GOLD SHIPPING NAVIGATION CO SA V LULU MARITIME LTD (THE “PEARL OF JEBEL ALI” AND THE “PRIDE OF AL SALAM 95”)

[2009] EWHC 1365 (Admlty), Queen's Bench Division, Admiralty Court, Mr Justice Teare, 18 June 2009

Admiralty – Procedure – Collision claim – Time bar – Construction of agreement to extend time to sue indefinitely – Counterclaim subject to two-year limitation period in section 190, Merchant Shipping Act 1995 – Discretion to extend time for counterclaim

On 17 October 2005 a collision occurred in the Suez Canal between the vessels Pearl of Jebel Ali and Pride of Al Salam 95 as a result of which Pride of Al Salam 95 sank. The collision gave rise to a claim by the owners of Pride of Al Salam 95 of about US$10,600,000 and to a claim by the owners of Pearl of Jebel Ali of about US$1,500,000. By a Collision Jurisdiction Agreement dated 1 November 2005 the owners of the two vessels agreed English law and jurisdiction and to provide security for the other's claim. Pursuant to section 190 of the Merchant Shipping Act 1995 there was a two-year time limit for commencing proceedings. Shortly before the two-year time limit, the parties agreed an indefinite extension “subject to one month's notice of termination of intention to proceed by either side”. Teare J held, construing the extension agreement in its factual matrix, that a reasonable person would not expect the parties to have agreed an unlimited extension of time which was not capable of being brought to an end, but that the extension of time would be capable of being brought to an end when evidence had been obtained or when it was apparent that evidence could not be obtained or when enough time had been spent in seeking that evidence; and that there would therefore be a means of terminating the unlimited mutual extension of time in any of those eventualities. The clause in question would convey to a reasonable person that either party could give one month's notice of the termination of the extension of time. The words "of intention to proceed" meant that when one month's notice of termination was given, the party giving it also gives notice that it intends to proceed with its claim within one month. It followed that the action of the owners of Pearl of Jebel Ali was time-barred, while that of the owners of Pride of Al Salam 95 was not. To the argument of the owners of Pearl of Jebel Ali that their counterclaim was not affected by the time bar in the Merchant Shipping Act section 190(3), Teare J held that it was indeed affected. Finally, Teare J agreed with the argument of the owners of Pearl of Jebel Ali that it would be just and fair in the circumstances to exercise discretion to allow the counterclaim to proceed. The discretion conferred by section 190 MSA 1995 should be exercised in a principled manner because, if time was extended, the statutory limitation would not take effect. There must therefore be good reason for extending time. Whether or not there was a good reason must depend upon all the circumstances of the case. The responsible person acting on behalf of Pearl of Jebel Ali had not acted culpably in thinking that the notice given would time bar any action after a month and there was therefore good reason. The two claims would be heard together and a limitation defence to a counterclaim would be a windfall.