Degroma Trading Inc v. Viva Energy Australia Pty Ltd

At a glance

Parties

Degroma Trading Inc (Panama), applicant, v. Viva Energy Australia Pty Ltd, respondent

Case no.

Federal Court of Australia, VID 1588 of 2018; [2019] FCA 649 (stay of proceeding VID 1441 of 2018)

Court

Federal Court of Australia, General Division (Victoria Registry), Admiralty and Maritime

Forum and rules

Stay application under s 7 of the International Arbitration Act 1974 (Cth); London arbitration clause (cl 10(B) of a draft bill of lading)

Treaty

New York Convention, Art II(1) and II(2)

Judge

O'Callaghan J

Sector

Shipping; carriage of petroleum products

Outcome

Stay granted: Viva's court proceeding was stayed in full and the disputes were referred to arbitration. The question whether an arbitration agreement exists was left to the arbitrator.

Amount

Voyage freight USD332,500 (plus GST and freight tax); no damages determined. Viva was ordered to pay Degroma's costs of the application.

The dispute

Degroma, a Panamanian company, owns the tanker Diamond-T. The ship was time chartered to its related company City Marine S.A., which voyage chartered it to Viva to carry diesel and unleaded petroleum from Geelong to Tasmania in October 2018. While loading was under way, the parties' agents exchanged drafts of Viva's standard tanker bill of lading. Clause 10(B) of that bill gave the English courts jurisdiction but let either party elect London arbitration. The bill was never finalised: a dispute arose over contamination of the cargo, the cargo was discharged ashore, and Viva arrested the ship. Viva then sued Degroma in the Federal Court for breach of its duties as bailee, negligence, negligent misstatement and misleading or deceptive conduct under s 18 of the Australian Consumer Law. Degroma elected arbitration under cl 10(B) and sought a stay under s 7 of the International Arbitration Act. Viva argued that no arbitration agreement existed because the bill of lading never took effect as a contract.

Key holdings

1. Under the competence principle the court does not have to decide whether the arbitration agreement exists: the arbitral tribunal may decide any question of jurisdiction, including whether the agreement ever came into existence. The practical question is whether the court should hear a separate attack on the agreement or stay its proceeding. That depends on the nature of the attack and all the circumstances. ¶ 64
2. Viva itself submitted that deciding whether cl 10(B) took effect would 'inevitably' require deciding whether the bill of lading bound the parties. The jurisdiction question therefore could not be separated from the question whether the main agreement binds the parties and on what terms. ¶ 65
3. Viva's pleaded claims (bailment, negligence and the Australian Consumer Law) do not rest on the bill of lading. Even so, if the court decided whether an arbitration agreement exists, it would risk a de facto determination of the substantive claims under the guise of a preliminary question. ¶¶ 66–67
4. Viva's argument that the arbitration agreement cannot exist apart from the bill of lading is exactly the kind of argument the doctrine of separability is meant to prevent. The Court relied on Fiona Trust v Privalov and Hancock Prospecting v Rinehart. ¶ 68
5. Under s 7 of the International Arbitration Act, the whole of proceeding VID 1441 of 2018 is stayed and all disputes arising from or in connection with its subject matter are referred to arbitration. Viva pays Degroma's costs of the application. Orders 1–2; ¶ 69

Procedural history

1. 17 September 2018City Marine voyage charters the Diamond-T to Viva.
2. 16–24 October 2018The parties' agents exchange drafts of Viva's tanker bill of lading, which contains cl 10(B), and correspond about clausing the bill for the cargo's condition.
3. 15 November 2018Viva commences an arrest proceeding, and the Diamond-T is arrested.
4. 11 December 2018Degroma gives notice electing London arbitration under cl 10(B). City Marine has also commenced a London arbitration against Viva.
5. 6 March 2019Hearing of the stay application.
6. 13 May 2019Judgment: stay granted and the disputes referred to arbitration.

Tribunal, counsel and experts

For the claimant

HFW Australia

For the respondent

Ashurst Australia

Run a conflict check on these names →

Keywords

• stay of proceedings
• International Arbitration Act 1974 (Cth) s 7
• New York Convention Article II
• agreement in writing
• separability
• competence-competence
• existence of arbitration agreement
• bill of lading
• exchange of correspondence
• London arbitration
• cargo contamination
• Diamond-T
• tanker
• ship arrest
• Hancock Prospecting v Rinehart
• Comandate Marine
• Fiona Trust
• admiralty

Summary generated with AI from the published documents — refer to the award for the authoritative text.