Fimbank Plc v KCH Shipping Co Ltd

Section 12 of the Arbitration Act 1996 provides an exceptional route to extend an agreed arbitration time bar. Under section 12(3)(a), the circumstances must be outside the parties’ reasonable contemplation and it must be just to extend time. A negligent omission, even when reinforced by innocent correspondence, will ordinarily remain within reasonable contemplation. Under section 12(3)(b), positive conduct by the respondent must have a causative nexus with the failure to comply and make reliance on the time bar unjust. The conduct need not be wrongful or the sole cause. The court retains a discretion to refuse relief, including for delay, even where a jurisdictional threshold is met.

Fimbank Plc sought under section 12 of the Arbitration Act 1996 to extend time to commence arbitration against KCH Shipping Co Ltd in respect of an alleged misdelivery of cargo without production of bills of lading. The bills contained a London arbitration clause and a one-year Hague/Hague-Visby Rules time bar.

Fimbank had commenced arbitration in time against the vessel’s registered owner, Mirae Wise SA, after correspondence concerning an extension of time. It later learned that KCH was the demise charterer and alleged that correspondence by solicitors, including one authorised communication on KCH’s behalf, had caused or contributed to its failure to commence arbitration against KCH. The court considered both limbs of section 12(3), and the possible effect of delay on the court’s discretion.

1. Application dismissed. Neither jurisdictional threshold in section 12(3) of the Arbitration Act 1996 was satisfied.
2. Section 12(3)(a) imposes two cumulative requirements. The relevant circumstances must be outside the parties’ reasonable contemplation when they agreed the time bar, and, had they contemplated them, they must also have contemplated that the time bar might not apply. The analysis must address both questions.
3. A simple negligent omission to comply with a time bar is ordinarily within reasonable contemplation. The phrase “without more” permits relief in an unusual case involving negligence plus an additional feature, but the court must assess the circumstances overall. Here, the claimant’s mistake, innocent reinforcement by third-party correspondence and subsequent failure to act were not sufficiently unusual. The case was materially different from Haven Insurance v Elephant Insurance [2018] EWCA Civ 2494, which involved a widely shared misunderstanding and an established practice supporting it.
4. Under section 12(3)(b), the claimant must establish positive conduct by the respondent with a causative nexus to the failure to comply or to the injustice arising from enforcement of the time bar. The conduct need not be wrongful, blameworthy, sole or predominant. The court accepted that KCH’s authorised agent drafted a communication which, against the known background, failed to dispel the claimant’s misunderstanding about who had granted the extension. That communication caused continuing uncertainty, but the claimant’s own failure to clarify the position after learning that KCH was the carrier was at least as significant. Reliance on the time bar was therefore not unjust.
5. The court distinguished The Lake Michigan [2009] EWHC 3325 (Comm); [2010] 2 Lloyd’s Rep. 141. That case involved a much stronger course of dealing, repeated extensions and misleading conduct by an agent acting with full authority.
6. The court observed that, even if a section 12(3) threshold had been met, section 12(1)’s use of “may” preserved a discretion to refuse relief. Delay in making the application could be relevant, although the point did not require determination. The claimant’s delay would probably have justified refusal in any event.