The MV Uljanik was carrying a cargo of urea from Qatar to Australia. On reaching its destination, the Australian Quarantine Inspection Service identified traces of North American wheat in the hold. This meant that the urea in the hold was possibly carrying a wheat disease called 'karnal bunt'. The whole urea cargo could not be unloaded and the consignee suffered financial loss.

The Uljanik was owned by United Shipping Adriatic Pty Ltd (United). Hi-Fert Pty Ltd (Hi-Fert) was the consignee of the cargo. For the purposes of transporting the cargo, Hi-Fert had entered into a voyage charter agreement with Hyundai Merchant Marine Co Ltd (Hyundai), the Uljanik's disponent owner. A few days prior, Hyundai had entered into a subcharter with Rondeau Bulk AG, which had the Uljanik under a time charter between itself and United. United, Hyundai, and Marine Cargo Care Pty Ltd (Marine) were the respondents in this case. Marine had been employed to inspect cargo imported into Australia for Hi-Fert.

Disputes arose between the parties to the time charter, subcharter, and voyage charter when the Uljanik was delayed. Hi-Fert claimed against United for considerable financial loss after having to sell some of the urea to Thai buyers. It also brought a claim against Marine for not discovering the disease risk while the ship was still in Qatar. Hi-Fert claimed against Hyundai for misleading and deceptive conduct as defined by the Trade Practices Act 1974 (Cth), as well as for other breaches of the voyage charter. United claimed against Hi-Fert for its own loss resulting from the Uljanik's detention in Australia.

This case involved two separate proceedings. The first and main proceeding involved Hi-Fert's claims against United, Hyundai, and Marine. In the second proceeding, Hi-Fert sought an injunction to prevent United from continuing arbitration proceedings against it in England. United had initiated proceedings in the English High Court to prevent prosecution of the first proceeding.

By notice of motion in this case, United sought a stay of the proceedings against it, on the grounds that it had agreed with Hi-Fert to settle any disputes surrounding the bill of lading through arbitration. Further, United contended that Australia was an inappropriate forum for determination of such disputes, should the proceedings not be stayed. If Hi-Fert's actions against United were stayed, then its claims against Hyundai and Marine would similarly be stayed until the arbitration with United was concluded.

Hi-Fert sought an injunction to prevent United from advancing arbitration proceedings any further, and to prevent United from keeping Hi-Fert from pursuing its claims against the other respondents.

Ultimately, the points of contention in this case were as follows: did the bill of lading between Hi-Fert and United incorporate cl 34 of the voyage charter, which requires the parties to determine any issues regarding the bill of lading via arbitration; second, had Hi-Fert made an ad hoc submission to arbitration proceedings by responding to United's initiation of those proceedings; third, did s 11 of the Carriage of Goods by Sea Act 1991 (COGSA) apply to the arbitration agreement between Hi-Fert and United in any form; fourth, was s 11's application in any way altered by the Carriage of Goods by Sea Amendment Act 1997 (the Amendment Act) and the Carriage of Goods by Sea Regulations 1998; fifth, did s 11 apply to ad hoc submissions to the arbitration of existing disputes; sixth, did the undertaking of the North of England P&I Association Ltd (North of England), provided in August 1997, render the arbitration agreement between United and Hi-Fert inoperative, on account of s 7(5) of the International Arbitration Act 1974 (Cth); and finally, since certain matters included in the main proceeding could not be resolved through arbitration, would it be appropriate to temporarily stay these, pending the result of United and Hi-Fert's arbitration in England?

Held: An injunction was granted against United to restrain it from furthering the arbitration between itself and Hi-Fert in England, until the main proceedings were prosecuted by Hi-Fert in Australia and concluded.

Did the bill of lading between Hi-Fert and United incorporate cl 34 of the voyage charter?

The Court noted the judgment of Lord Denning in The Annefield [1971] P 168, 184, which states that charter clauses should be incorporated into bills of lading where they are directly germane to the subject matter of the bill. The subject matter of a bill of lading involves the carriage of goods, their loading and unloading, etc. If a clause is not directly germane to the bill's subject matter, then it should not be incorporated, unless it is referred to in unambiguous terms in either the charterparty or bill.

An arbitration clause is not directly germane to the purposes of a bill of lading. However, condition (1) of carriage on the reverse of the bill of lading between the Uljanik's master and Hi-Fert (regarding the urea cargo) expressly stated that the 'Law and Arbitration Clause' from the charterparty was to be incorporated. The bill of lading did not name the voyage charter between United and Hi-Fert explicitly, however it could be inferred that the bill referred to their charter agreement because of the goods and loading dock in question. It was signed by the Uljanik's master, implicitly on behalf of United.

Clause 34, the arbitration clause, should be incorporated into the bill of lading, but its wording should be manipulated so that it refers directly to the bill of lading and not a 'charter or any bill of lading'.

Hi-Fert also raised the question whether the Hague-Visby Rules (the Rules) applied, since these had force of law in Australia by way of s 8 of COGSA, and indeed whether it was relevant that the Uljanik originated from Qatar for the purpose of applying the Rules. Articles 10.a and 10.b of the (unmodified) Rules had no application since Qatar was not a Contracting State to the Rules. Those articles determine when the Rules apply compulsorily to bills of lading governing the carriage of goods between different States.

The meaning of condition (2)(a) on the reverse of the bill of lading is this: the Hague Rules, as enacted in the country of shipment, will apply, except where these Rules are not in force at all in the country of shipment; in that case, the Hague Rules as enacted by the country of destination apply. In instances where no enactments of the Hague Rules apply compulsorily, the Hague Rules will broadly apply anyway, without any limitations that an adopting country might choose to impose.

The Court was of the opinion that s 11 of COGSA and condition (2)(a) had nothing to do with each other, since condition (2)(a) was talking about the version of the Hague Rules that had been enacted in Australia, not the enacting legislation. Section 11 of COGSA, unlike s 10, was not expressly about the Rules, but was a protective provision regarding laws that might be in force generally. Condition (2)(a) did not make s 11 of COGSA applicable and was not inconsistent with condition (1).

Did s 11 of COGSA apply to the arbitration agreement between Hi-Fert and United in any form, and was this altered by the Carriage of Goods by Sea Amendment Act 1997 and the Carriage of Goods by Sea Regulations 1998?

Section 11 of COGSA has effect regardless of whether the agreement in question is governed by Australian or foreign law. Its existence is backed by a number of underlying rationales. Section 11(2) in particular cannot be avoided by providing that a contract will be governed by another jurisdiction's laws.

Schedule 1A of COGSA details the modifications made to the Rules through the enactment of the Amendment Act and the Carriage of Goods by Sea Regulations 1998. This modified 'Australian version' of the Rules applied in accordance with s 10 of COGSA.

United advanced the argument that, following these amendments, s 11(2)(c)(i) of COGSA would have no application to the present case, because Schedule 1A only came into force on 1 July 1998, and the bill of lading between United and Hi-Fert was created prior to that. Section 11(2)(c)(i) invalidates agreements which preclude or limit the jurisdiction of an Australian court, in respect of a 'sea carriage document to which, or relating to a contract of carriage to which, the amended Hague Rules apply, relating to the carriage of goods from any place outside Australia to any place in Australia'. Before the amendments, the wording of the last part of that section referred only to bills of lading or like documents, which relate to the carriage of goods from outside Australia to a place in it. United's argument rested on the fact that after the amendments, s 11(2)(c)(i) would no longer apply because the bill of lading was not a document 'to which the amended Hague Rules apply'.

In analysing this argument, and its possible impacts on Hi-Fert's rights (by not allowing Hi-Fert to challenge the application of the arbitration clause, post-1 July 1998), the Court considered the secondary material surrounding the Amendment Act. There was no indication that the possible impact on importers through altering s 11(2)(c) was considered. It would make a large impact if, as United argued, the amendments operated to make it so that s 11(2)(c) only applied to sea carriage documents to which any of the three Conventions in art 10.3 of the modified Rules applied. Section 7(3)(b) of the Amendment Act describes how the regulations may make changes to COGSA to an extent 'necessary or appropriate'. To alter s 11(2)(c)(i) in the way United described would go far beyond the idea of 'necessary or appropriate'.

The alteration of 'bill of lading' in s 11(2)(c)(i) to 'sea carriage document' was a change effected throughout the amended Act and the modified Rules. The definition for 'sea carriage document' in art 1.1 of the modified Rules indicates the wider meaning it has. The fact that this wording was changed 'across the board' was likely done in the interest of consistency above all.

The Court's conclusion was that the amendment to s 11(2)(c)(i) in the COGSA should be read down so as to bring it within the power bestowed by s 7(3)(b) of the Amendment Act. What s 11(2)(c)(i) referred to and applied to was a sea carriage document as defined in the Rules.

United's argument about its altered meaning was rejected; if cl 34 of the contract of carriage would preclude or limit the jurisdiction of the Court, then it was invalid.

Did the North of England's undertaking render the arbitration agreement between United and Hi-Fert inoperative?

In August 1997, the North of England provided an undertaking to Hi-Fert that it would cover any costs awarded against Hi-Fert in an arbitration or by a court, in return for Hi-Fert consenting to the Uljanik's release and Hi-Fert's agreement that it would not commence legal or arbitration proceedings against United, except as otherwise understood from the provisions of the bill of lading. The undertaking expressly referred to the arbitration clause incorporated into the bill of lading and that any claims Hi-Fert had against the Uljanik should be brought in that forum. Moreover, it was stated in the undertaking that Australia was an inappropriate forum for resolving disputes that arose under the bill of lading.

Hi-Fert argued that North of England's undertaking rendered the arbitration clause (as incorporated into the bill of lading) inoperative. This was because s 7(2) of the International Arbitration Act 1974 (Cth), which provides that Courts shall refer parties (to an arbitration agreement) to arbitration even where they have initiated court proceedings, and must stay those court proceedings in the meantime, is altered by s 7(5) of the International Arbitration Act. Section 7(5) precludes s 7(2) from operating when that arbitration agreement is void, inoperative, or unable to be performed.

The Court in this case was already of the opinion that cl 34 (the arbitration clause) was invalid because, under s 11(2)(c)(i) of COGSA, it would preclude or limit the operation of a court. It was therefore unnecessary to decide whether s 7(5) of the International Arbitration Act invalidated cl 34. On this issue, however, the Court reached the decision that the undertaking did not render the arbitration clause inoperative under s 7(5) of the International Arbitration Act. This was because, unlike in the case Bakri Navigation Co Ltd v The Ship 'Golden Glory', the undertaking in this case did not alter the arbitration agreement so as to render it inoperative, nor was it inconsistent with it. The undertaking in this case did not raise participation in court proceedings either, unlike in the Golden Glory.

Ad hoc submissions to arbitration

The Court referred to correspondence between the London solicitors for Hi-Fert, Rondeau Bulk AG, United, and Hyundai over several months in 1997. United argued that this correspondence evinced an ad hoc submission by Hi-Fert to arbitration. This argument rested, partially, on Hi-Fert's appointment of an arbitrator through its London solicitors. Hi-Fert made repeated reservations in its correspondence regarding the appointment of an arbitrator, and through its London solicitors reiterated that it was conscious of Australian jurisdiction over any claim it had under the bill of lading. On 28 November 1997, Hi-Fert's solicitors wrote to the other three parties' solicitors that Hi-Fert disputed the arbitration tribunal's jurisdiction over the dispute, on account of s 11 of COGSA.

United interpreted these reservations as mere recognition that a different forum (that is, Australian courts) could preside over the disputes and might be the preferable option.

The Court in this case rejected United's assumption. There was little purpose in Hi-Fert simply stating that Australian courts were an alternative forum for it to seek an order against United. That much would have been understood between the parties. Rather, Hi-Fert's point was that the arbitration clause did not impede its rights to initiate proceedings in Australia nor impact Australian jurisdiction over its case.

It was unnecessary for the Court to settle the issue of whether s 11 of COGSA applied to an ad hoc submission to arbitration.

Position of Hyundai

In Hyundai's case, s 11 of COGSA did not apply to cl 34 of the voyage charter between itself and Hi-Fert as the charter was not a bill of lading. This meant that the arbitration clause was still valid and Hyundai could seek a stay of the court proceedings, at least with regard to the claims that could be classified as contractual claims.

Hyundai had agreed to transport the urea in accordance with the voyage charterparty arrangement between itself and Hi-Fert. Representations were made by it to Hi-Fert that constituted the alleged misleading and deceptive conduct. These claims led Hi-Fert to believe that the Uljanik had never transported a cargo of wheat. As the facts showed, this was incorrect. Not only had the Uljanik carried wheat before, but afterwards the holds were not cleaned properly and so the wheat residue remained. This directly led to the quarantining of the Uljanik in Australia.

Some of these claims were contractual and others were not; for example, Hi-Fert's claims against Hyundai under s 52 of the Trade Practices Act 1974 (Cth) were non-contractual, but its claims with respect to Hyundai's breach of its duties as carrier and as bailee for reward were contractual and arose under the voyage charter.

The claims which were contractual (including those based on breaches of the voyage charter and on the clause 34 warranty) could be stayed under s 7(2) of the International Arbitration Act 1974 (Cth) and Hi-Fert and Hyundai should be referred to arbitration to settle those. Hi-Fert should be kept from bringing those contractual claims against Hyundai in arbitration until the main proceeding was settled (consisting of all of Hi-Fert's allegations against Hyundai, United, and Marine).

Discretionary grounds

The Court was of the opinion that, as there was no ad hoc submission to arbitration on Hi-Fert's part and s 11 of COGSA invalided the arbitration agreement between Hi-Fert and United, the Federal Court was a perfectly acceptable forum in which to work through Hi-Fert's claims. There was nothing to suggest that Hi-Fert would be behaving oppressively or vexatiously by pursuing its claims against United in this forum.

Conclusions

United was not entitled to a stay of proceedings. Hyundai, however, was, at least in regard to the claims against it that arose under the voyage charter. All the other claims against United, Marine, the non-contractual claims against Hyundai, as well as Marine's cross-claim against United, could be dealt with in the main proceedings.

The second proceeding (injunction proceeding)

The injunction in this case was sought to prevent United furthering the arbitration proceedings in London. Section 11 of COGSA made the arbitration agreement between United and Hi-Fert invalid. It would be open to Hi-Fert simply to allow the arbitration in London to go ahead and then to ignore the subsequent award on the basis that it would have no effect; however, that could lead to further issues down the track should the award be against Hi-Fert or clash with a Federal Court judgment.

Allowing United to go ahead with the arbitration in London would be vexatious and oppressive if Federal Court proceedings were otherwise being properly instigated by Hi-Fert. The Court therefore approved an injunction against United to prevent it from continuing the arbitration proceedings in London, until Hi-Fert had finished prosecuting the main proceeding in Australia, with due expedition.