Contractual time limit to commence arbitration is a time bar to claim itself

In Wholecrop Marketing Ltd v Wolds Produce Ltd, [2013] EWHC 2079 (Ch), a relatively short decision of 33 paragraphs, the English Court allowed an appeal and held that a contractual time limit for commencing arbitration operated as an absolute time bar for a claim pursuant to the underlying contract.

Facts

Parties entered into an agreement for the supply of seed potatoes. The agreement was subject to and governed by the attached “BPTA Terms & Conditions of May 2007“. The British Potato Trade Association’s Conditions of Sale for Seed Potatoes (English law version) contained an arbitration clause, which provided that:

Any dispute arising out of the Contract shall be settled by Arbitration according to the Arbitration Rules of the British Potato Trade Association in force as the date of receipt by the Secretary of the request for Arbitration referred to below, and all parties, whether members of such Association or not, shall by their respectively entering into the Contract be deemed to have full knowledge of such rules and to have elected to be bound thereby. A request for Arbitration must be addressed to the Secretary WITHIN 12 MONTHS AFTER RECEIPT BY ONE PARTY OF NOTICE IN WRITING from the other party of the basis of the claim or dispute“.

(emphasis in all caps in the original).

A dispute subsequently arose between the parties (see paragraph [5]). Parties exchanged  correspondence. There were delays, more correspondence, more delays and ultimately a failed mediation before court proceedings were finally started in March 2012. There had been a dispute as to when the dispute itself arose (for purposes of computing the 12 month limitation period). . Wolds argued that the dispute arose on 9 October 2009 (so that the 12 month period expired on the 9 October 2010). Wholecrop argued that the dispute arose the 28 September 2010 (so that the 12 month period expired on the 28 September 2011) (see paragraph [6]). However, the exact date when the dispute arose ultimately did not matter in this instance because the commencement of court proceedings by Wholecrop was after the later of the disputed dates, and so, after the 12 month limitation period.

In response, Wolds (“slightly oddly” as noted by the High Court) applied for a stay of court proceedings. The Honourable Justice Kaye QC heard the initial application and refused the stay on the following reasons (see paragraph [14]):

“a) That the language [of the arbitration clause and the arbitration rules of the BPTA] conferred an option on the parties as to one way in which they might resolve their differences:

b) That if a party did make a request for arbitration within the time specified then the Courts would have little hesitation in staying the proceedings to enable the arbitration to proceed:

c) That the present application was not an attempt to fulfil the commercial purpose of the reference to arbitration, i.e. to have the matter decided quickly and speedily, but was an attempt to stifle a claim in circumstances where neither party (for whatever reason) had referred the matter to arbitration:

d) That much stronger language and much clearer language was required to oust the jurisdiction of the court:

e) That in the circumstances even though an arbitration was “Time Barred” it was still open to Wholecrop to pursue court proceedings: and

f) That a stay would be refused.

High Court’s Decision

The High Court allowed the appeal. In coming to his decision, the learned judge examined two earlier cases, both of which merit further examination.

The first was Metalfer Corporation v Pan Ocean Shipping [1997] CLC 1547 (see paragraphs [18] to [20]). A charterparty contained the following arbitration clause:

“Any dispute arising out of this charterparty to be referred to the London arbitrators within 30 days of completion of the voyage and English law to apply.”

The charterers did not commence an arbitration within 30 days of completion of the voyage, and came to court to seek a declaration that their claims were not time barred (and alternatively for an order under section 12 of the Arbitration Act 1996 extending the time for the commencement of arbitral proceedings). The charterers argued even though it could no longer bring the claim in arbitration, the claim itself was not time barred. The charterers sought to argue that the claim could no longer be brought to arbitration only.

“[Counsel for the charterers] submitted that the clause does not expressly say that any claim made after 30 days is barred, nor does it say that arbitration is a condition precedent to the making of a claim or that it is the only way of making a claim. He submits that parties’ rights to proceed for damages for breach of contract are not to be taken away without clear words…”

The Honourable Justice Longmore disagreed and held that the effect of such a clause was to bar the claim (and not simply the remedy of arbitration). The learned judge also relied on Mustill & Boyd “Commercial Arbitration” 2nd edition p.203 for the proposition that “it is easy to understand why parties to a commercial contract should wish to bar a claim entirely that is not put forward promptly, but it is not at all easy to understand why, when they have troubled to stipulate that all claims should be referred to arbitration, they should go on to provide that a stale claim should be litigated rather than arbitrated” (see paragraph [20]).

These same arguments were also considered and dismissed by the Honourable Justice David Steel in Nanjing Tianshun Shipbuilding Co Ltd v Orchard Tankers PTE Ltd, [2011] EWHC 164 (see paragraph [21] to [22]). In that case, parties had entered into a contract where the seller was entitled to dispute the buyer’s cancellation of the contract by way of arbitration “if such institution of arbitration is made within 30 days of the buyer’s cancellation“. The sellers only sought to dispute the buyer’s entitlement to cancel the contract after the relevant 30 day period. The sellers had argued that “any failure to institute arbitration proceedings timeously did not bar the right to dispute the cancellation but merely barred the remedy to be obtained by way of an arbitral award“.

Steel J, relying on Mustill & Boyd disagreed. He held at paragraph [11] that

“iv) It is difficult to discern any commercial purpose in granting the sellers an option either to be able to institute a private arbitration within 30 days or, whether by choice or indolence, be able to institute public litigation after 30 days but within 6 years”.

The English courts have also held it was not necessary for there to be express and unambiguous wording in the arbitration clause in order that the shorter time bar applied (see paragraph [22], [23] and [26]). In this case, however, the arbitration rules of the BPTA themselves make it “crystal clear” that the expiration of the 12 month period time barred the claim itself (see paragraph [26]). In this respect, the High Court specifically rejected the argument that the arbitration rules “only become relevant if an arbitration is actually commenced“.

Conclusion

There appears to be no Singapore case directly on point which addresses this issue. However commercial parties should note the following:

  1. English cases have persuasive value in Singapore law and before the Singapore courts.
  2. Like section 13 of the UK Arbitration Act 1996, the Singapore International Arbitration Act (Cap. 143A) provides in section 8A that the relevant Limitation Act shall apply to arbitral proceedings as they apply to proceedings in court.
  3. Under Singapore law, it would appear that a party may contract out of the Singapore Limitation Act and thereby be deprived of pleading and relying on any limitation defence, see Cytec Industries Pte Ltd v Asia Pulp & Paper Co Ltd, [2009] 2 SLR(R) 806. Conversely, a party may also contract to and be bound by a shorter contractual limitation period than it would otherwise be entitled to under the Singapore Limitation Act, subject to the Unfair Contracts Terms Act, see Press Automation Technology Pte Ltd v Trans-Link Exhibition Forwarding Pte Ltd, [2003] 1 SLR(R) 712; [2002] SGHC 286.

This decision is a timely reminder of the need to pay attention to the dispute resolution clause and to comply with the pre-conditions to arbitration.

About Shaun Lee

International Dispute Resolution and Arbitration lawyer. Fellow of the Chartered Institute of Arbitration. Panel of Arbitrators and Panelist for DNDR at the KLRCA.
This entry was posted in Arbitration, UK and tagged , , , , . Bookmark the permalink.

2 Responses to Contractual time limit to commence arbitration is a time bar to claim itself

  1. Pingback: SLW Commentary: Contractual Time Limit to commence Arbitration constitutes Time Bar on Claim itself | Singapore International Arbitration Blog

  2. Pingback: Draft Arbitration Bill in Myanmar | Singapore International Arbitration Blog

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