On 3 March 1965, Alma Shipping Corp (the claimant) and Union of India (the defendant) entered into a charterparty on the Austral Grain Charter 1956 or AUSTWHEAT form. The form contained an arbitration clause referring any dispute arising under the charterparty to arbitration. The same clause provided that the arbitrator should be appointed within 12 months of the ship's arrival at the final port of discharge, 'otherwise all claims shall be deemed to be waived'. Another clause stated that general average claims were to be settled subject to the York-Antwerp Rules 1950 in London.

On 3 March 1965, the Astraea was loaded in Australia. A bill of lading was issued. The defendant was named as the consignee. On 4 May 1965, the ship grounded. It was refloated after three-and-a-half hours. The vessel suffered damage to both hull and machinery. It was thus entitled to declare general average and receive general average contributions from the cargo interests. On 16 May 1965, the ship arrived at the discharging berth at Mumbai (then Bombay). The relevant time for appointing the arbitrator started running at this date.

On 11 March 1969, a copy of the adjustment was sent to the defendant. This was the first time that any claim had been made against the defendant regarding the incident. On 22 March 1971, the defendant took the position that the claimant was time-barred from pursuing the claim under the provisions of the arbitration clause. The 12-month period had elapsed on 16 May 1966.

The Court was required to determine two issues. The first was whether the arbitration clause covered general average claims, time-barring the claims. If so, the second issue was whether the claimant was entitled to an extension.

Held: The general average claims are subject to the arbitration clause. The claimant is not entitled to an extension.

Even though a bill of lading was issued, it named the defendant as consignee. The defendant was also a party to the charterparty. Therefore, the relations between the claimant and the defendant were subject to the charterparty rather than the bill of lading.

Roskill J referred to two decisions to confirm the conclusion that the general average claims were subject to the contract between the parties: Milburn & Co v Jamaica Fruit Importing & Trading Co of London [1900] 2 QB 540 and Goulandris Brothers Ltd v B Goldman & Sons Ltd (CMI2120). Even though general average does not arise as a matter of contract, if its adjustment is subject to the York-Antwerp Rules, those Rules are incorporated as a matter of contract. Therefore, the relevant general average claims are subject to the contractual provisions as well, including the arbitration clause.

The Judge found that using the words 'settled' in the arbitration clause and in the provision concerning the general average adjustment cannot be interpreted as providing for the exclusion of general average claims from the arbitration clause. In the arbitration clause, the word 'settled' meant 'determined', 'decided', or 'finally disposed of'. In the general average provision, the word 'settled' meant 'adjusted', and it did not deal with the adjudication of disputes arising in relation to general average.

Roskill J did not find any justification to conclude that the parties waived the arbitration clause limitation from applying to general average claims. The Judge did not find promissory estoppel or any shape or form of estoppel in the defendant’s actions.

The application for a time extension was also declined. This issue was considered with reference to Liberian Shipping Corp Pegasus v A King & Sons Ltd [1967] 2 QB 86, [1967] 1 Lloyd’s Rep 302. Roskill J held that the limitation provision in the arbitration clause did not create undue hardship for the claimant. Part of the reason for the delay was that the claimant added several particular average claims to the relevant general average adjustment. The Judge thus refused to exercise his discretion in favour of extending the time provided for in the arbitration clause.