Gatoil International Inc v Arkwright-Boston Manufacturers Mutual Insurance Co

An agreement falls within the statutory category of agreements relating to the carriage of goods by ship only where it has a reasonably direct connection with that activity. A merely remote or factual connection is insufficient.

A policy insuring cargo during carriage by sea does not have the required direct connection. A claim for premiums under such a policy therefore cannot support arrestment under section 47(2)(e) of the Administration of Justice Act 1956. Where domestic provisions derive from an international convention, their common origin may support consistent interpretation. Public and accessible preparatory materials may reinforce that interpretation when they clearly disclose a definite legislative intention.

Six insurers and an insurance broker claimed premiums allegedly due under a policy covering an oil cargo carried by sea. They arrested the appellants’ ship, the Sandrina, in Scotland to found jurisdiction and obtain security. The ship had no connection with the insured carriage.

The appellants sought recall of the arrestments. The sheriff held that the premium claim fell within section 47(2)(e) of the Administration of Justice Act 1956. The Second Division affirmed that decision and dismissed the appellants’ appeal.

The central question before the House was whether a claim for premiums under cargo insurance arose from an agreement “relating to the carriage of goods in any ship whether by charterparty or otherwise”.

1. The appeal was allowed unanimously and the arrestments were recalled. Lord Keith of Kinkel delivered the principal speech. Lord Scarman agreed with him. Lord Fraser of Tullybelton and Lord Roskill agreed with both Lord Keith and Lord Wilberforce.

2. Per Lord Keith, the expression “relating to” is wider than “for”, but it does not encompass every agreement having some remote connection with carriage, use or hire. There must be a reasonably direct connection with the relevant maritime activity. Whether that connection exists depends upon the facts of each case.

3. The cargo insurance agreement lacked a sufficiently direct connection with carriage by ship. The premium claim therefore fell outside section 47(2)(e) of the Administration of Justice Act 1956. Lord Keith drew support from the structure of section 47(2) and the reasoning in The Aifanourios 1980 S.C. 346. An agreement cancelling a contract of carriage would, by contrast, be sufficiently direct.

4. Per Lord Keith, provisions for England and Scotland derived from the same provisions of the 1952 Arrest Convention should, where their language permits, receive a consistent interpretation. The wide construction adopted in The Eschersheim [1976] 1 W.L.R. 430 was compatible with this conclusion because the salvage agreement there directly involved use of a salvage vessel.

5. Lord Keith held that The Sonia S. [1983] 2 Lloyd’s Rep. 63 was wrongly decided and should be overruled. Hiring containers intended for customers’ goods was not sufficiently directly connected with carriage by ship. Containers could not be equated with the salvage vessel used under the agreement in The Eschersheim.

6. Lord Wilberforce reached the same conclusion and relied additionally upon the preparatory materials of the 1952 Convention. Applying the cautious approach stated in Fothergill v Monarch Airlines Ltd [1981] AC 251, he considered those materials public, accessible and unequivocal. They showed that the conference deliberately declined to include insurance premiums among arrestable maritime claims. Lord Scarman expressly agreed with this use of the materials.

7. The House sustained the appellants’ relevant plea, repelled the respondents’ corresponding plea and granted decree in terms of the summons. The appellants received their costs in the House and their expenses in the courts below.

1. House of Lords: Allowed the appeal unanimously, reversed the result below and recalled the arrestments.

2. Court of Session, Second Division: Affirmed the sheriff’s construction of section 47(2)(e) of the Administration of Justice Act 1956, dismissed the appeal and granted leave to appeal to the House of Lords.

3. Sheriff Court: Held that the claim for cargo-insurance premiums fell within section 47(2)(e), refused recall of the arrestments on that ground and allowed proof on the disputed ownership of the Sandrina.