96. Furness Withy (Australia) (Pty) Ltd v Metal Distributors (UK) Ltd (The “Amazonia”) [1990] 1 Lloyd’s Rep 236

Estoppel – party participating in initial process of arbitration estopped from denying validity of agreement

The facts

Disponent owners chartered the vessel to chaterers for a shipment of zinc concentrates from Australia to two ports in India. Charterers claimed damages for loss of cargo.

The voyage charterparty contained a London arbitration clause but also a clause paramount incorporating the Australian Sea-Carriage of Goods Act, 1924 which provided that any clause in the charterparty inconsistent with the provisions of the Act was to be void and of no effect.

The Australian COGSA required the adjudication of all disputes in Australia in terms of Australian Law.

Shortly before the expiry of the one year time bar, charterers called for arbitration in London proposing the names of three arbitrators. Disponent owners reacted after the expiry but agreed not take the point.

Further correspondence ensued which led to an agreement with regard to the identity of the arbitrator. Disponent owners reserved the right to argue that a part of the claim which had not been referred to in charterers’ original letter was time barred.

At the same time, arbitration was pending between disponent owners and the owners. In their own interest, owners prompted disponent owners to take the Australian COGSA point which they did.

The main points for decision were (1) the effect of the incorporation of the Australian COGSA, (2) whether there was a separate agreement to arbitrate, (3) whether this ad hoc agreement could be avoided by mistake or illegality and (4) whether the doctrine of estoppel by convention applied.

Findings

The Commercial Court found that incorporation of the Australian Act negated the London arbitration clause but that a separate arbitration agreement had come about. The parties’ ignorance regarding the effect of the Australian Act was a mistake of law which did not vitiate the agreement. In any event, disponent owners were estopped from denying the validity of the arbitration agreement.

The Court of Appeal held that the parties’ mistake was one of fact, foreign law being a question of fact. The mistake therefore did vitiate the agreement. Nevertheless the finding of estoppel was upheld.

Commentary

As the Australian Act was incorporated by choice and did not apply mandatorily, the parties’ mutual intention could have been given effect to by giving precedence to the express arbitration clause. The Starsin is an example where the court chose one of two contradictory provisions to give effect to the intention of the parties.

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