Dongnam Oil & Fats Co. v. Chemex Ltd. et al.

In Arbitration/Jurisdiction Clauses in Maritime Law, In Rem Actions and Arrest on (Updated )

This matter concerned damage to a cargo of bleached tallow to be carried from Newark, New Jersey to Inchon, Korea. The cargo was to be carried on board the ship “Tuapse”. The “Tuapse” was owned by Novoship but chartered under a head charter to Chemex. The head charter provided for London arbitration. The Plaintiff and Chemex entered into a voyage charter party which again called for London arbitration. The cargo was loaded at Newark and two bills of lading were issued which incorporated the voyage charter party. The cargo was carried on board the “Tuapse” to Nanaimo, British Columbia where it was transhipped to another vessel for carriage to Korea. The cargo was allegedly damaged during the transhipment. The Plaintiff subsequently commenced this proceeding and the Defendants Novoship and Chemex brought applications to stay the proceedings in favour of London arbitration. The Plaintiff argued that s. 46 of the Marine Liability Act applied making the arbitration provisions inapplicable. The Prothonotary disagreed ruling that a transhipment from one vessel to another was not loading or discharging at a Canadian port within the meaning of s. 46(1)(a). The Prothonotary further noted that section 46 should be interpreted strictly since it was a restriction on freedom to contract. The Prothonotary then considered whether the arbitration provisions were incorporated. With respect to the dispute between the Plaintiff and Chemex he found that there was clearly an arbitration provision in the voyage charter and therefore concluded that he had no alternative but to allow the stay. With respect to the dispute between the Plaintiff and Novoship, however, there was no direct contractual relationship between these two and therefore he had to consider the effect of the bills of lading. In this regard he noted that if the bills of lading had specifically referred to the arbitration provision, Novoship would be entitled to a stay. In addition, if the bills of lading incorporated the charter party terms and those terms provided that the arbitration provision applied to disputes under the bill of lading, then Novoship would be entitled to a stay. However, in this case the terms of the voyage charter party did not provide that the arbitration provision applied to disputes under the bill of lading and the bills of lading did not specifically refer to arbitration. Accordingly, Novoship was not entitled to a stay. Two subsidiary issues dealt with in these reasons concerned applications to strike out a claim for a declaration the Plaintiff did not owe dead freight and a claim for wrongful arrest. The claim for a declaration on the dead freight issue was struck on the grounds that the issue had been decided in an arbitration. The claim for wrongful arrest was struck on the grounds the Plaintiff was not the owner or in possession of the cargo at the time it was arrested.