605. Leif Hoegh & Co A/S v Petrolsea Inc (the World Era) [1992] 1 Lloyd’s Rep 45

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Arbitration – points of claim sought to be amended – pleading a new cause of action which has become time-barred will not be allowed because it was not, and could not have been, included in the reference to arbitration

The facts

Tanker voyage charterparty between Leif Hoegh and Petrolsea of a Liberian vessel for carriage of crude oil, one or two Gulf ports to Sardinia/Italy. Back to back charters, with head owners above, and sub-charterers, “East Coast” below.

After the vessel had sailed from the loadport, charterers ordered the vessel to discharge in Durban, South Africa.

Head owners refused and the cargo was discharged at Bonaire in the Caribbean.

Charterers claimed damages for inter alia additional freight and terminal costs.

Cedric Barclay, Donald Davies and a third arbitrator were appointed.

Charterers applied to amend their points of claim to allege that they were acting as agents for an undisclosed principal, Marc Rich. They modified their substantive claim for damages somewhat – this involved dropping some claims and adding a further claim that the alleged breach had exposed them to further liability to indemnify East Coast and Marc Rich. They also introduced an alternative prayer: “claimants in their own right or in the right of East Coast or of Marc Rich are entitled to recover that loss”.

Disponent owners, Leif Hoegh, opposed the application for amendment on the basis that the tribunal had no jurisdiction to rule on a new claim which was time-barred.

Findings

Hobhouse J held that the allegation of liability to indemnify East Coast and Marc Rich was a broadening of the extent of the damages suffered and not the introduction of a new cause of action. The existence of a time bar was therefore irrelevant.

The assertion that Marc Rich was entitled to recover was, however, new and not part of the reference to arbitration. It had therefore to be excluded.

.Discussion

Leif Hoegh relied on a passage in Mustill and Boyd suggesting that arbitrators have no jurisdiction to entertain new claims which are time-barred. Hobhouse J’s analysis was that this is putting the cart before the horse – the first question is what was referred to arbitration at the outset.

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