Bernuth Lines Limited vs High Seas Shipping

The case

Bernuth Lines Ltd applied under the section 68 of the Arbitration Act to set aside an arbitrator's final award in favour of High Seas Shipping Ltd on the basis that an arbitration purportedly commenced by email had not been validly served, leading to a serious irregularity that would cause them substantial injustice.

Bernuth chartered a vessel, the Eastern Navigator, from High Seas. A dispute ensued in relation to unpaid charter hire. High Seas sought settlement using an email address found in the Lloyd's Maritime Directory which significantly was also the only email address on Bernuth's website. This email was deleted by Bernuth's cargo officers as "spam". High Seas began an arbitration. A series of subsequent emails were then sent to the same address as the arbitration developed, culminating in an award for some $40,000 (£23,000) in favour of High Seas. All emails were similarly deleted. It was not until a copy of this decision was received, by post, that the directors of Bernuth became aware of the proceedings against them.

The issue

The central question before Mr Justice Clarke was whether email service had validly commenced the proceedings. Bernuth contended that under the Civil Procedure Rules the party to be served must expressly agree that they are willing to accept by email and that by analogy email should not be regarded as good service of the arbitration proceedings.

The decision

Mr Justice Clarke disagreed, denying that the CPR is the appropriate benchmark for establishing effective service of arbitration proceedings. He explained that the CPR caters for a wide range of claimants, from the individual litigant acting alone to multinational corporations and their teams of lawyers. Arbitration on the other hand is the domain of businessmen and their lawyers who use email as a matter of course. In particular Section 76(3) of the Act was drafted widely enough to allow for a notice or other documentation to be served "by any effective means" and did not require notification of such address to the serving party.

Supporting his judgment, Mr Justice Clarke cited The Pendrecht [1980] 2 Lloyd's Rep 56, in which service of an arbitration notice was deemed on actual receipt, despite the fact that the telex did not come to the attention of a responsible employee for sometime. Similarly Bernuth's ignorance of the proceedings was a failing of its own internal clerical staff.

Mr Justice Clarke qualified his decision stating that the email must be sent to the actual address of the recipient; it must not be rejected by the system and if a confirmation of receipt is not requested it may not be possible to show that receipt has occurred. None of these problems arose in this case as confirmation of delivery reports were generated for every email and the address was the only one publicly available.

Mr Justice Clarke confirmed that, if he had found that the arbitration proceedings were not validly served by email, he would have held that Bernuth had suffered a substantial injustice. In particular, they would have been deprived of the opportunity to set off their counterclaims. However, the finding that proceedings were validly served meant that the question of substantial injustice did not arise.

Mr Justice Clarke also commented on High Seas' proposal that in the event of email not being effective service under the Act, it was rendered effective under the Small Claims Procedure "SCP") of the London Maritime Arbitrator's Association, which allows email service where the amount claimed is under $50,000 (£29,000). Bernuth contested that as their counterclaim was over $90,000 (£52,000), the SCP would not apply. Mr Justice Clarke clarified the position: a counterclaim could exceed $50,000 in a SCP, provided that the amount put forward in the arbitration was less than $50,000. As Bernuth's counterclaim was never advanced, the SCP would have remained available.

Comment

The judgement means that email may be an effective method of service for arbitration proceedings under the Arbitration Act 1996, even when not expressly agreed between the parties.

For further information please contact: Helen Garthwaite, a partner in the construction and engineering group at law firm Taylor Wessing. Email h.garthwaite@taylorwessing.com

Tom Wrzesien, a solicitor in the construction and engineering group at law firm Taylor Wessing. Email t.wrzesien@taylorwessing.com