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Misleading impression as to identity of carrier justifies time extension for misdelivery claim

Insights / 29-07-2020

National Bank of Fujairah (Dubai Branch) v. Times Trading Corp (Archagelos Gabriel) [2020] EWHC 1983 (Comm)
The Court has granted a time extension for commencing arbitration proceedings in a misdelivery claim in circumstances in which the correspondence between the Claimant and the ship interests’ lawyers resulted in a misleading impression as to the true identity of the carrier under the bills of lading. The Court concluded that, as a result, it would be unjust to hold the Claimant to the one-year time limit for bringing the claim.

The background facts

National Bank of Fujairah (“NBF”) was the holder of 27 bills of lading (“the Bills”) issued in respect of a cargo of steam coal loaded onto the MV Archagelos Gabriel (“the Vessel”) in May 2018. In June 2018, the cargo was discharged against letters of indemnity without production of the Bills. NBF subsequently alleged that the cargo had been misdelivered. The Bills contained a general paramount clause and incorporated an English law and London arbitration provision. There was, therefore, a one-year time limit for commencing arbitration against the carrier under the Bills.

The Vessel’s registered owner was Rosalind Maritime LLC (“Rosalind”). However, the Vessel was bareboat chartered to Times Trading Corp (“Times”) at the material time. Times Management Inc was the Vessel’s ISM Manager. There was also a chain of time and voyage charters, with Trafigura Pte Ltd (“Trafigura”) at the bottom of the chain.

In December 2018, NBF’s lawyers sent a letter in respect of the claim to the registered owners, addressed to “Rosalind … c/o Times Navigation Inc”. This was passed on to the P&I Club (“the Club”) with whom Rosalind, Times and Times Navigation were all entered. The Club instructed solicitors (“WH”) to respond on behalf of their Members. One of the immediate sources of WH’s instructions was Times Navigation, who were authorised to act for Times only. However, WH were unaware at this point of the bareboat charter and their reply to NBF stated that they acted “on behalf of Owners of this vessel”. The correspondence between the lawyers continued and, in January 2019, WH became aware of the bareboat charter. However, they only provided NBF with selected extracts from the charter and nothing to indicate that Times was the disponent owner.

In February 2019, pursuant to a claims cooperation agreement, Trafigura became responsible for handling the misdelivery claim on behalf of Rosalind and Times. This agreement expressly referred to the bareboat charter.

In May 2019, NBF commenced arbitration by a notice addressed to "Rosalind Maritime LLC, Owners of the Vessel 'Archagelos Gabriel' c/o Times Navigation Inc". The lawyers who responded to the notice stated that they acted for Trafigura "who have the conduct of the defence of your clients' alleged claims".  Exactly for whom Trafigura acted was not clarified and the bareboat charter was not mentioned.

In July 2019, after the one-year time limit had expired, Trafigura’s new lawyers indicated to NBF’s lawyer that there was a bareboat charter and stated that arbitration had been commenced against the wrong party. NBF sought to obtain the particulars of the bareboat charter but did not in fact obtain a copy until March 2020, when Times applied for an anti-suit injunction in relation to in rem proceedings that NBF had initiated in Singapore. NBF applied to the Court for a time extension to commence arbitration against Times.

Pursuant to section 12 of the Arbitration Act 1996, such an extension will only be granted in very limited circumstances, including where the conduct of one party makes it unjust to hold the other party to the strict terms of the time period in question.

The Commercial Court decision

The Court decided that it would be unjust to hold NBF to the time limit. The conduct and correspondence of both WH and Trafigura’s lawyers had misled NBF and its lawyers as to the true identity of the carrier under the Bills, with the result that the time limit against Times was missed.

Significantly, the Court distinguished between WH’s correspondence before and after it discovered the existence of the bareboat charterer, with WH’s conduct after the discovery being more ‘culpable’ because it was now deliberate rather than inadvertent. In the Court’s view, WH had continued to correspond with NBF’s lawyers with the aim of not disclosing Times’ involvement.

Furthermore, on the evidence, the Court agreed with NBF that:

  • WH was generally appointed by the Club to act for Times and Rosalind and WH’s messages were sent pursuant to that general authority on behalf of Times; and
  • WH was specifically instructed by natural person(s) working for Times Navigation, Times Navigation was authorised to act only for Times (under a Services Management Agreement between the two), not Rosalind, and it was to be inferred that those persons on behalf of Times authorised the relevant messages.

Consequently, WH’s conduct was attributable to Times. The conduct of Trafigura’s lawyers was also attributable to Times, on the basis of the claims handling agreement and to the extent that their correspondence involved the implementation of the strategy not to disclose the existence of the bareboat charter until the limitation period had expired. 

The Court commented that whilst NBF’s lawyers should have investigated whether there was a bareboat charter, the effect of WH’s correspondence was to put NBF’s lawyers off their guard and to contribute to the mistaken understanding of the true position. The Court concluded that there was the required causal connection between this conduct and NBF’s failure to comply with the time-limit. NBF should not, therefore, be held to the strict one-year time limit for commencing arbitration against Times.

The Court also noted the argument that it should not exercise its discretion in NBF’s favour on the grounds of delay in applying for the time extension – eight months after NBF was first alerted to the possible existence of a bareboat charter. The Court acknowledged that delay can be an important consideration in whether to grant such relief and certain factors weighed against NBF. However, a key consideration in this case was that NBF had sought to obtain a copy of the bareboat charter, but Times had not provided one for several months. Times’ refusal to do so was a continuation of the conduct adopted before NBF knew of the bareboat charter. On balance, this conduct made it appropriate to grant the time extension.

Comment

This decision can be compared with that in Fimbank PLC v. KCH Shipping Co Ltd (Giant Ace) [2020], in which a similar application failed. In that case, the Court found that there was no sufficient connection between the conduct/correspondence of the other party’s lawyers and the time limit being missed. What emerges clearly from both cases is that, in such situations, it is crucial to try and establish insofar as possible and as early as possible whether there is a bareboat charterer in the picture. Even if it is not possible to ascertain the true position, diligent efforts to establish the true identity of the carrier will weigh in a party’s favour if it subsequently seeks relief from the Court.

This decision also highlights the fine line between unnecessarily alerting the other side to a mistake that they have made (keeping in mind the client’s best interests) and actively reinforcing any misunderstanding. It may not always be clear where the line should be drawn.

Paul Crane

Paul Crane Partner

Clare Birchenhough

Clare Birchenhough Associate

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