Gatoil International Inc v. Arkwright-Boston Manufacturers Mutual Insurance Co
[1985] 1 All ER 129(Judgment by: Lord Keith of Kinkel J) Court:
Judges:
Lord Fraser of Tullybelton J
Lord Scarman J
Lord Wilberforce J
Lord Keith of Kinkel JLord Roskill J
Subject References:
Admiralty
Jurisdiction
Action in rem
Claim arising out of agreement relating to carriage of goods in a ship or to use or hire of a ship
Agreement
Claim for payment of premiums on insurance policy over cargo
Whether claim for premiums arising out of 'any agreement relating to the carriage of goods in any ship'
Legislative References:
Administration of Justice Act 1956 - 47(2)(e)
Judgment date: 13 December 1984
Judgment by:
Lord Keith of Kinkel J
My Lords, this appeal, which arises out of certain proceedings in the Sheriff Court at Lerwick, is concerned with the proper construction of s 47(2)( e ) of the Administration of Justice Act 1956. Section 47 provides, so far as material:
'(1) Subject to the provisions of this section and section fifty of this Act, no warrant issued after the commencement of this Part of this Act for the arrest of property on the dependence of an action or in rem shall have effect as authority for the detention of a ship unless the conclusion in respect of which it is issued is appropriate for the enforcement of a claim to which this section applies, and, in the case of a warrant to arrest on the dependence of an action, unless either-( a ) the ship is the ship with which the action is concerned, or ( b ) all the shares in the ship are owned by the defender against whom that conclusion is directed.
(2) This section applies to any claim arising out of one or more of the following, that is to say-[and there follow 19 paragraphs lettered ( a ) to ( s ), para ( e ) being in these terms] ( e ) any agreement relating to the carriage of goods in any ship whether by charterparty or otherwise ... '
The respondents, six insurance companies and an insurance broker, raised an action against the appellants in the Sheriff Court at Lerwick claiming payment of premiums on a policy of insurance which they say was effected with them by the appellants over a cargo of oil shipped from Kharg Island in Iran to various destinations. In order to found jurisdiction over the appellants, a Panamanian company, and also in order to obtain security for their claim, the respondents on 24 February 1984 arrested at Sullom Voe in the Shetland Islands a ship, the Sandrina, at the time lying there. There is a dispute whether or not the Sandrina was then owned by the appellants, but the House is not concerned with that issue in the instant appeal, it being required to be assumed for present purposes that they were in fact the owners. It is to be remarked that there is no question of the Sandrina or any other ship owned by the appellants having been concerned with the carriage from Kharg Island of the oil cargo which was the subject of the insurance policy.
The appellants then raised an action against the respondents in the Lerwick Sheriff Court seeking recall of the arrestments. That is the action in which this appeal arises. They denied ownership of the Sandrina and in addition pleaded that the arrestment was incompetent because the respondents' claim was not one of those specified in s 47(2) of the 1956 Act. A debate on relevancy was heard by Sheriff Russell sitting at Aberdeen. He allowed a proof on the matter of ownership of the Sandrina, and held that on a proper construction of para ( e ) of s 47(2), which I have quoted above, the respondents' claim for payment of premiums on a policy of insurance over goods to be carried by sea fell within its terms. The appellants appealed to the Court of Session, and on 23 March 1984 the Second Division of the Inner House (the Lord Justice Clerk (Lord Wheatley), Lord Stott and Lord Robertson) affirmed the decision of the sheriff and dismissed the appeal, but gave leave to appeal to your Lordships' House.
It is common knowledge that the 1956 Act, though its long title does not express this, was passed for the principal purpose of enabling the United Kingdom to ratify and to comply with the international obligations accepted by states which became parties to the International Convention relating to the Arrest of Sea-going Ships (Brussels, 10 May 1952; TS 47 (1960); Cmnd 1128) (see The Jade, The Eschersheim, Erkowit (owners) v Jade (owners ), Erkowit (cargo owners) v Eschersheim (owners ) [1976] 1 All ER 920 at 923, [1976] 1 WLR 430 at 434 per Lord Diplock). Before the passing of the 1956 Act the maritime claims falling within the Admiralty jurisdiction of the High Court in England were limited to those listed in s 22 of the Supreme Court of Judicature (Consolidation) Act 1925. This list was substantially reproduced in s 1 of the 1956 Act, which is in Pt I of the Act relating to England. Section 3(4) of the Act provided that the jurisdiction might be invoked by action in rem against a ship in connection with which the claim arose, or a sister ship. This liberty to take proceedings against a sister ship was new. It was provided for by art 3(1) of the 1952 convention. In Scotland, before the 1956 Act, the right to arrest a ship did not depend on any particular Admiralty jurisdiction provided for by statute, but on the general common law under which any movable property within the jurisdiction of an intended defender might be arrested ad fundandam jurisdictionem and on the dependence of an action against him. Section 47 limited this right, as respects maritime claims, to the list of such claims there set out, which follows very closely the list in art 1(1) of the convention. However, s 47(1)( b ) is so worded that it is competent to arrest any ship wholly owned by the defender, even though neither that ship nor a sister ship had any connection whatever with the claim against him, which is the position in the present case.
Paragraph ( e ) of s 47(2) follows verbatim (except for the opening word 'any') the terms of the corresponding paragraph in the English language version of the convention, as does para ( d ): 'any agreement relating to the use or hire of a ship whether by charterparty or otherwise'. In s 1(1)( h ), however, these two heads of claim are rolled up together: 'any claim arising out of any agreement relating to the carriage of goods in any ship or to the use or hire of a ship'. A very similar form of words was used in s 2(1) of the County Courts Admiralty Jurisdiction Amendment Act 1869, which gave jurisdiction to county courts appointed to have Admiralty jurisdiction to try and determine, inter alia, causes-
'As to any claim arising out of any agreement made in relation to the use or hire of any ship, or in relation to the carriage of goods in any ship, and also as to any claim in tort in respect of goods carried in any ship, provided the amount claimed does not exceed £300 ... '
The proper construction of this provision came under consideration in a number of cases, and it may well be that the draftsman of s 1(1) of the 1956 Act had these cases in mind. In Gunnestad v Price (1875) LR 10 Ex 65 it was held that a claim by the owner of a ship against a charterer for demurrage did not fall within s 2 of the 1869 Act. This was a claim over which the High Court of Admiralty itself did not at the time have jurisdiction, and the ratio decidendi was that, reading the 1869 Act along with the County Courts Admiralty Jurisdiction Act 1868, it appeared that the legislature did not intend to invest county courts with any more than a portion of the then existing jurisdiction of the Admiralty Court, to a limited monetary amount. This decision was disapproved of in The Alina (1880) 5 Ex D 227, where a Court of Appeal presided over by Jessel MR held that the county court had jurisdiction over a claim for damages for breach of a charterparty. In R v City of London Court Judge [1892] 1 QB 273 it was held by the Court of Appeal that, since the Admiralty Court had no jurisdiction over a claim against a pilot for damages on the ground of his negligence in causing a collision on the high seas, the county court had no such jurisdiction either by virtue of s 2 of the 1869 Act. Lord Esher MR expressed strong criticism of The Alina . He said (at 291): 'I will, therefore, follow The Alina so far as it actually goes, but not one inch further.' In the mean time, in R v City of London Court Judge (1883) 12 QBD 115 Day J, in the course of holding that a passenger's luggage was not 'goods' within the meaning of s 2, had expressed the view that the first part of the material passage in that section ('use or hire of a ship') had reference to a charterparty and the second part ('carriage of goods in a ship') had reference to a bill of lading. Finally, in the nineteenth century, in The Zeus (1888) 13 PD 188, a Divisional Court consisting of Hannen P and Butt J held that an agreement by a colliery owner to load a ship with coal within 48 hours and to pay 'demurrage for each hour exceeded' was not an agreement made in relation to the use or hire of a ship or in relation to the carriage of goods in a ship within s 2, and that the county court therefore had no jurisdiction.
Turning to more modern English cases, in The Beldis [1936] P 51 , [1935] All ER Rep 760 an action to enforce an arbitrator's award under a charterparty was held not to arise out of an agreement made in relation to the use or hire of a ship and therefore not to be within s 2. The reported cases since then have been under s 1(1) of the 1956 Act and its re-enactment as s 20(1) of the Supreme Court Act 1981. In The Queen of the South, Corps v Queen of the South (owners ) [1968] 1 All ER 1163 , [1968] P 449 Brandon J decided that an agreement for the mooring and unmooring and other servicing of a ship fell within s 1(1)( h ) because it involved the use of motor boats for providing the agreed services, and motor boats were ships within the definition in s 8(1) of the Act. Likewise in The Jade, The Eschersheim [1976] 1 All ER 920 , [1976] 1 WLR 430 this House held that an agreement for salvage services fell within s 1(1)( h ) because the rendering of these services involved the use of a salvage vessel. The claims were for negligence in the manner of carrying out the salvage services. Lord Diplock after having considered R v City of London Court Judge and The Alina , said in relation to the former case:
'My Lords, this was not a decision which ascribed a specific and precise meaning to the words "an agreement relating to the use or hire of a ship". The reasons given in the judgment for giving a restricted meaning to words conferring admiralty jurisdiction on county courts, in the context in which they appeared in the 1869 Act, have no application in the context of Part I of the Administration of Justice Act 1956, which is dealing with the jurisdiction of the High Court itself. I see no reason in that context for not giving to them their ordinary wide meaning. That would include the salvage agreement in the present case.'
(See [1976] 1 All ER 920 at 926, [1976] 1 WLR 430 at 438):
The Tesaba [1982] 1 Lloyd's Rep 397 was another case concerned with a salvage agreement. There was provision for security, and the shipowners agreed to use their best endeavours to ensure that the cargo owners provided security before the cargo was released. The vessel having been safely salved, the owners in breach of that undertaking allowed the cargo to be discharged without security being given. The salvors' claim against the shipowners for damage for breach of the undertaking was held by Sheen J not to fall within para ( h ). He said (at 401):
'If the ordinary businessman were to be asked "Is that an agreement relating to the carriage of goods in Tesaba ?", the answer would undoubtedly be "No".'
In The Sonia S [1983] 2 Lloyd's Rep 63, however, the same judge held that an agreement for the hire by shipowners of containers intended to be used by customers of the latter for packing goods to be carried on their ships was within para ( h ) of s 20(2) of the 1981 Act. The claim was by the owners of the containers for non-payment of hire. Sheen J said (at 65):
'It seems to me that the claim arises out of an agreement which relates to the carriage of goods by sea. It relates to it, as I have said, because the only purpose of the agreement was for the shipowners to provide for their customers the facility for packing their own goods, and for no purpose other than to have those goods carried in a ship.'
The most recent English case is The Antonis P Lemos [1984] 2 All ER 353 , [1984] 2 WLR 825 . The defendants were owners of a ship of which the plaintiffs were sub-charterers, under a time charter. The plaintiffs in turn entered into a voyage charter with a third party for the carriage of grain from Houston to Alexandria, and undertook that the vessel's draught on arrival would not exceed 32 feet. The defendants loaded the vessel to a greater draught, so that the plaintiffs sustained loss for which they claimed against the defendants in negligence. The Court of Appeal held that the claim fell within para ( h ) of s 20(2) on the ground that it arose out of the plaintiffs' time charter or their voyage sub-charter or both, it not being essential that it should arise out of an agreement between the plaintiffs and the defendants.
There is one Scottish decision directly in point. That is West of Scotland Ship Owners Mutual Protection and Indemnity Association (Luxembourg) v Aifanourios Shipping SA, The Aifanourios [1980] 2 Lloyd's Rep 403, where an insurance association had arrested the defenders' ship on the dependence of an action claiming payment of release calls under a contract of marine insurance over the ship and its cargo. Lord Wylie held that such a contract did not come within the provisions of either para ( d ) or para ( e ) of s 47(1) of the 1956 Act, and that the arrestment was therefore incompetent. He said (at 407):
'Counsel for the pursuers submitted that the provisions of these two paragraphs fell to be broadly interpreted. "Any agreement relating to the use ... of a ship" was any agreement connected with the use of a ship. The provision was not confined to an agreement "for" the use of a ship, and it could not be said that an agreement for the insurance of a ship, or for the insurance of its cargo, did not come within the broad terms of the statutory provisions. Put in these simple terms the agreement is attractive, but these provisions have to be construed in the light of other provisions of the subsection as a whole. In addition to claims arising out of damage done to or by any ship, claims in respect of salvage, towing or pilotage, they include claims arising out of the supply of goods or materials to a ship for her operation or maintenance, the construction, repair or equipment of a ship, liability for dock charges and master's disbursements, to take but a few examples of the kind of claims covered by the subsection. If the provisions of para (d) fell to be as broadly construed as was contended for, it is difficult to see how any of these provisions could fail to come within the ambit of the provision. A claim, for example, arising out of the supply of goods to a ship for her operation or maintenance or arising out of her repair would certainly appear to arise from an agreement relating to the use of a ship. I am accordingly driven to the view that a more restricted construction is called for than that which, in isolation, the words might otherwise bear. Moreover, it is clear that the insurance of a vessel is a matter directed to the convenience or protection of the owner, and is not essential for the operation of the vessel as such.'
That concludes the review of the authorities. It is to be observed that, while some divergences from the provisions of the 1952 convention can be seen both in the provisions of the 1956 Act relating to England and in those relating to Scotland, it is desirable that such provisions for both jurisdictions as can be identified as having a common derivation from particular provisions of the convention should be interpreted alike in each of these jurisdictions, if that can be done without undue straining of language. Paragraph ( h ) of s 1(1) of the 1956 Act and paras ( d ) and ( e ) of s 47(2) are in this category, deriving as they all clearly do from art 1(1)( d ) and ( e ) of the convention. In the English cases under s 2 of the County Courts Admiralty Jurisdiction Amendment Act 1869 there prevailed a tendency to give a restricted interpretation to words almost identical to those of para ( h ) of s 1(1) of the 1956 Act. Lord Diplock in The Jade, The Eschersheim attributed this to a disinclination on the part of the judges to attribute to Parliament an intention to give a wider jurisdiction to the county court than was possessed by the Admiralty Court itself, and said that since similar considerations did not apply to the 1956 Act there was no reason for not giving to para ( h ) its ordinary wide meaning. The agreement in issue in The Jade, The Eschersheim was, however, one which was concerned in a very direct sense with the use of the salvage vessel involved, and as I have mentioned it may well be that the draftsman of para ( h ) had in mind the cases under s 2 of the 1869 Act and the restricted interpretation which had there been placed on the words which he was using. The Zeus (1888) 13 PD 188 is perhaps a particularly important decision in this connection. It did not purport to proceed on a consideration of the unlikelihood of Parliament having intended to confer on the county court a jurisdiction which the Admiralty Court itself did not possess. There is no doubt that the agreement there in issue, to load a ship with coals within a time limit, had some connection with the carriage of goods by a ship and also with the use of a ship. But Hannen P said (at 190):
'We should disturb the natural meaning of the words of the statute if we said that the agreement has relation to the use or hire of the ship. It is merely an engagement to deliver coals at a particular place.'
It is necessary to attribute due significance to the circumstance that the words of the relevant paragraphs speak of an agreement 'in relation to' not 'for' the carriage of goods in a ship and the use or hire of a ship. The meaning must be wider than would be conveyed by the particle 'for'. It would, on the other hand, be unreasonable to infer from the expression actually used, 'in relation to', that it is intended to be sufficient that the agreement in issue should be in some way connected, however remotely, with the carriage of goods in a ship or with the use or hire of a ship, and I think there is much force in the view expressed by Lord Wylie in The Aifanourios [1980] 2 Lloyd's Rep 403 as to the inference to be drawn from the presence of certain other paragraphs in s 47(2). There must, in my opinion, be some reasonably direct connection with such activities. An agreement for the cancellation of a contract for the carriage of goods in a ship or for the use or hire of a ship would, I think, show a sufficiently direct connection. It is unnecessary to speculate what other cases might be covered. Each case would require to be decided on its own facts. As regards the contract of insurance founded on in the instant appeal, I am of opinion that it is not connected with the carriage of goods in a ship in a sufficiently direct sense to be capable of coming within para ( e ).
I consider that in The Sonia S there was likewise an insufficiently direct connection between the agreement for the hire of containers and the carriage of goods in a ship. There is clear fallacy in the reasoning of Sheen J in the latter part of his judgment, where he equates the use to which the containers were to be put with the use to which the salvage vessel was to be put in The Jade, The Eschersheim . The salvage vessel there was a ship which was to be used under the salvage agreement. The containers were not a ship. In my opinion that decision was wrong and should be overruled.
The appellants argued that, should the House conclude that the provisions of para ( e ) were ambiguous, regard should be had, for the purpose of resolving that ambiguity, to a certain aspect of the travaux préparatoires for the 1952 convention. The particular aspect in question was that, as published records show, the Dutch representative in the course of the negotiation of the convention proposed that claims for premiums on policies of marine insurance should be specifically included in the list of maritime claims, that this proposal was opposed by other representatives, and that in the event it was not adopted. Since I am of opinion that any ambiguity in s 47(2)( e ) can be resolved to the effect of holding that it does not, on a proper construction, cover the respondents' claim, it is unnecessary to deal with this branch of the appellants' argument.
My Lords, for these reasons I would allow the appeal, to the effect of sustaining the third plea-in-law for the pursuers, repelling the third plea-in-law for the defenders, and granting decree in terms of the conclusions of the summons. The appellants must have their costs in this House and their expenses of the proceedings in the courts below.