Finmoon Ltd & Anor v Baltic Reefers Management Ltd & Ors

A contract of affreightment may arise from the parties’ conduct where their conduct, viewed cumulatively, objectively demonstrates contractual intention. The conduct must be referable to the alleged contract, but individual variations or the absence of a precisely identifiable formation date are not necessarily fatal.

Under Arbitration Act 1996, s 14(4), a notice commencing arbitration is construed broadly and flexibly. It is effective if, viewed objectively and in context, it sufficiently identifies the dispute and communicates an intention to arbitrate. Identifying the wrong contractual document does not necessarily invalidate the reference.

A bill of lading may evidence an underlying contract of carriage even where it is later surrendered and cancelled. Replacement bills may preserve that underlying contract and transfer rights of suit under the Carriage of Goods by Sea Act 1992.

The claimants challenged parts of an arbitration award under s 67(1)(a) of the Arbitration Act 1996. The award concerned preliminary jurisdictional issues arising from cargo damage claims relating to twelve banana shipments from Ecuador to Russia.

The court reconsidered whether the parties had a winter 2007/2008 contract of affreightment, whether Baltic Reefers Management Ltd contracted as principal or agent, whether the bills of lading evidenced contracts of carriage to which Megafruit acquired rights, and whether arbitrations had been validly commenced.

The court also considered whether an apparent omission concerning one vessel invalidated the appointment of the claimants’ arbitrator, and whether Megafruit could be a party to the arbitration as an undisclosed principal.

The court answered the preliminary issues as follows.

1. Contract of affreightment. A formal written agreement dated 22 October 2007 did not exist, but a binding contract of affreightment arose on the terms proposed by email on that date. The contract covered weeks 43 of 2007 to week 22 of 2008. The nomination of a vessel alone could not create a contract by conduct because conduct from both sides was required. The subsequent acceptance of nominations and loading of cargo did so. The parties’ wider conduct, including nominations, invoices, freight payments, liens and references to the winter COA, confirmed that conclusion. The alternative case based on individual charterparties did not arise.
2. Capacity. Baltic Reefers contracted as principal and not as agent. The earlier COAs had been signed by it as owner, the commercial arrangements made little sense if unidentified members of a group were contracting jointly, and the subsequent conduct was more consistent with Baltic Reefers being the contracting owner.
3. Bills of lading. The loadport bills evidenced contracts of carriage despite being intended for surrender and cancellation and despite not being negotiable. They ceased to be valid when surrendered, but were replaced by disport bills issued on behalf of the owners. Megafruit became lawful holder of the disport bills and acquired rights of suit as if it had been a party to the contract under s 2(1) of the Carriage of Goods by Sea Act 1992. The court did not decide the separate argument under s 2(1)(b).
4. Arbitration. Section 14(4) of the Arbitration Act 1996 requires an objectively clear notice of the dispute and an intention to arbitrate, but adopts a broad and flexible approach. The March 2009 letters validly commenced arbitrations under the COA although they referred to individual charterparties. The claimants had identified the wrong contractual document, but the disputes and contractual basis were sufficiently clear. The Baltic Meridian arbitration was also validly commenced by the later notice, notwithstanding the earlier omission from the arbitrator’s appointment letter; subsequent conduct additionally supported an estoppel.
5. Megafruit. If Megafruit was an undisclosed principal, it was a party to the COA arbitration. Its substantive rights and status were matters for the tribunal, subject to any later court review. No election between Finmoon and Megafruit was required at this stage.

The parties were directed to agree a draft order, including costs, or return to court on outstanding matters.

First-instance determination of challenges to an arbitration award under s 67(1)(a) of the Arbitration Act 1996.