Friday, 10 March 2023

Briggs Marine Contractors Ltd v Bakkafrost Scotland Ltd

[2023] ScotCS CSOH_6

The parties entered into a written contract where Briggs undertook to recover a barge owned by Bakkafrost which had sunk, and to provide certain other services, for a fixed fee. 

Briggs said that the contract was frustrated and that the parties subsequently entered into an oral agreement for the provision of different services for a price of costs plus 15%. Bakkafrost, as a preliminary point, said that there was a clause in the contract, which said that “any dispute arising out of or in connection with” shall be referred to arbitration. The contract was governed by English law. 

Under the contract, Briggs were only entitled to the fixed fee if the barge was recovered: “no cure, no pay”. Briggs said that its divers discovered that the vessel was emitting dangerously high levels of hydrogen sulphide, such that it became too dangerous to continue to provide the services specified and that, as a result, the contract was frustrated. 

Following various discussions, there was an oral agreement for the venting of the barge and the removal of the cargo in return for which Briggs was to be paid its costs, plus 15%. Bakkafrost said that this was nothing more than an oral variation of the original contract in relation to price and methodology. 

Lord Reid noted that the parties had agreed five propositions setting out the relevant approach to be taken to construction of arbitration clauses:

(i) Arbitration clauses should be liberally construed. In other words, the courts should pay little attention to the linguistic nuance and precise phraseology of arbitration clauses.

(ii) The exercise of construction starts from the presumption that the parties, as rational business people, are likely to have intended any dispute arising out of the relationship into which they have entered to be decided by the same tribunal: the one-stop arbitration approach. 

(iii) If the parties wish to exclude certain matters from the one-stop approach, they must either say so expressly.

(iv) In the absence of any express provision excluding a particular issue from arbitration, only the most forceful evidence of a purpose to exclude a claim from arbitration could prevail. 

(v) Where there is doubt over the scope of an arbitral clause, the issue should be resolved in favour of arbitration as arbitration clauses should be construed as broadly as possible. 

Bakkafrost said that, by applying these principles, particularly the “one-stop” approach, the parties had intended all disputes arising out of their relationship to be decided by arbitration. The subject matter of the action plainly arose out of and was connected with the relationship created by the original contract: the salvage operation. 

Briggs submitted that, although the parties were the same, the contract and the oral agreement applied to wholly different subject matters. The contract had provided for the barge to be recovered for a fixed fee on a no cure, no fee basis, whereas the oral agreement was for the provision of different services, which had to be rendered subsea due to the dangerous nature of the gas. It was pure coincidence that Briggs had the necessary skills to carry out the work agreed in the oral agreement. The only matter in issue here was the oral agreement, which contained no arbitration agreement. The original contract prohibited any oral variation. There was no question of different tribunals deciding different matters arising out of the same agreement. 

Lord Reid noted that it was going too far to say that the one-stop approach, presumably intended by rational business people, had the consequence that every subsequent agreement between the same parties was subject to the same arbitration agreement. To determine whether or not there is a sufficient connection between the dispute and contract necessarily involved determining what the dispute was, and then asking whether that could be said to be a dispute which arose out of, or was in connection with, the contract. This must always be a fact-sensitive question. 

The dispute here concerned Briggs’ entitlement to be paid under an alleged oral agreement for the venting of the defender’s barge and the recovery of the cargo. That contract, if it was entered into at all, was entered into, said Briggs, because the original contract WFC had been frustrated. Bakkafrost said that the oral agreement simply had the effect of varying the contract. Lord Reid held that the matters in dispute arose out of (or were in connection with) the original contract. Briggs actually accepted that, were they to seek a declaration that the contract had been frustrated, any dispute about that would be a matter covered by the arbitration clause. Further, Bakkafrost’s argument that any oral agreement simply varied the contract was, itself, a dispute which arose out of, or was in connection with, the contract. 

Further, there was a clear overlap between the facts underlying the two contracts. The services under both included the recovery of cargo from the same barge, located in the same position. It was nothing to the point that the basis for payment was different, or that the task had become more difficult, or that not every salvage company had the necessary skills to undertake the second agreement. There was a close causal connection between the two agreements since one arose out of the other. 

The dispute should be resolved through arbitration. 

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