Mr Justice Eder:
Introduction
- In these proceedings, the claimants seek to challenge certain parts of an arbitration award (the "Award") dated 24 December 2010 under s.67(1)(a) of the Arbitration Act 1996. As appears below, the Award determined certain preliminary issues concerning, in particular, the jurisdiction of the tribunal under a number of related but separate arbitration references.
- The underlying claims which form the subject of these proceedings are cargo damage claims in respect of 12 cargoes of bananas shipped from Ecuador to St. Petersburg, Russia in the course of 2008 on the following vessels:
Baltic Navigator – Week 12
Nordic Star (1) – Week 12
Smolensk – Week 13
Skulptor Tomskis – Week 13
Nordic Cape – Week 14
Nordic Ice – Week 15
Eisha – Week 16
Baltic Wind – Week 17
Sun Unity – Week 18
Baltic Meridian – Week 19
Nordic Star (2) – Week 20
Sun Blossom – Week 21
- The claimants are part of the Optifood Group, a major producer, importer and distributor of food products based in the Russian Federation. The second claimant ("Megafruit") is a Russian registered company; it was responsible within the Group for the importation to and the distribution within Russia of fruit including bananas. The first claimant ("Finmoon") is a Cyprus registered company and was concerned primarily with the shipping arrangements for the Group. It has been represented since 2001 by chartering brokers, Van Weelde Chartering ("VWC").
- So far as these proceedings are concerned, Megafruit sourced produce from Ecuador and shipped it to St. Petersburg by weekly shipments on reefer vessels. From the second half of 2006, the carrying vessels were chartered for Megafruit by Finmoon and were (using a neutral term) supplied by the first respondent ("BRM") or by its predecessor company, Baltic Reefer Management LLP ("BRM LLP"). BRM LLP was a Scottish limited liability partnership. In December 2006, the business of BRM LLP was transferred to BRM, a Virgin Islands registered company. It is not in dispute between the parties that BRM succeeded to the rights, obligations and business of BRM LLP. Both were at all relevant times represented by Baltic Shipping Ltd ("BSL") a Russian registered company that acted as agents only. For present purposes, it is common ground that no distinction is to be drawn between BRM and BRM LLP and unless otherwise stated I shall therefore refer to them compendiously and without distinction as "BRM". BRM does not own any ships but (at least so far as the respondents are concerned) generally acts as manager on behalf of various shipowners and also charters in tonnage as part of what is sometimes referred to as the "Baltic Fleet". At all material times, it is common ground that BRM was the disponent owner of three of the ships identified above viz Skulptor Tomskis, Sun Blossom and Sun Unity (which I shall refer to as the "TBU" vessels); the other vessels were owned by separate registered companies which are the named second to ninth respondents and were managed by BRM. I shall refer to these companies as the "Baltic Owners".
- It is also common ground that for the summer season of 2006 and the winter season of 2006/7, the carrying vessels were supplied pursuant to written contracts of affreightment ("COAs") based on the Gencon form and incorporating the normal Gencon arbitration clause. There is an important issue as to the identity of the parties to these COAs but it is, at least, common ground that as a matter of form, the COAs were signed by BRM as owner and Finmoon as charterer.
- Weekly reefer tonnage continued to be provided by BRM after the expiry of the winter 2006/7 season COA although formal contracts of affreightment were not executed. For the summer season of 2007 the parties continued to do business "as per present coa until new one is finalised". For the 2007/8 season which covers the shipments in question, although the terms of a new COA were discussed, no formal agreement was ever signed by both parties. It is the claimants' case that, notwithstanding the absence of a properly executed and signed COA, BRM chartered each of the carrying vessels to Finmoon on Gencon terms as principal either under a COA covering the 2007/8 season or under individual Gencon charterparties. BRM accepts that this is indeed the case so far as the TBU vessels are concerned but otherwise this is denied by BRM. In summary, so far as the other vessels are concerned, BRM says that it acted only as agent and that the COA or individual charterparties were entered into on behalf of each of the registered owners respectively.
- Bills of Lading were issued for all the cargoes in question. The bills named Megafruit as the consignee. The bills were on the standard Gencon charter bill of lading form and expressly incorporated the charterparty arbitration clause.
The arbitration proceedings
- The claimants purported to commence arbitration in respect of their cargo damage claims both under the alleged charterparty arrangements and under the bill of lading contracts – although it will be necessary to consider in more detail how this was done and with what effect. In the result, the present proceedings are concerned with seventeen separate but connected arbitration references. One arbitration was commenced by Finmoon (and arguably Megafruit as undisclosed principals) as charterers under the alleged 2007/2008 COA which they said they had with BRM as owners. Twelve arbitration references (of which these proceedings are concerned with eight) were also commenced against each of the Baltic owners under the alleged COA alternatively under individual charterparties on the terms of the COA. Megafruit has applied to be joined as a claimant in the references under the alleged COA. A further twelve arbitrations were commenced by Megafruit as the alleged lawful holder of the bills of lading against each of the twelve one-ship companies which issued the bills of lading. At this stage, it is sufficient to note that with regard to the claims in respect of the TBU vessels BRM has accepted the jurisdiction of the appointed arbitration tribunals; and with regard to the other vessels, the registered owners have accepted the jurisdiction of the appointed tribunals under the charterparty arrangements but not under the bills of lading.
- Although there are numerous separate references, the parties appointed the same arbitrators in each reference ie Finmoon and Megafruit appointed Mr David Farrington. BRM and the registered owners (including the Baltic owners) appointed Mr Alan Oakley. These two arbitrators then appointed Mr Brian Williamson as the third arbitrator. For simplicity, I shall refer to them as the "tribunal".
The preliminary issues
- Following directions by the tribunal, there was a hearing to determine certain preliminary issues. These questions and the tribunal's answers as set out in the Award are as follows.
(1) (a) [Claimants' draft] Was there a COA between BRM and Finmoon covering the disputed voyages? (b) [Defendants'/Respondents' draft] Was there a COA between BRM and Finmoon dated 22nd October 2007? If not, was there such a COA for any other period in 2007-2008? If so, when was it made and what period did it cover?
Tribunal's Answer: 1(a) Yes. 1(b). There was no COA dated 22nd October 2007 in the sense that there was a formal written agreement on that date. The COA for the period which included the disputed voyages came into existence no later than 25th October 2007 when Mr Kukhalashvili nominated the "Baltic Mariner" for week 44 and, possibly, as early as 17th October when he nominated the "Baltic Wind" for week 43. The parties intended the COA to be for the period week 43 in 2007 until week 22 in 2008.
(2) If not, are BRM estopped from denying that there was?
Tribunal's Answer: Yes.
(3) If so, did BRM contract as principals or as agents for the owners of the ships which performed the service?
Tribunal's Answer: BRM contracted as principals and not as agents. They were disponent owners.
(4) If BRM contracted as agents, is there an estoppel by convention which prevents them from asserting that fact?
Tribunal's Answer: An answer is not required.
(5) Were the bills of lading issued at the load port or the discharge port contracts of carriage to which Megafruit were a party?
Tribunal's Answer: No.
(6) Were there charterparties covering the disputed voyages? If so, were they the ones referred to in the bills of lading?
Tribunal's Answer: No.
(7) If the answer to question (6) is yes, were BRM (a) parties to those charterparties or (b) estopped from denying that they were parties?
Tribunal's Answer: An answer is not required.
(8) Has an arbitration against BRM been validly begun under a COA? Was Mr Farrington validly appointed as Arbitrator by the Claimants in relation to the claim made for the carriage by the "Baltic Meridian"?
Tribunal's Answer: No.
(9) Is Megafruit a party to the arbitration commenced by Finmoon under the COA? If not, can it now join the arbitration rather than commence proceedings of its own?
Tribunal's Answer: Megafruit is not a party because an arbitration under the COA has not validly been commenced. Megafruit is a party to arbitration references commenced under bills of lading.
- In summary, the effect of the tribunal's answers to the preliminary issues as stated above is as follows:
(1) BRM was party to a COA covering all the disputed shipments.
(2) The tribunal did not, however, have jurisdiction in respect of the claims against BRM in respect of which BRM disputed jurisdiction since the Claimants had started arbitration under individual charterparties rather than under a COA.
(3) The tribunal did not have jurisdiction in respect of the claims against the registered owners since the bills of lading were not in fact contracts at all.
(4) In any event the tribunal did not have jurisdiction in respect of the claims in respect of cargo carried on the m.v. "Baltic Meridian" since the letter written on behalf of the Claimants to its own appointed arbitrator inadvertently referred to a different vessel.
- The claimants now challenge certain parts of the Award under s.67(1)(a) of the Arbitration Act 1996 viz paragraphs 60-65 (Issue 5), paragraphs 71-84 (Issue 8) and the associated conclusions. Otherwise the claimants seek to uphold the Award. However, the shape of the case and arguments as they were advanced at the present hearing are somewhat confusing. In particular, it is important to understand that the claimants succeeded before the tribunal on one of the main issues viz that BRM was a contracting party under a COA for the winter season 2007/2008 in respect of all the carrying vessels; and that, at this present hearing, the claimants are seeking to uphold the tribunal's conclusion on this issue whereas it is the respondents who are seeking to argue that the tribunal's conclusion on this point was wrong ie that there was no COA. Despite the claimants' success before the tribunal on this main issue, the claimants now complain that the net result of the other conclusions reached by the tribunal's Award in respect of Issue 5 and Issue 8 is that the claimants are left with no remedy in respect of their cargo damage claims despite:
(1) BRM having accepted jurisdiction in respect of cargoes carried on vessels not managed by BRM and the tribunal having found that BRM was the contracting party in respect of all the carrying vessels.
(2) The fact that it makes no difference either to the merits of the underlying cargo damage claim or to the issue whether there is a binding arbitration agreement whether the contractual arrangement was (in accordance with the claimants' primary case) a long term COA or (in accordance with the claimants' secondary case) a series of individual charters.
(3) It being common ground that the bills of lading were issued on behalf of the registered owners and they named Megafruit as consignee and incorporated an arbitration clause.
- At the arbitration hearing, there was evidence including oral evidence from a number of witnesses. At the hearing in this court, I had the benefit of their written statements and transcripts of their evidence. These proceedings are, in effect, a rehearing of the preliminary issues directed by the tribunal but on the basis of the evidence that was provided to the tribunal. The parties agreed that it was open to all parties to argue any issue that was before the tribunal.
- In this Judgment, I propose to deal first with the chartering arrangements ie issues 1, 2, 3, 4, 6 and 7. These are all related. I will then deal with issue 5 which essentially concerns the bill of lading arrangements. I will then deal with issues 8 and 9 which essentially concern the arbitration proceedings.
The chartering arrangements: Issues 1, 2, 3, 4, 6 and 7
- Issues 1, 2, 3, 4, 6 and 7 are related. It is convenient to consider them together and to start by considering the chartering arrangements in 2006/2007. In that context, it is common ground that there were two signed COAs dated 5 June 2006 and 19 October 2006; the former covering weeks 23/40-2006 (ie the 2006 summer season) and the latter covering weeks 42-2006 to week 22-2007 (the 2006/2007 winter season).
- For present purposes, these two COAs were in similar form. In particular, they were on the standard GENCON form. Part 1 was in the standard box form duly completed (in material part) as follows:
i) Box 1 named the shipbroker as VWC.
ii) Box 3 headed "Owners/Place of Business" (C1.1)" stated "Messrs BALTIC REEFERS MANAGEMENT LLP, London/UK as Managers for performing vessels."
iii) Box 4 headed "Charterers/ Place of Business (C1.1)" stated "Messrs Finmoon Limited, Nicosia, Cyprus".
iv) Box 5 headed "Vessel's name (C1.1) Performing vessels" stated "BALTIC REEFER LLP TONNAGE to be nominated".
v) Clause 44 of the additional clauses provided in material part as follows:
"Performing vessels: Baltic Reefers LLP tonnage, owners' option to nominate vessels taken from the market.
Owners irrevocably confirm that all nominated vessels are suitable and able in any and all respects to call during the Winter to St Petersburg. "
The signature boxes at the bottom of Part 1 were completed as follows. The box on the left headed "Signature (Owners)" contained a signature and was also impressed with a round stamp marked in the middle "BALTIC REEFER MANAGEMENT LLP" and around the edge "CORPORATE SEAL ENGLAND". The box on the right headed "Signature (Charterers)" also contained a signature on top of the typed words "and on behalf of the Charterers, Van Weelde Chartering B.V (as agents only)".
Summer Season 2006/ Winter Season 2006-2007
- It was BRM's case that BRM LLP did not conclude the summer 2006 or winter 2006/7 COAs as principals but as agents on behalf of the registered owners of the carrying vessels. In that context, Mr Howard QC on behalf of all the respondents submitted that it was important to stress that so far as BRM was concerned, there was in place a conventional ship management arrangement: a formal management structure was in place in that each of the owners of the fleet had engaged BRM as its manager pursuant to various SHIPMAN agreements. In particular, Mr Howard QC submitted that, pursuant to such arrangement, BRM acting as managers would nominate a particular vessel virtually exclusively from the managed fleet for a particular week; that the performing vessels were owned by separate legal entities and BRM was neither the legal nor beneficial owner of any of the vessels; and that (apart from the TBU vessels) BRM did not charter in any of the vessels from the registered owners;
- In my judgment these internal arrangements are of little, if any, relevance when considering the legal effect of the COA which BRM signed; and the submissions advanced by BRM in that regard were rightly rejected by the tribunal for the reasons it gave which were in essence as follows:
i. The description of BRM in box 3 of the Gencon form as "Managers for performing vessels" ties in with box 5 where it is stated that the performing vessels will be Baltic Reefer tonnage to be nominated.
ii. At the foot of Part I, BRM signed and affixed its company seal as "owners" without qualification, thus signifying that BRM is prima facie deemed to be contracting personally: see The Elikon [2003] 2 Lloyd's Rep 430.
iii. Clause 44 provided for Baltic Reefers tonnage with an option to "owners" to nominate vessels taken from the market. Within the context of clause 44 and a series of nominated performing vessels it does not make sense to read the words "Owners' option" as meaning the registered owners of Baltic Reefers or other tonnage. If none of the registered owners had tonnage available for a particular week, this then begs the question as to which entity had the power and, possibly, the duty to obtain a vessel in the market. If, however, "Owners" is read as meaning BRM, then the nomination provisions become straightforward.
iv. If BRM had wished to avoid personal liability it would have been a comparatively simple exercise to have inserted an additional sentence to that effect.
Summer Season 2007
- On the expiry of the winter 2006/7 COA, no formal COA was ever signed by the parties. However, on 29 May 2007, BSL on behalf of BRM made a proposal "to proceed as per present COA until next one is finalized". Mr Howard QC submitted that that was no more than an indication of the general pattern the business was to follow and not an invocation of the particular terms of the contract; that the general pattern of the business was that one side provided ships and the other side provided cargoes; and that what was being said, by one commercial man to another, was commercially descriptive, not legally prescriptive; and that this is what the parties did. In support of the foregoing, Mr Howard QC relied upon a number of further matters to the effect, as he submitted, that the manner in which the parties conducted their business changed to "spot trading" from May 2007. In particular, he relied upon the fact that the whole basis of the operation was changed; that fixing notes under the COA ceased from May 2007; that instead of a global total, the parties worked on a ship by ship basis; and that rather than bills of lading referring to the COA date, the bills of lading from May 2007 referred to individual charterparties. On one view, it is strictly unnecessary to determine this issue because none of the relevant claims fall within this period. However, in my judgment, it is potentially significant because it provides the necessary backdrop to subsequent events. In that context, I accept as submitted by Mr Howard QC that there were certain changes in the manner in which the parties conducted their business. However, in my view the terms of the email dated 29 May are clear and the subsequent conduct of the parties must, in my view, be viewed in that light. On that basis, I have little doubt that in light of the email and the conduct of the parties, the proper conclusion is that despite the various changes referred to by Mr Howard QC the previous COA was, in effect, extended until, as the email states, the next COA was finalised and the shipments performed during the summer 2007 season were performed thereunder.
Winter Season 2007
- The next period being that of winter 2007/8 is the period covering the disputed shipments. As I have said, there was no signed COA for this period. However, the tribunal concluded that the chartering arrangements continued to be on the basis of a COA between Finmoon and BRM. The tribunal reached this conclusion by two legal routes: first the tribunal found an estoppel by convention that precluded BRM from denying the COA; second, it found a contract made by conduct and performance.
- On behalf of BRM, Mr Howard QC submitted that any alleged estoppel could not create a contract where otherwise there was none. In that context, reference was made to relevant passages in Chitty on Contracts (30th Ed), Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 and Troop v Gibson [1986] 1 EGLR 1. In the event, it does not seem to me necessary to determine that issue because in my judgment the right approach is to consider, first of all, whether a contract by conduct came into existence and, on the present facts, I agree with the conclusion of the tribunal that a COA did indeed come into existence. This is so for the following reasons.
- So far as the law is concerned, there is no doubt that an enforceable contract may come into existence by acceptance of an offer by conduct: see Chitty on Contracts, 30th Ed, para 2-030 citing well-known authority including, of course, Brogden v Metropolitan Railway (1877) 2 App Cas 666. In the recent case of Maple Leaf Macro Volatility Master Fund v Rouvroy [2009] EWHC 257 (Comm). Mr Justice Andrew Smith stated as follows:
" Although the formation of contract is conventionally analysed in terms of whether a contractual offer was accepted, the law does not require rigorous compliance with an analysis along these lines. Nor does it require that any particular communication or act must in itself manifest that the party intends to contract: the court will, if appropriate, assess a person's conduct over a period and decide whether its cumulative effect is that he has evinced an intention to make the contract."
Andrew Smith J. cited G Percy Trentham Ltd v Archital Luxfer Ltd [1993] 1 Lloyd's Rep. 25, in which Steyn LJ observed (at page 27 col 1) that:
"… it is true that the coincidence of offer and acceptance will in the vast majority of cases represent the mechanism of contract formation. It is so in the case of a contract alleged to have been made by an exchange of correspondence. But is is (sic) not necessarily so in the case of a contract alleged to have come into existence during and as a result of performance...."
I respectfully agree with those comments.
- So far as the present facts are concerned, the starting point is that, as I have concluded above, BRM was bound as principal in the capacity of owners to the previous COAs – and, insofar as may be necessary, the same relationship continued during Summer 2007. It is against that background that the parties' conduct after the conclusion of the 2007 summer season is to be considered.
- In this context, the story then continues on 10 October 2007 when BSL nominated "Nordic Ice" as the performing vessel for week 42 and they requested 96,940 boxes. On 17 October BSL nominated "Baltic Wind" as the performing vessel for week 43 and they requested 95/995 boxes. This was followed by an email dated 22 October from Mr Kukhalashvili, the fixing manager of BSL, to Mr Hanne of VWC which stated in material part as follows:
"Good afternoon
Have to agree terms for winter season.
Suggest to make it as follows: Baltic Reefers tonnage to be nominated for
- account Finmoon Limited
- put cargo of about 100,000 bxs up to 150,000 bxs in owners option of fresh green bananas, every week
- Owners option to load part of Chtrs volume into Reefer containers as well as split this volume into 2 vessels a week
- Start – week 43, finish week 22, both weeks inclusive
- No loading on week 39 and 50 – unless otherwise agreed
………
- Freight: to be mutually agreed on weekly basis latest by Friday prior loading.
- Owners Option to cancel 1 shipment during this coa with 2 weeks advance notice
…….
- Sub further terms/details based on gcn 94
End
Please reconfirm by return."
I should make clear that I have not quoted the full email. It included other detailed provisions relating to amongst other things loading parts, laytime, demurrage and condition of containers.
- There was apparently no response to this email from Finmoon or VWC but a few days later (ie on 25 October) Mr Kukhalashvili sent a further email to VWC and other third parties stating: "herewith owners nominate MV "Baltic Mainer" as performing vessel for week 44." The email continued by giving further information as to the vessel and the holds' distribution with regard to Finmoon's cargo for a total quantity of 106,822 boxes. The tribunal's conclusion was that it was this email nomination which in effect brought the COA into existence. As stated in paragraph 59 of their Reasons:
"(1) There was no contract of affreightment dated 22nd October 2007 in the sense that there was a formal written agreement on that date.
(2) The contract of affreightment for the period which included the disputed voyages came into existence no later than 25th October 2007 when Mr Kukhalashvili nominated the "Baltic Mariner" for week 44 and, possibly, as early as 17th October when he nominated the "Baltic Wind" for week 43.
(3) The parties intended the contract of affreightment to be for the period week 43 in 2007 until week 22 in 2008."
At this court hearing, the claimants' primary submission was that the tribunal's conclusion as stated above was correct; alternatively, the claimants relied upon the further conduct of the parties after 22 October 2007.
- I am unable to accept the claimants' primary submission because I disagree with the tribunal's conclusion (at least with regard to timing) as quoted above in paragraph 59(2) of their Reasons. As there stated, the tribunal's conclusion was that a contract came into existence no later than 25 October 2007 when Mr Kukhalashvili nominated the "Baltic Mariner". However, that is conduct merely by one party (ie on one side of the contractual line) as was the earlier email dated 22 October containing Mr Kukhalashvili's proposal for a COA. In order for a contract by conduct to come into existence, the conduct in question must be the conduct of both parties. Given the absence of any formal response to the email dated 22 October, it seems to be impossible to say that the mere nomination of the Baltic Mariner a few days later could of itself give rise to any contract by conduct. For similar reasons, I cannot accept the tribunal's further alternative tentative conclusion that such a contract "possibly" came into existence on 17 October with the nomination of the Baltic Wind which nomination in any event pre-dated the email of 22 October. However, the nominations of both those vessels were accepted by or on behalf of Finmoon and cargo was subsequently loaded on board these vessels. In my judgment, such conduct could and, on balance, did give rise to a binding COA on the terms of the email dated 22 October. The result is that I disagree with the tribunal's conclusion with regard to timing but not as to the substance of its conclusion i.e. I disagree with the tribunal's conclusion that a contract came into existence on the nomination of the Baltic Mariner but, on balance, agree that it came into existence shortly thereafter when, in effect, the nomination was accepted and cargo loaded on board.
- In the alternative, it was the claimants' case that a contract on the terms of the email dated 22 October 2007 came into existence by virtue of the further subsequent conduct of the parties. As to such further conduct, the claimants relied generally on the findings of the tribunal as set out in paragraphs 24-28 of the Award. I recognise, of course, that on this hearing and unlike the position that would obtain under s.69 of the 1996 Act such findings are not binding on the parties. However, this part of the Award provides a convenient summary of the relevant primary facts and unless otherwise stated below were not in dispute.
"24. On 26th October Mr Kukhalashvili pressed for a reply to his e-mail of 22hd October, and Mr Hanne in turn made an enquiry of Finmoon. On 1st November BSL sent a freight invoice addressed to Finmoon. The invoice was on BRM paper. It was for the freight on the "Baltic Wind": in its heading and immediately following the printed word "CHARTERPARTY" were the typed words
" 1st voyage under COA ref Winter 2007/2008".
The invoice sought freight on 95,995 boxes. The terms of payment were described "As per c/p". BRM signed the invoice "on behalf of Owners". Finmoon transferred the freight due on that invoice and also in respect of the "Baltic Mariner" to an account in the name of BRM.
"25. On 9th November Mr Kukhalashvili again pressed for an answer on the "winter coa". In the event between week 43 of 2007 and week 22 of 2008 there was no confirmation either written or verbal from or on behalf of Finmoon that Mr Kukhalashvili's e-mail of 22nd October was agreed. The parties, however, continued to carry on business. BSL nominated a vessel for a particular week and identified the amount of cargo which was required from Finmoon; the parties agreed the freight rate and an invoice (whether for freight or detention) which identified a particular voyage under "COA ref Winter 2007/2008" would be sent by BSL. Loadport bills and disport bills continued to be issued and dealt with in the manner described in paragraph 19 above.
"26. However, by mid November 2007 Finmoon was falling behind in its payments due on a number of different vessels for different voyages. By early December Mr Larchenkov was beginning to press — the amount due was said to be US$2,237,653.02 — but no substantial progress was made. By 8th January 2008 the payments claimed from Finmoon were US$2,898,409.29. Mr Larchenkov in an e-mail of that day advised that a lien would be imposed on the cargo of the "Canterbury Star" until all the payments had been received including damages for detention of the "Baltic Meridian". Reference was made in his e-mail to "terms and conditions agreed". The "Owners rights" were fully reserved. Some payments were made by Finmoon. However, because the weekly shipments continued the financial consequence was that by 16th January the amount claimed from Finmoon had risen. On that day Mr Larchenkov advised by e-mail that owners - who were not named — would not break bulk of the cargo on the "Baltic Wind", which was expected at St. Petersburg on 19th January, and would exercise a lien until freight was paid, Reference was made to "the charterparty terms and conditions". By 25th January the amount claimed from Finmoon had risen to US$3,458,993.33. Mr Larchenkov by e-mail stated that owners — who, again, were not named — would exercise a lien and retain possession of the cargo on both the "Baltic Wind" and the "Baltic Stream" (which was shortly to arrive at St. Petersburg)). Mr Larchenkov stated that freights for subsequent ships "in the COA" would soon become due.
"27. Messages passed and certain payments were made. Overall, however, the financial position was not resolved to the satisfaction of both parties. On 13th February 2008 in relation to the "Nordic Ice" Mr Larchenkov advised Finmoon that discharging of the cargo could not continue unless either freight was paid or Finmoon signed a letter in the form which Mr Larchenkov had drafted. That letter, which Mr Dolgov of Finmoon signed, was headed:
"To Baltic Reefers Management Ltd, VBI [sic] on behalf of Owners as Agents. Re: m/v "Nordic Ice" — 14th voyage under the COA ref "Winter 2007/2008".
The letter opened with words which stated that Finmoon had chartered from "Owners by the contract of affreightment and/or program of shipments and/or scheduling and/or particular nomination for transportation of cargo ". Later in the same document, Finmoon agreed that "the Owners shall have a lien...on the cargo on board all and any ship(s) chartered by us... " and BRM "As Agents for the Owners" and Owners were authorised "to keep the lien on cargo on any ship" chartered by Finmoon. In the event discharge of the "Nordic Ice" was not further interrupted.
"28. However, the payment difficulties persisted, although vessels continued to be nominated weekly. On 3rd March Mr Larchenkov in an e-mail which contained in the heading the words "Finmoon Winter COA" served notice that a lien would be exercised on the cargo of the "Baltic Carrier" for amounts due as a result of carriage on that vessel plus the "Baltic Navigator" and the "Nordic Star". On the same day a letter signed by Mr Dolgov on behalf of Finmoon was given in the form sent by Mr Larchenkov, The letter had the same addressee as the letter given in connection with the "Nordic Ice" and it mentioned by name the vessels which had performed what were described as the 15" — 17th voyages under the "COA ref Winter 2007/2008". The letter also gave permission for a lien to be exercised in respect of "other ships working under the COA". On 6 March a payment was made by Megafruit."
- At my request, the claimants identified the particular conduct of the parties which they relied upon in support of this alternative case. In summary, this was as follows:
i. BSL's usual practice was to refer to and to treat "Owners" as a single entity. For example, the emails nominating vessels generally stated "owners nominate...". No mention was ever made of the name of any registered owner.
ii. Both parties proceeded on the basis that BRM was obliged to make a weekly nomination and that Finmoon was obliged to accept the nominations made by BSL on behalf of "Owners". For example, in relation to week 51, BRM had no vessel though Canterbury Star could be chartered. Finmoon insisted "no intention to skip next week". That ship was then chartered by BRM and nominated.
ii) Vessels were "nominated" not "proposed".
iii) Nominations were made weekly as required by the COA.
iv) BRM exercised owners' option under the COA to determine quantities to be shipped as set out in the nomination emails.
v) Nominated quantities were not treated as being subject to negotiation. For example, in relation to week 52 (Baltic Sky), BRM nominated the quantity; Finmoon then requested a reduction; BRM then insisted that quantity nominated be loaded.
vi) The parties proceeded on the basis that Finmoon was obliged to ship and BRM was obliged to carry the quantities stipulated in the 2007/8 COA (see e.g. during summer 2007 COA, a request to reduce COA volumes in future weeks rejected by BRM).
vii) Invoices were rendered in the name of a variety of offshore entities, always as agents on behalf of unnamed "Owners" and referring to the 2007/2008 COA save in the case of the Sun Blossom.
viii) Requests for payments pursuant to those invoices were made in the same terms of the COA.
ix) If Finmoon failed to ship the cargo quantity stipulated in the COA, it would be invoiced for deadfreight.
x) BRM exercised liens on unpaid sums in relation to one vessel in respect of unpaid freight on other vessels, in a manner only consistent with the 2007/8 COA.
xi) Detention was calculated and charged to Finmoon in accordance with clause 44 of the 2007/2008 COA.
- As to these matters, Mr Howard QC submitted that some at least were incorrect or exaggerated. For example, Mr Howard QC submitted that the actual owners' names were sometimes mentioned and, in any event, the claimants were aware of the identity of the actual owners having used the vessels on the prior COA. Further, Mr Howard QC submitted that none of the foregoing – either singly or cumulatively - justified the conclusion that there came into existence a COA binding on BRM (or indeed any other party) whether on 25 October 2007 or at any time thereafter. In particular, he submitted that the period between 2006-2010 divided into essentially three parts. The first part was the period (2006-2007) when there were two binding COAs; the second part was the disputed period (ie 2007-2008 including both the summer season 2007 and the winter season 2007/2008); and the third part was the period (2008-2010) when it was common ground that there was no COA and the parties continued doing business on the basis of "spot trading". The first and last periods constituted what Mr Howard QC described as "objective correlatives" and he submitted that there was no particular reason why the disputed period should not fall to be treated together with the last, rather than the first, period with the parties simply trading "spot" rather than under a binding COA. In that context, he emphasised that in order for the court to conclude that a contract by conduct came into existence, the conduct in question must clearly be referable to the particular alleged contract; that the conduct relied upon by the claimants did not meet that test; and that the conduct during the disputed second period was equally if not more consistent with and referable to spot trading.
- In principle, I accept that where a party seeks to assert a contract by conduct, the alleged conduct must generally be referable to the particular alleged contract; and I also accept that some at least of the conduct relied upon by the claimants when viewed in isolation might be regarded as being consistent with or at least not inconsistent with spot trading. For example, with regard to point (iii), Mr Howard QC emphasised that the fact that nominations were made weekly in accordance with the alleged COA is arguably not inconsistent with spot trading and does not, of itself, prove the existence of a COA. However, in making that submission, it seems to me that Mr Howard QC ignored the manner and pattern in which the nominations were actually made (which, in my view, was much more consistent with a COA). Similarly with regard, for example, to point (ix) (ie the claim for deadfreight) and point (x) (the exercise of the lien), Mr Howard QC submitted that although such claim and the purported exercise of the lien might, on their face, be consistent with a COA, they were equally explicable on the basis of an attempt being made to exercise commercial pressure without any proper legal justification or even, perhaps, a simple mistake of some kind. For example, he relied upon the fact that the claim for deadfreight was never pursued. In addition, Mr Howard QC drew attention to other matters which occurred in the course of performance which were, he submitted, inconsistent with the terms of the proposed COA in particular (a) the size of certain shipments which subsequently took place were outside the parameters set out in the 22 October 2007 email and (b) contrary to that email, certain of the cargoes shipped were not of the stipulated cargo description ie "green bananas" but other produce. I was not persuaded by such submissions. It may not be tidy but I see no reason why parties might not from time to time agree in effect a variation of terms under a COA. Indeed, my own view would be that in any long-term arrangement such variations are to be expected or at least not unexpected. Sometimes parties will agree to accommodate such possible variations; other times possibly not. However, it does not seem to me that these matters are necessarily inconsistent with the parties being in a long-term binding relationship. The proper approach, in my view, is to look at the conduct of the parties overall as appears plain, for example, from the speech of the Lord Chancellor, Lord Cairns, in Brogden at [1877] 2 App Cas 666, 679. If that approach is adopted, it seems to me that the claimants are right to say that the proper conclusion is that there was here a contract as alleged by the claimants by virtue of the further conduct of the parties as summarised above.
- In reaching my conclusion that a COA by conduct did come into existence (whether on the basis of the claimants' primary or alternative case), I should mention four further points emphasised by Mr Howard QC.
- First, he submitted that even if a COA did come into existence, it did not necessarily follow that such COA was binding on BRM. I do not agree. It is right that unlike the previous signed COAs that I have referred to, there was no COA for the disputed period signed by BRM as principal; and the email dated 22 October which is the basis of the alleged COA does not in terms state that such COA was to bind BRM as principal. To this extent, I recognise the potential force of this particular submission. However, in my judgment, the task for the court must be to determine, as best it can, the objective intention of the parties. In that context, it seems to me relevant and important to bear in mind at least three matters. First, the earlier COAs were (as I have found) signed by and binding on BRM as principal. Second, it makes little, if any, sense to have a COA in these particular circumstances with more than one party contracting, in effect, as owner. What is the alternative ? In my view and similar to the views expressed in The Frost Express [1996] 2 Lloyd's Rep 375 in particular at p379 lhc, it would be difficult if not impossible to conceive of a COA giving rise to contractual obligations on behalf of one or more members of a group of shipowners or by the members jointly particularly where that group was not identified with any precision. Third, the conduct of the parties summarised above is more consistent with one party contracting, in effect, as owner; and, as a matter of reality, such party could only be BRM particularly in the light of the fact that BRM did contract as principal in respect of the previous signed COAs as I have concluded.
- Second, Mr Howard QC submitted that the claimants' approach was flawed because, at least so far as the claimants' alternative case is concerned, it was impossible to identify a specific point in time when the alleged COA came into existence. That is a fair point and has an intellectual attraction. However, the alleged flaw is inherent in most, if not all, cases of any alleged contract by conduct. Nevertheless, it did not prevent the House of Lords from reaching the conclusion it did in Brogden; and I do not regard the point as fatal in the present case.
- Third, Mr Howard QC submitted that the conclusion that a COA came into existence by virtue of the conduct of the parties ignores the fact that in what he described as the later objective correlative i.e. the third period it was common ground between the parties that they conducted themselves without any COA ie on the basis of "spot trading" and, in effect, their conduct during that third period was no different in substance from their conduct during the disputed period. Thus, he asked rhetorically, if the parties' conduct in that third period did not give rise to any COA, on what basis should the court in effect conclude in favour of the existence of a binding COA during this disputed second period ? That submission was advanced with great vigour and I was, at least initially, rather impressed by it particularly because there is no doubt that certain aspects of such conduct during the third period bore a strong similarity to the parties' conduct during the disputed period. However, the difficulty for the court is that the evidence with regard to the conduct of the parties during such third period had not been explored in the arbitration in any great detail and was incomplete. Further, it is not clear to me why the parties apparently agreed to treat their relationship during the third period as being on a spot basis. In any event, the fact that the parties did so agree does not seem to me necessarily to lead to the conclusion that their relationship during the disputed period must be dealt with on the same basis. For all these reasons, I remained unpersuaded that such conduct of the parties during the third period provided any assistance with regard the nature of the relationship during the disputed period.
- Fourth, Mr Howard QC raised a point with regard with regard to certain events which took place in August 2008 i.e. some time after the expiry of the winter season 2007/2008. In particular, it appears that on 26 August 2008, the claimants made a request to BSL to issue a COA. This request was originally made in a telephone call to Roger Hanne (of VWC) which is referred to in an email from Bas Groeneveld (shipping broker/operations manager at VWC) to Mr Larchenko (operations manager at BSL) later that day as follows: "Further to your telcon with Roger this morning in connection with the original COAs. Would there be any way you can send us the previous one as an attachment enabling us to issue them. Seems Finmoon needs them urgently from (sic) auditing purposes." Later that day, Mr Kukhalashvili (BSL) responded in an email to VWC stating "PLEASE CHECK AND ADVISE" and attaching a copy of a draft unsigned COA. The attached draft COA was on the Gencon 94 form and backdated to 22 October 2007 (ie the date of the email originally sent by Mr Kukhalashvili which I have already referred to above). It was substantially in the same form as the June 2006 and the October 2006 COAs, but it provided for the period to be from week 42 of 2007 until week 41 of 2008 ie effectively a whole year covering both the winter season 2007-2008 and the summer season 2008. This prompted a response from VWC in an email later that day stating: "Thanks. The latest c/p we had (dd 19/10/06) was ending week 22-2007. The one you attach hereto starts week 42-2007. So the new one should start week 23-2007 ??" Mr Kukhalashvili then responded: "you can make an additional one covering week 23/2007-41/2007". It seems that the correspondence then petered out. However, it appears that an original and two working copies of that COA were subsequently signed by VWC on behalf of the charterers and duly sent by VWC to BSL under cover of a letter dated 28 January 2009. The letter requested BSL to return the original duly counter-signed by the owners; but in the event this never happened. I mention these matters because Mr Howard QC referred to them although in the event it does not seem to me that they take matters much, if any, further. It is true that the draft contains some (slightly) different terms from the original email dated 22 October 2007 and, as I have said, the correspondence then peters out. No one has apparently been able to find any relevant documents other than those referred to above. However, in my judgment, such matters are not necessarily inconsistent with an already existing binding COA for the disputed period. To my mind, this exchange is best explained as an attempted tidying-up exercise. As stated by Mr Groeneweld: "..we were "papering up" an arrangement which was already in place…" If anything, it seems to me that, this short exchange possibly provides some additional support for the claimants' case; the fact that the tidy-up exercise was never completed is, in my view, not significant.
- Finally, under this head, I should mention for the avoidance of doubt that given my conclusion that there was a single COA covering the winter season 2007-2008, the claimants' alternative case that there were individual charterparties does not arise. In my view, the proper analysis is simply that there was a series of individual voyages performed on charterparty terms binding on BRM as owner under the COA.
- For all these reasons, I answer the relevant questions under this head as follows:
Issue 1
(a) [Claimants' draft] Was there a COA between BRM and Finmoon covering the disputed voyages? (b) [Defendants'/Respondents' draft] Was there a COA between BRM and Finmoon dated 22nd October 2007? If not, was there such a COA for any other period in 2007-2008? If so, when was it made and what period did it cover?
Answer: There was no COA dated 22nd October 2007 in the sense of any formal written agreement on that date. However, a binding COA came into existence on the terms of the email dated 22 October 2007 for the period week 43 in 2007 until week 22 in 2008.
Issue 2
If not, are BRM estopped from denying that there was?
Answer: Does not arise.
Issue 3
If so, did BRM contract as principals or as agents for the owners of the ships which performed the service?
Answer: BRM contracted as principals and not as agents.
Issue 4
If BRM contracted as agents, is there an estoppel by convention which prevents them from asserting that fact?
Answer: Does not arise.
Issue 6
Were there charterparties covering the disputed voyages? If so, were they the ones referred to in the bills of lading?
Answer: No. The disputed voyages were performed on charterparty terms binding on BRM as owner under the COA.
Issue 7
If the answer to question (6) is yes, were BRM (a) parties to those charterparties or (b) estopped from denying that they were parties?
Answer: Does not arise.
Issue 5: Were the bills of lading issued at the load port or the discharge port contracts of carriage to which Megafruit were a party?
- The tribunal answered this question: No. In my judgment, this answer was wrong or at least requires expansion and qualification for the reasons set out below.
- The starting point is to consider the bill of lading arrangements which are set out in paragraphs 18-19 of the Award and were not in dispute. In summary, the cargo was shipped by the shippers, Isbelni, who had agreed to sell weekly shipments of bananas to Megafruit under a contract for the winter season 2007/8 dated 13 September 2007. Bills of lading on the Congenbill 1994 form were issued on behalf of the Master by the ship's agents (MARSEC) at the loadport (the "loadport bills"). The loadport bills identified Isbelni as the shipper and were made out to a named consignee i.e. Megafruit rather than "to order". On that basis, Mr Howard QC submitted and Mr Crookenden QC accepted that the bills were not "bills of lading" within the definition of s.2(1) of the Carriage of Goods by Sea Act 1992 because they were "straight" bills; but that they were nevertheless sea waybills within the meaning of s.1(3) of that Act : see A.P Moeller Maersk A/S (trading as Maersk Line) v Sonaec Villas Cen Sad Fadoul [2010] EWHC 355 (Comm) per Christopher Clarke J. at para 28.
- The loadport bills all contained an endorsement in standard form as follows:
"ALL THE TERMS, CONDITIONS CLAUSES AND EXCEPTIONS CONTAINED IN THE CHARTER PARTY DATED [DATE] (INCLUDING CLAUSE REGARDING ARBITRATION WHICH, IF ANY, MUST BE COMMENCED IN LONDON IN ACCORDANCE WITH ENGLISH LAW) ARE HEREWITH INCORPORATED IN THIS BILL OF LADING".
In addition, freight was described as payable in accordance with the same charterparty. In each of the loadport bills, a date was inserted in the gap referring to the date of the charterparty. There was no single date. Rather, the dates inserted all varied. As referred to in paragraphs 66-67 of the Award, the origin of the dates set out in the bills of lading as being the charterparty dates remains obscure. It is, however, clear that no individual charterparties so dated were ever drawn up or signed and this was accepted by Mr Kukhalashvili of BSL in his oral evidence in the arbitration. The dates inserted in each of the loadport bills appear to approximate but are not identical to the dates on which the performing vessels were nominated by BRM. Whatever the origin of these dates, they came from the BRM side of the contractual relationships not the Finmoon/Megafruit side:
(1) The dates were inserted in the bills of lading that started life as evidence of contracts between Isbelni and the shipowners.
(2) There is no reason to suppose that the dates originated from Isbelni. Isbelni was not a party to any charterparty. Although, as a shipper who was being offered bill of lading contracts incorporating the terms of a charterparty, Isbelni would no doubt have had the right to call for a copy of the charterparty referred to, there is no evidence that it did this.
(3) There is no evidence that suggests the dates originated from Finmoon, Megafruit or Optifood.
(4) The dates must have originated from the shipowners or from those acting on the shipowners' behalf. In respect of the shipowners whose ships were being managed by BRM, this would have been BRM or its agent BSL. In respect of the ships chartered in by BRM ("Sculptor Tomskis", "Sun Unity" and "Sun Blossom"), it could have been the registered owners but, since the vessels were handled by BRM's loadport agent, MARSEC, it is likely that the charterparty dates for the bills issued by these vessels came from BRM/BSL as well.
(5) Such evidence as there is indicates that the dates were given by an employee of BSL to MARSEC.
- Once the loadport bills were signed on behalf of the Master, the subsequent events in relation to them were summarised by the tribunal in paragraph 19 of the Award as follows:
"19. The loadport bills were released by MARSEC to Isbelni. However, they were not negotiated by Isbelni, After Isbelni had received payment of what was due under the relevant sale and purchase contract, Isbelni returned the loadport bills marked "NULL AND VOID" to MARSEC. BSL would then be instructed to prepare and issue a new set of bills of lading at the discharge port ("the disport bills") and the disport bills would be given to the receivers' agents. The disport bills bore the stamp of the relevant vessel, and recorded that they had been issued on the same date and in the same place as the loadport bills. They also contained the same endorsement as the loadport bills concerning the charterparty, but they were not marked "NULL AND VOID"."
That summary account was not in dispute. Further, for the avoidance of doubt, it was, as I understood, common ground that the receivers' agents were agents of Megafruit. However, on the basis of these findings, the Tribunal concluded as follows in paragraph 64 of the Award:
"64. On considering the evidence and in the light of the finding of fact which we have made in paragraph 19 above, we conclude that the loadport bills were not contracts of carriage. The loadport bills were intended by the parties to be and were in fact no more than receipts which Isbelni retained until they had received payment from Megafruit under the Cooperation Agreement dated 15th September 2005. The loadport bills were then cancelled. We consider that the parties' intention was that the loadport bills should never be negotiated to Megafruit (or to anyone else). That intention is fatal to their being contractual bills of lading, as that expression is commonly understood. They were not contracts of carriage and Megafruit, as we have found on the evidence, never became the lawful holder of the loadport bills."
- With respect to the tribunal, it seems to me that this paragraph contains a number of errors. At a most basic level, the reference to the Cooperation Agreement dated 15th September 2005 is incorrect. That is a reference to a different agreement between Finmoon and Megafruit which is not relevant in this context. As was common ground before me, the reference should be to the sale contract between Isbelni and Megafruit dated 13th September 2007. However, in my judgment, there is a series of more fundamental errors which appears to be founded on the assumption that the loadport bills were not contracts of carriage either because (i) they were intended to be and were in fact no more than receipts until Isbelni received payment or (ii) they were never intended to be negotiated.
- The practice adopted in the present case involving surrender, cancellation and reissue of bills of lading is not uncommon. There are many reasons why this may occur. It may be because a shipment is to be split between a number of sub-buyers; it may be to ensure that the bills arrive at the discharge port in time to avoid any delay to discharge formalities. This was, in essence the evidence of Ms. Bartnovskaya. Her evidence was that what occurred was a "normal standard procedure for all the companies" in order to secure delivery and to ensure that the disport bills are in identical form to the loadport bills. It was "not convenient" for the claimants to use the loadport bills and it was not possible to split the bills into sub-bills. The surrender and reissue of the bills was, in short, a convenient method adopted to ensure the bills were available at the discharge port in time to facilitate the discharge and process the delivery of the goods to the consignee.
- Notwithstanding this evidence, it was Mr Howard QC's submission that these loadport bills lacked the features which contractual bills of lading possess and that the defects could be summed up as indicating an intention not to create contractual relations. In particular, Mr Howard QC submitted: (i) the bills were not negotiable and not intended to be negotiated; (ii) they were not intended to be used as part of the documentary mechanism for payment; (iii) they were not intended to be used as a means of securing the delivery of the goods; (iv) they were never intended to leave the loading port; but (v) were intended to be and were handed back to the shipowners.
- I do not accept the main thrust of such submission. In my judgment, there is nothing in the features in the present case to negative the intention to create legal relations. Against the background set out above and the further facts as set out in the Award (which were not in dispute), the legal position is, in my judgment, tolerably clear. The starting point is to bear in mind that the piece of paper which is the bill is not (or at least not necessarily) the actual contract of carriage. It is well established that the contract of carriage may not only be contained in but also evidenced by the bill. Once that is borne in mind, the practice adopted is readily explicable. At the very least, the loadport bills evidenced the contract of carriage. The fact that those loadport bills were themselves never intended to be negotiated but were always intended to be and were in fact surrendered and cancelled following receipt of payment for the goods by Isbelni does not mean that there was no contract of carriage. For example, if pending receipt of payment, the goods had been lost, there is no reason to suppose that Isbelni would not have been able to assert a claim against the owners under the contract of carriage contained in or evidenced by the bill in the usual way.
- The question then arises: what is the effect of the surrender and cancellation of the loadport bills ? The short answer is that the loadport bills ceased to have any validity. However, that is not the end of the story and, in my view, these events cannot be viewed in isolation. As appears above, it is plain that following such surrender and cancellation, the mutual intention of all parties (including, of course, the various shipowners) was always that the loadport bills would, in effect, be replaced by the disport bills; and that is exactly what happened. Thus, although the loadport bills ceased to have validity, they were replaced by the disport bills which were duly issued on behalf of the owners and thereby became valid bills binding on the owners and containing or evidencing the original contract of carriage. In my judgment, this was a matter of mechanics and convenience only and did not affect the existence of the underlying contract of carriage.
- The next question is: was/is Megafruit a party to the loadport bills or the disport bills? Given that the loadport bills were surrendered and cancelled, the former is no longer of direct relevance. It is true that these loadport bills were never "negotiated"; and it is also true that Megafruit never became the (lawful) holder of the loadport bills. But, in my judgment, Megafruit did become the lawful holder of the disport bills which were, as I have said, valid bills binding on the Owners and evidencing the contract of carriage. On that basis, and subject to the further point raised by Mr Howard QC and dealt with below, Megafruit had transferred and vested in them all rights of suit under the contract of carriage as if Megafruit had been a party to that contract pursuant to s.2(1) of the Carriage of Goods by Sea Act 1992.
- I should mention that Mr Crookenden QC advanced an argument that the rights of suit in the contracts between Isbelni and the shipowners were transferred to and vested in Megafruit as the party to whom delivery was to be made of the goods to which the bills relate by s.2(1)(b) of the 1992 Act irrespective of any negotiation or transfer of the bills and irrespective of whether Megafruit was the lawful holder of the bills. The general position is discussed in Scrutton on Charterparties and Bills of Lading, 22nd Edition para 2-023. However, it seems to me that that argument gives rise to some difficulty in the circumstances of the present case in particular where the original loadport bills were surrendered and cancelled. In the event, it is unnecessary to determine that issue and I decline to do so.
- I should also mention that Mr Howard QC advanced an argument that Megafruit could not, in any event, obtain the benefit of s.2(1) of the 1992 Act if it was also party (as undisclosed principal) to the charterparty arrangements. In that context, he relied upon Rodoconachi v Milburn (1886) 18 QBD 67 (CA) and President of India v Metcalfe [1970] 1 QB 289 (CA). That argument raises a number of difficult issues which were not fully explored at the present hearing. The topic is discussed at some length in Carver on Bills of Lading, 3rd Edition para 5-049 to 5-051 where the statement is made at para 5-050 that the 1992 Act was not intended to alter the position established by the earlier cases there cited (including President of India v Metcalfe); see Law Com. No 196, Scot Law Com. No 130 para 2.53 (1991). The text continues:
"Thus even though a charterer to whom a bill of lading is indorsed may fall literally within the words of s.2(1), it remains open to the courts to hold that the carrier and charterer intended their relations to be governed by the charterparty rather than by the bill of lading. Whether such inference is to be drawn will continue to be governed by the factors which were relevant to such an issue before the 1992 Act. "
I respectfully agree with those observations. However, it is important to note that any bill of lading contracts that there may be were with the registered owners not BRM. Given that it is also common ground that there were no charterparties with the registered owners in relation to the TBU vessels and, further, my own conclusion that the only chartering arrangements with respect to the other vessels were with BRM under the COA, this point does not, in my judgment, arise.
- It follows that my answer to issue No. 5 is as follows: Megafruit was not the lawful holder of the loadport bills but was the lawful holder of the disport bills. On that basis, Megafruit had transferred and vested in it all rights of suit under the contract of carriage as if it had been a party to that contract pursuant to s.2(1) of the Carriage of Goods by Sea Act 1992.
Issue 8: Has an arbitration against BRM been validly begun under a COA? Was Mr Farrington validly appointed as Arbitrator by the Claimants in relation to the claim made for the carriage by the "Baltic Meridian"?
- This issue falls into two discrete parts. I will deal with each in turn. The first part poses the question: Has an arbitration against BRM been validly begun under a COA? The Tribunal answered this question: No. As to that question, the relevant facts were not in dispute and were set out in paragraphs 71-73 of the Award. In summary, the starting point is a series of letters all dated 29 December 2008 which Holman Fenwick Willan ("HFW") on behalf of the claimants wrote to BRM setting out the nature of the alleged claims in relation to the voyage in question. There was one letter for each disputed voyage. Each letter contained in its heading the dates of a "Charterparty" and "Bills of Lading". The claim advanced in each letter was stated as being under the bills of lading or, in the alternative, under the Charterparty. The date given for the Charterparty was in each case the date which was inserted in the respective bill of lading for that voyage as being the date of the Charterparty. I have already explained the position with regard to such dates earlier in this Judgment. The COA for 2007/2008 was not specifically mentioned. However, at the end of each letter was a heading "Supporting Documents" with a statement: "19. Please find enclosed with this letter the following documents which support the Consignee's claim:" There was then a list of documents which were enclosed with the letter including what was described as "(i) The Charterparty; (ii) The Bills of Lading……..". The document referred to in that list as the "Charterparty" and which was attached was the draft COA dated 22 October 2007 which I have already referred to above. In addition, the letter referred to and attached various survey reports and a schedule summarising the breakdown of each particular claim.
- On 26 February 2009 HFW wrote to Mr Farrington following a telephone conversation with him. The letter, which was headed "Baltic Navigator & Ors" referred to the carriage of twelve cargoes of bananas from Ecuador to St. Petersburg and continued:
"The contractual arrangement is said by our clients to be governed by a Contract of Affreightment dated 22nd October 2007, bills of lading and voyage charters for each cargo. Our clients are the Charterer under the COA, Finmoon Ltd, and the receivers under the bills of lading, 000 Megafruit.
Owners are Baltic Reefers Management, alternatively Baltic Shipping, alternatively Baltic Reefer Ltd.
A copy of the COA is attached to this message..."
The letter mentioned "twelve cargoes of bananas" and identified by name 10 different vessels; the "Nordic Star" and the "Baltic Navigator" were each named twice.
- Following Mr Farrington's acceptance of appointment, HFW on 6 March 2009 wrote a series of letters in similar format to each of BRM, Baltic Reefers Ltd and BSL. There was an individual letter for each vessel in respect of each of the voyages. The COA for 2007/2008 was not mentioned in any of these letters. Rather, the heading of each letter identified the particular vessel with which it was concerned; the heading also gave the date of the supposed relevant charterparty which was (again) the same date as inserted in the respective bill of lading, plus the numbers and dates of the relevant bills of lading. The letters stated in material part:
"We are London solicitors instructed by OOO Megafruit and Finmoon Ltd. By this letter, we give you notice of commencement of arbitration proceedings by our clients in respect of the loss and/or damage to a cargo of bananas during the voyage of [name of vessel] from Guayaquil, Ecuador to St Petersburg, Russia.
"Please note that OOO Megafruit and Finmoon Ltd have today appointed Mr David Farrington [address and details] as their arbitrator in respect of all claims arising under the above bills of lading and the above charterparty…."
- The tribunal in effect held that although Mr Farrington was himself appointed and accepted such appointment under the COA, these letters dated 6 March 2009 did not validly commence arbitration proceedings thereunder because they made no mention of the COA. In particular, as appears from paragraph 79 of the Award, the tribunal held that no arbitration was commenced against BRM under the 2007/8 COA since "there were several contractual arrangements even though the nature of claims was for all practical purposes the same" and that "it is a reasonable conclusion from a reading of the HFW letters that the Claimants thereby were not commencing arbitration under the contract of affreightment for 2007/2008".
- As before the arbitrators, Mr Howard QC submitted that this was really a short point: the claimants say that they are claiming under a COA but the reference (ie the letters dated 6 March 2009) did not mention a COA; the principle is that the arbitrator is seised of the matters which have been referred to him by the reference; he is not seised of matters which have not. In particular, Mr Howard QC submitted that in order to begin an arbitration properly, the party attempting to initiate proceedings must give such information as is reasonably necessary for the other party to know what is the scope of the dispute he is submitting to decision of the arbitrators. In that context, Mr Howard QC accepted that that there is (or at least may be) a degree of informality and flexibility but submitted that the test was not "infinitely elastic"; that in order for a party to satisfy the test, he has to identify with sufficient particularity (a) what disputes are the subject of the reference, by reference to time and subject-matter and (b) the source of the legal obligation which is said to give rise to the claim and that if one or other of these is omitted, the arbitration begun in consequence will be limited to the cases properly covered by the invitation. In the present case, Mr Howard QC submitted that the notices commencing arbitration in the letters dated 6 March 2009 were "utterly unambiguous". Each was expressed to deal with a "claim for cargo damage" arising out of a charterparty dated broadly in accordance with the date of nomination of the particular ship or bills of lading of a given date or dates, which accord with the loadport bills of lading dates. In no case was there any mention of a COA.
- Further, Mr Howard QC submitted that the fact that the COA had been referred to in the letter to Mr Farrington dated 26 February and a copy of the COA enclosed with that letter was irrelevant as was the fact that he had purportedly been appointed under the COA and accepted such appointment thereunder. In that context, Mr Howard QC relied in particular on the decision of Saville J in The Standard Ardour [1988] 2 Lloyd's Rep 159 in particular at p162:
"In my judgment the charterers' counterclaim was not referred to arbitration. It was accepted by [counsel] - correctly, in my view - that the appointment by the owners of their arbitrator was exclusively in respect of their claim for hire. It is perhaps just possible to read the charterers' request to Mr. Manx to act as their arbitrator as encompassing somewhat more than this, but to my mind the notification by the charterers to the owners of Mr. Manx's appointment can only be read as an appointment by the charterers for the purpose of dealing with the owners' claim for hire and with no other matters, that is to say as a simple response to the owners' appointment which was undoubtedly only concerned with the question of hire.
In my view when the question arises whether an arbitral tribunal constituted as in the present case has jurisdiction to determine a particular dispute or claim it is necessary to look objectively at what passed between the parties to the reference, and on that basis to determine whether or not any particular matter is included in the reference. This seems to me to be the approach of Mr. Justice Neill in The World Ares and one which I adopt. It is not sufficient for a party privately to seek to invest his arbitrator with power to determine a particular claim unless this is also made clear to the other party. That was not done in the present case."
Similarly, Mr Howard QC also relied on the passage from the judgment of Lloyd LJ in The Antares (no.1 and 2) [1987] 1 Lloyd's Rep. 424 at 432:
"[The arbitrator] has no jurisdiction to decide disputes which have not been referred to him even though they may arise out of the same facts or substantially the same facts …If the new cause of action falls outside the reference, then, unless the parties agree to refer the new cause of action, the arbitrator would have no jurisdiction to deal with it." (emphasis added)
- These are forceful submissions. However, I am unable to accept them in the particular circumstances of the present case for the following reasons.
- The starting point is, of course, s.14(4) of the Arbitration Act 1996 which provides in material part as follows:
' … arbitral proceedings are commenced in respect of a matter when one party serves on the other party or parties a notice in writing requiring him or them to appoint an arbitrator or to agree to the appointment of an arbitrator in respect of that matter.'
- There is no dispute between the parties that the notice of arbitration must contain at least some information about the dispute in respect of which the arbitrator is to be appointed. As appears from The Standard Ardour, the nature of the dispute must also be communicated to the other party. However, the modern view of this statutory provision is that it should be interpreted broadly and flexibly. The test, therefore, is whether it is clear on objective grounds that arbitration in respect of the relevant dispute has been commenced: see The Agios Lazaros [1976] QB 933; Seabridge Shipping AB v AC Orsslef's Eftf's A/S [1999] 2 Lloyd's Rep 685; Taylor Woodrow Construction v RMD Kwikform Ltd [2008] 2 Lloyd's Rep 345. In Seabridge Shipping, Mr Justice Thomas held:
"Section 14 should, in my view, be interpreted broadly and flexibly. A strict and technical approach to this section has no place in the scheme of the 1996 Act. Notices are given by international traders and businessmen who often use shorthand expressions, or ways of doing things, which are objectively clear in giving notice to the other party of a reference and of the requirement to appoint an arbitrator."
- Further assistance is, in my view, to be found in the judgment of Moore-Bick J. in Atlanska Plovidba v Consignaciones Asturianas SA ("The Lapad") [2004] 2 Lloyd's Rep 109, Moore-Bick J. where he held:
"To be effective, a notice of arbitration to identify the dispute to which it related with sufficient particularity and had also to make it clear that the person giving it was intending to refer the dispute to arbitration, not merely threatening to do so if his demands were not met. Apart from that, there was no need for any further requirements. If one party to an arbitration agreement sent a written notice to the other that made it clear that he was seeking to invoke that agreement to determine an existing dispute between them, the Court should be slow to hold that it was ineffective simply because the sender had identified the wrong document as containing or evidencing their contract if the dispute was otherwise sufficiently identified. In the present case there could have been no doubt about which arbitration agreement A was seeking to invoke, nor about which dispute it was seeking to refer."
That passage reflects the approach advocated in the leading textbook viz that a notice commencing arbitration will not be invalidated if (for example) the claimant refers to the wrong contractual document: see Mustill & Boyd on Commercial Arbitration (Second Edition) pp.198-199.
- In Bulk & Metal Transport (UK) LLP v Voc Bulk Ultra Handymax Pool LLC (The "Voc Gallant") (20 February 2009), HHJ Mackie QC summarised the effect of the cases in the following way:
i. A broad and flexible approach must be adopted with respect to the effect of s14(4).
ii. The requirements of that section will be satisfied provided that it is objectively clear that a communication is intended to refer a dispute to arbitration and to require the necessary steps in that regard to be taken. In that regard the communication must be viewed in its context and not taken in isolation.
iii. A communication will satisfy that test if, by its wording (construed in a matter which is not unduly strict, scrutinous, technical, legalistic or formulaic, and which focuses upon its substance rather than its form) that intention is objectively express or implied.
iv. That intention will be implied from a communication which simply demonstrates that an arbitration clause is being invoked, or which intimates that a dispute is to be submitted to arbitration or that an arbitration is to be resorted to, or which states to the effect that 'I demand the right to have this dispute decided by arbitration as we agreed and require your co-operation in bringing about' or 'I require the difference between us to be submitted to arbitration' or 'unless you are prepared to make proposals for settlement, you must take this letter as requiring you to appoint your arbitrators'.
v. A communication which makes the invocation of the arbitration clause conditional upon the failure to accept an offer of settlement will also suffice, provided that the time of commencement is made clear (by way of a time limit for acceptance of any proposal). Thus, a communication to the effect of 'Unless you are prepared to settle the matter amicably, we must ask you to agree to the appointment of an arbitrator' will suffice to commence proceedings as from the expiry of the stated time limit for acceptance.
I respectfully agree with that summary of the applicable principles.
- Applying those principles to the present facts, I accept that in accordance with observations of Saville J in The Standard Ardour, the terms of the letter dated 26 February 2009 should be ignored. I also accept, of course, that the letters dated 6 March 2009 did not refer to the COA. That is the high point of Mr Howard QC's case. However, I do not think that the failure to refer to the COA in the letters dated 6 March 2009 is fatal. Reading those letters fairly and in accordance with the principles stated above, it seems to me plain that the disputes that have been submitted to arbitration are the claimants' claims for damage to the cargoes of bananas that were carried on the disputed voyages. The letters commencing arbitration themselves made this clear as well as the fact that the claims were being made both under the contractual arrangements by which the vessels were chartered and also under the contracts contained in or evidenced by the bills of lading.
- It seems to me that the confusion arose because the bills of lading contained references to date(s) of individual charterparties. But, as I have already explained, there were never any individual signed charterparties with such dates as the respondents well knew. As I have found, there was a single COA. However, on one view, a COA is in essence simply a series of voyage charters. It is usual for a contract of affreightment to be on the form of a standard voyage charter. This COA was on the standard Gencon voyage charter form with additional clauses. The essential difference between a COA and a series of voyage charters is that owners are obliged to provide tonnage and the charterers are obliged to ship cargo for each of the voyages provided for by the COA whereas, under individual charterparties, the parties can elect whether or not to contract for each voyage. Apart from that, Mr Crookenden QC submitted (and I accept) that there is virtually no difference between a COA and a series of voyage charters. In particular, the respective rights and obligations of the parties in respect of the carriage of a particular cargo carried under a COA are broadly the same as under a single voyage charter on the same terms. No issue arises here between the parties as to BRM's obligation to supply tonnage or Finmoon's obligation to supply cargo. It is for this reason that Mr Crookenden QC submitted that it does not matter to the claimants whether the chartering arrangements between the parties were properly to be analysed as a contract of affreightment or as a series of voyage charters. Whichever it was, the claimants' case is that the carriage was subject to the Hague/Hague-Visby Rules and to the specific clauses relating to the carriage of bananas that were agreed between the parties. The claimants' primary case was that the chartering arrangements were properly to be analysed as a COA; throughout, however, the claimants maintained an alternative case that, even if there was no binding COA, there were individual charterparties between BRM and Finmoon covering the disputed shipments.
- Thus, it seems to me that the letters dated 6 March 2009 can and should be construed as, in effect, giving notice commencing arbitrations under whatever was the relevant charterparty governing the particular identified voyage. That is the substance of the matter. In my judgment, Mr Crookenden QC was right to submit that, as a matter of substance, the most that could be said was that the claimants "had identified the wrong document as containing or evidencing their contract". But, as Moore-Bick J held in the above passage from The Lapad, that is insufficient to make a reference to arbitration invalid or ineffective. In that context, Mr Howard QC submitted that The Lapad and Seabridge Shipping are distinguishable and of no real assistance because they were concerned with the issue of limitation and whether notice of an intention to arbitrate had been properly given and did not deal or purport to deal with the issue of what disputes had been submitted to arbitration once notice has been given. I accept, of course, that those cases arose out of different facts but it seems to me that the general principles expressed in both those cases are of assistance in the present context.
- On this basis, it is my conclusion that the arbitration against BRM has been validly commenced under the COA and I would answer the first question posed under issue 8 accordingly ie "Yes".
- In my judgment, that conclusion is also supported by two further considerations. First, it appears that, at most, the error made by the claimants was to refer in the notices commencing arbitration to charterparties of specific dates being the dates that the respondents themselves had inserted in their bills of lading as being the contracts of carriage pursuant to which the damaged cargoes were carried. As submitted by Mr Crookenden QC, the respondents can have been in no doubt as to the substantive nature of the claims in respect of which arbitrations were being commenced i.e. charterparty claims as well as bill of lading claims. Second, although the letters dated 6 March 2009 did not refer specifically to the COA, the earlier letter dated 29 December 2008 certainly did and, indeed, attached a copy of the COA referring to it as the "charterparty" as I have already described above. I see no reason why that letter (which, of course, passed between the parties) should not be referred to in this context. As submitted by Crookenden QC, it seems to me that in the light of that letter, there could be no misunderstanding on the part of BRM as to the nature of the claim that the claimants were referring to arbitration.
M.V "Baltic Meridian"
- The second question under Issue 8 concerns Mr Farrington's appointment in the reference involving the owners of the mv "Baltic Meridian". In essence, the respondents' case is that the claimants failed to make an appointment because HFW's letter dated 26 February 2009 did not mention that vessel, although it named the 10 others in the reference and mentioned the "Baltic Navigator" (incorrectly) and the "Nordic Star" (correctly) both twice. The tribunal had "little doubt" that the failure to refer to the Baltic Meridian in the letter of appointment of Mr Farrington was a "typographical error": see Award para 82. No such error occurred in the letters dated 6 March 2009 commencing the various arbitrations and all other relevant documents proceeded on the basis that an arbitration reference had been commenced in relation to the "Baltic Meridian". However, the tribunal took the view that "even using a broad and flexible approach" it was unable to agree that Mr Farrington had expressly or impliedly accepted appointment in relation to the "Baltic Meridian": Award para 82.
- In essence, the claimants submitted that the tribunal erred in law in deciding that such a "typographical error" resulted in no arbitration being commenced in respect of that vessel in particular because it was inconsistent with the cases referred to above which mandated a broad and flexible approach to issues relating to the commencement of an arbitration. In particular, the claimants submitted that the opposite conclusion should be reached for the following reasons:
i. Despite the omission to refer to the "Baltic Meridian" in the letter appointing Mr Farrington on 26 February, the letter before action dated 29 December 2008 in respect of the "Baltic Meridian" was clearly served on the Defendants by HFW. Also a letter dated 6 March 2009 commencing arbitration in respect of the "Baltic Meridian" was served on the Defendants.
ii. Further, by an email dated 20 March 2009, Mr Horn, solicitor for the respondents, expressly referred to and listed the "Baltic Meridian" as one of the vessels in relation to which claims had been brought, pursuant to which the respondents appointed Mr Oakley as arbitrator.
iii. Further still, the "Baltic Meridian" was expressly listed as one of the vessels named on the front page of the Order of the tribunal dated 17 March 2010, (over a year after the arbitration proceedings were commenced) an indication that it had been accepted and understood that an arbitration reference had been commenced in relation to the shipment on that vessel.
iv. In any event, the typographical error in the letter of appointment can be rectified or construed in accordance with the intentions of the parties and the overriding interests of justice (i.e. that a serious cargo contamination claim is not shut out by what was obviously a typographical error).
- I confess that I have wavered on this point. As submitted by Mr Howard QC, it seems to me that there are and must be limits to the broad and flexible approach referred to in the authorities. Here, the simple fact is that the appointment letter to Mr Farrington dated 26 February 2009 did not refer to the "Baltic Meridian" at all. There is much force in Mr Howard QC's argument that no amount of flexibility can properly stretch the terms of the letter to cover an appointment in respect of the "Baltic Meridian" voyage when the letter made no reference to that at all; and it is difficult, if not impossible, to see how the principles of rectification or overriding interests of justice might be invoked to save the error. All other things being equal, I would have held in the respondents' favour on this point. However, as sometimes happens, all other things are not equal because it seems to me that Mr Crookenden QC is at least right in what was in effect his alternative submission viz that even if the claimants failed to appoint Mr Farrington in respect of the "Baltic Meridian" in their letter dated 26 February 2009 that would not invalidate the subsequent notice commencing arbitration contained in the letter dated 6 March 2009 in respect of disputes in relation to that vessel. All that was required to commence an arbitration pursuant to s.14(4) of the 1996 Act was for the claimants to serve on the respondents a notice requiring them to appoint an arbitrator or to agree to the appointment of an arbitrator. That is what the claimants did by their notices commencing arbitration ie the letters from HFW dated 6 March 2009. And there is no doubt that one of those letters did give notice of commencement of arbitration in relation to the "Baltic Meridian" voyage in respect of "all claims arising under the bills of lading and above charterparty". So, in my judgment, the answer is that an arbitration in respect of the "Baltic Meridian" voyage both under the COA and under the bills of lading was duly commenced; and although Mr Farrington was not initially appointed in respect of such claims, it would seem that the tribunal (including Mr Farrington) and the parties have by their subsequent conduct proceeded on the basis that Mr Farrington was duly appointed such that, at the very least, the respondents are, in effect, estopped from contending otherwise.
- For all these reasons, I would therefore answer the second part of issue 8 as follows: "Yes".
Issue 9: Is Megafruit a party to the arbitration commenced by Finmoon under the COA? If not, can it now join the arbitration rather than commence proceedings of its own?
- The Tribunal answered this question as follows: Megafruit is not a party because an arbitration under the COA has not validly been commenced. Megafruit is a party to arbitration references commenced under bills of lading.
- The position in relation to this issue (in fact two issues) is very confusing. At the start, I should make plain that the claimants did not seek at least directly to challenge the tribunal's conclusions under this head. Given my conclusion under Issue 5, the tribunal's conclusion that Megafruit is a party to arbitration references commenced under the bills of lading is relatively straightforward. The main difficulty concerns the tribunal's conclusion that Megafruit is not a party to the arbitration commenced by Finmoon under the COA. As I say, the claimants did not at least directly seek to challenge that conclusion; but given my own conclusion that an arbitration under the COA has been validly commenced, it seems to me that at the very least the reason given by the tribunal for stating that Megafruit was not a party to such arbitration cannot survive.
- However, the reason for possible confusion is that the main attack (if that is the right word) in relation to this issue came not from the claimants but the respondents. In particular, the respondents sought to reformulate the preliminary question under this head as follows:
"Was Megafruit a principal (admittedly undisclosed) of Finmoon in respect of any of the above contracts and if so which? If it was (a) is it already party to the arbitration? If not (b) can it now join in this arbitration rather than commence proceedings of its own? If it can join in this arbitration, can it do so while Finmoon remains a party to it?
- In addressing these questions, the respondents made extensive reference to the decision of Hobhouse J in The World Era [1950] 1 Lloyd's Rep 45 and, in reliance upon various passages in that Judgment, invited the Court to find that by beginning this arbitration in the name of Finmoon, Megafruit, even if later established to be principals of Finmoon, have irrevocably committed themselves, for good or ill, to suing in the name of their agents. I decline that invitation. Given my earlier conclusions, there is no doubt that Megafruit has purportedly commenced arbitration under the COA. Whether or not it will be able to advance and to succeed in such claim will depend (amongst other things) on its substantive rights (if any) as undisclosed principal which it is impossible for me to determine at this stage and which, as I understood, neither claimants nor respondents invited me to determine. Indeed, I am uncertain whether the claimants would still wish to advance such a case in the light of my other conclusions.
- I recognise that this is not very satisfactory because, on one view, Megafruit can only be said to be a party to the arbitration if it has the status of an undisclosed principal and, in that capacity, is a party to the arbitration agreement; and, to that extent, these are matters which potentially give rise to issues as to the jurisdiction of the tribunal. However, it seems to me that given the position adopted by the parties these are matters to be determined in the arbitration subject (possibly) to review by the court in due course. Be that as it may, I can see no basis at this stage for requiring either Finmoon or Megafruit to make any election with regard to which party is the proper claimant under the COA.
- In these circumstances, I would answer issue 9 as follows: If Megafruit is an undisclosed principal it is a party to the arbitration under the COA.
Conclusion
- In summary, I would answer the issues as set out above. Counsel are requested to seek to agree a draft order (including costs) failing which I will deal with any outstanding issues.
