Empresa Navegacion "Mambisa" v. Taikoo Dockyard & Engineering Co of Hong Kong Ltd
Read the full judgment text of CACV 52/1976 on BabelCite. This Court of Appeal judgment.
2. The ship-owners entered into a ship repair agreement with the defendant deck company. In the events which have happened it was an agreement for two years from 10th August 1969. The principal terms governing the number of ships to be repaired and various discounts or credits which were to be allowed in specified circumstances were contained in what has been described as "the Master Agreement". Clause 6 of that Agreement reads:
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CACV000052/1976
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----------------- Coram: Huggins and Pickering, JJ.A. and Leonard, J. Date of Judgment: 11th February 1977. ----------------- JUDGMENT ----------------- Huggins, J.A.: The learned Chief Justice, reversing the decision of a Registrar, ordered that this action be stayed on the ground that the parties had agreed to submit to arbitration any dispute which might arise between them. The plaintiff ship-owners now appeal to this court. 2. The ship-owners entered into a ship repair agreement with the defendant deck company. In the events which have happened it was an agreement for two years from 10th August 1969. The principal terms governing the number of ships to be repaired and various discounts or credits which were to be allowed in specified circumstances were contained in what has been described as "the Master Agreement". Clause 6 of that Agreement reads:
The two sets of Standard Conditions were indeed annexed and they are headed respectively -
The "B" Conditions contain a clause which reads in part:
but the "A" Conditions contain no such clause. 3. Within the period of the Master Agreement the ship-owners asked the dock company for an estimate of the cost of effecting specified repairs to their vessel "E1 Jigue". The dock company in reply supplied what they described as a "tender" for the work. It was not a tender in the sense (to quote from the Shorter Oxford English Dictionary) of
because for many of the items of work only approximate figures were given - sometimes with the addition of the words "for budgetting purposes only" - and in some instances the notation was "price after examination". The dock company contend that the document was nevertheless a "tender" of the kind contemplated by the parties in their Agreement and the ship-owners accept that, the case having been argued in chambers on that basis, it is not open to them to suggest otherwise in this court. Again, at least for the purposes of this appeal, both parties expressly accept that on the true construction of clause 6 of the Master Agreement Conditions "A" and "B" are exhaustive, i.e. that all repairs carried out by the dock company to the ship-owners' vessels are governed by one or the other. 4. There is no evidence of any further communication between the parties before, on 31st March 1971, the "E1 Jigue" entered the dock company's dock. It is reasonable to assume that there were communications of a purely administrative nature, but we are told of nothing which could be construed as an acceptance or rejection of the "tender". While the vessel was in the dockyard two things happened: first, in addition to work covered by the "tender" a large amount of other work was carried out, for which the dock company charged a sum in excess of the total price for the works covered by the "tender", and, second, a fire broke out on board which resulted in extensive damage, that damage being the basis of the ship-owners' claim in the action. 5. The ship-owners submit that the learned Chief Justice was in error in finding on the evidence that the "tender" had been accepted so as to bring into operation the arbitration clause in the "B" Conditions. Unfortunately we do not have the advantage of any written reasons for the decisions below, but an agreed note of the decision in the judge's chambers reads:
I understand that to mean that there was what has been contended for by the dock company - an acceptance by conduct: by presenting the ship at the dockyard, apparently for (inter alia) the very repairs specified in the "tender", the ship-owners indicated (in the absence of any express acceptance or rejection of the "tender") that they were accepting. Mr. Ching argues that this is not sufficient evidence of acceptance because (he says) not only might there have been another agreement but the extent of the additional work charged for makes it probable that there was another agreement, which would constitute a counter-offer and a rejection of the "tender". He emphasizes that the burden of proof is on the dock company - and that is conceded. I agree that the evidence of acceptance was sparse but in my view it was sufficient to transfer to the ship-owners the evidential burden, a burden which they could so easily have discharged if in fact there had been a rejection of the "tender". The learned Chief Justice had to decide the case on the evidence before him and I do not think his findings can be successfully attacked. 6. Next it is submitted that even if the arbitration clause was operative the dock company have not sufficiently identified the dispute which is to be referred to arbitration and, even if they have, that they have not shown that that dispute is within the ambit of the arbitration clause. At an early stage the solicitors for the dock company asked for particulars of the Statement of Claim and later threatened to apply for an order if the particulars were not given voluntarily. The solicitors for the ship-owners on 5th May 1976 gave notice that they required a Defence to be filed and six days later formally refused to give the particulars sought or to agree to a submission to arbitration. What Mr. Ching says here is that if the particulars were really necessary to enable the dock company to file their Defence the dispute cannot have been sufficiently identified and once again, the burden was on them to show what the dispute was. I suspect that there was a certain amount of tactical manoeuvring going on but, be that as it may, the dock company never said they could not identify the dispute which would be referred to the arbitrator if the decision to arbitrate came to be made: what they said was that they wished to have the particulars before deciding whether to insist on arbitration. Until they filed their Defence or a reference was made the exact issues might not be known, but the general nature of the dispute was in my view clear enough. 7. Was that dispute within the ambit of the arbitration clause? The substance of the contention on behalf of the ship-owners is that the "B" Conditions, assuming they governed some of the work, had not been shown to apply to such dispute as had been disclosed. Mr. Ching submits that the "B" Conditions would at most apply to events arising from the carrying out of the repairs covered by the "tender" and that any additional work would be governed by the "A" Conditions: it was therefore for the dock company to show that the dispute arose out of the former repairs. This argument appears to be consonant with the headings to the two sets of Conditions when they are considered in isolation, because it does not necessarily follow from the fact that a tender has been submitted (even if accepted) that all repairs done must be "pursuant to" that tender. However, the concession which was made, that all repairs must be governed by one set of Conditions or the other, shows that too much weight should not be attached to the strict meanings of the headings themselves. Mr. Ching points to a number of the "B" Conditions and in particular to clause 7, which expressly states that the "B" Conditions shall apply to "replacements" of work carried out and subsequently destroyed or damaged. From this it is suggested that the parties have, where they desired that the "B" Conditions should apply to other than the specified repairs, expressly so stated. Mr. Evans, on the other hand, relies heavily on clause 4, which is in these terms:
He argues that this provides that extra works shall be treated on the same footing as the specified repairs and that, though chargeable at tariff rates, they are thus brought under the heading "Repairs pursuant to Tenders". He further says that clause 6(ii) clearly recognizes that sums may be payable under the "B" Conditions which are different from "the price quoted": such amounts must be for the extra works. In clause 4 the use of the word "expressly" shows that there may be work done which is not expressly included in the "tender" and which will be charged separately, but the clause does not say that such work shall not be governed by the "B" Conditions. However, the extra works there referred to may be no more than those specifically mentioned in clause 1, which reads in part:
In so far as extra works were "unspecified removals in connection therewith" they would clearly be "pursuant to" the tender and it seems to me that any extra works (including such "unspecified renewals" as are chargeable) could similarly be "pursuant to" the tender - at least so long as the specified repairs remained the substantial reason for the entry of the vessel into the dock company's dockyard. Mr. Evans submits that the scope of the contract is wider than the scope of the "tender". By that, as I understand him, he means not that the extra works are not "pursuant to" the "tender" but merely that they are not specified in the "tender" and it matters not that on one possible interpretation of clause 1 the "tender" covers and includes only the specified work, the specified removals and the unspecified removals. If Mr. Ching's argument is correct, then, on the agreed basis that the "A" or the "B" Conditions must govern all repairs undertaken by the dock company for the ship-owners, it follows that where repairs specified in a "tender" are done at the same time as other repairs not so specified both sets of Conditions will apply at one and the same time. In this connection clause 1 of the "A" Conditions is relevant and this reads in part:
Again it may be argued that this is capable of two interpretations, either that where the terms of the formal tender prevail the "A" Conditions shall not apply at all or that the terms of the formal tender shall prevail only in so far as the work done is specified in the formal tender. Seeing that there is this ambiguity, I think it would be highly inconvenient that both sets of Conditions should apply at one and the same time and such a result is unlikely to have been intended by the parties. Suppose a fire resulted from a defective electric cable supplying power at the same moment of time for specified repairs and for unspecified repairs. If both sets of Conditions applied, a dispute as to liability for negligence would be arbitrable under one but not under the other. The more natural meaning of clause 6 of the Master Agreement and of the relevant clauses of the two sets of Conditions seems to me to be that only one set of Conditions is to apply at any one time in respect of any one vessel. Mr. Ching has suggested that where there is any doubt whether there has been an agreement to submit disputes to arbitration the judge should exercise his discretion against a stay, and he cites London Sack and Bag Co. Ltd. v Dixon and Lugton Ltd. 1943 2 All E.R. 763. However, as Buckley, L.J., said in Modern Building Wales Ltd. v Limmer and Trinided Co. Ltd. 1975 1 W.L.R. 1281, 1287 there is a difference between failing to prove an agreement and proving an agreement the construction of which is in doubt: we are bound to resolve any doubt of construction, for that is the function of a court of Law. Although we do not have to decide upon the interpretation of all the clauses of the "B" Conditions, our decision necessarily involves ascertaining whether all those Conditions apply, for if the arbitration clause applies so must they all. The task is no light one, because the language used by the parties is far from clear, and I come to a decision with considerable hesitation, but, looking at the whole of the documents, I think the learned Chief Justice was right and that the "B" Conditions do apply to the dispute. I add only that I reserve the question whether a case might arise where the extras so far outweighed the repairs specified in the tender that the latter might fairly be ignored under the de minimis principle. 8. The last requirement which the dock company had to fulfil was that they show they were ready and willing to do all things necessary to the proper conduct of the arbitration both when the action was brought and at the time of their application for the stay. With respect to Mr. Ching I think his argument on this point confused readiness and willingness to arbitrate with making a firm decision to seek arbitration. It is, of course, entirely correct that what has to be proved is a state of mind, the existence of which cannot depend upon a defendant's being asked whether he is ready and willing, but in the absence of the question it may be difficult to find extrinsic evidence of his state of mind. The dock company asserted that they were ready and willing and it was sought to contradict that evidence by evidence that the company had not decided to insist on arbitration. The dock company was the defendant and was under no obligation to expedite the ship-owners' claim. Whether or not an application to the court for the particulars for which they had asked by letter would have constituted a "step in the proceedings" is apparently open to argument (see Fathers of Confederation Buildings Trust v Pigott Construction Co. Ltd. [1974] 44 D.L.R. (3rd Ed.) 265) but, having been granted an extension of time to file that Defence, they were entitled to delay even though the particulars might not be necessary to enable them to file that Defence. The ship-owners were masters of the proceedings and could have given notice at any time requiring a Defence (as they eventually did). That would have forced the dock company's hands: they would either have had to take a step in the proceedings or have applied for a stay. That they did neither of those things does not prove that they were not ready and willing to arbitrate. There was evidence upon which the learned Chief Justice could properly find that they were ready and willing. 9. That leaves only the discretion to refuse a stay where there is sufficient reason why the matter should not be referred to arbitration in accordance with the Agreement. Weighty dicta have been cited to us which establish that there is a "strong bias" in favour of maintaining the special bargain between the parties: see, e.g., Metropolitan Tunnel and Public Works, Ltd. v London Electric Railway Co. 1926 Ch. 371, 390. It is enough to say that the learned Chief Justice considered all the relevant factors and that I am not persuaded he was wrong in his conclusion. In particular I see no reason why a hearing before an arbitrator should not be a satisfactory method of disposing of this dispute: although it may be that difficult questions of law will arise they will not be the only issues and I believe that (to use the words of Viscount Simon, L.C. in Heyman v Darwins Ltd. 1942 A.C. 356, 369)
10. I would dismiss the appeal. 11th February 1977. Representation:
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----------------- Coram: Huggins & Pickering, JJ.A. & Leonard, J. Date of Judgment: 11th February, 1977. ----------------- JUDGMENT ----------------- Pickering, J.A. I entirely agree that there was an acceptance of the tender herein by conduct in that the ship was delivered to the Defendants' dockyard for repair and there is an ample identity between many of the items tendered for and those eventually paid for to leave no doubt that that delivery was made pursuant to the tender thereby constituting an acceptance of the tender. I am equally in no doubt that the Defendants were ready and willing within the meaning of that term in section 6(1) of the Arbitration Ordinance, Cap.341 to do all things necessary to the proper conduct of the arbitration and that they were so ready and so willing at the time when these proceedings were commenced. There is distinction between a state of readiness and willingness and insistance upon arbitration and it was only insistance that was not demonstrated for approximately 18 months, that is, until the issue of the summons for a stay of the present proceedings. 2. As it seems to me however the Appellants must succeed upon this appeal and the order for a stay of the proceedings be set aside since the Defendants have been unable to demonstrate, as is their onus, that the dispute lies within the ambit of the Arbitration Clause. The Ship Repair Agreement, which has been referred to as the Master Agreement, states in Clause 6 that the Dockyard Standard Conditions "A" or "B" are to apply during the whole period of the Agreement unless specifically amended by the terms of the Agreement. It was Mr. Evans' contention for the Defendants that either Standard Conditions "A" or Standard Conditions "B" must apply to the repairs. With respect I am unable to agree for there is no reason in law or in logic why that should be so for although at one stage Mr. Ching conceded that for the purpose of this appeal either Standard Conditions "A" or Standard Conditions "B" applied, it became apparent that that concession was confined to his argument to the effect that the tender had never been accepted; for subsequently, in arguing the ambit of the Arbitration Clause, he urged that the "B" Conditions applied only to works specified in the tender and to claims arising therefrom. In truth there is no reason why both sets of Conditions should not apply to the contract. Standard Conditions "A" are expressed in their very title as "governing repairs when no tender is submitted" whereas the "B" Standard Conditions are expressed as "governing repairs pursuant to tenders". It is common ground that the work actually performed on the ship and charged for and paid for was not confined to the times detailed in the tender submitted by the Defendants. Clause 4 of the Standard Conditions "B" reads:
3. Quite plainly some of the work performed was in the nature of extra work as contemplated by Clause 4 and was not the subject of tender. But the document containing the Arbitration Clause, that is Standard Conditions "B", is headed:
which clearly delimits the maters to which the conditions, including the Arbitration Clause, shall apply. Moreover Clause 1 of these "B" Conditions states unequivocally that "the tender covers and includes the work herein specified and all specified removals in connection therewith". Extra work is not embraced in that definition but is separately provided for by Clause 4 and had it been the intention that the Standard Conditions "B" should apply not only to works specified in Clause 1 but also to extra work not the subject of tender, nothing could have been more simple than to have said so. It is this very dichotomy between Clauses 1 and 4 which in my view differentiates Standard Conditions "B" from the common type of building contract containing provisions for extras. 4. There are in existence two sets of special Conditions "A" and "B" but those Conditions relate to "repairs" and not to vessels. Quite clearly if the whole of the work on one vessel was covered by an accepted tender Conditions "B" would apply whereas if work on another vessel was the subject of an order without any tender Conditions "A" would operate: but there is no reason why both sets of conditions should not apply to work on the same vessel since what the special Conditions govern are repairs and those repairs can be contracted for, as in this case, at different times and by different methods - both within the contemplation of the parties - one involving the submission of a tender and the other no such submission. It is the fact that the two sets of special Conditions govern repairs and not vessels which seems to me to negative the "stream to seawall" argument which has appealed to my brother, Leonard, J. 5. With respect, the comment that a situation in which both sets of Conditions apply at the same time was unlikely to have been intended by the parties, is irrelevant. The question is - what does the document mean? This is not the same question as - what did the parties intend when they executed it? They are presumed to have intended that which they in fact said and the Court must not, by supplying information, substitute its own idea of what the parties meant. It is only where the words used are not clear and unambiguous that intention will prevail. But nothing could be less ambiguous than "governing repairs pursuant to tenders" - the more so when there is in existence another standard form of conditions "governing repairs where no tender is submitted". The phrase "the tender covers and includes the work herein specified and all specified removals in connection therewith", contained in Clause 1 of Conditions "B", is equally clear and the fact that the possibility of extra work, over and above that tendered for, being ordered is contemplated in Clause 4, does not detract from that clarity. 6. I entirely agree that more assistance is to be derived from the body of a document than from its title but even if we turn from the unambiguous description "Governing repairs pursuant to tenders" contained in the heading of the "B" Conditions the very next thing encountered is the definition clause which does not include extras. 7. The fact that the "A" Conditions contained no clause similar to Clause 4 (the extras clause) in Conditions "B" is not surprising. By their very nature the "A" Conditions are not susceptible of such a clause because where work is ordered item by item there can be no such thing as extras it being only where an estimate or tender has been given, intended to embrace the work to be done, that extras can arise. 8. On the view which I have taken it is necessary for the Defendants, if they wish to insist upon arbitration and to stay the Court proceedings, to demonstrate that the fire which occurred upon the ship arose during the course of or otherwise in connection with the execution of tender work as opposed to extra work. No attempt has been made to demonstrate this although, in view of the Defendants' stated possession of upwards of 50 written statements concerning the cause of the fire, the probable cause must be well within their knowledge. It is argued that the burden of the Plaintiffs' allegations is that the fire was caused by an electrical fault - and electrical work was covered by the original tender. The inference reached for is that if the Plaintiffs are right in alleging that the fire started as a result of an electrical fault that fault must have occurred in the course of tender work. But this is simply not so for certainly some electrical work was so covered but a comparison of the tender details with the items eventually billed, reveals that "extra" electrical work was performed. 9. Mr. Evans criticises the practical situation arising if Conditions "B" apply to part of the work performed upon the ship and Conditions "A" to another part describing it as inconvenient and absurd. That the result is clumsy and inconvenient I would agree but I do not think it necessarily absurd. There is no reason why businessmen should not provide that disputes arising from certain types of work should be referred to arbitration whilst those arising from other types of work should not and this is the precise result for which the parties contracted. 10. For these reasons I would allow the appeal, set aside the stay ordered by the judge in chambers and restore the order of the Registrar refusing the stay. Representation: Charles Ching, Q.C. & William Waung (Deacons) for appellant Evans, Q.C. & A. Dicks (J.S.M.) for respondent.
----------------- Coram: Huggins, Pickering, JJ.A. & Leonard, J. Date of Judgment: ----------------- JUDGMENT ----------------- Leonard, J.: I have had the advantage of reading in draft the judgment of Huggins, J.A. with which I agree, and that of Pickering, J.A. and will confine myself to the question whether the respondents have brought themselves within the ambit of the arbitration clause since that is the only question on which Huggins, J.A. and Pickering, J.A. differ. I am in agreement with Huggins, J.A. on this point for reasons which follow: 2. Para. 6 of the Ship Repair Agreement reads:
3. Para. 1 of Ship Repair Agreement reads:
To my mind when read with Clause 1 of the Ship Repair Agreement Clause 6 must mean that either Standard Conditions "A" or Standard Conditions "B" will apply so as govern the rights and obligations of the parties in respect of anyone of the appellants vessels while that vessel is "placed" with the Defendant. 4. Standard Conditions "A" and Standard Conditions "B" were attached to the Master Agreement. In each the respondent is referred to as "The Contractor". Standard Conditions "A" are headed "Governing repairs where no tender is submitted". Its first paragraph reads in part:
Standard Conditions "B" as attached to the Ship Repair Agreement are headed "Governing repairs pursuant to tender" and at first sight therefore there would appear to be a lacuna. The position where no tender is submitted is covered as is the position where repairs are carried out pursuant to tenders but there appears at first sight to be no provision for the case where a tender is submitted but the repairs being done are not being done pursuant to it. This lacuna I regard as more apparent than real because of Clauses 1 and 4 of Special Conditions "B". The relevant sentence in Clause 1 reads:
I would emphasize the word "tender" and the word "herein". In my view they presuppose (as was in fact the case) that Special Conditions "B" should where applicable form part of a larger document to be read as a whole. Further the use of the word "tender" as distinct from the words "these conditions" raises at least the possibility that Special Conditions "B" would affect the rights of the parties when repairs other than the work actually specified in the tender to which they are to be attached were being carried out. The possibility of such work existing is adverted to in Clause 4 which reads:
This clause then covers what may loosely be termed "extras" and the manner in which payment for them is to be computed. It is to be noted that there is no similar clause in Standard Conditions "A" and that neither Clause 4 nor any other clause in Special Conditions B suggests that Special Conditions "A" should apply while extras are being carried out. 5. Clause 14 of Special Conditions "B" reads:
6. The appellants asked for an estimate for the "work list" for the vessel M.V. "EL Jigue" on the 1st February 1971. They got what the respondents called "our tender No. T. 25/71". In the court below this document was regarded throughout as "the tender" so that Mr. Ching was constrained to admit that he could not argue that it was not a tender. He nevertheless and perhaps casuistically argued that it was not and could not be regarded as an offer capable of acceptance because of the many instances in it where figures were not firm. Be that as it may I am persuaded in the complete absence of any evidence to the contrary that it was under this document and the Ship Repair Agreement that the appellants entrusted their ship to the respondents. I must therefore look to it to ascertain the rights and liabilities of the parties while the vessel was so entrusted. 7. It is headed in large print "Tender" bears the Tender No. T. 25/71 and annotations "Date issued 20th February 1971" and "Date expires 20th May 1971". I pause to remark that it is common case that the fire giving rise to the litigation occurred between these two dates. 8. The document bears the further heading "M.V. EL Jigue Docking and Repairs". The first item of a large number listed reads:
This item lends support to the argument that the "tender" and the conditions attached to it are intended to apply throughout the period the vessel is "placed" with the respondent "from stream ... and out to stream again". I do not think any useful purpose will be served by my listing the other items set out in this document. It concludes with the words "Conditions see over". The Conditions set out overleaf were, it is common case, Standard Conditions "B". Again it is common case that while the vessel was with the respondents a very large amount of work not listed in the "tender" nor contemplated by the "tender" was done and there is no evidence as to whether the fire giving rise to the litigation occurred while the extra work was being done. It was Mr. Ching's case that unless the casualty was proved to have arisen while the work specified in the "Tender" was being done the respondents had failed to prove that the arbitration clause was applicable. 9. This argument does not commend itself to me. I agree with Mr. Evans that it is necessary to distinguish between three questions when determining the applicability of the arbitration clause - (a) the scope of the tender; (b) the scope of the contract between the parties the scope that is of the rights and liabilities of the parties arising from the documents I have particularised and the action of the appellants in entrusting the vessel to the respondents and (c) the scope of the submission to arbitration. 10. As to (a) I would agree with Mr. Ching that the respondents have failed to prove that the fire arose from the "tender work". I would not however agree that for that reason it has not been proved to have arisen within the scope of the agreement delineating the parties rights and liabilities. My reasons are almost self-evident from my earlier recital of the documents. Clause 6 of the Ship Repair Agreement read in its context and with Clause 1 of the same agreement in mind indicates that either Standard Conditions "A" shall apply in connection with the work to be done to any vessel "placed" for repair or Standard Conditions "B" shall apply. Clause 6 must be read with the Standard Conditions in mind also. Standard Conditions "A" apply only where no tender has been "submitted" (the word is not "accepted"). If a tender is submitted its terms are to prevail. I can find in this no support for the suggestion that Standard Conditions "A" may apply to "extras" in a case where a tender has been submitted. I have already indicated my view that the apparent lacuna between the two sets of Special Conditions disappears when one bears in mind all the documents and that Clause 4 of Special Conditions "B" visualizes "extras" while no clause in Special Conditions "A" does so. From the practical business point of view it seems to me that the respondents would refrain from submitting a "Tender" and so bring Special Conditions "A" into force where one or two readily ascertainable and simple jobs of work were to be done but would submit a "tender", thereby rendering Special Conditions "A" inapplicable, in a more complicated case where "extras" might be involved. The title of Special Conditions "B" i.e. "Governing repairs pursuant to tenders" is not entirely incorrect in such cases as at least some repairs to be done would be "repairs pursuant to tender". The wording is loose for strictly speaking many of the conditions do not govern repairs. For the intention of the parties one must look to the entirety of the document rather than its title. Turning to the actual "tender" in this case we have the express incorporation of Special Conditions "B" in it together with the initial paragraph or item. These factors combine to indicate to me an intention that Special Conditions "B" shall apply between the time the vessel is towed "from stream to seawall until it is towed "out to stream again upon completion of repairs". The intention is perhaps not clearly expressed but its implication appears to me inevitable. 11. I turn then to the third question - the scope of the arbitration clause itself. In its wording this could not be wider. Once granted that Special Conditions "B" are applicable it is to me inevitable that it be binding in the events that have happened whether the claim be in contract or in tort. Representation: |