Globe Master Management Limited v Boulus Gad Limited

In a guarantor claim arising from a terminated charter arrangement, an arbitration clause in the underlying contract did not postpone proceedings against the guarantors until an arbitral award. Amounts accrued for services already rendered were payable and did not warrant permission to appeal. A larger sum attributable to the period after termination raised arguable issues under a contractual force majeure clause and the doctrine of frustration, supported by evidence concerning the safety of relevant vessels. Permission to appeal was therefore granted only for that sum, subject to payment of the accrued amount and interest.

The claimant crewing agency agreed to provide crew for a vessel chartered by Boulus-Gad Tourism and Hotels Ltd. The obligations of the charterers were guaranteed by Boulus Gad Ltd. Following cancellations and reduced demand, the charterers terminated the arrangement. The claimant sued the guarantors and obtained summary judgment in the Queen’s Bench Division before Mr Justice Morison for $622,284.59.

The defendants argued that the underlying arbitration clause prevented proceedings against them until an award had been obtained. They also sought to challenge liability for sums arising after termination by relying on a force majeure clause and frustration. The central questions were whether the arbitration objection was sound and whether there was an arguable appeal concerning the larger post-termination sum.

1. Disposition. Longmore LJ gave the first judgment and Hale LJ agreed. Permission to appeal was granted only in relation to $441,718.68, conditional on payment of $220,565.91, together with interest, within 21 days. Costs were to be costs in the appeal.
2. Guarantee and arbitration. The judge was plainly right to construe the guarantee arrangement as permitting proceedings against the guarantors without first invoking the arbitration clause in the underlying contract and obtaining an arbitral award.
3. Accrued services. The sum of $220,565.91, representing amounts due for services rendered up to 31 October 2000, was inevitably payable. Even if the defendants’ arguments concerning clause 8(1) and frustration succeeded in relation to later liabilities, those arguments could not justify permission to appeal in respect of the accrued sum.
4. Force majeure and frustration. The larger sum raised an arguable issue concerning either the operation of clause 8(1), described as a force majeure clause, or the doctrine of frustration. Evidence that vessels carrying Israeli passengers had become unsafe in September and October 2000 made the issue capable of being properly ventilated on appeal.
5. The court gave no encouragement as to the merits. Its provisional view was that clause 8(1) might effectively oust frustration. The clause appeared to relate only to payment of money, and payment was not beyond the defendants’ reasonable control. Those observations were made on the permission application and did not finally determine the merits.

• Queen’s Bench Division: Mr Justice Morison gave summary judgment for $622,284.59 and rejected the argument that arbitration had to occur before proceedings against the guarantors.
• Court of Appeal (Civil Division): Permission to appeal was granted only in relation to $441,718.68, subject to the stated payment condition. Costs were to be costs in the appeal.