Methanex New Zealand v. Fontaine Navigation S.A.

This was an application for a stay of proceedings on the grounds of an arbitration clause in a contract of affreightment and a jurisdiction clause in the bill of lading. The Plaintiff resisted the application on various grounds including that the Defendants, through their solicitors, had given a letter of undertaking. The letter of undertaking provided that, in consideration of the Plaintiff refraining from arresting the Defendant vessel, the Defendants undertook to instruct named solicitors to accept service of the Statement of Claim and to file a Statement of Defence. The letter further provided that it was "without prejudice as to any rights or defences which the owners or vessel may have, non of which is to be regarded as waived". The Court held that the letter of undertaking superseded the arbitration and jurisdiction clauses with the result that the stay was refused. In addition, with respect to the jurisdiction clause, the Court felt there were strong reasons to exercise its discretion against a stay. These reasons included: that under Japanese law only the owner would be a carrier; that a stay would result in duplicitous proceedings, a strong grounds for refusing a stay; that the security provided by the letter of undertaking applied only to a judgement of the Federal Court of Canada and the Defendant had not offered to post alternate security, a strong reason to deny a stay; and that the Defendant did not waive any time bar defence it might have.