ENGLISH HIGH COURT GRANTS EXTENSION OF TIME TO BRING CLAIM UNDER S12 ARBITRATION ACT 1996

In the recent case of National Bank of Fujairah (Dubai Branch) v Times Trading Corp [2020] EWHC 1983 (Comm) the English High Court (the “Court”) granted National Bank of Fujairah (”NBF”) an extension of time under s12(3)(b) Arbitration Act 1996 (the “Act”) to bring an arbitration claim against Times Trading Corp (“Times”). The decision follows the recent case of Fimbank PLC v KCH Shipping (“Fimbank”) (see our blog post on this decision here) where an extension of time to bring an arbitration claim was refused on a somewhat similar set of facts.

Background

Further background to the broader dispute between the parties can be found in our previous blog post on this case here, concerning Times’s successful application for an anti-suit injunction to restrain proceedings brought by NBF in the Singaporean High Court.

NBF’s application for an extension of time under s12 of the Act was made in the context of a complex factual and contractual background, in which NBF sought to bring a claim for damages against the carrier of cargo under the relevant bills of lading (the “Bills”). The Bills incorporated the Hague Rules, which imposed a one year time bar on claims, requiring claims to be made by 20 June 2019.

Section 12 provides a power for the English court to extend a contractually agreed time limit for beginning arbitration proceedings in certain limited circumstances (and without prejudice to general rules of limitation). In particular, section 12(3) provides that the court “shall make an order only if satisfied –

• that the circumstances are such as were outside the reasonable contemplation of the parties when they agreed to the provision in question, and that it would be just to extend time, or
• that the conduct of one party makes it unjust to hold the other party to the strict terms of the provision in question.”

NBF had identified the registered owners (“Rosalind”) of the vessel as the carrier under the Bills in its message asserting its claim for misdelivery, which was sent on 28 December 2018 (addressed to Rosalind “c/o Times Navigation Inc.”). NBF were then unaware of the existence of a bareboat charter (the “Bareboat Charterparty”) between Rosalind and Times and that Times was in fact the carrier under the Bills.

The insurers of Rosalind, Times, and Times Navigation (the vessel’s International Safety Management Code managers) instructed a law firm (the “Insurer’s Counsel”) to respond to the message of 28 December 2018 and these lawyers also undertook various other pieces of correspondence with NBF and other parties in the contractual chain (the “Charter Chain Parties”).

Initially, the Insurer’s Counsel was unaware that the Bareboat Charterparty existed. In its response to the assertion of claim, the Insurer’s Counsel stated that they acted “on behalf of the Owners of the vessel”. On 18 January 2019, the Insurer’s Counsel became aware of the existence of the Bareboat Charterparty and failed to reflect this in future correspondence. This included sending to NBF an extract of a contract that was incorporated into the Bills containing the law and arbitration clause, but not sending the relevant pages that would have revealed the existence of the Bareboat Charterparty.

Following a Claims Handling and Cooperation Agreement (the “Claims Agreement”) being concluded between the Charter Chain Parties, Trafigura was made responsible for defending NBF’s misdelivery claim against “Rosalind and/or Times”. Under the Claims Agreement, Times was described as the bareboat charterer of the vessel. Within the time limit specified in the Bills, NBF commenced an ad hoc arbitration against “Rosalind... c/o Times Navigation Inc.” Trafigura’s counsel responded, acknowledging that the claim was commenced to preserve time.

Following the expiry of the time bar on 20 June 2019, in July 2019 Times’s counsel sent a letter to NBF informing NBF of the existence of the Bareboat Charterparty, and that NBF had commenced arbitration against the wrong party. NBF requested a copy of the Bareboat Charterparty, but only finally received a copy on 9 March 2020, when it was disclosed as part of Times’s application for an anti-suit injunction in respect of the proceedings brought by NBF in the Singapore High Court.

On 20 March 2020, NBF applied to the Court under (in particular) s12(3)(b) of the 1996 Act for an extension of time to commence arbitration against Times.

Decision:

The Court granted NBF’s application for an extension of time under s12(3)(b), on the basis that conduct attributable to Times gave the impression that Times was not the carrier and that this was a “significant factor in NBF missing the time bar”, making it unjust for Times to hold NBF to the time bar set out in the Bills.

Conduct attributable to Times

The Court considered that before 18 January 2019, Times, through the Insurer’s Counsel, had communicated in a manner which “implied, and… contributed to [NBF’s] belief that [the Insurer’s Counsel] acted for the carrier liable under the Bills… and for the entity to who the claims were appropriately addressed”.

The Court was not convinced by the argument that the Insurer’s Counsel was only acting for Rosalind, when stating that it was acting for the “Owners of the vessel”. Instead, the Court considered that NBF’s assertion of its claim was “clearly aimed” at the carrier, and as the Insurer’s Counsel had responded by identifying its client by reference to its function in the charter chain (rather than by its name) this suggested that the Insurer’s Counsel was acting on behalf of a party to the Bills. The Court emphasised that Times Navigation was an “immediate source” of the Club’s Counsel’s instructions, and that Times Navigation had authority to act for Times under an agreement between Times and Times Navigation. While until 18 January 2019 the Club’s Counsel had acted “innocently” in this respect, the Court considered that Times on the other hand knew the true position and the Club’s Counsel could have “made more detailed enquires to ascertain the correct position”.

As to the correspondence after 18 January 2019, the Court considered that the conduct of the Club’s Counsel and Times was “more open to criticism”. The Court concluded that the “objective effect of the communication…was to convey an impression which did not accord with the facts as Times and the parties acting for them understood them to be”. The Court considered that the only reason for disclosing a single page of the contract incorporated into the Bills was to “avoid producing a document referring to Times” and was “once again suggestive” that the Insurer’s Counsel was acting for a party to the Bills. The communications following the Claims Agreement were also attributable to Times “to the extent that they involved implementing the strategy of not disclosing the existence of the Bareboat Charter or the involvement of Times until after the limitation period had expired” and “continued the impression that arbitration had been commenced against the carrier”.

Unjust to hold NBF to the time bar?

Despite the suggestion by Times that NBF ought to have “explored the issue of whether there was a bareboat charterparty of its own initiative”, the Court considered that this was not merely a case of Times remaining silent “in the face of an insufficiently tested assumption” by NBF. Instead, “the effect of the communication was to reinforce [NBF’s] erroneous understanding and to put [NBF] off its guard”. The impression was a “significant factor” in NBF missing the time bar, satisfying the required “causative nexus” between the conduct attributable to Times and NBF failing to bring its claim within the contractually stipulated period, and making it unjust for Times to insist on holding NBF to the time bar.

The Court’s Discretion

The Court agreed with the earlier decision in Fimbank that even when the jurisdictional requirements of s12 were satisfied (as was the case here) the Court nonetheless retained discretion under s12 as to whether to grant the extension of time sought.

Although the Court considered that NBF had not acted “promptly” in seeking the extension under s12, and had taken steps other than seeking an extension of time, it nonetheless considered it appropriate to grant the extension of time. The Court considered that a number of factors pointed towards the exercise of its discretion to grant the extension of time, including (among others) (i) the failure to provide the Charterparty until it was disclosed as part of Times’s anti-suit application; (ii) that the jurisdictional requirements of s12 had been satisfied by “an appreciable margin”; (iii) that Times was aware of the arbitration commenced against Rosalind; (iv) that the same lawyers were representing Rosalind and Times in respect of the claim that NBF is seeking an extension of time to bring against Times.

Comment

The decision of the High Court to grant an extension of time in this case (in circumstances at first sight similar to those in the Fimbank case where an extension of time was refused) demonstrates the high hurdle that applicants seeking an extension of time must surpass in order to obtain an extension.

The difference in outcome between the two cases is arguably attributable to the differing allocation of the causative burden for the applicant missing the time bar. In Fimbank the relevant conduct only caused Fimbank to be unclear as to which party had granted an extension of time. At that stage the possibility remained open to Fimbank to investigate who had granted the extension and to bring the arbitration within the agreed extended time limit. Significantly, in Times Trading the Court considered there to be a policy of deliberately obscuring the proper respondent to the claim and that this was the greater causative factor in NBF missing the time bar than any culpability attributable to NBF.

The Court’s decision also demonstrates the types of factors and circumstances that will be taken into consideration by the Court when exercising its discretion to grant an extension of time to bring an arbitration claim that would otherwise be contractually time-barred. A delay in bringing the application for an extension of time may not necessarily be fatal to an application under s12(3)(b) where the Court considers countervailing factors outweigh or justify the delay. However, given the difficulty of succeeding with an application under s12 it is best practice to bring claims against all potential respondents where the contractual matrix remains unclear. Where a time limit has been missed an application under s12 must be brought without delay.

For more information, please contact Nicholas Peacock, Partner, Rebecca Warder, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.