CLAIMS FALLING WITHIN SECTION 3(1)(H) OF THE HIGH COURT (ADMIRALTY JURISDICTION) ACT AND THE RIGHT OF ARREST

• Citation: (1997) 9 SAcLJ 310
• Date: 01 December 1997
• Published date: 01 December 1997

WRITING in late 1984, Lord Wilberforce described the statutory words “any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship”1 as “loose textured”2 and added that there was a spectral character3 in the boundary dividing claims which fell within section 3(1)(h) of the High Court (Admiralty Jurisdiction) Act4 (“the HCAJA”) and those which did not. The passage of some 13 years has clarified the nature of the claims which fall within section 3(1)(h) of the HCAJA and Lord Wilberforce’s observation made more than a decade ago no longer holds the ground.

It is the burden of this article to show that, properly understood, the recent case law has charted a course for the determination of the question whether or not a particular claim falls within section 3(1)(h) of the HCAJA.5

The difficulties surrounding the interpretation of section 3(1)(h) of the HCAJA are more apparent than real if it is borne in mind that there are two aspects to the question whether a claim falls within the said section 3(1)(h). These two aspects are first, the connection between the agreement out of which the claim arises and one of the three prescribed activities, and secondly, the connection between the claim and the agreement relating to one of the three prescribed activities. The three prescribed activities are the carriage of goods in a ship, the use of a ship and the hire of a ship. The two aspects will be considered seriatim.

I. THE CONNECTION BETWEEN THE AGREEMENT OUT OF WHICH THE CLAIM ARISES AND THE PRESCRIBED ACTIVITIES

The first aspect of the question of whether a claim falls within section 3(1)(h) of the HCAJA is that the agreement relied on or out of which the claim arises must relate to one of the prescribed three activities. This is an issue of the agreement being one of the relevant type in the sense that the

agreement is related to any of the prescribed activities. Where there is the requisite connection between the agreement relied on or out of which the claim arises and any of the three prescribed activities, the agreement is one of the prescribed type. Thus, an agreement of the prescribed type may be one of three types, namely, an agreement relating to (a) the carriage of goods in a ship; (b) the use of a ship; or (c) the hire of a ship.

On the nature and extent of the connection between the agreement relied on or out of which the claim arises and any of the three prescribed activities, Lord Keith of Kinkel in The Sandrina6 stated that the question is, whether on the facts of each particular case, the agreement has some reasonably direct connection with the use or hire of a ship or with the carriage of goods in a ship.7 This is so because the words “relating to” appearing in section 3(1)(h) of the HCAJA are intended to signify some sort of connection between the agreement relied on and the prescribed activities.8 In the words of Lord Keith of Kinkel in “The Sandrina”,

“… it would be unreasonable to infer [from the words “relating to”] … that it is intended to be sufficient that the agreement in issue should be in some way connected with, however remotely, with the carriage of goods in a ship or with the use or hire of a ship … There must … be some reasonably direct connection with such activities.”9

In The Sandrina, the House of Lords held that as the agreement relied on by the plaintiffs was a War Risk Open Cover policy effected on goods shipped on board a vessel, it was not an agreement related to any of the three prescribed activities and therefore the claim for unpaid premia was not one which arose out of an agreement of the prescribed type. There was simply no reasonably direct connection between the agreement relied on and the carriage of goods in a ship or the use or hire of a ship. The agreement relied on was simply a contract for the placement of marine insurance cover in respect of war risks for cargo carried on board a ship. The mere fact that a ship was carrying the insured cargo did not ipso facto provide the requisite connection between the marine insurance contract and the prescribed activities identified in section 47(2) (d) and (e) of the Administration of Justice Act 195610 (which is in pari materia with section 3(1)(h) of the HCAJA). Consequently, the court has no subject matter jurisdiction and the insurance association could not arrest the vessel to secure its claim for payment of release calls under a contract of marine insurance over the ship and its cargo.

At this juncture, it is pertinent to state that the words “relating to” as they appear in section 3(1)(h) of the HCAJA are wider in import than the word “for”.11 It follows from the import of the words “relating to” that the agreement relied on need not be the agreement which gives rise to the plaintiff’s cause of action. Thus, there is no requirement for the plaintiff’s cause of action to be for breach of the identified agreement of the prescribed type. Consequently, a cause of action for conversion of cargo by cargo owners against the shipowners with whom the cargo owners are not in a contractual relation is a cause of action “relating to” the carriage of goods in a ship.

As long as the agreement out of which the claim arises is reasonably connected with any of the three prescribed activities, the first requirement that the agreement out of which the claim arises be of a prescribed type would have been satisfied. A tenuous connection between the agreement out of which the claim arises and any of the three prescribed activities would be too remote a connection. Indeed, The Sandrina illustrates that a claim arising from a marine insurance contract is not reasonably connected with any of the three prescribed activities in section 3(1)(h) of the HCAJA.

A case which demonstrates the reasonably direct connection between the agreement out of which the claim arises and one of the three prescribed activities is The Stella Nova.12 In that case, Sheen J held that the management agreement entered into between the plaintiffs and the defendants for the management of the vessel ‘Stella Nova’ was reasonably connected with the use or hire of a ship. This was so as the plaintiffs were the managers of the vessel who were solely entitled under the management agreement to commit the vessel to charterparties. As the terms of the management agreement spelt out the terms on which the plaintiffs were to manage the use or hire of the vessel, the plaintiffs’ claim was reasonably connected with an agreement for the use or hire of a ship.

Another case which illustrates that the agreement relied on must have a reasonably direct connection with any of the three prescribed activities is The Maersk Nimrod. In that case, there was a contract of sale of goods where the sellers sold to the buyers fuel oil under a cif (cost, insurance and freight) contract which provided for demurrage. The charterparty to which the sellers were not a party, provided for a demurrage rate and other terms. The sellers sued the buyers for demurrage. Phillips J held that the agreement sued upon was a cif contract which was not related to any of the prescribed activities in the sense that the connection between the cif contract and the prescribed activities was not reasonably direct. His Lordship held

that it would not be natural to describe the buyer’s agreement to pay demurrage as an agreement “relating to the carriage of goods in a ship”. It would have been natural, however, to describe the buyer’s agreement as “an agreement relating to the discharge of goods from a ship.” The learned judge held that the buyer’s agreement to pay demurrage was not an agreement relating to the use of the ship since all that the buyer had agreed to was to accept the delivery of goods at a particular place within a particular period of time failing which the buyer was to pay damages. Phillips J added that the use of the word “demurrage” did not ipso facto mean that the agreement was one relating to the use of a ship. Consequently, the sellers’ claim against the buyers in The Maersk Nimrod did not fall within section 20(2)(h) of the United Kingdom Supreme Court Act 1981.13

Three Canadian cases demonstrate the reasonably direct connection between the agreement relied on and the prescribed activities in section 3(1)(h) of the HCAJA. In Shibamoto & Co v. Western Fish Producers Inc14 it was agreed between the plaintiff and the defendant that the former was to provide funds to the defendant in return for the defendant to make available a vessel called the ‘Nicolle N’ for the acquisition and processing of salmon and salmon roe at sea. It was further agreed that the plaintiff’s personnel would be on board the ship for purposes of price determination and preparation of the fish and roe for the Japanese market. In these circumstances, the Canadian Federal Court that the agreement was of the prescribed type as there was a sufficient use of the ship within the meaning of section 22(1)(i) of the Federal Court Act.15

In National Bank Leasing v. Merlac Marine Inc,16 the Canadian court held that a guarantee given to guarantee due performance of a charterparty was reasonably connected with the use or hire of a ship and consequently, a claim on the guarantee is a claim arising out of an agreement of the prescribed type. Similarly, in Cormorant Bulk-Carriers v. Canficorp (Overseas Projects) Ltd,17 the Canadian Federal Court of Appeal held that an agreement to indemnify a party in respect of matters relating to the carriage of goods in a ship is an agreement relating to the carriage of goods in a ship. Thus, a claim on the indemnity agreement was held to be a claim connected with an agreement of the prescribed type. The indemnity was referable to the contract of carriage in that, on the particular facts of the case, the carrier would not have issued the bill of lading without the indemnity.

Where the agreement relied on is not related to any of...