In The "Navios Koyo",(1) the Singapore Court of Appeal held that the appellant was not entitled to a stay of proceedings that was conditional upon the respondent's waiver of a time-bar defence. In doing so, the Court of Appeal has provided guidance as to when a conditional (as opposed to an unconditional) stay of proceedings might be ordered. This decision is a timely reminder to claimants to be vigilant in complying with any relevant jurisdiction or arbitration clause. Otherwise, their claim might potentially become time barred.
The appellant was the holder and endorsee of several bills of lading in respect of NZ pine logs (the "cargo") carried on board the Taikoo Brilliance. The cargo was carried from New Zealand to India, and was completely discharged at Kandla on 23 September 2019. The appellant subsequently brought a claim against the respondent shipowner for failing to deliver the cargo upon presentation of the bills of lading.
The bills of lading also referred to and incorporated the terms of a charterparty, including the charterparty's law and arbitration clause. However, the appellant failed to ascertain the relevant terms of the charterparty. Subsequently, the appellant commenced proceedings in the Singapore High Court and arrested the Navios Koyo, a sister ship of the Taikoo Brilliance, in respect of the misdelivery claim against the respondent.
It was only on 24 September 2020 (ie, more than one year after the cargo had been discharged) that the appellant obtained a copy of the relevant charterparty, which provided for disputes to be resolved by way of London arbitration. By this time, the one-year time bar under the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading of 25 August 1924, as amended by the Protocol of 23 February 1968, which were incorporated by the bills of lading, had passed.
The respondent subsequently applied for and was granted an unconditional stay of the Singapore court proceedings by the assistant registrar. The appellant appealed against the decision, arguing that the stay should be conditional on the waiver of any time-bar defence in the London arbitration. The Singapore High Court disagreed; the appellant appealed to the Court of Appeal.
The Singapore Court of Appeal dismissed the appeal. In doing so, the Court made the following observations:
- The courts have the power under section 6(2) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (IAA) to impose a broad range of conditions for a stay granted under section 6(1) of the IAA.
- A relevant consideration in the exercise of the court's discretion to impose a condition would be the nature of the condition sought. There is a distinction between administrative conditions, which are essentially orders consequential upon the stay order intended to give effect to the arbitration agreement, and conditions that impact substantive issues that should be decided by the arbitral tribunal (eg, waiver of a time-bar defence). The latter would be subject to a heightened level of scrutiny.
- Proper justification would have to be put forward for the imposition of any condition. In deciding whether such justification is established, the court will consider:
- the reasons for the conditions being sought, and whether those reasons could have been obviated by the applicant's own conduct;
- whether the need for any of the conditions was contributed to or caused by the respondent's conduct; and
- the substantive effect on the parties of any condition that the court may impose.
The first two considerations focus on the respective conduct of each party. Where a party seeks a condition for reasons that arise entirely from its own conduct, and the other party did nothing to cause or contribute to the need for the stay or the imposition of the condition, that party would only have itself to blame.
Conversely, a stay may be imposed if there was unconscionable or improper conduct on the part of the other party that lulled the applicant to conduct itself in a particular manner. For example, misrepresentation, wilful non-disclosure and/or deliberately waiting for a time-bar defence to set in before applying for the stay.
The third consideration looks at the substance of the condition sought – if the court is asked to impose a condition to deprive a party of a substantive and accrued defence which ought to be determined at arbitration, that would be a strong factor against the imposition of that condition.
On the facts, the Court decided that there was no basis to grant the conditional stay sought by the appellant. This was because the appellant had chosen to take the risk of not finding out about the terms of the bills of lading, despite having ample opportunity to do so. The court held that the appellant:
- knew from the outset that there might be a potential arbitration clause that would govern any disputes arising under the bills of lading, but it chose to not take any steps to verify or find out about the clause;
- only allegedly asked for the charterparty 10 months after the appellant came into possession of the bills of lading. Even then, there was no documentary evidence of the appellant's efforts to obtain the charterparty;
- had chosen to look at first instance to the buyer of the cargo (which the appellant had financed) for payment, even though it was aware that the respondent had delivered the cargo without producing the bills of lading; and
- produced explanations for its failure to approach the respondent for the charterparty earlier that were "speculative" and "outrageous". Fundamentally, the appellant had simply waited until the last minute to ask for the charterparty from the respondent. There was no improper conduct on the respondent's part that had led to or contributed to the appellant's failure or omission.
The Court also took the chance to clarify that the quantum of the claim would not be a relevant consideration in the Court's exercise of its discretion to impose condition(s).
The "Navios Koyo" is a cautionary tale to potential claimants of the need to be vigilant and make efforts at an early stage to ascertain:
- the applicable jurisdiction or arbitration clause; and
- if there are any time-bar defences that are applicable to their claim.
If proceedings have been commenced in a wrong forum and a time bar has set in, potential claimants may find themselves in the position of having their original proceedings stayed, while facing a potential time-bar defence in any subsequent proceedings commenced.
For further information on this topic please contact Matthew Teo or Kenneth Lim at Helmsman LLC by telephone (+65 6816 6660) or email ([email protected] or [email protected]). The Helmsman LLC website can be accessed at www.helmsmanlaw.com.
Endnotes