Practice — Stay of proceedings — Whether assignee of debt arising out of contract entitled to benefit of arbitration clause — Whether action should be stayed — Arbitration Act, 1975, s. 1 .

On July 16, 1981, the first plaintiffs (Rumput) entered into an agreement with the second plaintiffs (Belzetta), the owners of the vessel Leage , under which Belzetta assigned—

. . . all freights, hires and any other amounts of whatsoever nature which may at anytime be earned by [the vessel].

On Sept. 15, 1982, the owners (Belzetta) let their vessel Leage to the defendant charterers. The charter contained a London arbitration clause which provided that English law was to govern the charter.

In due course substantial sums became due to Rumput or Belzetta in respect of demurrage with possibly an additional sum due in respect of the balance of freight. The plaintiffs claimed just over U.S. $304,000.

On Oct. 21, 1983, Rumput issued a writ against the defendants claiming U.S. $304,264.37 plus interest, as assignees and on Nov. 9, 1983, they issued an R.S.C., O. 14 , summons for summary judgment. The defendants admitted that U.S. $269,175.76 was due in respect of demurrage but challenged the plaintiffs' entitlement to recover and averred that a triable issue existed. On Dec. 9, Mr. Justice Staughton gave judgment for the admitted sum and gave leave to join Belzetta as a plaintiff. The summons was then adjourned.

On Jan. 9, 1984, the defendants issued a summons seeking a stay of proceedings under s. 1 of the Arbitration Act, 1975 and on Jan. 10, the defendants issued a further summons seeking a stay of execution under R.S.C., O. 14, r. 3 (2) and under O. 45 .

Held, by Q.B. (Com. Ct.) ( Bingham, J. ), that

(1) on a simple reading of the statutory language in s. 1 an assignee of a debt did claim against the debtor "through or under" the assignor; an assignee of a debt only, where that *260 debt arose out of a contract subject to an arbitration agreement, fell within the statutory language and s. 1 clearly intended to give parties to the arbitration agreement a right to insist on disputes being arbitrated, thus here, on suit brought by Belzetta, and in the absence of any step in the action by the defendants, the Court would have no discretion to refuse a stay to the defendants unless it appeared that there was in fact no dispute ( see p. 262, col. 1 );

(2) here the defendants could have sought a stay of Rumput's proceedings on showing the existence of a real dispute but they did not do so and instead sought unconditional leave to defend; they therefore took a step in the proceedings and were now disentitled to seek a stay against Rumput ( see p. 262, col. 2 );

(3) since Belzetta did not become a party until the writ was amended to join them as plaintiffs, the defendants took no steps in the proceedings disentitling them from applying for a stay and the defendants were entitled to a stay of the proceedings in so far as they were brought by Belzetta but not otherwise ( see p. 262; col. 2; p. 263, col. 1 );

(4) it was common ground that there was a triable issue concerning the balance of Rumput's claim and in the continuing action by Rumput against the defendants, the defendants would be given unconditional leave to defend ( see p. 263, col. 1 );

(5) since Belzetta had sold the vessel which was the subject of the charter and Rumput had no standing save as assignees, and the enforcement of any judgment if in favour of the defendants would be very problematical, it would be just to order a stay of Mr. Justice Staughton's judgment as to U.S. $31,449.52 under R.S.C., O. 14, r. 3 (2) ( see p. 263, cols. 1 and 2 ).

The following cases were referred to in the judgment:

Cottage Club Estates v. Woodside Estate Co. Ltd., [1928] 2 K.B. 462 ;

Liff v. Peasley, [1980] 1 W.L.R. 781 ;

Pitchers Ltd. v. Plaza (Queensbury) Ltd., [1940] 1 All E.R. 151 ;

Shayler v. Woolf, [1946] Ch. 320 .

There were before the Court three summonses. The first was issued by the first plaintiffs Rumput (Panama) S.A. and was a summons for summary judgment under R.S.C., O. 14 , against the defendants Islamic Republic of Iran Shipping Lines. The second was a summons issued by the defendants seeking a stay of the proceedings brought by the first plaintiffs and the second plaintiffs, Belzetta Shipping Co. S.A., the owners of Leage , under the Arbitration Act, 1975, s. 1 and the third was a summons issued by the defendants seeking a stay of execution under O. 14, r. 3 (2) and under O. 45 .

Representation

Mr. Jonathan Gaisman (instructed by Messrs. Richards, Butler & Co. ) for the plaintiffs; Mr. Dominic Kendrick (instructed by Messrs. Lloyd Denby Neal ) for the defendants.

The further facts are stated in the judgment of Mr. Justice Bingham.

Judgment was reserved and delivered in open Court.

JUDGMENT

Mr. Justice BINGHAM:

There are before the Court three summonses. The first, in time, is a summons by Rumput (Panama) S.A., the first plaintiffs, issued on Nov. 9, 1983, and that is a summons for summary judgment under R.S.C., O. 14 . The second is a summons issued on Jan. 9, 1984, by the defendants seeking a stay of proceedings under s. 1 of the Arbitration Act, 1975. The third is a summons issued by the defendants on Jan. 10, 1984 seeking a stay of execution under O. 14, r. 3 (2) of the Rules of the Supreme Court and under O. 45, r. 11 . The second of these summonses, seeking a stay of proceedings under s. 1 of the Arbitration Act, 1975, raises a point of some general importance and I have accordingly agreed, at the request of both parties, to deliver this judgment in open Court.

There are three parties concerned. The first is Belzetta Shipping Co. S.A., who were the owners of Leage . The second party, Rumput (Panama) S.A., is a finance company. On July 16, 1981, it entered into an agreement with Belzetta under which Belzetta assigned—

. . . all freights, hires and any other amounts of whatsoever nature which may at any time be earned by [the Leage ] . . .

that being the vessel in question. The third party are the Islamic Republic of Iran Shipping Lines which, as their name suggests, are an Iranian Shipping line.

On Sept. 15, 1982, a charter-party was made between Belzetta and the defendants. The terms of that charter are irrelevant for present purposes. It suffices to note that it contained an arbitration clause providing for English law to govern the charter and for London arbitration.

In due course substantial sums became due to Rumput or Belzetta in respect of demurrage滞期费 with, possibly, an additional sum due in respect of the balance of freight. The plaintiffs claimed a sum of just over U.S. $304,000.

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On Oct. 21, 1983, Rumput issued a writ against the defendants. Belzetta were not a party to those proceedings, in which Rumput claimed U.S. $304,264.37, plus interest, claiming as assignees. On Nov. 9, 1983, Rumput issued an O. 14 summons for summary judgment. That summons was supported by an affidavit sworn by Mr. Bowtle, a partner in Richards, Butler, in which the whole sum was claimed or, alternatively, the sum of approximately U.S. $269,000 said to have been admitted.

The defendants replied with an affidavit sworn by their solicitor, Mr. Denby, on Dec. 8, 1983. He admitted, on behalf of the defendants, that the sum of U.S. $269,175.76 was due in respect of demurrage but he challenged the plaintiffs' entitlement to recover the balance and averred that a triable issue in respect of the balance existed. He furthermore denied that Rumput were the proper plaintiffs in the action entitled to claim the demurrage and denied that they were entitled to sue as assignees. Accordingly, in his affidavit, on behalf of the defendants, he sought unconditional leave to defend.

On Dec. 9, 1983, there was a hearing of that summons before Mr. Justice Staughton. He pointed out at an early stage that the difficulty as to who was entitled to sue could be cured by adding Belzetta as a plaintiff, and he accordingly gave leave to join Belzetta as plaintiffs on production of a signed consent to the joinder by their solicitors, Richards, Butler. He then gave judgment for the sum of U.S. $269,175.76, being the sum tentatively admitted by the defendants as being due. The defendants did not, as I understand, consent to that judgment but they had already admitted the sum to be due to someone and once Belzetta were added as plaintiffs there was no effective opposition they could advance.

The summons was then adjourned to Jan. 13, 1984. It is plain that at that hearing before Mr. Justice Staughton the defendants made reference to their desire to apply for a stay and the learned Judge ordered that if they wished to apply for a stay they should serve an affidavit by Jan. 9, 1984, final. The defendants did swear a further affidavit by Mr. Denby on Jan. 9, 1984. That affidavit supported their summons recently issued for the stay of the proceedings under s. 1 of the 1975 Act and further raised an issue concerning the balance of the claim. A further affidavit was sworn by Mr. Denby on Jan. 12, 1984, supporting the defendants' claim for a stay of execution. He said, on behalf of the defendants, that a balance of U.S. $31,449.52 was due to the defendants over and above the sum for which judgment had been given to the plaintiffs. It appeared that there had been a misunderstanding between the defendants and their solicitors and accordingly a stay of execution of the judgment was sought in respect of the balance said to be owing of U.S. $31,449.52, the remainder of the judgment sum having by then been paid.

[被告主张]So much for the history and I turn first to the summons seeking a stay of proceedings. The defendants' argument was simply this. They had entered into an arbitration agreement with Belzetta in the charter-party; Rumput were a person claiming "through or under" Belzetta; therefore they were, as they contended, entitled to a stay as of right under s. 1 of the 1975 Act against both parties.

[原告主张]The plaintiffs, in reply, relied on four propositions. First, they contended that Rumput were not a party to any arbitration agreement. Secondly, they contended that Rumput were not a person claiming "through or under" Belzetta; this was not, in their submission, a case where the benefit of a contract containing an arbitration clause or the benefit of an arbitration clause itself had been assigned but merely a case where a debt or claim had been assigned. Accordingly, they relied on the statement of principle contained in Russell on Arbitration, 20th ed., at p. 169, which reads:

Assignee of contract

An arbitration clause will bind a valid assignee of a contract containing it; and the presence of an arbitration clause will not normally cause a court to hold that a contract is not assignable. The benefit of such a clause will, however, not pass to the assignee of a debt arising out of the contract containing it.

The plaintiffs further relied on the authority of Cottage Club Estates v. Woodside Estate Co. Ltd., [1928] 2 K.B. 462 , the authority of which on this point was not, in their submission, undermined by Shayler v. Woolf, [1946] Ch. 320 . Thirdly, the plaintiffs submitted that if Rumput were bound by the arbitration clause the defendants had taken a step in the action by resisting judgment under O. 14 and adducing evidence without applying for a stay: for that proposition they relied on the authority of Pitchers Ltd. v. Plaza (Queensbury) Ltd., [1940] 1 All E.R. 151 . Fourthly, the plaintiffs' submission was that Belzetta's joinder, once effected, related back to the commencement of the action. Therefore, steps taken in the action as against Rumput were deemed to be also steps in the action as against Belzetta so disentitling the defendants to obtain a stay.

It is plain that Rumput itself entered into no agreement to arbitrate. If it is to be held bound by the arbitration clause in the charter-party it must be as a result of the reference to "a person *262 claiming through or under" a party to an arbitration agreement in s. 1 of the 1975 Act. Like the learned authors of Mustill and Boyd on Commercial Arbitration, p. 107, I regard the position of an assignee of a debt as at present unclear. Although the decision of Mr. Justice Wright in the Cottage Club Estates case on its face supports the proposition in Russell and the argument of the plaintiffs, it does not appear that the present point was argued in that case and no reference was apparently made to the language I am now considering. I am, I think, free to construe the language of the section (which appears also in s. 4 of both the 1889 and 1950 Acts).

It appears to me that on a simple reading of the statutory language an assignee of a debt does claim against the debtor "through or under" the assignor. The entitlement of the assignor is an essential ingredient of the assignee's claim, to be properly pleaded and proved. The derivative nature of the assignee's claim is underlined by the rule that an assignee takes subject to equities and by the practice of joining the assignor as either plaintiff or defendant in bringing suits on an equitable assignment of a legal chose in action. It does therefore seem to me that an assignee of a debt only, where the debt arises out of a contract subject to an arbitration agreement, falls within the statutory language. This impression is strengthened when one considers the intention of the draftsman and the consequences of any other interpretation. Section 1 of the 1975 Act clearly intends to give parties to the arbitration agreements to which it refers a right (subject to very limited exceptions) to insist on disputes being arbitrated. Thus in a case such as the present, on suit brought by Belzetta and in the absence of any step in the action by the defendants, the Court would have no discretion to refuse a stay to the defendants unless it appeared that there was in fact no dispute. The statute thus entrenches the defendant's right to have genuine disputes arising out of the charter-party resolved by arbitration. But supposing that there is, as here, an assignment of earnings (not, after all, an uncommon arrangement). The assignee brings suit. The defendant is entitled to raise defences which would have been good against the assignor. But if that dispute is to be resolved to seek a stay, the effect is to deprive the defendant of his right to arbitrate, not consensually (because the defendant has no option in the matter) but by unilateral act of the other party, who also agreed to arbitrate. This result is, as it seems to me, so directly contrary to the principle that those who wish to have their disputes settled by arbitration should be entitled to do so as to leave me in no doubt that the construction I have put on the statutory words is the correct one.

The defendants could therefore have sought a stay of Rumput's proceedings on showing the existence of a real dispute. But they did not do so and instead sought unconditional leave to defend, adducing evidence before Mr. Justice Staughton to that end. On the authority of Pitchers Ltd. v. Plaza (Queensbury) Ltd. , sup., it seems to me plain beyond argument that they took a step in the proceedings and are disentitled to seek a stay against Rumput.

The position of Belzetta is more difficult. On the one hand it is unattractive and harsh to treat the defendants as having taken a step in proceedings brought by Belzetta when, at the time of their taking those steps, Belzetta were not a party to the proceedings. and on their joinder, an intention to seek a stay was intimated. On the other hand, it may be thought somewhat anomalous to treat the defendants as having, taken no step in the action by Belzetta even though, following the leave to join Belzetta, they maintained formal opposition to judgment, had judgment given against them and have satisfied the judgment to the extent of over U.S. $260,000. This problem is not, however, one to be resolved by an exercise of discretion but by a correct application of legal principle. It has, I believe, been the common understanding among lawyers that if a party is added to an action his joinder is treated as dating back to the commencement of the action. But that understanding has recently been the subject of tentative but effective criticism by the Court of Appeal in Liff v. Peasley, [1980] 1 W.L.R. 781 . That case was concerned with the addition of a defendant and with limitation, but it is not easy to see why the position of a plaintiff should be different nor why the underlying principle should vary according to the context in which the question arises (statute, of course, apart). It is further to be observed that O. 15, r. 8 (4) of the Rules of the Supreme Court , which weighed with the Court of Appeal in reaching its tentative conclusion, applies both to plaintiffs and defendants. The present case, if the plaintiffs are right, provides a good example of the capricious manner in which the relation back theory could operate, since it would have the effect of penalizing the defendants on account of acts performed when Belzetta were not a party. Although the Court of Appeal in the case cited did not make disapproval of the relation back theory a ground of decision, and although this point was not at all fully explored in argument before me, I think it is open to me to conclude, as I do, that Belzetta did not become a party until the writ was amended to join them as a plaintiff. Thereafter the defendants, as I find, took no step in the proceedings disentitling them from applying for a stay; instead, they issued a summons seeking a stay as they had told the *263 Judge they would. It follows that the defendants are entitled to a stay of the proceedings in so far as they are brought by Belzetta but not otherwise. This may not turn out to be a very significant victory for the defendants, since it may well be that the action can be effectively pursued without Belzetta being parties; alternatively, Rumput may succeed in an application to join Belzetta as defendants in their capacity as equitable assignors.

In so far as the O. 14 summons is concerned, it is common ground that Mr. Denby's affidavit of Jan. 9, 1984, raises a triable issue concerning the balance of Rumput's claim. In the continuing action by Rumput against the defendants, the defendants must accordingly have unconditional leave to defend.

I turn to the third summons. The defendants seek a stay of execution of Mr. Justice Staughton's judgment as to U.S. $31,449.52, the balance of the judgment including interest having been satisfied. The ground advanced is that the defendants not only (as they contend) have a defence to the balance of the plaintiffs' claim but also a claim for this sum in addition. This claim was not raised earlier because the defendants' London solicitors had not understood their instructions to be that the defendants asserted such a claim, and the assertion of this additional claim had only recently been appreciated.

In seeking this stay of execution the defendants relied first on O. 45, r. 11 , of the Rules of the Supreme Court. This gives the Court a discretion to stay execution on the ground of matters which have occurred since the date of the judgment. This is very wide language, but even so I have grave doubts whether it can extend to cover a case such as this where nothing has occurred after judgment save new or clarified instructions by clients to solicitors. But I need not pursue this point since a clear power to stay is conferred by O. 14, r. 3 (2) , of the Rules of the Supreme Court and the question is whether, as a matter of discretion, I should exercise it. It is said with force and much justification that the defendants have only themselves to blame for their present predicament; they could and should have raised the point earlier: they did not pay even the large amount admittedly due until sued to judgment; their counterclaim is even now presented in a manner unintelligible to an English Cout. I have, on the other hand, no reason to doubt that there was a genuine failure of communication between the defendants and their solicitors, as can occur when instructions are given by telex in an unfamiliar language. As a Court seeking to serve the commercial community of the world the Commercial Court should not be too rigorous in its approach when lapses of this sort occur, as occur they must. The defendants have demonstrated their good faith by making a large payment. While I cannot assume the counterclaim to be well-founded, nor can I at this stage regard it as a sham, none of these considerations would justify a stay if I were reasonably sure that any over-payment could be recovered. But the plaintiffs are both Panamanian companies. Belzetta have, as I understand, sold the vessel which was the subject of the charter. Rumput have no standing save as assignees. The enforcement of any judgment, if in favour of the defendants, would be very problematical. In all the circumstances I consider it just to order a stay of Mr. Justice Staughton's judgment, as to U.S. $31,449.52, under O. 14, r. 3 (2) , of the Rules of the Supreme Court.