The “Navios Koyo”

• Judge: Sundaresh Menon CJ,Judith Prakash JCA,Steven Chong JCA
• Judgment Date: 27 October 2021
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 19 of 2021

The “Navios Koyo”

[2021] SGCA 99

Sundaresh Menon CJ, Judith Prakash JCA and Steven Chong JCA

Civil Appeal No 19 of 2021

Court of Appeal

Admiralty and Shipping — Bills of lading — Incorporation of arbitration clause into terms of bill of lading — Effect of arbitration clause being incorporated into bill of lading

Arbitration — Stay of court proceedings — Conditional stays — When conditions were to be imposed on stays in favour of arbitration — Court's exercise of its discretion to impose conditions on stays — Party seeking condition that other party's accrued defence of time bar be waived in other proceedings — Distinctions between different types of conditions sought — Factors to be considered in determining whether condition should be imposed on stay — Relevance of quantum of claim to determining whether or not condition which did not merely facilitate process of arbitration should be imposed — Sections 6(1) and 6(2) International Arbitration Act (Cap 143A, 2002 Rev Ed)

Held, dismissing the appeal:

(1) It was clear from the very outset that any claim under the Bills of Lading would be subject to arbitration. The Bills of Lading categorically stated that “[a]ll terms and conditions … of the Charter Party, dated as overleaf, including the Law and Arbitration Clause are herewith incorporated” [emphasis added]: at [20].

(2) In the appellant's affidavit in support of the warrant of arrest of the Navios Koyo, the appellant had specifically sought to distance itself from the terms of the applicable charterparty by stating that it “d[id] not have a copy of the [charterparty referred to in the Bills of Lading]”, and that it was not “aware of the terms of any such charterparty”. However, from this very statement, it was in fact clear that the appellant was well aware that the terms of the relevant charterparty had been incorporated into the Bills of Lading. All that the appellant was stating was that it was not aware of the precise terms which had been incorporated. However, that was the consequence of the appellant's own conduct in not asking for a copy of the charterparty earlier. The appellant's attempt to rely on its ignorance of the terms of the incorporated charterparty did not, without more, prevent it, as the holder of the Bills of Lading, from being bound by the charterparty's terms: at [22] and [23].

(3) The power of the court to impose conditions for a stay granted under s 6(1) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”) stemmed from s 6(2) of the said Act. A survey of the caselaw showed that s 6(2) of the IAA had been relied on for the imposition of a whole range of conditions. In relation to the range of conditions which had been imposed, a distinction ought to be drawn between: (a) the imposition of administrative conditions on a stay such as imposing a timeline to commence arbitration, requiring a party to appoint a solicitor to accept service, or ordering parties not to frustrate the appointment of the tribunal; and (b) substantive conditions such as requiring one party to waive a substantive defence. The former could be said to be essentially orders consequential upon the stay order, and to give effect to the arbitration agreement. By contrast, the latter category of conditions might, in effect, determine an issue which would otherwise fall to be decided at the arbitration: at [24] to [27].

(4) It was not the case that all conditions sought which did not solely facilitate or give effect to the arbitration agreement were necessarily impermissible. Rather, reference had to be had to all of the surrounding facts and circumstances. However, conditions which did not merely facilitate or seek to give effect to the arbitration agreement ought to be subject to a heightened level of scrutiny, and the threshold for such conditions to be granted could be said to be considerably higher than that applicable for essentially administrative conditions: at [29].

(5) The court should take cognisance of all of the surrounding facts and circumstances in determining whether it should exercise its discretion to impose conditions on a stay. In particular, the exercise of its discretion had to be informed by the justice of the case. This entailed consideration of whether the party seeking the stay was able to put forward a proper justification for the imposition of any condition. In determining whether such justification was established, the court should have regard to: (a) the reasons for the conditions being sought, and whether those reasons could have been obviated by the applicant's own conduct; (b) whether the need for any of the conditions was contributed to or caused by the conduct of the respondent; and (c) the substantive effect on the parties of any condition that the court might impose: at [30].

(6) There was no legal basis for the court to exercise its discretion in favour of the appellant to grant the condition sought:

(a) First, while the appellant knew from the outset that there was, at the very least, a potential arbitration clause which would govern any disputes arising under the Bills of Lading, it chose not to take any step to verify or find out about that clause. The appellant took the risk in not finding out about the terms of the Bills of Lading, and the consequences which eventuated could not in any way be attributed to the respondent.

(b) Second, the appellant's explanation that it had asked Amrose for a copy of the charterparty, but that Amrose had refused to provide one, did not assist it. There was no documentary evidence whatsoever of the appellant's efforts to obtain a copy of the charterparty from Amrose. Moreover, even if the appellant had in fact asked Amrose for the charterparty, that had nothing whatsoever to do with the respondent. The appellant had and continued to have a separate cause of action against Amrose.

(c) Third, the appellant's explanation that it did not take any further step vis-à-vis Amrose because it was in commercial negotiations with Amrose over the overdue payment did not assist it. It was clear that the appellant had elected to look to the buyer of the Cargo, Amrose, for payment notwithstanding its own awareness that the respondent was allegedly in breach of the Bills of Lading for having delivered the cargo without production of the Bills of Lading. This made the appellant's failure to take any step to commence arbitration against the respondent prior to the time bar setting in all the more egregious.

(d) Fourth, the appellant's explanations for its failure to approach the respondent for the charterparty earlier were speculative and outrageous. There was not even any basis in the first place to suggest that the appellant's alleged concerns were in any way engendered by the respondent's conduct.

The appeal was thus dismissed: at [34] to [37].

(7) The Court of Appeal also clarified that the size of the claim was irrelevant in determining whether or not a condition for the waiver of a time bar ought to be imposed. There were three reasons for this: at [39] to [42].

(a) First, even assuming that the size of the claim was material, it would be impossible to conclusively state when the line would be crossed such that a claim was sizeable enough to warrant the imposition of a condition that a time-bar defence be waived. Such a determination would be completely arbitrary.

(b) Second, if the size of the claim were relevant, the party who was required to waive the time-bar defence would suffer hardship that was equally disproportionate to that of the party seeking the condition. This would be especially so if the party losing its accrued defence of time bar was in no way responsible for the claimant's omission or failure.

(c) Third, imposing a condition that the defence of time bar be waived would operate in absolute terms. Such a condition would either preclude the raising of a time-bar defence altogether, or not at all. Once such a condition were to apply, the entire defence of time bar would be rendered unavailable, and the same would be true conversely. The absolute nature of this position meant that the size of a claim would have highly dramatic and potentially disproportionate effects if it were deemed to be relevant.

Case(s) referred to

Channel Ranger, The [2014] 1 Lloyd's Rep 337, HC (Eng) (refd)

Channel Ranger, The [2015] 1 Lloyd's Rep 256, CA (Eng) (refd)

Duden, The [2008] 4 SLR(R) 984; [2008] 4 SLR 984 (refd)

KVC Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd [2017] 4 SLR 182 (refd)

Splosna Plovba International Shipping and Chartering d o o v Adria Orient Line Pte Ltd [1998] SGHC 289 (refd)

Star-Trans Far East Pte Ltd v Norske-Tech Ltd [1996] 2 SLR(R) 196; [1996] 2 SLR 409 (folld)

T W Thomas & Co v Portsea Steamship Co Ltd [1912] AC 1 (refd)

Titan Unity, The [2013] SGHCR 28 (refd)

Tomolugen Holdings Ltd v Silica Investors Ltd [2016] 1 SLR 373 (refd)

Xanadu, The [1997] 3 SLR(R) 360; [1998] 1 SLR 767 (distd)

Facts

On 25 July 2019, the appellant entered into a memorandum of understanding (“MOU”) with Amrose Singapore Pte Ltd (“Amrose”) for the financing of Amrose's purchase of New Zealand pine logs. Under this MOU, the appellant would procure its financier, the Bank of Baroda, to issue letters of credit to Amrose's supplier, TPT Forests Ltd, for shipments of New Zealand pine logs from New Zealand to India on board the Taikoo Brilliance. In return, Amrose would repay the appellant with interest. The carriage of the cargo of pine logs (the “Cargo”) was made pursuant to four bills of lading (collectively, the “Bills of Lading”). The appellant received the Bills of Lading as security for its financing arrangements on or about 12 September 2019.

The salient portions of the Bills of Lading were threefold:

• (a) first, on the face of each of the Bills of Lading, there was a clear statement that “Freight [was] payable as per CHARTER PARTY dated 03/07/2019”;

• (b) second, on the reverse side of the Bills of Lading, the...