3PLR – ANTAIOS CIA NAVIERA SA V. SALEN REDERIERNA AB

Published by Law Nigeria Admin at October 17, 2018

POLICY, PRACTICE AND PUBLISHING, LAW REPORTS 3PLR

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ANTAIOS CIA NAVIERA SA

V. SALEN REDERIERNA AB

THE ANTAIOS

COURT OF APPEAL, CIVIL DIVISION

[1983] 3 ALL E.R. 770

15, 17 JUNE, 8 JULY 1983

3PLR/1983/6 (CA-E)

BEFORE THEIR LORDSHIPS

SIR JOHN DONALDSON MR,

ACKNER AND

FOX LJJ

MAIN ISSUES

ADMINISTRATION OF JUSTICE; Arbitration: CONTRACT

Arbitration – Award – Leave to appeal to Court of Appeal against grant or refusal of leave to appeal to High Court – When leave to appeal to Court of Appeal should be granted – Principles applicable to grant of leave – Arbitrator’s decision raising substantial and arguable point of law – Case important to parties or of general interest – Judge concluding arbitrator’s decision probably right – Judge requiring guidance on principles applicable to grant of leave – Whether judge should grant leave – Arbitration Act 1979, s 1(6A).

Arbitration – Award – Leave to appeal against award – Factors to be considered by court when deciding whether to grant leave – Award affecting parties’ rights and involving conflict of judicial opinion – Judge concluding that arbitrator’s decision probably right and refusing leave to appeal to High Court – Whether judge right to refuse leave to appeal – Arbitration Act 1979, s 1(3)(b).

Contract – Breach – Waiver – Conduct amounting to waiver – Owners chartering vessel to charterers – Charterparty providing for withdrawal of vessel in event of any breach of charterparty – Charterers issuing inaccurate bills of lading – Owners indicating that charterers in breach of charterparty – Owners purporting to withdraw vessel three weeks after breach – Whether owners entitled to withdraw vessel – Whether owners exercising right of withdrawal within reasonable time – Whether owners can extend time in which it is reasonable for them to withdraw vessel.

By cl 5 of a time charter in the standard New York Produce Exchange from, which provided for disputes to be referred to arbitration in London, the owners were entitled to withdraw the vessel from the charterers’ service in the event of ‘any breach’ of the charterparty by the charterers. On 7 May 1980 the owners discovered that the charterers had issued inaccurate bills of lading and indicated to the charterers on the same day that although they considered the charterers to be in breach under cl 5 they reserved the right to withdraw the vessel without prejudice to any delay in doing so. On 20 May the owners did in fact purport to withdraw the vessel. The question whether the owners were entitled to do so was referred to arbitration. The arbitrators found (i) that on its true construction cl 5 only gave the owners the right to withdraw in the case of a repudiatory breach, whereas the charterers’ breach was not repudiatory, and (ii) alternatively, that if the owners had acquired the right to withdraw they had lost that right by not exercising it within a reasonable time, which the arbitrators considered to be 48 hours after becoming aware of the breach. The arbitrators held that there was an implied term in the charterparty that the owners had to give notice within a reasonable time. The owners applied under s 1(3)(b)^a of the Arbitration Act 1979 for leave to appeal to the High Court, contending that, since there was a conflict of judicial opinion on the construction of cl 5 the determination of which would substantially affect the rights of the parties, leave ought to be given. The owners further contended, on the issue of withdrawal within a reasonable time, that they could only lose their right to withdraw if they waived that right or were estopped from enforcing it and that their notice to the charterers on 7 May showed that they did not intend to waive that right. The judge refused leave to appeal to the High Court, on the ground that although the construction of cl 5 gave rise to substantial and arguable questions of law that issue was immaterial and did not affect the rights of the parties because, in his opinion, the arbitrators were prima facie right on the issue of withdrawal within a reasonable time. However, the judge granted the owners leave to appeal to the Court of Appeal under s 1(6A) of the 1979 Act on the question whether a judge ought to give leave under s 1(6A) where the arbitrator’s decision raised a substantial and arguable point of law but the judge considered his decision was probably right.

Held –

(1) On the issue of leave to appeal to the Court of Appeal against a decision granting or refusing leave to appeal to the High Court, the purpose of the 1979 Act was to encourage finality in arbitration and discourage appeals, and therefore a judge ought not to grant leave where the arbitrator’s decision raised a substantial and arguable point of law but was probably right or further (per Sir John Donaldson MR and Fox LJ) merely because the case was important to the parties or of general interest. Although the judge at first instance had an unfettered discretion to grant leave under s 1(6A) that discretion was normally to be exercised only where the judge required guidance on the principles applicable to the grant of leave (see p 782 a to d, p 787 a b, p 788 d e and p 789 b c, post).

(2) On the issue of leave to appeal to the High Court under s 1(3)(b) of the 1979 Act, a judge ought to refuse leave where he formed the view that the arbitrator’s decision was probably right, regardless of the basis on which the arbitrator reached his decision or whether the Court of Appeal might, simply because it was an appellate court, take a different view. If, however, the resolution of the issue was going to affect the rights of the parties substantially and there was known to be a conflict of judicial opinion then leave ought to be given (see p 780 e to j, p 782 d e g to j, p 783 e, p 785 g, p 787 c, p 788 d and p 789 c d, post); dictum of Lord Diplock in Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1981] 2 All ER at 1040 explained.

(3) (Ackner LJ dissenting) On the substantive issue of whether the owners had exercised their right of withdrawal within a reasonable time, the rule was that notice of withdrawal had to be given within a reasonable time after default and what was reasonable in any case was a matter for the arbitrator. Therefore, whatever the basis of the rule, the owners were not entitled, merely by the unilateral assertion that delay on their part was to be without prejudice to their rights, to extend the time for withdrawal beyond what was reasonable. In any event (per Sir John Donaldson MR), the charterers were by their without prejudice notice seeking to acquire a right which they would not otherwise have had, namely the right to withdraw the vessel after the expiry of a reasonable time, and therefore they could not rely on a supposed refusal to waive their right since that presupposed that they already had the right. On the facts, therefore, regardless of whether the juridical basis of the doctrine was an implied term (as found by the arbitrators) or waiver, the arbitrators were probably correct in deciding that the owners had not exercised their right of withdrawal within a reasonable time, and accordingly the judge had been right to refuse leave to appeal to the High Court (see p 783 a b d to f, p 784 b c, p 788 f j to p 789 a d, post); dictum of Lord Wilberforce in Mardorf Peach AND Co Ltd v Attica Sea Carriers Corp of Liberia, The Laconia [1977] 1 All ER at 552 applied; Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana, The Scaptrade [1983] 1 All ER 301 considered.

Per Sir John Donaldson MR and Fox LJ. Since the time within which it is reasonable for shipowners to withdraw their vessel from the charterers’ service may be affected by matters known only to the owners, it follows that if the owners make any problems they may have known to the charterers and indicate that they are not abandoning their right of withdrawal they may thereby extend the period within which it is reasonable for them to withdraw the vessel (see p 783 j and p 788 g, post); dictum of Lloyd J in Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana, The Scaptrade [1981] 2 Lloyd’s Rep at 430 applied.

Notes

For appeals to the High Court from an arbitrator’s award, see 2 Halsbury’s Laws (4th edn) para 627.

For waiver generally, see 9 ibid para 571, and for cases on the subject, see 12 Digest (Reissue) 544–545, 3796–3806.

For promissory estoppel, see 9 Halsbury’s Laws (4th edn) paras 575–579 and for cases on the subject see 21 Digest (Reissue) 8–16, 52–74.

For the Arbitration Act 1979, s 1, see 49 Halsbury’s Statutes (3rd edn) 59, and for s 1(6A) of that Act (as inserted by the Supreme Court Act 1981, s 148(2)), see 51 ibid 672.

Cases referred to in judgments

BVS SA v Kerman Shipping Co SA, The Kerman [1982] 1 All ER 616,[1982] 1 WLR 166.

China National Foreign Trade Transportation Corp v Evlogia Shipping Co SA of Panama, The Mihalios Xilas [1979] 2 All ER 1044,[1979] 1 WLR 1018, HL.

Italmare Shipping Co v Ocean Tanker Co Inc, The Rio Sun [1982] 1 All ER 517,[1982] 1 WLR 158, CA.

Mardorf Peach AND Co Ltd v Attica Sea Carriers Corp of Liberia, The Laconia [1977] 1 All ER 545,[1977] AC 850,[1977] 2 WLR 286, HL.

Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1981] 2 All ER 1030,[1982] AC 724,[1981] 3 WLR 292, HL.

Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana, The Scaptrade [1981] 2 Lloyd’s Rep 425; affd [1983] 1 All ER 301,[1983] QB 529,[1983] 2 WLR 248, CA.

Telfair Shipping Corp v Athos Shipping Corp SA, The Athos [1983] 1 Lloyd’s Rep 127, CA; affg [1981] 2 Lloyd’s Rep 74.

Tropwood AG v Jade Enterprises Ltd, The Tropwind [1977] 1 Lloyd’s Rep 397.

Tyrer AND Co and Hessler AND Co, Re (1902) 86 LT 697, CA.

Cases also cited

Amherst v James Walker Goldsmith and Silversmith Ltd [1983] 2 All ER 1067,[1983] 3 WLR 334, CA.

Eximenco Handels AG v Partrederiet Oro Chief, The Oro Chief (10 May 1983, unreported), QBD.

Gatoil Anstalt v Omennial Ltd, The Balder London [1980] 2 Lloyd’s Rep 489.

Appeal

Antaios Cia Naviera SA (the owners) appealed with leave against the decision of Staughton J dated 5 November 1982 refusing the owners leave to appeal against the award of the arbitrators, Mr Anthony Diamond QC, Mr Bruce Harris and Mr John Potter, dated 9 July 1982 whereby they held that the owners were not entitled to withdraw the vessel Antaios on 20 May 1980 from the service under a charterparty made between the owners and the respondents, Salen Rederierna AB (the charterers). The facts are set out in the judgment of Sir John Donaldson MR.

Gordon Pollock QC and Angus Glennie for the owners.

Mark O Saville QC and Bernard Eder for the charterers.

Cur adv vult

8 July 1983. The following judgments were delivered.

SIR JOHN DONALDSON MR. The appellants, the owners of the Antaios, applied to the Commercial Court under s 1(3)(b) of the Arbitration Act 1979 for leave to appeal to the High Court against an arbitration award dated 9 July 1982. The application was heard and refused by Staughton J. Normally that would have been the end of the matter, 779because s 1(6A) of the Arbitration Act 1979 bars any appeal to the Court of Appeal from the grant or refusal of leave to appeal to the High Court, unless the High Court itself gives leave authorising such an appeal. However in this case Staughton J gave leave to appeal to this court and also invited us to consider whether he should have done so.

The background

Before considering that question and the substance of the appeal, I should set the scene briefly. At all material times the vessel was under time charter to the respondents on the New York Produce Exchange form, which provides for disputes to be referred to three arbitrators. The arbitrators in this case were Mr Anthony Diamond QC, Mr Bruce Harris and Mr John Potter, all of whom are very experienced in this field. A major issue in the arbitration concerned the right of the owners to withdraw the vessel from the chartered service on discovery that the charterers had issued bills of lading which were ‘inaccurate’, to use a neutral word. This turned on whether cl 5 of the charter entitled the owners to withdraw the vessel in the event of any breach of the charterparty on the part of the charterers or only in the event of a repudiatory or some other restricted category of breach.

The arbitrators held that the breach by these charterers was non-repudiatory and that the clause, properly construed, gave a right of withdrawal only in the case of a repudiatory breach. They further held that, even if they were wrong in this and the owners had acquired a right of withdrawal, it had to be exercised within a reasonable time and that the owners had lost that right by delaying far beyond a reasonable time before purporting to exercise it. The arbitrators held that in all the circumstances of the case, including in particular the fact that the owners had long suspected that the charterers were in breach of the charterparty, a reasonable time would have expired on 9 May 1980, ie 48 hours after the owners acquired firm knowledge of the breach, whereas the owners gave notice of withdrawal on 20 May.

Staughton J said that if the only issue had been the true construction of cl 5 he would have granted leave to appeal to the High Court because the arbitrators had disagreed with a dictum of Neill J and also with a dictum of Kerr J which itself conflicted with the view expressed by Neill J. In this I think he was right. There is a public interest in the construction of cl 5 and some measure of uncertainty as to what is the true answer. It thus falls within the category of case considered by Lord Diplock in Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1981] 2 All ER 1030 at 1040,[1982] AC 724 at 743. In saying that I think Staughton J was right, I am, of course, construing Lord Diplock’s speech as if it had read,‘But leave should not be given, even in such a case, unless the judge considered that a strong prima facie case had been made out that the arbitrator might well have been wrong in his construction’ rather than ‘the arbitrator had been wrong in his construction’. I think that this must have been his intention as otherwise, where there are known to be differences of judicial opinion on a matter such as this, whether leave to appeal was granted or refused would depend on the accident of whether the judge hearing the application did or did not take the same view as the particular arbitrator. This cannot have been the intention of Parliament. If I am wrong in so construing Lord Diplock’s speech, then I think that this is one of those cases in which it is permissible to remind oneself that the speeches in The Nema were intended to provide guidelines rather than to remove the discretion granted to the judge hearing the application and that guidelines by definition permit of exceptions, albeit great care must be exercised to ensure that the exceptions do not become so numerous as to blur the edges of the guidelines or even render them invisible.

However, despite his willingness to grant leave on the basis of the cl 5 issue, Staughton J refused leave to appeal to the High Court because he considered that issue to be immaterial, and thus incapable of affecting the rights of the parties substantially or at all (see s 1(4) of the 1979 Act), unless the arbitrators were wrong in their view that the owners had, by their own inactivity, lost any right of withdrawal. On this latter issue he was of the opinion that the arbitrators were probably right and it would follow, applying The Nema guidelines, that leave to appeal to the High Court should be refused.

There was also a subsidiary point on the charterers’ counterclaim, the owners complaining that there was some logical inconsistency between two parts of the award. So far as this was concerned Staughton J considered that the owners were plainly wrong.

Section 1(6A) of the 1979 Act: leave to appeal to the Court of Appeal

I now return to the reason why leave to appeal to this court was given by Staughton J and I cannot do better than quote from his judgment. After adverting to s 1(6A) of the Arbitration Act 1979 he said:

‘Parliament thus contemplated that in some cases at any rate it would be right for a judge at first instance to grant leave to appeal to the Court of Appeal against his own decision either granting leave to appeal from an arbitration award or refusing leave to appeal from an arbitration award. There have been discussed in argument three classes of cases in which this problem might arise. Class 1 is cases like BVS SA v Kerman Shipping Co SA, The Kerman [1982] 1 All ER 616,[1982] 1 WLR 166, where Parker J laid down guidelines as to the granting of leave under the Arbitration Act 1979, or perhaps it may be said laid down a practical interpretation of the guidelines earlier laid down in The Nema. It is not disputed that in such a class of case it would be right for this court to give leave to appeal to the Court of Appeal so that the guidelines may be either approved or varied and have the authority of that court. The second class of case is where the judge at first instance has decided the matter for one reason or another as one of discretion. In such a case counsel for the charterers submits, and I would agree, that it is not right to give leave to appeal to the Court of Appeal. The third class of case is more difficult. That is where the issue raised by the arbitration award is a genuine arguable point of law, but one on which the judge at first instance has concluded that the arbitrators, so far from being probably wrong as they must be shown to be if leave is given in accordance with The Nema guidelines, are, on the contrary, probably right. If a judge at first instance comes to the conclusion on such a substantial and arguable point of law that the arbitrators are probably right, should he nevertheless give leave to appeal to the Court of Appeal? Most judges at first instance are occasionally wrong, and I certainly count myself among that number and am the first to recognise that, although I may think that the arbitrators were probably right, the Court of Appeal might take the view that they were probably wrong, and that therefore leave should be given in accordance with The Nema guidelines. Nevertheless it seems to me that the policy of the 1979 Act will not be best served if leave is given in such circumstances. The judge at first instance must make up his mind; and, if he concludes, even on a substantial and arguable point of law, that the arbitrators are probably right, then he must say so and must refuse leave to go to the Court of Appeal. That would be my conclusion but for this point. In expressing that view I have in effect laid down or attempted to lay down a principle, a principle which would benefit by being considered, and if right adopted, by the Court of Appeal. It would be very much to the advantage of the commercial community, as it seems to me, that the Court of Appeal should consider this very point, and if I were to refuse leave they would have no opportunity of doing so. In effect this case has now become one in the first class like The Kerman where I have stated what seems to me to be a principle, and the Court of Appeal ought to consider that principle. So I conclude that in general it is not right for a judge at first instance to grant leave to appeal under the new s 1(6A) in a case where the arbitrators’ decision raises a substantial and arguable point of law but the judge considers that the arbitrators were probably right on it. I say “in general”, but in this particular case I consider it right to grant leave to appeal in order that that conclusion can itself be considered by the Court of Appeal.’

I appreciate the problem which confronted Staughton J. As he says,‘Most judges at first instance are occasionally wrong’, or, as I would prefer to put it,‘Most judges at first instance have had the experience of taking a different view from that of an appellate court’. They are equally aware, of course, that if the parties are sufficiently persistent there may be a further appeal in which their judgment is restored.

Parliament has made it clear that, subject to the exceptional situation contemplated by s 1(6A) of the 1979 Act, it was content and indeed required that the decision whether to grant or refuse leave to appeal to the High Court should be left exclusively to the discretion of the judges of the High Court which, in the light of RSC Ord 73, r 6, means the judges of the Commercial Court. This is understandable because of the need for speed of decision and the fact that the judges of that court are specialists in the field of arbitration.

The exceptional situation contemplated by s 1(6A) is, I think, one in which a judge of the High Court wishes to have a ‘second opinion’ on the principles which should guide him in the exercise of his discretion. That is this case and accordingly I consider that Staughton J was right to grant leave to appeal to this court.

Counsel for the owners submitted that leave to appeal to the Court of Appeal from the decision granting or refusing leave to appeal to the High Court should also be given where the issue raised by the award itself was of general interest or importance, of particular importance to the parties or one on which there is a difference of judicial opinion. I do not accept this submission. These factors may well have to be taken into account within the general Nema guidelines in deciding whether or not to grant leave to appeal to the High Court, but they do not seem to me to have any bearing on whether, a decision having been given to grant or refuse leave to appeal to that court, that decision should be open to reconsideration by the Court of Appeal.

Counsel for the owners stressed the undesirability of allowing a situation to arise in which, in relation to any particular award, one judge would grant leave because he thought that the arbitrator was prima facie wrong and another would refuse leave because he thought that the arbitrator was probably right. This, of course, I accept without reservation. But the solution is not an appeal to the Court of Appeal. It is to grant leave to appeal to the High Court. Staughton J, I think, applied this principle in deciding that if the construction of cl 5 had been the only issue he would have granted such leave.

Section 1(3) of the 1979 Act: leave to appeal to the High Court

In the light of the fact that Staughton J gave leave to appeal, we have to review his decision not to grant leave to appeal to the High Court pursuant to s 1(3) of the 1979 Act. That involves a consideration of the award with which he was concerned. However, before doing so, I should consider the general question which he asked, namely whether, where a judge has formed a firm view that the arbitrator is probably right, the fact that the Court of Appeal might take a different view is any ground for granting leave to appeal to the High Court. My answer to this question is that it is not if his appreciation that the Court of Appeal might take a different view has no more solid a basis than that this is in the nature of appellate courts and that if the Court of Appeal did take a different view and the parties were sufficiently persistent his own view might equally well be affirmed by the House of Lords. It is quite different if there are known to be differing schools of thought, each claiming their adherents amongst the judiciary, and the Court of Appeal, given the chance, might support either the school of thought to which the judge belongs or another school of thought. In such a case leave to appeal to the High Court should be given, provided that the resolution of the issue would substantially affect the rights of the parties (s 1(4) of the 1979 Act) and the case qualified for leave to appeal to the Court of Appeal under s 1(7) of the 1979 Act as no doubt it usually would. I add this additional qualification because there is no point in the judge giving leave when he has little doubt that the arbitrator is right and that, despite adversarial argument, he will affirm the award, unless he is also prepared to enable the Court of Appeal to resolve the conflict of judicial opinion.

I now turn to the substance of the appeal. In Mardorf Peach AND Co Ltd v Attica Sea Carriers Corp of Liberia, The Laconia [1977] 1 All ER 545,[1977] AC 850 Lord Wilberforce, the agreement of Lord Salmon, said, obiter, that notice of withdrawal must be given within a reasonable time after the default and that what is a reasonable time is essentially a matter for the arbitrators. As a general proposition this is hardly open to challenge, but somewhat different views have been expressed on why this should be the case. Two theories in particular have been aired, namely that the rule stems from an implied term of the contract or that delay in exercising the right will amount to waiver or create an estoppel. In the present case the owners knew of the default on 7 May 1980 and indicated to the charterers that any delay in withdrawing the vessel would be without prejudice to their right to do so. The arbitrators took the view that such an indication prevented the owners’ conduct amounting to a waiver of their rights or creating any estoppel. However, they espoused the implied term explanation for the legal result declared in The Laconia and held that the owners had lost any right to withdraw the vessel.

Counsel for the owners submitted, in effect, that, while Staughton J might be described in this context as ‘an implied term judge’, it was clear from Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana, The Scaptrade [1981] 2 Lloyd’s Rep 425 that Lloyd J was ‘a waiver judge’. From this, he submitted, it would follow that Lloyd J would have considered that the arbitrators were wrong in law in the conclusion which they reached and would have given leave to appeal to the High Court.

I think that this argument confuses the juridical basis of the rule that a right of withdrawal must be exercised within a reasonable time with the rule itself. What matters in the context of deciding whether leave should be given to appeal to the High Court is whether the arbitrators have given effect to the rights of the parties, not whether they have correctly divined the juridical basis of those rights. Unless the arbitrators’ decision is wrong, the fact that their reasoning is wrong will not affect the rights of the parties substantially or at all.

I know of no authority for the proposition, and I do not think that I have ever heard it suggested before, that a shipowner can extend the time for reaching a decision whether or not to withdraw beyond what is reasonable in all the circumstances by the simple device of announcing that his failure to decide is without prejudice to his rights. He can certainly do so by reaching an agreement with the charterers either ad hoc or by including in the charterparty an anti-technicality clause. But neither occurred in the present case. If counsel for the owners is right, and the owner can extend his option to withdraw the vessel in this way, chaos would result. Ships would be hove to at sea or tied up in port, no one knowing whether they were going to perform the chartered service. Counsel for the owners answers this by saying that when the next hire comes due, or when the owner has to accept or reject instructions from the charterers, he will have to make up his mind. I am not sure that this is necessarily so, because if counsel is right I do not see why he should not continue to perform the charterparty in all respects while at the same time proclaiming that none of this was to be taken as being an election to affirm the contract. So far as accepting payment of hire is concerned, if this must inevitably amount to an affirmation of the contract, it must be remembered that hire is sometimes paid only monthly. An interval of nearly a month before the owners could be forced to elect would be wholly unacceptable commercially.

This is not to say that a declaration such as was made by the owners in this case can never have any effect. As Lloyd J pointed out in The Scaptrade (at 430), what time is reasonable may well be affected by matters known only to the owners. Being in ignorance of these matters, charterers might reasonably conclude after x days that the owners were not going to withdraw the vessel and in such circumstances I can well understand it being held that the owners had waived their right to withdraw or were estopped from asserting it. If on the other hand the owners made their problems known to the charterers or indicated that they were not abandoning their rights, they may thereby retain their right of withdrawal for a longer period than x days, being such period as was reasonable in all the circumstances, including the special problems which were afflicting them. Thus waiver or an implied term are not alternatives. The implied term may well set a limit on the owners’ rights and waiver may cut down those rights, but the concept of waiver is only appropriate where the person ‘waiving’ is giving up some right. In the instant appeal the owners are contending that by ‘waiver’ they acquired something which they would not otherwise have had, namely a right to withdraw the vessel after the expiry of a reasonable time.

Counsel for the owners also relied on the subsidiary point based on an alleged logical inconsistency to which I referred earlier in this judgment. Suffice it to say that this is pure makeweight and very little weight at that.

I would dismiss the appeal for two reasons. First, in my judgment the decision was one for the discretion of Staughton J and I can detect no error in the principles which he applied. Second, if the matter had been one of my discretion, I would have exercised it in exactly the same way as he did.

ACKNER LJ. Staughton J accepted that if the only question arising out of the award concerned the proper construction of cl 5 of the charter, that is to say the owners’ right to withdraw for ‘any breach’, he would have given leave to the owners to appeal to the Commercial Court. The charterers not only wholly accept the correctness of such a view, but in their outline written submissions, to which counsel for the charterers faithfully adhered in his cogent submissions before us, they accepted that the court should ‘plainly’ have given leave, if that was the only question, and for the following reasons: (1) cl 5 would have given rise to a question of law the determination of which ‘would substantially effect the rights of one or more of the parties to the arbitration agreement’ thereby satisfying the (negative) requirements of s 1(4) of the Arbitration Act 1979;(2) that question of law concerned the proper interpretation of a printed clause in a standard form of charter;(3) the question of law remained undetermined by the authorities: see Telfair Shipping Corp v Athos Shipping Corp SA, The Athos [1981] 2 Lloyd’s Rep 74; affd [1983] 1 Lloyd’s Rep 127 and Tropwood AG v Jade Enterprises Ltd, The Tropwind [1977] 1 Lloyd’s Rep 397.

The arbitrators (Mr Anthony Diamond QC, Mr Bruce Harris and Mr John Potter) held that ‘any breach’ meant a repudiatory breach and therefore concluded that the owners were not entitled to withdraw the vessel from the head charter. They were almost content to base their decision on this finding, but in case they were wrong on their construction of ‘any breach’ they went on to consider the charterers’ contention that the owners lost their right to withdraw the vessel by their own conduct and/or delay. The charterers’ contention was that the owners had ‘elected’ to affirm the charter having had from the first week in April until 20 May to exercise their right to withdraw the vessel. This contention was rejected by the arbitrators on the ground that the duty to elect did not arise before 7 May, when the owners had knowledge of the breach, and that between 7 and 8 May the owners reserved their position and then on 20 May exercised their right to elect to disaffirm the contract. The arbitrators specifically rejected that there was any foundation in the evidence for a claim based on estoppel and then considered the final contention of the charterers that the period from the first week in April until 20 May was ‘by itself so long that the owners lost their right to withdraw independently of all the above matters’. In support of this submission the charterers relied on the observations of Lord Wilberforce in Mardorf Peach AND Co Ltd v Attica Sea Carriers Corp of Liberia, The Laconia [1977] 1 All ER 545 at 552,[1977] AC 850 at 872:

‘The owners must within a reasonable time after the default give notice of withdrawal to the charterers. What is a reasonable time—essentially a matter for arbitrators to find—depends on the circumstances. In some, indeed many cases, it will be a short time—viz the shortest time reasonably necessary to enable the shipowner to hear of the default and issue instructions.’

As to this submission, the arbitrators concluded that the critical period was from 7 to 20 May, since, as previously stated, before 7 May the owners did not have the knowledge of the breach. The arbitrators concluded:

‘In view of the Owners’ long standing and firm belief, as from the first or second week of April, that the breach had been committed there was in our view no need on 7th May for the Owners to wait any longer, whether to obtain legal advice (which could have been obtained earlier), or to obtain further information or to make up their minds or for any other reason. In particular, there was no need for a meeting to take place at Piraeus or anywhere else to enable the Owners to decide whether or not to withdraw the vessel … We therefore find that a reasonable time for withdrawing the vessel expired on 9th May, at the latest, and that the notice of withdrawal on 20th May was not given within a reasonable time.’

The arbitrators then asked themselves this question: does this finding entitle the charterers to contend successfully that the owner lost their right to withdraw the vessel? To this they replied: ‘This is a question of law. We find it difficult. Though discussed at the hearing, we have had little argument upon it.’

In the succeeding paragraphs they then explained why they found it a difficult question of law. In substance they said this. The answer to the problem must lie in the question whether Lord Wilberforce’s statement that withdrawal must be effected within a reasonable time is based on the doctrine of ‘election’ or on the principle that a contractual option must be exercised at the time stipulated in the contract or, if none is stated, then there is an implied term that the option should be exercised within a reasonable time. They decided that, if the relevant principle is that of election, then there was nothing in the circumstance of the delay to indicate that the owners had elected to affirm the contract. Accordingly, if election was the correct principle, the delay after 9 May did not preclude the owners from withdrawing the vessel.

However, in their opinion Lord Wilberforce’s statement in The Laconia was not based on election but on the implied term, although they recognised that this did not appear to be the view of Lloyd J in Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana, The Scaptrade [1981] 2 Lloyd’s Rep 425.

I return to the three grounds which the charterers accepted ‘plainly’ justified that grant of leave to appeal if the only question arising out of the award concerned the proper construction of cl 5 of the charter and I ask myself the question: why should those three grounds not equally apply to this question of law which the arbitrators found difficult? Before considering whether the three reasons equally apply to the waiver point, I note that neither the judge nor the charterers could have been applying the guidelines in Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1981] 2 All ER 1030,[1982] AC 724 when they accepted that leave should be given if the cl 5 point stood on its own. The relevant guideline is that leave should not be given even where it is not a ‘one-off case’ unless the judge considers that a strong prima facie case had been made out that the arbitrator had been wrong in his construction. Counsel for the charterers in fact strongly contended that the arbitrators had been wholly right in their construction of the ‘any breach’ clause. I infer that both the judge and counsel for the charterers were completely accepting the observation of Lord Denning MR in Italmare Shipping Co v Ocean Tanker Co Inc, The Rio Sun [1982] 1 All ER 517 at 521,[1982] 1 WLR 158 at 162: ‘Useful as guidelines often are, nevertheless it must be remembered that they are only guidelines. They are not barriers.’

Ground one

There can be no dispute but that the ‘waiver’ question of law ‘would substantially effect the rights of one or more of the parties to the arbitration agreement’ thereby satisfying the (negative) requirements of s 1(4) of the Arbitration Act 1974.

Ground two

The judge took the view, and in my view rightly, that this was the equivalent of a ‘standard terms’ case. The ‘election’ point is a commonly recurring one not only in the context of withdrawal under a time charterparty, but also in many other situations where contractual options have to be exercised.

Ground three

The question of law does remain undetermined by the authorities. This appears clearly to have been recognised by Staughton J, who said in his judgment:

‘If one looks at the cases, Lloyd J in Scandinavian Trading Tanker Co v Flota Petrolera Ecuatoriana, The Scaptrade [1981] 2 Lloyd’s Rep 425 at 428 cited a decision of the Court of Appeal in 1902, Re Tyrer AND Co and Hessler AND Co 86 LT 697, and in particular a judgment there of Romer LJ, who said that lapse of time was immaterial in effect unless it shows an intention on the part of shipowners to abandon their right to withdraw the vessel or amounted to waiver or estoppel (at 699), and Lloyd J followed that reasoning. But there are other authorities which show to my mind quite clearly that lapse of a reasonable time does deprive the owner of the right to withdraw.’

He then quotes The Laconia and other cases. I accept the submission of counsel for the owners that there are, or appear to be, in the Commercial Court two schools of thought. To the question, ‘Can mere lapse of time defeat a right to exercise an option where that lapse of time does not give rise to any inference of an affirmation of the contract, or of an election not to exercise the option to withdraw or to an estoppel?’, one school will answer in the affirmative and one in the negative. It is obviously highly desirable for commercial men and their advisers in particular to know which school is right. Any so-called guidelines which frustrate the resolution of that conflict seem to my mind to be performing the function of a strait-jacket confining the commercial law to an utterly unsatisfactory position.

In the course of the argument I ventured to inject into this esoteric branch of the law the prosaic example of the conflict of decisions at first instance that existed, prior to the wearing of car seatbelts becoming mandatory, whether the failure to wear a seatbelt could form the basis of a valid plea of contributory negligence to a claim by an injured driver or passenger. Counsel for the charterers was prepared frankly to accept that The Nema guidelines imposed such a fetter on the exercise of the judicial discretion under s 1(4) of the 1979 Act that that conflict, had it any relevance in arbitral disputes, could not have been resolved by the grant of leave to appeal unless fortuitously the application came before a judge who was a member of the opposite school of thought to that espoused by the arbitrator.

It therefore seems to my mind that all the grounds which would have justified the giving of leave if the only question arising out of the award concerned the proper construction of cl 5 of the charter equally apply to the waiver point.

Counsel for the charterers submitted that the problem was of the simplest proportions. The arbitrators had decided that the owners lost their right of withdrawal because they did not exercise it within a reasonable time; this was a question of fact for the arbitrators and that was an end of the matter. In my judgment that is an over-simplification. In order to decide whether or not a contracting party has exercised his right within a reasonable time you must first ask: reasonable for what purpose or reasonable by what criteria? The criterion adopted by the arbitrators was the shortest time reasonably necessary to enable the shipowner to hear of the default and issue the notice of withdrawal. It was on that basis that they held against the appellants. However, they were at pains to explain that such a period of time did not in the circumstances give rise to an election to affirm, to an estoppel or to a waiver of the option. Clearly on their approach a longer period would have been required for any of those inferences to have been drawn. That is why the arbitrators, as I understand the matter, said the problem was one of law which they found difficult.

With great respect, it seems clear to me that the judge, like counsel for the charterers, over-simplified the situation and concluded that once there was a finding that a reasonable time had expired there could then be only one answer, and that unfavourable to the owners. The starting point must be: for what purpose and on what basis are your seeking to assess what is a reasonable time? It is the different approach to this fundamental question which has created the two schools of thought.

As previously stated, the waiver question satisfies all the grounds which were accepted as ‘plainly’ justifying the giving of leave on cl 5, if that had been the only question. With all proper diffidence I would therefore have allowed this appeal.

I should perhaps refer to one remaining point of general application. As regards the basis of appeals to this court, I agree entirely that the philosophy of the 1979 Act is to favour finality in arbitration and therefore to discourage appeals. I therefore wholly agree with Staughton J that, if the judge concludes, even where there is a substantial and arguable point of law, that the arbitrators are probably right, he must say so and refuse leave to appeal to the Court of Appeal. However, it would be wrong in my judgment to confine the discretion given by the 1979 Act to those cases where guidelines (or their interpretation) as to the granting of leave are in issue. As an example of another category, where there is a conflict of judicial opinion on some important point of principle, the commercial judge ought to give leave to appeal to enable that conflict to be resolved. It would reflect no credit on our system, in fact the reverse, if the final outcome of a dispute which depended on the application of a principle of law also depended fortuitously on which particular judge chanced to try the issue.

FOX LJ. The opinion of the arbitrators was that the critical period was from 7 to 20 May 1980. Before 7 May the owners did not have knowledge of the breach. They became aware of it on 7 May. In view of the owners’ long-standing and firm belief as from the first or second week of April that the breach had been committed, the arbitrators concluded that by 7 May there was no need for the owners to wait any longer either to obtain legal advice or further information or to make up their minds or for any other reason. They therefore held that a reasonable time for withdrawing the vessel expired on 9 May at the latest.

The arbitrators then considered whether that finding entitled the charterers to claim that the owners had lost their right to withdraw the vessel.

That, said the arbitrators, was a question of law which depended on whether the rule as to ‘reasonable time’ stated by Lord Wilberforce in Mardorf Peach AND Co Ltd v Attica Sea Carriers Corp of Liberia, The Laconia [1977] 1 All ER 545 at 552,[1977] AC 850 at 872 (to which I refer later) depends on the doctrine of election or on an implied term that the right must be exercised within a reasonable time. The ‘election’ theory is sometimes called ‘waiver’. Lloyd J in Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana, The Scaptrade [1981] 2 Lloyd’s Rep 427 at 430 said that it is the kind of waiver which is better categorised as ‘election’.

If the basis of the rule was election the arbitrators concluded that, as the owners indicated that the delay after 7 May would be without prejudice to their right to terminate for fundamental breach (which the arbitrators took as including the right of withdrawal), there was nothing in the circumstances to indicate that the owners had elected to affirm the contract. If that was correct, the arbitrators were of opinion that the delay after 9 May did not preclude the owners from withdrawing the vessel. They were, however, of the opinion that the rule is based on an implied term that if no specific time is stated in the contract the contractual option to withdraw the vessel must be exercised within a reasonable time. In accordance with their finding of fact on that matter, therefore, the arbitrators held that the owners had lost their right to withdraw. Staughton J was of opinion that, whatever was the correct basis of the rule (and whatever was the correct interpretation of cl 5), the actual decision of the arbitrators was correct and he therefore refused leave to appeal to the High Court.

Now whatever the basis of the rule, there seems no doubt as to its existence. Lord Wilberforce’s statement of it in The Laconia [1977] 1 All ER 545 at 552,[1977] AC 850 at 872 is that—

In China National Foreign Trade Transportation Corp v Evlogia Shipping Co of Panama, The Mihalios Xilas [1979] 2 All ER 1044 at 1055,[1979] 1 WLR 1018 at 1030 Lord Salmon said:

‘If the vessel had not been withdrawn within a reasonable time after the charterers’ breach, the right to withdraw it would have been waived by the owners.’

Lord Scarman in that case said ([1979] 2 All ER 1044 at 1061,[1979] 1 WLR 1018 at 1037):

‘The owners were bound within a reasonable time after default to give notice of withdrawal. If they did not do so, they would be held to have waived the default.’

I do not think that the fact that doubt or dispute exists as to the basis of the rule is, by itself, a sufficient reason for giving leave to appeal to the High Court. If the decision was probably right, whatever the basis of the rule, it was proper to refuse leave. But if the resolution of the question as to the basis of the rule would substantially affect the rights of the parties, then I think it would be proper to give leave to appeal (assuming that the case qualified for leave to appeal to the Court of Appeal under s 1(7) of the Arbitration Act 1979, as to which qualification I agree with the observations of Sir John Donaldson MR).

I turn then to consider what would be the consequence in this case of a resolution of the question of the basis of the rule as stated by Lord Wilberforce in The Laconia. Resolution in favour of the implied term theory would leave matters as they are since the arbitrators proceeded on that basis. The question, therefore, is what would be the consequence of resolution in favour of the ‘election’ theory.

As I understand the reasons of the arbitrators, the only materiality of the ‘election’ basis is that, if it be right, the fact that the owners indicated that the delay after 7 May would be without prejudice to their right to terminate demonstrated that there was no election by the owners to affirm the contract.

I cannot see how the mere unilateral assertion of the owners that delay after 7 May was to be without prejudice to their rights can affect the matter. If the owners can do that, the rule, whatever its basis, is largely useless. I can see that there might be circumstances in which the owners could not reasonably be expected to make up their mind at once and that if they bring that to the notice of the charterers (who might not otherwise be aware of it) they could reserve their position. That, however, is a quite different matter and goes generally to the question of reasonableness. I would suppose that the question of reasonableness must be determined in the light of all the circumstances. One does not look at it exclusively from the point of view of either side. But, be that as it may, if the owners’ right to withdraw must be exercised within a reasonable time I do not see how they can extend the ‘reasonable time’ simply by their own choice; though they could no doubt extinguish or reduce their rights by waiver.

Apart from the ‘without prejudice’ point, the arbitrators, as I read the reasons, do not suggest that the juridical basis of the rule would have affected their finding of fact on the question of reasonable time and I do not think it would.

Thus, the arbitrators found that, by 7 May, there was no reason for the owners to wait any longer either to obtain legal advice or fuller information or to make up their minds or for any other reason. In particular, say the arbitrators, there was no need for a meeting to take place at Piraeus to enable the owners to decide whether or not to withdraw the vessel.

In the circumstances, in my opinion Staughton J was right in his view that the arbitrators’ decision was probably correct whatever the juridical basis of the doctrine. And I think he was right in the exercise of his discretion (on which he did not misdirect himself) to refuse leave to appeal to the High Court. I would likewise have refused leave.

I add only some observations on the question of the principles applicable to the question of giving leave to appeal from the High Court to the Court of Appeal.

I do not think that the fact that the judge of first instance may think that, so to speak, ‘there is always a chance’ that an appellate court might take a different view to his own is even on a substantial and arguable point sufficient reason for giving leave to appeal to the Court of Appeal. That in my opinion is not the spirit of sub-s (6A) of s 1 of the 1979 Act at all. The subsection, I think, must have been intended, in the interests of finality, to tilt the balance fairly heavily against appeals beyond the High Court. I think that the judge would be justified in giving leave to appeal if he wanted guidance on the principles applicable to the grant of leave. I do not think that the importance of the case to one or other of the parties or the fact that it is one of general interest are reasons for giving leave to appeal, though I would not doubt that they could be of importance in determining whether to give leave to appeal to the High Court where the matter could be fully investigated.

I would not, however, wish to tie the granting of leave to appeal wholly to cases where the judge requires guidance as to principles relating to leave to appeal, though I think that would be the normal case. The judge is, however, given a discretion by the statute and, if he is satisfied that for a special reason leave to appeal to the Court of Appeal from refusal of leave is desirable, I think he should be free to give it.

I would dismiss the present appeal.

Appeal dismissed. Leave to appeal to the House of Lords refused.

Solicitors: Vincent Stokes French AND Brown (for the owners); Richards Butler AND Co (for the charterers).

Diana Procter Barrister.