Gold Shipping Navigation Co SA v Lulu Maritime Ltd

Under section 190 of the Merchant Shipping Act 1995, the two-year limitation period applies to collision counterclaims as well as originating proceedings. The provision consolidated the settled effect of its predecessor, section 8 of the Maritime Conventions Act 1911, and clear words would be required to change that position.

The court may extend time where there is good reason, assessed in all the circumstances, and where justice supports the extension. A genuine and non-culpable misunderstanding of an unusually worded time-extension agreement may constitute good reason. The court should also consider promptness and the prejudice or unfairness which would result from allowing or refusing the counterclaim.

The claim arose from a collision in the Suez Canal between PEARL OF JEBEL ALI and PRIDE OF AL SALAM 95. The parties had agreed English law and jurisdiction and later agreed a mutual extension of the two-year limitation period while evidence was sought in Egypt.

One owner gave notice to proceed and issued proceedings. The other misunderstood the badly drafted extension agreement, issued separate proceedings later, and counterclaimed in the first action. The issues were the construction and effect of the agreement, whether section 190 applied to the counterclaim, and whether time should be extended under section 190(5).

1. Construction of the extension agreement. Applying the principles in Investors Compensation Scheme v West Bromwich Building Society and the objective approach reaffirmed in Attorney General of Belize v Belize Telecom, the agreement meant that time was extended indefinitely, but either party could terminate the extension by one month’s notice while intending to proceed with its claim. The syntax was defective, but the court was not entitled simply to delete words forming part of the agreement.
2. Effect of the notices. The notice to start proceedings within one month objectively operated as notice terminating the extension. Proceedings had therefore to be commenced within that month. The later claim was out of time.
3. Counterclaims. “Any proceedings” in section 190(1), and “proceedings” in section 190(3), include collision counterclaims. The Merchant Shipping Act 1995 was a consolidation Act which preserved the settled interpretation of section 8 of the Maritime Conventions Act 1911, including the decision in The Fairplay XIV. The counterclaim was consequently time barred unless time was extended.
4. Extension of time. The discretion under section 190(5) must be exercised on principled grounds. The applicant must first show good reason. The court must then decide whether, in all the circumstances, it is just and fair to extend time. Promptness is also a relevant consideration.
5. The applicant’s misunderstanding was caused by an unusual and clumsy agreement and was not culpable or dilatory. It would be unjust to deprive the applicant of a counterclaim arising from the collision, while allowing the defendant a limitation defence would confer a windfall. The application was made promptly. Time was therefore extended to permit the counterclaim.