IN THE FEDERAL COURT OF AUSTRALIA NG 1001 of 1998 NEW SOUTH WALES DISTRICT REGISTRY BETWEEN: HI-FERT PTY LIMITED Plaintiff AND: UNITED SHIPPING ADRIATIC INC. First Defendant and: Marine cargo care pty limited Second Defendant JUDGE: EMMETT J DATE of order: 3 november 1998 where made: SYDNEY the court orders that: 1. Upon the plaintiff and Withnell Hetherington (including any predecessor firms) by its counsel undertaking to the Court: (1) to pay to any party adversely affected by this order such compensation (if any) as the Court thinks just in such manner as the Court directs, and (2) to take no further steps in the arbitration commenced on 30 August 1998 by the First Defendant in London against the Plaintiff being an arbitration with reference to bill of lading No. 1 at Mesaieed, Qatar on 27 May 1996 other than to give effect to any compromise between the parties of the claim or claims therein and taking any necessary steps in relation thereto, The first defendant: (i) be restrained until the final determination of these proceedings by itself, its officers, servants, employees, agents, attorneys or otherwise howsoever from taking any step in the London Arbitration aforesaid including presenting any oral argument otherwise than to give effect to this order. (ii) apply on 3 November 1998 for an adjournment of the London Arbitration proceedings sine die. 2. Upon the plaintiff and Withnell Hetherington (including any predecessor firms) by its counsel undertaking to the court: (1) to pay to any party adversely affected by this order such compensation (if any) as the Court thinks just in such manner as the Court directs, and (2) to take no steps in the action commenced by the First Defendant in the High Court of Justice, Queen's Bench Division, Commercial Court, 1998 Folio No. 1164 filed 11 September 1998 other than for the plaintiff to appear conditionally in the High Court action, the first defendant be restrained until the final determination of these proceedings by itself, its officers, servants, employees, agents, attorneys or otherwise howsoever from taking any step in the United Kingdom action aforesaid otherwise than to give effect to this order. the court grants: 3. Leave to enter these orders forthwith. the court orders that: 4. These orders may be served by facsimile transmission addressed to the solicitors for the first defendant Messrs Ebsworth & Ebsworth 135 King Street Sydney, facsimile transmission number (02) 9235 3606, with a hard copy to be served upon the said solicitors as soon as practicable thereafter. the court grants: 5. Liberty to any party to apply on 24 hours notice in writing. THE COURT DIRECTS THAT: 6. The proceedings stand over to 9.30am on 10 November 1998 for directions. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NG 1001 of 1998 NEW SOUTH WALES DISTRICT REGISTRY BETWEEN: HI-FERT PTY LIMITED Plaintiff AND: UNITED SHIPPING ADRIATIC INC. First Defendant and: Marine cargo care pty limited Second Defendant JUDGE: EMMETT J DATE: 3 november 1998 PLACE: SYDNEY REASONS FOR JUDGMENT HIS HONOUR: I have before me ingredients for a procedural stew which looks to be unpalatable wherever it is eaten. The immediate application is for orders restraining the defendant from prosecuting an arbitration in London and from prosecuting proceedings in the High Court of Justice in England. The plaintiff, Hi-Fert Pty Limited ("Hi-Fert"), is the consignee of a cargo of urea which was shipped on the MV Uljanik on 27 May 1997. The defendant, United Shipping Adriatic Inc. ("United"), is the owner of the Uljanik. A bill of lading in respect of the cargo was issued by the master of the Uljanik at Mesaieed. The bill of lading contained an endorsement "Freight payable as per governing charter party." Printed on the reverse of the charter party was the following: All terms and conditions, liberties and exceptions of the charter party, dated as overleaf, including the law and arbitration clause, are herewith incorporated. On the face of the bill of lading provision was made for reference to a charter party as follows: Freight payable as per charter party dated … However, the space for a date was not completed and there is no other reference to any charter party. The cargo was carried pursuant to a contract of affreightment entered into between Hi-Fert and Hyundai Merchant Marine Co. Limited ("Hyundai") on 2 May 1997. The Uljanik had been the subject of a time charter from United to Rondeau Bulk AG ("Rondeau") dated 12 November 1996. Rondeau, in turn, entered into a sub-charter with Hyundai on 30 April 1997. The other relevant party is Marine Cargo Care Pty Limited ("Marine Cargo") which was appointed by Hi-Fert to provide inspection services on vessels intended to load cargoes of fertilisers for importation into Australia by Hi-Fert. In particular, Marine Cargo was instructed to provide such inspection services in connection with the cargo loaded on the Uljanik. When the Uljanik arrived at its port of destination, Port Lincoln, South Australia, the Australian Quarantine Inspection Service ("AQIS") detained the Uljanik and prevented discharge of part of the cargo. The residue of an earlier cargo of wheat was found in certain of the holds of the Uljanik. The earlier cargo originated in North America and, accordingly, there was a risk of a quarantineable disease known as karnal bunt. Introduction of that disease into Australia could be highly prejudicial to Australia. Because it was not permitted to unload the whole of the cargo of urea in Australia, it was necessary for Hi-Fert to sell the cargo overseas. The cargo was sold to Thailand. Hi-Fert contends that, as a consequence, it has suffered a loss of approximately $A3 million. By reason of the action of the AQIS, the Uljanik was delayed in Adelaide. That delay has given rise to a dispute between Rondeau and United under the time charter. It has also given rise to a dispute between rondeau and Hyundai under the sub-charter and between Hyundai and Hi-Fert under the contract of affreightment. In addition, Hi-Fert claims to be entitled to recover damages from United under the bill of lading. Hi-Fert also claims to be entitled to damages from Marine Cargo as a consequence of failure to discover the residue of wheat cargo when the vessel was inspected in Qatar. Further, Hi-Fert also claims to be entitled to damages from Hyundai under the Trade Practices Act. Finally, United also has a claim against Hi-Fert arising out of the delay of the Uljanik in South Australia. It is the procedure for the resolution of those disputes which gives rise to the situation presently before me. On 17 July 1997, United referred to arbitration in London its dispute with Rondeau. On 24 July 1997, Hyundai referred to arbitration in London its dispute with Hi-Fert. Hi-Fert appointed an arbitrator on 1 August 1997 in response to Hyundai's reference but asserted that that appointment was subject to Hi-Fert's contention that Australian courts had jurisdiction and that it was Hi-Fert's intention to commence proceedings against Hyundai in the Australian courts. On 13 August 1997, United referred to arbitration in London all disputes with Hi-Fert arising under the bill of lading. On 10 September 1997, Hi-Fert appointed an arbitrator in response to United's reference without prejudice to its contention that jurisdiction in respect of disputes under the bill of lading lay with the Australian courts. Hi-Fert reserved its right to bring proceedings relating to the cargo damage claim against United in the Australia courts. On 5 November 1997, United served points of claim in its arbitrations against both Rondeau and Hi-Fert and on 24 November 1997, sought an order for concurrent hearings of its arbitration with Rondeau and its arbitration with Hi-Fert. By that stage, Rondeau had also referred to arbitration in London its dispute with Hyundai. United expressed the view that all four arbitrations should be heard concurrently since the evidence would be common to the disputes in all four proceedings. However, on 16 December 1997, Hi-Fert commenced two sets of proceedings in the Federal Court. In proceedings NG 1082 of 1997, it asserted its claims against United and Marine Cargo. In proceedings NG 1084 of 1997 it asserted claims against Hyundai under the contract of affreightment and under the Trade Practices Act. However, the initiating process was not served until some considerable time later. It appears that the application in proceedings NG 1082 of 1997 was served pursuant to an undertaking given by Northern England P&I Association Limited to Hi-Fert on 13 August 1997. That undertaking relevantly provided as follows: IN CONSIDERATION of your consenting to the release from arrest … of the ship MV "ULJANIK" … and that you refrain from commencing and/or prosecuting legal or arbitration proceedings (otherwise than as referred to below) against the said registered owners … for the purposes of founding jurisdiction and/or obtaining security in respect of the above mentioned claim against the said registered owners, … WE, the North of England Protecting & Indemnity Association Limited, … undertake to pay to your above named solicitors on your behalf on demand such sums as may be adjudged by any competent court (including any appeal from any such court) or other tribunal or as may be awarded in any arbitration or as may be agreed to be recoverable against the said registered owners … in respect of the said claim, interest and costs… This undertaking shall be governed by and construed in accordance with Australian law and we submit to the exclusive jurisdiction of the Australian courts for the purposes of any action for the enforcement hereof. AND FOR THE CONSIDERATION aforesaid we undertake that we will … instruct Solicitors on behalf of the said registered owners … to accept service of proceedings brought by you and we warrant that we have received irrevocable authority from the owners and demise charterers of the above named ship to instruct solicitors accordingly. It is noted that nothing herein is to be construed as a waiver or limitation of any of the provisions contained in the bill of lading … and this letter of undertaking shall be without prejudice to any rights or defences available to owners … with respect to any claims arising out of the bill of lading or otherwise. In particular all rights are reserved to argue … that any claim which Hi-Fert Pty Limited has against the MV "ULJANIK" in respect of the above mentioned claim, shall be determined in accordance with the arbitration clause incorporated in the bill of lading … and that Australia is an inappropriate forum for the resolution of any disputes arising under that bill of lading or otherwise between Hi-Fert Pty Limited and those interested in the MV "ULJANIK". The application in proceeding NG 1082 of 1997 was served on the representative of North of England P&I in Australia and subsequently an appearance was filed on behalf of United. The application in proceeding NG 1084 of 1997 was not served on Hyundai. However, pursuant to an application made by United in those proceedings, I have ordered that those proceedings be consolidated with proceedings NG 1082 of 1997. On 21 May 1998, Hi-Fert served a counter claim in the arbitration commenced against Hi-Fert by United in London. There had been considerable correspondence in the interim. Almost invariably in such correspondence, Hi-Fert purported to reserve its position concerning jurisdiction of the arbitrators. It appears that all other parties to the arbitrations were content for the disputes to be resolved by arbitration in London. Hi-Fert alone as a party to the arbitrations in London consistently maintained its stance that an Australian court would be the appropriate forum for resolution of the disputes to which it was a party. Hi-Fert's application against United and Marine Cargo was served on United on 1 June 1998. On 13 July 1998, United filed a notice of motion in proceedings NG 1082 of 1997, seeking a permanent stay of the proceedings in favour of arbitration in London. On 25 August 1998, United applied to the arbitrators for a ruling from the arbitral tribunal as to its own substantive jurisdiction pursuant to section 30 of the Arbitration Act 1996 (UK). On 11 September 1998, United also commenced proceedings in the Queen's Bench Division of the High Court of Justice in London seeking an injunction restraining Hi-Fert from prosecuting proceeding NG 1082 of 1997 in this Court, contending that the prosecution of those proceedings was a breach of the agreement contained in and/or evidenced by the bill of lading. Hi-Fert then commenced these proceedings, NG 1001 of 1998, in which it seeks orders restraining United from pursuing the arbitration in London and from prosecuting the proceedings in the Queens Bench Division. The application which I have presently have before me is by Hi-Fert seeking interlocutory orders restraining United from proceeding with the arbitration or the proceedings in the Queens Bench Division until determination of the motion for a stay in proceedings 1082 of 1997 or final orders in the application to restrain the arbitration and the Queens Bench Division proceedings. The application under section 30 of the Arbitration Act is fixed for hearing in London at 5 pm today, London time. The application before me has been brought on with some degree of urgency in order to restrain that proceeding continuing at least for the time being. It has not been suggested that Hi-Fert will not obtain procedural fairness in the application under section 30 of the Arbitration Act to the arbitrators in London. Substantial written submissions have already been prepared and delivered to the arbitrators. It is apparent that Hi-Fert will be adequately represented by senior counsel in the hearing of the argument under section 30. I have indicated that I may well be able to give the parties some time for a hearing at the end of this month for both the stay application in NG 1082 of 1997 and the final resolution of these proceedings. Against that background, I understand that the issues which I have to resolve today are as follows: (1) whether there is a serious question to be tried in these proceedings as to Hi-Fert's entitlement to restrain the arbitration in London; (2) if there is such a serious question to be tried, where the balance of convenience lies as between Hi-Fert and United in restraining the prosecution of the proceedings for a determination by the arbitrators; (3) whether there are circumstances such as would disentitle Hi-Fert to any relief on an interlocutory basis. Several alternative bases have been advanced on behalf of Hi-Fert as the basis for its entitlement to restrain the prosecution of the arbitration proceedings. The first concerns the effect of the letter of undertaking. Hi-Fert asserts that the effect of the letter of undertaking is to constitute an agreement between Hi-Fert and United, the effect of which is to vary any submission to arbitration which may have been effected by the bill of lading. I do not consider that there is much substance in that contention. For reasons which will become apparent, it is not necessary for me to embark on a further consideration of that question. Second, it is argued by Hi-Fert that there is a doubt as to which charter party is referred to in the bill of lading to which I have referred above. The question is whether the governing charter party is the contract of affreightment between Hyundai and Hi-Fert or whether it is the time charter between United and Rondeau. In its statement of claim in NG 1082 of 1997, Hi-Fert asserts that the bill of lading incorporated the voyage charter party of 2 May 1997 in respect of the Uljanik. Reference is then made to warranties given by clause 35 of that charter party. If that is the charter party which is incorporated by reference, that must be the charter party, which is referred to in the provision which I have set out above, including any arbitration clause. Of course, one difficulty might be that, even if that charter party is incorporated, it is a charter party between Hyundai and Hi-Fert. United is not a party to it. A question may therefore arise as to whether, even if there is a submission to arbitration as between Hyundai and Hi-Fert, that submission extends to United. Again, for reasons which will become apparent, I do not consider that it is necessary for me to consider this question further at this stage. Third, it is suggested that some equity arises in favour of Hi-Fert for the questions raised by the section 30 application to be resolved in Australia rather than in the United Kingdom because of the sequence in which United commenced its application for a stay in Australia and referred the question to be arbitrated under section 30. As I have indicated, the application for a stay was filed on 13 July 1998 whereas the request for a determination of jurisdiction under section 30 was not made until 25 August 1998. I am not satisfied that any equity arises by reason of the order in which United has commenced those proceedings. I was referred to observations made by Bingham LJ in EI Du Pont De Nemours & Co & Endo Labs Inc v Agnew & Kerr [1987] 2 Lloyds Rep 585, in which his Lordship observed that he did not regard that case as one in which the dates of beginning proceedings were significant. The order in which proceedings were commenced may be a matter of pure chance particularly where the moving party is different. In these proceedings, of course, the moving party in the proceedings in question is United in each case. The reasons why proceedings were begun at the times they were and the explanation for the considerable delays are matters which I might have to consider in a different context below. Again, however, for the reasons which will become apparent, I do not consider it necessary to resolve this contention at this stage. The final basis upon which Hi-Fert contends that it is entitled to have the proceedings restrained is based on section 11 of the Carriage of Goods by Sea Act 1991 (Cth). Section 11 (2)(c) relevantly provides as follows: (2) An agreement (whether made in Australia or elsewhere) has no effect so far as it purports to: (c) preclude or limit the jurisdiction of a court of the Commonwealth or of a State or Territory in respect of: (i) a bill of lading … relating to the carriage of goods from any place outside Australia to any place in Australia. The bill of lading to which I have referred falls within that category. Hi-Fert contends that the effect of section 11(2)(c) is to render ineffective the arbitration clause insofar as it requires Hi-Fert to litigate the question arising under the bill of lading otherwise than in a court in Australia. United contends that the provision does not have the effect of disentitling United to arbitrate under a valid submission. In Compagnie de Messageries Maritimes v Wilson (1954) 94 CLR 577, Dixon CJ made observations concerning the effect of section 9 of the Sea Carriage of Goods Act 1924 (Cth) which is the precursor of section 11 of the Carriage of Goods by Sea Act. Dixon CJ observed that the condition of the bill of lading under consideration in that case clearly had a negative as well as a positive aspect. It means, his Honour said, that (at 582): …actions of a description falling within [the relevant clause] shall not be brought in the courts of another country but shall be brought in the specified courts of France. Applying that principle to the circumstances of this case, the effect of clause 34 of the contract of affreightment is an agreement that actions or disputes falling within clause 34 will be brought to arbitration in London and will not be brought in the courts of another country. That may be open to argument but it seems to me that it is at least a seriously arguable contention. It is arguable that the effect of the clause is that, insofar as there was a covenant not to litigate in Australia, that was ineffective by the operation of section 11. United said that that did not necessarily lead to the conclusion that the proceedings in London are vexatious or oppressive. Reference was made to the decision of the High Court in CSR Limited v Cigna Insurance Australia Limited (1997) 189 CLR 345. The joint judgment referred (at 393) to Societe Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] AC 871, where the Privy Council emphasised that the various cases decided in the 19th century with respect to vexation and oppression have continuing significance for the grant of anti-suit injunctions. Those cases establish that the mere existence of proceedings in different countries does not constitute vexation or oppression. In particular, double litigation which has no other element of oppression than that an action is going on simultaneously abroad, which will give other or additional remedies beyond those obtainable in the domestic forum, does not amount to vexation or oppression. Reference was made to the decision of Gough LJ in Bank of Tokyo Ltd v Karoon [1987] AC 45 that foreign proceedings are to be viewed as vexatious or oppressive only if there is nothing which can be gained by them over and above what may be gained in local proceedings. They are vexatious or oppressive if there is a complete correspondence between the proceedings or, in terms used in Carron Iron Co v Maclaren (1855) 5 HLC 416, if complete relief is available in the local proceedings. Those observations seem to indicate that where there is in fact complete correspondence between the two sets of proceedings such that no additional relief is obtainable in one set of proceedings over that which is obtainable in the other proceedings, then it would be vexatious or oppressive for both to continue. The argument therefore is that when that principle is coupled with the effect of section 11, it would be oppressive and vexatious for United to continue the proceedings at arbitration in London in circumstances where it has no entitlement to a stay of the proceedings in the Federal Court. Having regard to the limitations on the time that is presently available to me, I do not consider that it is appropriate to endeavour to hear out full argument in relation to those questions. I am satisfied that there is a serious legal question to be determined as to those matters such as would justify embarking on the second stage of the inquiry which is required before determining that interlocutory relief is appropriate. That is to say, the question is whether the balance of convenience favours restraining United from prosecuting the section 30 application tonight as against the possible detriment to Hi-Fert if the proceedings before the arbitrators proceed to conclusion before I am able to determine whether or not Hi-Fert is entitled to a permanent injunction. Section 30 of the Arbitration Act provides that unless otherwise agreed by the parties, the arbitral tribunal may rule on its own substantive jurisdiction, that is, as to: (a) whether there was a valid arbitration agreement; (b) whether the tribunal is properly constituted; and (c) what matters have been submitted to arbitration in accordance with the arbitration agreement. It is apparent that there is significant overlap between the issues that will be thrown up by proceedings under section 30 and the stay application brought by United in NG 1082 of 1997. Hi-Fert contends that, if it is entitled to the relief which it claims in these proceedings, namely a permanent injunction restraining the prosecution of the proceedings before the arbitrators, to have some of the issues that would arise in the proceedings before me determined by the arbitrators on a basis which may give rise to an issue estoppel would, in effect, mean that part of the proceedings before me would be otiose because the very question which is raised in the proceedings would have been resolved by a different tribunal. That seems to me to be irreparable damage which can only be avoided by the arbitrators not proceeding to a determination of the issue that arises under section 30. Certainly, Hi-Fert would be entitled to have any determination by the arbitrators reviewed by an English court. Section 67 of the Arbitration Act provides as follows: (1) A party to arbitral proceedings may … apply to the court – (a) challenging any award of the arbitral tribunal as to its substantive jurisdiction; … …and the right to apply is subject to the restrictions in section 70(2) and (3). Section 70 relevantly provides as follows: (2) An application or appeal may not be brought [under section 67] if the applicant or appellant has not first exhausted – (a) any available arbitral process of appeal or review;… Further there are time limits within which any application or appeal must be brought. Thus it does not appear that a determination of the arbitrators would necessarily be finally determinative in the sense that the English court may well review the determination. Nevertheless that proceeding is one which, if Hi-Fert's contention in these proceedings is correct, should not be imposed upon Hi-Fert. That is to say, if Hi-Fert's contention is correct, it is entitled to have all questions arising determined by an Australian court rather than by arbitration. For those reasons, I am satisfied that the balance of convenience lies in favour of an injunction. The only disadvantage to United would be a delay of some weeks and the costs which would be thrown away by an adjournment of the arbitration proceeding. That damage however, it appears to me, could be adequately compensated for by the usual undertaking as to damages, which would be a term of any injunction which I would grant. The third matter which arises concerns conduct said to disentitle Hi-Fert from any interlocutory relief. The first ground concerns an allegation of unclean hands. I do not consider that there is any substance in this contention. The argument was that the obtaining of any relief in these proceedings would be in breach of the agreement to submit to arbitration. However, that begs the question. If Hi-Fert is entitled to the relief, it should have the relief. It is not a breach of contract to assert an entitlement which ultimately turns out not to exist if at all times the party making the assertion nevertheless indicates that it will perform the contract as properly construed. There is nothing to suggest that Hi-Fert has evinced an intention not to perform whatever obligations the Court might ultimately determine arise out of its arrangements with United. The second ground concerns delay in the commencement of these proceedings. I must say, I find the delay somewhat puzzling. As I have indicated above, the dispute arose in June 1997 when the Uljanik was first detained in South Australia. By 13 August 1997, United had clearly indicated its intention that it proposed to have any dispute as between it and Hi-Fert arising under the bill of lading resolved by arbitration in London. I have before me voluminous correspondence between the London solicitors for the various parties to the arbitrations indicating step by step the advancement of those proceedings. The steps have not yet gone very far. It is clear that at each step Hi-Fert, through its solicitors, made clear its contention that it considered that the Australian courts were the appropriate forum for determination of any dispute between it and Hyundai and it and United. For reasons which are not clear, however, it did not commence proceedings in Australia until December 1997. It delayed for some months before it served those proceedings on the defendants. It was not until United itself threatened to bring the question of jurisdiction to a head by asking the arbitrators to rule on their own jurisdiction that Hi-Fert took any steps at all to determine jurisdiction in Australia. Thus, there has been unexplained delay. That might ultimately be something which I would have to take into account in determining whether or not I should grant any final relief in these proceedings, if there were no explanation for that delay. However, it does not appear to me that there has been undue delay in the application for interlocutory relief. Until there was some real threat that the question of jurisdiction might be determined in London before it was resolved in Australia, there was really no occasion for any application for interlocutory relief. Once that threat became apparent, Hi-Fert has moved with what seems to me to be adequate speed to bring the matter to a head. Accordingly, I do not regard the unexplained delay as sufficient to disentitle Hi-Fert from any relief of an interlocutory nature. In the circumstances, I consider that some relief ought to be granted to restrain United from prosecuting the application under section 30 to any finality. The mere hearing of argument may not be prejudicial, having regard to the fact that counsel and solicitors will have been prepared for the argument at this stage. I do not know whether it would be practical to restrain United from pursuing the section 30 application to the stage of an award. Alternatively, it may be that the appropriate relief is a mandatory order that United request the arbitrators not to make an award pursuant to the section 30 application until after these proceedings have been finally resolved. If that is not practicable, the appropriate order would simply be to restrain United from pursuing the application before the arbitrators until after I have decided the matters raised in these proceedings on a final basis and to order United to request the arbitrators to adjourn their hearing. The proceedings in the Queen's Bench Division are brought in aid of the arbitration proceedings. Accordingly, since I am disposed to make an order restraining any final determination in respect of the section 30 application, I would also restrain United from prosecuting the proceedings in the Queen's Bench Division until such time as I have made a final determination in these proceedings or perhaps, at the earliest, until I have determined United's stay application in proceeding NG 1082 of 1997. I shall hear the parties further on the appropriate relief. I certify that this and the preceding twelve (12) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 3 November 1998 Counsel for the Plaintiff: P.E. King with M.J. Watts Solicitor for the Plaintiff: Withnell Hetherington Counsel for the First Defendant: A.S. Bell Solicitor for the First Defendant: Ebsworth & Ebsworth Counsel for the Second Defendant: J.E. Marshall Solicitor for the Second Defendant: Clayton Utz Date of Hearing: 26 October, 3 November 1998 Date of Judgment: 3 November 1998