Bernuth Lines v. High Seas
1. Under the Arbitration Act 1996, notice of arbitration proceedings can be served "by any effective means" - s.76(4). This case held that provision would include email sent to the address held out to the world as the email address of the recipient party. The fact that the recipient's staff assumed the email was "spam" and ignored it did not affect the validity of service.
2. Where a claim under the London Maritime Arbitrators Association’s Small Claims Procedure ("SCP") did not exceed US$50,000, the procedure could be used even where a counterclaim in excess of USD50,000 had been asserted , if the counterclaim was not in fact brought in the arbitration
DMC Category Rating: Developed
This case note is based on an Article in the February 2006 Edition of the ‘Marine Bulletin’, published by the Marine team at the international firm of lawyers, DLA Piper Rudnick Gray Cary. DLA Piper is an International Contributor to this website.
"For disputes where the total amount claimed by either party does not exceed US$50,000 the arbitration shall be conducted in accordance with the Small Claims Procedure of the London Maritime Arbitrators Association".
It was planned that the vessel would go to Rama, a riverine port, access to which is via a lagoon starting at the port of El Bluff. On arrival at El Bluff, however, the master was not happy that there was sufficient draught, even at high water. As a result, the vessel was sent to the nearest port where she discharged her entire cargo into another Bernuth ship.
High Seas issued a revised invoice of US$34,000 for hire and bunkers, which was sent to Bernuth's representative, Bernuth Agencies in Miami. Bernuth Agencies responded enclosing claims invoices totalling over US$90,000. Correspondence continued between Agencies and lawyers by post.
In May 2005, however, High Seas' London lawyers sent a letter by email to firstname.lastname@example.org, asking Bernuth to pay the additional hire to avoid arbitration proceedings. The letter continued that, if proceedings were issued, High Seas would claim the outstanding hire, compound interest and costs pursuant to the LMAA Small Claims Procedure and gave notice requiring agreement to the appointment of an arbitrator. No reply was received.
There followed a series of communications from High Seas' lawyers and from the arbitrator regarding the arbitration, all sent by email to the same address. The lawyers' emails generated automatic "confirmation of delivery" receipts. But no replies were received from Bernuth. On 29 July, the arbitrator awarded High Seas US$40,220 for additional hire, plus interest and costs. The award was sent to Bernuth by email and by post.
Bernuth said that the first time it heard of any arbitration proceedings was when it received the award in the post. The email address email@example.com was used for cargo bookings and the clerical staff would have ignored the messages regarding the arbitration as "spam". It issued this application challenging the award under section 68 of the Arbitration Act 1996 claiming that, since the proceedings were not properly brought to its notice, there had been a serious irregularity which would cause substantial injustice.
Service by any effective means
Section 76 provides that the parties are free to agree on a manner of service of any notice or other document. In the absence of agreement, "a notice or other document may be served by any effective means" – s.76(4). Notices sent by post to the addressee's last known principal residence, principal business address, registered office or principal office will be treated as effectively served.
Bernuth claimed that an email was not service by effective means nor was it an agreed method of service. Under the Civil Procedure Rules, email service is not allowed in the absence of an express written indication by the recipient that it is willing to accept service at the email address.
Small claims procedure
The Civil Procedure Rules apply to court proceedings and so were not an appropriate benchmark by which to judge whether or not service by email was effective in arbitration proceedings. Section 76(4) of the Arbitration Act provided for service by any effective means and was deliberately wide. There was no reason why delivery of a document by email - a method habitually used by businessmen, lawyers and civil servants - should be regarded as essentially different from communication by post, fax or telex.
Of course, the email must be sent to the correct address and must not be rejected by the system. If the sender does not require confirmation of receipt, he may not be able to show that receipt has actually occurred. Other practical problems could arise if a company has a number of different email addresses.
But none of these difficulties arose here. The email of 5 May and all subsequent emails were received at the address held out to the world as the only email address of Bernuth. They bore none of the hallmarks of spam. On the contrary, they called for serious attention. The first one came from a firm of lawyers and identified a claim and purported to initiate arbitration proceedings. Subsequent emails came directly from the LMAA arbitrator. The fact that someone at Bernuth decided not to forward them to the relevant managerial and legal staff was an internal failing which had no effect on the validity of service.
As regards the issue of the Small Claims Procedure, the judge held that High Seas had been entitled to proceed at first instance on the basis of the SCP.
Clause 45 provided that the SCP was available where the total amount claimed by either party in the arbitration did not exceed US$50,000. A claimant could, therefore, initiate an arbitration for a sum less than US$50,000, even though a counterclaim had been indicated in excess of that sum. If the other side did not pursue its counterclaim, the arbitration could proceed under the SCP. If, however, on receipt of the arbitration notice, the respondent put forward a claim in excess of US$50,000, the SCP would at that point no longer be applicable.
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