Bernuth Lines v. High Seas: arbitration and e-mails
| Autor | Hew R. Dundas |
| Cargo | Arbitrator |
| Páginas | 138-143 |
Bernuth Lines v. High Seas: arbitration and e-mails
Hew R. Dundas, United Kingdom
Arbitrator, London
We nearly all use e-mail daily, both in our business and personal lives; we perhaps sometimes assume
(sometimes wrongly !) that (a) all e-mails sent are received and (b) transmission is more or less
immediate. What if an arbitration (on documents) was commenced by e-mail and proceeded by e-mail
but one of the parties claims it never received any such e-mails ? This was a key issue in Bernuth Lines
Limited v High Seas Shipping Limited ([2005] EWHC 3020 (Comm) – 21st December 2005) in which
Mr Justice Christopher Clarke also addressed two other key issues. The case was an application to set
aside the Final Award of an LMAA Arbitrator dated 26th July 2005 on the ground that the arbitration
had purportedly been commenced by e-mail but that that notice had not been effectively served.
The Facts
Bernuth, a Cayman company, chartered the vessel "Eastern Navigator" from High Seas, a Marshall
Islands company, on an amended NYPE form. The charter was for a period of "one time charter trip to
Nicaragua via good/safe ports. Duration 6 days without guarantee". The vessel was to be delivered, as
in the event she was, at the arrival pilot station at Miami. Clause 45 of the charterparty contained a
London arbitration clause which provided for arbitration by a single Arbitrator, failing agreement on
whom, by two Arbitrators being both members of the Baltic Exchange and engaged in Shipping, with
power to such Arbitrators to appoint an Umpire…. For disputes
apply.
The vessel departed Miami on 24th August 2004 bound for Nicaragua and on 27th August the Master
sent a message to the effect that he would not be able to enter the nominated port because of inadequate
draft. Consequently, the vessel was sent to the nearest appropriate port where she discharged. On 1st
September 2004 High Seas issued a revised invoice in the sum of $34,100 for hire (less commission)
and bunkers. The invoice was addressed to Bernuth at the postal address in Miami of its agent, Bernuth
Agencies Ltd (BAL), who, on 7th September sent a fax to High Seas’ agent enclosing BAL’s invoices,
as agents for Bernuth, totalling $ 93,384.77. On 13th and 16th September 2004 High Seas forwarded a
second hire invoice by e-mail to BAL’s Captain Davis, which BAL forwarded to its Mr Polo, also by e-
mail. On March 22nd 2005, a Florida law firm representing High Seas wrote (in hard copy) to BAL’s
Mr Polo in connection with the unpaid charter hire.
The “info@.....” e-mail address
On 5th May 2005, High Seas' London Solicitors (SM) sent an e-mail to info@......, inter alia inviting
Bernuth to settle the $34,100 so as to avoid arbitration proceedings. This e-mail address was one that
had not appeared on any previous BAL communication but it was, however, an address for Bernuth that
appeared (a) in the Lloyds Maritime Directory 2005 and (b) on a website, www.bernuth.com, where it
followed the postal address, telephone and fax numbers of BAL in Miami. According to Bernuth’s
London Solicitor (JP), the address given on the website was only intended for cargo bookings for
Bernuth’s liner service but there was, however, no indication either on the website or in Lloyd's
Maritime Directory that it was only to be used for that purpose.
Thereafter a series of e-mails were sent by SM, by the Arbitrator and by the LMAA to info@.......
These included all the substantive proceedings of the arbitration including High Seas’ claim
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submissions, notification of the appointment of the arbitrator, his Directions, a request by SM to the
arbitrator seeking a peremptory order requiring service of a defence within 7 days, the Arbitrator’s
request for Bernuth’s comments on SM’s request, the Arbitrator’s Peremptory Order requiring defence
submissions by c.o.b. on 22nd July 2005, a request at c.o.b. on that date by SM to the Arbitrator to
proceed with his award and the Arbitrator’s confirmation that he would do so. All SM’s e-mails
generated e-mail ‘confirmation of delivery’ receipts. On 29th July the Arbitrator issued his final award
which was sent to info@....... and also by post. This was the first communication with Bernuth since 5th
May 2005 otherwise than by e-mail to info@.......
The Arbitrator’s Award and the Appeal
In the recital to his Award the arbitrator recorded the procedural history, including, as recital K: "No
Defence submissions were received at any time. I was and am satisfied that the Charterers are aware of
these proceedings and that they have had a reasonable time to serve Defence Submissions. Accordingly
I proceeded to my Award". He did not state on what basis he was so satisfied. By his Award the
Arbitrator held that High Seas were entitled to $40,220.93 for hire, less commission and payment
received and a sum for hold cleaning, and he awarded interest and costs.
On 12th August 2005 JP wrote to the Arbitrator and SM expressing their client's surprise at receiving the
Award and stating that their client had been unaware thereof until receipt of the Award by post. They
said that: "..it appears that email notices may have been sent to our client's department for cargo
bookings for liner service and would have been ignored by the clerical staff in receipt of such messages.
Our client is perplexed that the other channel of communication established through your client's Miami
lawyers appears to have been bypassed."
Bernuth applied under s.68 contending that the arbitration proceedings had not properly been brought to
the attention of Bernuth with the consequence that there had been a serious irregularity affecting the
proceedings which has caused or will cause them substantial injustice; it also sought to advance a claim
under s.72.
Had the Notice of Arbitration been validly served by e-mail ?
S.14(4) provides that arbitral proceedings are commenced when one party serves on the other party
notice in writing requiring him to appoint an arbitrator or to agree to the appointment of an arbitrator in
respect of the relevant matter. It was not disputed that SM’s e-mail of 5th May 2005 constituted
"writing" for this purpose: see s.5(6).
Bernuth submitted that High Seas had not served notice by any effective or agreed means (s.76(1)
refers), no issue being taken as to any distinction between Bernuth and BAL, since service by e-mail
was not recognised as effective service under the CPR, save under closely defined conditions not
applicable to the present case. By analogy, the Court should not regard sending a notice initiating an
arbitration to any e-mail address of the person to be served as effective service. Service in a manner
totally at variance with that prescribed by the CPR should not be treated as effective service. E-mail
service would only be good if the recipient had agreed to accept service at the e-mail address to which
the document had been sent, or if the service was effective in the sense that the notice reached the
relevant legal or managerial person.
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CPR 6.2(1)(e) provides that (in litigation) a document may be served by e-mail in accordance with the
relevant practice direction, CPR 6 PD, which requires express written indication by the recipient that he
is willing to accept such service by electronic means, sufficient indication including an e-mail address
set out in a statement of case or a response to a claim filed with the court". Further, paragraph 3.2 of
CPR 6 PD provided that: "Where a party seeks to serve a document by electronic means he should first
seek to clarify with the party who is to be served whether there are any limitations to the recipient's
agreement to accept service by such means including the format in which documents are to be sent and
the maximum size of attachments that may be received."
Clearly High Seas’ service of notice would have failed the CPR requirements but the e-mails sent to
info@...... were received at that address and not rejected; however, JP indicated that they "….. would
have been ignored by the clerical staff in receipt of such messages" since the persons who received the
e-mails did not know what to do with them and therefore ignored them as "spam". It was apparent from
the evidence that the representative in question saw the e-mail of 5th May and consciously decided to
ignore it.
The Judge did not regard the provisions of CPR Part 6 as an appropriate benchmark for arbitration since
the CPR had to cover litigants of all kinds from major corporations represented by large law firms to
individuals represented by more modest firms and those who are not represented at all. In contrast
arbitrations were usually conducted by businessmen represented by, or with ready access to, lawyers.
S.76(4), when providing that a notice could be served on a person by any effective means was, he
considered, purposely wide, contemplating that any means of service would suffice provided that it was
a recognised means of communication effective to deliver the document to the party to whom it is sent
at his address for the purpose of that means of communication (e.g. post, fax or e-mail). There was no
reason why, in this context, delivery of a document by e-mail – a method habitually used by
businessmen, lawyers and civil servants – should be regarded as essentially different from
communication by post, fax or telex. However, clicking on the "send" icon did not automatically
amounts to good service: inter alia (i) the e-mail must, of course, have been despatched to what was, in
fact, the e-mail address of the intended recipient; (ii) it must not have been rejected by the system; (iii)
if the sender did not require confirmation of receipt he may not be able to show that receipt had in fact
occurred.
None of these difficulties had arisen in the present case. The e-mail of 5th May 2005 and, so it would
appear, all subsequent e-mails, were received at an e-mail address that was held out to the world as the,
and so far as the evidence shows, the only e-mail address of Bernuth. Someone at Bernuth had looked
at the e-mails on receipt and, apparently, decided that they could be ignored, without making any
contact with the sender. The position was, the Judge considered, no different to the receipt at a
company's office of a letter or telex which, for whatever reason, someone at the company decides to
discard. In both cases service has effectively been made, and the document received will, in the first
instance, be dealt with by a clerical officer.
The Judge found confirmation of his view in The Pendrecht [1980] 2 Lloyd's Rep 56 where a telex had
been received by charterers at their head office in Japan outside office hours on a Friday so did not
come to the notice of a responsible employee until the office re-opened on the Monday; time had
expired over the intervening weekend. Parker J, as he then was, held that – for the purposes of s.27(4)
of the Limitation Act 1939 - the telex was served, both in the case of an English and a foreign company,
when it was received, irrespective of whether this happened within business hours and whether or not
the office was closed. It was not necessary that it should come to the attention of the company or to any
particular individual at the company at the time it was served. The decision in that case was not
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dependent on the telex’s having come to the attention of the responsible personnel on the Monday,
passages at p.65 of Parker J's judgment indicating that service would have been valid even if the
document served had not come to the attention of the party to be served for some time.
There was no requirement implicit in s.76(4) that service had to be on, or brought to the attention of,
any particular personnel, service being effective if the notice was addressed and delivered (by post) to
the relevant address. Similarly, a notice was to be treated as effectively served if it was delivered to the
party to be served by e-mail.
The Judge rejected Bernuth’s contentions regarding spam because, when the e-mail was received, a
particular employee had not thought that a serious legal matter would be sent to that address. That e-
mail and those that followed it, were plain and straightforward in their terms and bore none of the
hallmarks of "spam". On the contrary they called for serious attention: the critical e-mail of 5th May
was sent with “High Importance”, it referred to a vessel which Bernuth had in fact chartered by the
charterparty mentioned in it, it identified SM as High Seas' London solicitors and referred to an
outstanding hire claim which had been the subject of earlier correspondence. It purported to initiate
arbitration proceedings by calling for agreement as to an arbitrator. The Judge would have been
surprised if much junk e-mail purported to do that or to emanate, as later e-mails did, from an LMAA
arbitrator. If the e-mails never reached the relevant managerial and legal staff, that was an internal
failing which did not affect the validity of service and for which Bernuth had only itself to blame.
Having put info@...... into the current Lloyd's Maritime Directory as its only e-mail address, they could
not be surprised to find that an e-mail inviting them to agree to the appointment of an arbitrator in a
maritime matter was sent to that address.
The Judge did not accept that, in arbitration, in order for service to be effective it was essential that the
e-mail address at which service is purportedly made had been notified to the serving party as an address
to be used in the context of the relevant dispute (i.e. as per CPR): this was not provided in s.76 and
there was no basis upon which it could be implied.
Was the Arbitrator’s Decision to Rely on Service by E-mail a Question of Law
High Seas submitted that, if Bernuth had any claim, it lay under s.69 and was unmaintainable because it
had not secured the necessary leave and was out of time to do so. In any event, SCP Rule 4 excludes
any such right of appeal. This submission flowed from Recital K of the Award i.e. that the arbitrator
was proceeding on the basis that service by e-mail was a valid method of commencement, such
proposition being either correct or incorrect in law and the Arbitrator must have taken the view that it
was correct. Consequently Bernuth was seeking to "appeal to the court on a question of law arising out
of an award made in the proceedings" (s.69(1) refers).
The Judge rejected this argument: (i) that recital was not part of the Award; (ii) neither the Award nor
the reasons for it purport to determine any question of law in relation to the commencement of the
arbitration; (iii) even if Recital K was to be taken as part of his Award, it did not purport to determine
any question of law concerning service; (iv) the logical conclusion the submission was that, whenever
an arbitrator proceeds to an award, and a question arose as to whether he had had jurisdiction, he must
be taken impliedly to have answered, in a manner favourable to the party in whose favour the award is
granted, every question of law bearing on whether or not he had jurisdiction; so that all such questions
can be challenged only pursuant to s.69 and not under s.67. This is not, the Judge said, correct since if it
were it would rob s.67 of much of its apparent effect.
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The Judge identified an additional consideration, not raised in argument, and upon which he expressed
no view. Ss.67/68/69 allow "a party to arbitral proceedings" to apply to the court. Such a person is to
be contrasted with "a person alleged to be a party to arbitral proceedings but who takes no part in the
proceedings" per s.72. Mustill & Boyd suggest (p.362 of 2001 Companion) that if a person who takes
no part in the arbitral proceedings is excluded from any of the rights under the Act of a "party to
arbitral proceedings" other than those specifically conferred on him by s.72, the effect of High Seas’
argument would be to restrict the rights of an alleged party who takes no part in the proceedings to a
challenge to the jurisdiction based on fact alone.
Further, a party to arbitral proceedings, who contends that the tribunal lacks substantive jurisdiction, and
who is in receipt of an adverse ruling involving a determination of law, may apply under s.67 to
challenge that conclusion. There is nothing in s.69 or s.67 to compel him to proceed under the former
and it would be natural for him to proceed under the latter. If so, a person who has taken no part in the
arbitral proceedings can invoke s.67 by reason of s.72(2)(a).
Other Issues
The Judge having reached his conclusion that service had been effective, it was unnecessary for him to
decide whether or not, if service by e-mail was not, in the present case, effective under s.76(3) it was
rendered effective because of the provisions of the LMAA’s SCP or to decide the type of relief, if any,
that would be appropriate. Since both matters had been the subject of considerable argument, the Judge
indicated his obiter conclusions on them. These are the subject of a separate e-mail.
Comment
This is an excellent decision, combining practical common sense with an ability to reiterate (one of my
hobby-horses !) that CPR principles do not apply in arbitration even if they might provide helpful
guidance in some areas (e.g. where there is no arbitration authority).
Permit me to add some observations of my own:
(i) I can envisage enforcement difficulties since Bernuth has at least an arguable
case under Art.V(1)(b) NYC58 and there are several jurisdictions who take a
less ‘modern’ view of e-communications and might not accept electronic “Read
Receipts” or the absence of any ”System Rejection” notices as sufficient;
(ii) In the light of (i) and also given the CPR’s requirements for litigation notices, it
is a little surprising that SM did not send High Seas’ submissions in hard copy
to minimise the Art.V(1)(b) risk;
(iii) Further, and with respect to the arbitrator in this case (who is known to me), as
arbitrator I would have sent at least some of the documentation/correspondence
by fax and courier or recorded delivery to minimise the NYC risk; I see my
obligation as being to deliver an enforceable award and I therefore see it as
incumbent on me to avoid unnecessary enforcement risks; I have recently been
involved in such a case in the Far East where a key notice had to be delivered to
a Respondent in a relatively remote part of a large country and, although the
arbitration agreement provided for fax delivery, extensive (and time-
consuming) efforts were made to ensure proof of delivery of a hard copy
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(actually two – one by courier from a SE Asian city, one by in-country
registered mail);
(iv) Bernuth’s argument on being deluged by spam is demonstrably without
merit since there are readily available spam filters (mine, powered by
Symantec, is an integral part of the BT Internet service and is 99% effective)
able to block advertisements for certain “performance-enhancing” drugs,
solicitations from widows of billionaire dictators, announcements of lottery
wins, etc etc;
(v) further, in my last role as Head of Legal for a large oil company, it was a rigid
rule across the company’s worldwide operations that any communication such
as Bernuth received at info@...... should be forwarded to me without delay so I
have no sympathy for Bernuth if its clerical staff ignored the various
communications;
(vi) in the context of SCP and any other fixed fee and/or time-limited arbitration
procedure, it is, I suggest, axiomatic that the arbitrator be permitted to work at
maximum efficiency and this, at least for me, requires substantial reliance on e-
mail in comparison with the time taken to print out, send, file and locate faxes
(or, worse, hard copy mail !)
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