The Owners of and/or Other Persons Entitled To Sue in Respect of Cargo Lately Laden on Board the Ship or Vessel "Yaoki" v. The Owners of and/or Demise Charterers of the Ship or Vessel “Yaoki” and The Ships or Vessels Listed in Schedule Hereto

HCAJ134/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO.134 OF 2005

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Admiralty action in rem against the ship or vessel “Yaoki”

and the ships or vessels listed in Schedule hereto

BETWEEN

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Before : Hon Waung J in Court

Date of Hearing: 10 May 2006

Date of Judgment  : 15 May 2006

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J U D G M E N T

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1.The defendants by motion are seeking a stay of the Hong Kong proceedings on the ground of an arbitration clause in the Bill of Lading.

2.The claim of the plaintiffs is based on a Bill of Lading dated 31 August 2003 (“B/L”).  The claim is in respect of damage to cargo of benzene in bulk carried under the B/L.  The B/L contained the following provision on the front and on the back :

“ ……This shipment is carried under and pursuant to the terms of the Contract of Affreightment/Charter Party dated AS PER CHARTER PARTY at PER CHARTER PARTY between AS PER CHARTER PARTY and AS PER CHARTER PARTY as Charterer and all the terms whatsoever of the said Contract of Affreightment/Charter Party including the Arbitration clause, cargo line clause, and the conditions appearing on both sides of this Bill of Lading to apply and to govern the rights of the parties concerned in this shipment.  A copy of the Contract of Affreightment/Charter Party may be obtained from the Shipper or the Charterer upon request.”

Clause 3 on the back reads :

“3. Arbitration

Any and all differences and disputes of whatsoever nature arising out of this Bill of lading shall be put to Arbitration in the City of New York or in the City of London, whichever place is specified in the Charter and in accordance with the Arbitration clause therein.”

3.The reference to the Charter Party in the B/L creates the problem.  There are two Charterparties in existence, the head charter which is a Time Charter on Shelltime 4 Form dated 24 September 2002 (“Time CP”) with S.H. Marine Ltd as the charterer and a Voyage Charter dated 14 August 2003 (“Voyage CP”) with S.H. Marine Ltd as owner and BP Singapore as the voyage charterer.   The Time CP contains a London Arbitration Clause [Clause 61] but the Voyage CP contains no arbitration clause, only an Exclusive Jurisdiction Clause for London High Court [Clause 44].  The dispute before me is on the proper construction of the B/L, having regard to these two Charters, whether there is a binding arbitration clause under the B/L so that the present Hong Kong proceedings must be stayed.  It is not in dispute that if there is such a binding arbitration clause, this Court has no discretion to refuse a stay.  This is so because Mr Coleman on behalf of the defendants has abandoned the alternative reliance on stay for English High Court.

4.The issues argued at the hearing between the parties are the following :

(1) Whether the Time CP (or the Voyage CP) is the Charter Party referred to in the B/L.

(2) If the Voyage CP is the Charter Party referred to in the B/L :

(a) Is the Exclusive Jurisdiction Clause in the Voyage CP incorporated into the B/L?

(b) Is the Arbitration Clause in Clause 3 of the B/L ousted from the B/L?

(c) If the answer to (a) is yes and the answer to (b) is no (namely that the Exclusive Jurisdiction Clause and Arbitration Clause are both part of the B/L terms), should this claim, being a dispute under the B/L, be stayed for arbitration as a dispute under the B/L and subject to the B/L Arbitration Clause and not a dispute arising out of the C/P and subject to the Voyage CP Exclusive Jurisdiction Clause?

Issue (1) : Which Charter referred to in B/L — Time or Voyage CP?

5.The lack of sufficient identification of the Charter Party in the B/P has created the problem of which of the two CP, the B/L referred to.  This is not an unusual problem in carriage disputes.  Carver on Bills of Lading, 2^nd edition discusses the problem this way at 3-025 and 3-026 :

“…One question which can arise in such cases is whether the shipowner or his agent is contractually bound to sign such a bill; and the answer to this question depends on whether the bill complies with any requirements with regard to it in the charterparty alleged to have been broken by the shipowner’s refusal to sign the bill. … [para. 3-025]

…The lack of clarity may, secondly, result from the facts that the carrying ship is the subject of more than one charterparty, and that the incorporating clause does not state from which of these the incorporated terms are to be taken, e.g. because a blank in the incorporating clause is not filled in, or because that clause merely uses the words ‘as per charterparty’, without specifying which is intended.  One possible view was that in such cases the attempt to incorporate the charterparty terms failed on the ground that the incorporation clause was too uncertain.  But the courts are now reluctant to take this view and will make considerable efforts to determine which of the charters it was the original parties to the bill of lading contract intended to incorporate.  One view is that it is the terms of the “head charter” which are incorporated (presumably on the ground that it was by reference to that charter that the shipowner intended to define his obligations).  However, this is a somewhat one-sided argument … The view that the terms incorporated by an ambiguous incorporation clause are those of the head charter also seems to be based on the assumption that the original parties to the bill of lading contract are shipowner and shipper; but where … that contract is between a sub-charterer and the shipper, then it might be more appropriate to regard a reference in the bill of lading incorporation clause simply to a charterparty as being one to the sub-charter. There is no easy answer to the problem raised by cases of the kind here under discussion.  The only general statement which can safely be made about them is that where the courts have to choose between two or more charterparties, they will be inclined to favour the incorporation of terms of that charter which are the more (or the most) appropriate to regulate the legal relations of the parties to the bill of lading contract.  Where each (or more than one) of the charterparties is equally appropriate for this purpose, the courts might determine the issue by holding the relevant charterparty to be that one which governed the contractual relations between the original parties to the bill of lading and in pursuance of which the bill was issued. [3-026]” 

6.In Scrutton on Charterparties, 20^th ed., this was said in Article 38 :

“… It is submitted that a general reference will normally be construed as relating to the head charter, since this is the contract to which the shipowener, who issues the bill of lading, is a party.  But this will not invariably be so, and the court may conclude, on examining the facts, that the intention was to incorporate the sub-charter; or even, in extreme cases, that the bill of lading is so ambiguous as to be void.”

7.With these general principles in mind, it seems to me that on the proper construction of the B/L, having regard to the terms of the B/L, the terms of the head Time CP and the terms of the Voyage CP that the Charter Party referred to in the B/L is the Time CP and not the Voyage Charter.  I reach this conclusion for the reasons below.

8.The shipowner is a party to both the B/L and the Time CP but is not a party to the Voyage CP.  Whereas the shipper of the B/L is the original party to the B/L but is not a party to the Voyage CP.  There is therefore a much stronger reason for the Shipowner to link the B/L (of which the Shipowner is a party) to the Time CP (of which the Shipowner is a party) than for the Shipper to link the B/L (of which the Shipper is a party) to the Voyage CP (of which the Shipper is not a party).  This strong reason supports the general rule (repeatedly stated in various editions of Scrutton) that “general reference will normally be construed as relating to the head charter”.

9.There are however in this case further very strong support that the B/L was issued pursuant to and incorporating the Time Charter.  First and foremost is the Arbitration Clause appearing not only on the front of the B/L but also expressly stated in clause 3 on the back of the B/L.  A linkage of the B/L to the Time CP simply fulfilled the intention in the Time CP of the Shipowner that disputes are to be settled by arbitration.  The Voyage CP has an Exclusive Jurisdiction Clause which is certainly not what was intended by the Shipowner in either the Time CP or the B/L nor by the Shipper of the B/L in the B/L who was not a party to the Voyage CP.

10.Secondly, the Time CP specified that bills of lading issued must contain two particular clauses with specific wordings spelt out in the Time CP.  The two mandatory clauses in the bills of lading are the Paramount Clause [Clause 38 of Time CP] and the Export Restrictions Clause  [Clause 40 of the Time CP].  Clause 1 of the B/L is the very same Paramount Clause required by and with the wordings set out in Clause 38 of the Time CP.  Clause 10 of the B/L is the very same Export Restrictions Clause required by and with the wordings set out in Clause 40 of the Time CP.  The exact match of these two very important clauses suggests compellingly in my view that the B/L Clause 1 and 10 was the attempt to comply with the Time CP [Clause 38 and 40] to which, the B/L was linked by its reference to “As per Charter Party”.

11.It is to be further noted in the context of these two clauses that the Voyage CP contains a differently worded Clause Paramount [Clause 33] and does not contain any Export Restrictions Clause.  If the Voyage CP was the incorporated Charter Party then it would mean that the B/L issued and now sued upon was in breach of Clause 33 of the Voyage CP which required B/L to be issued in the wordings stated therein not per clause 1 of the B/L.

12.I of course accept that there are features of the Voyage CP which seem to be more appropriate to link up and work with carriage under the B/L.  What was said in the case of The Everest [1981] 2 Lloyd’s Rep 389 as to inappropriateness of the time charter terms being incorporated into the bill of lading is of course accepted.  Mr Wright has referred me to many of the terms in the Voyage CP including the Freight term, and suggest that these are good and strong reasons for the Court to regard the B/L as referring to the Voyage CP and not to the Time CP.  I accept that there are contrary indications in the Voyage CP, but in my view the defendants have satisfied me that the Time CP is the relevant Charter Party referred to in the B/L.  It follows therefore that I am satisfied that the Arbitration Clause at Clause 3 on the back of the B/L [Case A referred to during the hearing] and the Arbitration Clause on the Front of the B/L [Case B referred to during the hearing] are binding on the Plaintiff and that therefore a mandatory stay of Hong Kong proceedings must be ordered.

13.I am however also of the view that on Issue (2), on the assumption that I am wrong on Issue (1) and that the Charter Party referred to in the B/L is the Voyage CP, the defendants should also succeed.  

Issue (2) : Is Exclusive Jurisdiction Clause incorporated

14.It is well known that the mere incorporation of a charter party by a general incorporation clause does not bring in the arbitration clause in the charterparty into the bill of lading.  The general discussion on this subject in Carver shows that incorporation of arbitration clause is possible if sufficiently clear words exist in the bill of lading incorporation provision and the intention to incorporate such clause is clear. [para.3-031].  Therefore by similar reasoning, it seems to me (although I have not been cited cases on this scenario of ours) the general incorporation clause in the B/L does not bring in the Exclusive Jurisdiction Clause of the Voyage CP.  Furthermore it is to be observed that the scope of Clause 44 of Voyage CP is “any dispute which may arise out of this Charterparty” and the present claim of the plaintiffs is a dispute under the B/L as can be clearly seen in the Indorsement of Claim.   

Issue (2) — Is clause 3 (Arbitration Clause) of B/L ousted

15.The question here is whether Clause 3 of the B/L survives the Voyage CP being the reference Charter Party.   The submission of Mr Coleman for the defendants is that the intention of the parties to the B/P to arbitrate is extraordinary clear because not only is it stated in Clause 3 on the back of the B/L, arbitration is also specifically referred to by the Arbitration Clause on the front of the B/L.  The fact that Clause 3 refers to the venue of arbitration at either New York or London does not detract from it being a valid arbitration clause.  Reference to New York and London is merely the reflection of the appropriateness of reliable arbitral expertise at those two places to deal with these tanker carriage disputes.    

16.The strong existence of an express valid arbitration clause therefore cannot be easily ousted by a mere general incorporation of charter party terms.  I agree that there is nothing in the Voyage CP (not even the existence of Clause 44) which can oust a clear express term of the B/L, namely Clause 3.  

17.It follows therefore that I find even if I am mistaken on Issue (1) that there is a binding Arbitration Clause in the B/L and that therefore the proceedings must be stayed.

18.Mr Coleman also as a matter of logical completeness referred to the third possibility of both Clause 3 of the B/L and Clause 44 of the Voyage CP co-existing side by side.  It does arise in the circumstances.

Conclusion

19.I therefore make the Order that all further proceedings in this action be stayed in favour of arbitration.  The plaintiffs must pay to the defendants the costs of this action including the costs of this motion.

Mr Colin Wright, instructed by Messrs Crump & Co., for the Plaintiffs

Mr Russell Coleman, SC, instructed by Messrs Holman Fenwick & Willan, for the Defendants