797

A.C.

[HOUSE OF LORDS]

UNION OF INDIA APPELLANTS

AND
E. B. AABY'S REDERI A/S . . . . . RESPONDENTS

B 1974 March 25, 26, 27, 28; Lord Reid, Lord Morris of Borth-y-Gest,
June 13 Viscount Dilhorne, Lord Simon of Glaisdale
and Lord Salmon
Shipping—General average—Centrocon arbitration clause—General
average expenditure for tow—Undertaking by charterers to
pay general average contribution—Claim by shipowners for
Q contribution—Charterers' repudiation alleging unseaworthiness
of vessel—No arbitrator appointed within time specified by
arbitration clause—Preliminary issue whether arbitration
clause affording shipowners defence to action—Whether claim
within clause—Whether undertaking precluding charterers
from relying on clause
Ships' Names—Evje
On January 14, 1966, the appellants chartered the respon-
D dents' vessel Evje to load a cargo of wheat in bulk from a
United States port in the North Pacific and carry it to Bombay
or Kandla under a Baltimore Berth Grain Charterparty Form
C, which provided, inter alia, by clause 2 that general average
was payable according to the York/Antwerp Rules 1950, and
" to be settled in London." By clause 6 the vessel had a lien on
the cargo for general average. The charterparty also incor-
porated the " Centrocon " arbitration clause to deal with " all
E disputes from time to time arising out of " the contract. The
second sentence of the clause provided: " Any claim must be
made in writing and claimant's arbitrator appointed within
twelve (12) months of final discharge and where this pro­
vision is not complied with the claim shall be deemed to be
waived and absolutely barred."
The vessel was loaded at Portland, Oregon, and on January
_, 23, 1966, set out for Bombay or Kandla, and was to call at
^ Yokohama for bunkers. On February 12, 1966, she ran out
of fuel oil and engaged the services of a tug to tow her to
Yokohama. The cost of that measure fell in the first instance
on the respondents but it was general average expenditure. In
order to avoid the need to exercise a lien at the port of dis­
charge, the respondents, through average adjusters, obtained
from the appellants' High Commission in London a written
^ undertaking dated February 23, 1966, to pay "any general
*J average contribution which may be legally due." The cargo
was discharged at Bombay. In reliance upon the undertaking
the respondents did not attempt to exercise a lien for general
average contribution. The adjustment was completed on
February 24, 1967, and the respondents' agents applied on
March 30, 1967, for payment of their contribution of £5,995-23.
On June 7, 1967, the appellants' solicitors repudiated liability
„ on the ground that the vessel was unseaworthy, and correspon-
" dence continued until April 1971, when for the first time the
appellants' solicitors contended that the claim was barred
under the arbitration clause since an arbitrator had not been
appointed within 12 months of final discharge.
798
Union of India v. E. B. Aaby's A/S (H.L.(E.)) [1975]
On the question whether the respondents' claim for general
average was barred in view of the terms of the arbitration A
clause:—
Held, (1) that the claim for general average contribution
arose solely out of or under the charterparty, and that
accordingly, if the contract had remained unvaried, it followed
from the " Centrocon" clause that, since the respondents'
arbitrator was not appointed within 12 months of final dis­
charge, the claim for contribution would be absolutely barred
(post, pp. 807H—808B, 810D-E, 815B-D, 816C-E). B
But (2) that the contract which came into existence upon
the acceptance of the undertaking of February 23, 1966, was a
fresh contract which varied the charterparty in that the re­
spondents' claim to any general average contribution due to
them was subject to no time limit save such as might be
imposed by statute, and that, accordingly, in the circumstances
the claim was not barred (post, pp. 81 lc-E, 815H—816B, 819A-C). _,
Alma Shipping Corporation v. Union of India {The ^
Astraea) [1971] 2 Lloyd's Rep. 494 approved.
Decision of the Court of Appeal [1973] 1 Lloyd's Rep. 509
affirmed on different grounds.
The following cases are referred to in their Lordships' opinions:
Alma Shipping Corporation V. Union of India {The Astraea) [1971] 2
D
Lloyd's Rep. 494.
Atlantic Shipping and Trading Co. Ltd. v. Louis Dreyfus & Co. [1922] 2
A.C. 205, H.L.(E.).
Gibraltar (Government of) v. Kenney [1956] 2 Q.B. 410; [1956] 3
W.L.R. 466; [1956] 3 All E.R. 22.
Heyman v. Darwins Ltd. [1942] A.C. 356; [1942] 1 All E.R. 337.
H.L.(E.).
Morrison Steamship Co. Ltd. v. Greystoke Castle (Cargo Owners) [1947] E
A.C. 265; [1946] 2 All E.R. 696, H.L.(E.).
The following additional cases were cited in argument:
Agro Co. of Canada Ltd. v. Richmond Shipping Ltd. (The Simonburn)
[1973] 1 Lloyd's Rep. 392, C.A.
Bede Steam Shipping Co. Ltd. v. Bunge y Born (1927) 27 Ll.L.Rep. 410.
Chandris V. Argo Insurance Co. Ltd. [1963] 2 Lloyd's Rep. 65. F
Dreyfus (Louis) & Co. v. Atlantic Shipping and Trading Co. Ltd. (1920) 4
LlX.Rep. 424; [1922] 2 A.C. 250, H.L.(E.).
Hain Steamship Co. Ltd. v. Tate and Lyle Ltd. (1936) 41 Com.Cas. 350,
H.L.(E.).
Himmerland, The [1965] 2 Lloyd's Rep. 353.
London and North Western and Great Western Joint Railway Companies
v. J. H. Billington Ltd. [1899] A.C. 79, H.L.(E.). G
London and North Western Railway Co. v. Jones [1915] 2 K.B. 35, D.C.
London & Overseas Freighters Ltd. v. Timber Shipping Co. S.A. [1972]
A.C. 1; [1971] 2 W.L.R. 1360; [1971] 2 All E.R. 599, H.L.(E.).
Monmouthshire County Council v. Costelloe and Kemple Ltd. (1964) 63
L.G.R. 131.
Pinnock Brothers v. Lewis and Peat Ltd. [1923] 1 K.B. 690.
Polemis and Furness, Withy and Co. Ltd., In re [1921] 3 K.B. 560, C.A. H
Schothorst and Schuitema v. Franz Dauter G.m.b.H. (The Nimrod) [1973]
2 Lloyd's Rep. 91.
Simonds v. White (1824) 2 B. & C. 805.
 799
A.C. Union of India v. E. B. Aaby's A/S (H.L.(E.))
Svendsen v. Wallace Brothers (1885) 10 App.Cas. 404, H.L.(E.).
A
Tradax Export S.A. v. Volkswagenwerk A.G. [1970] 1 Q.B. 537; [1970]
2 W.L.R. 339; [1970] 1 All E.R. 420; [1970] 1 Lloyd's Rep. 62, C.A.
Wavertree Sailing Ship Co. Ltd. v. Love [1897] A.C. 373, P.C.
Woolf v. Collis Removal Service [1948] 1 K.B. 11; [1947] 2 All E.R.
260, C.A.

APPEALfrom the Court of Appeal.

This was an appeal by the charterers, The Union of India, from an
order dated March 19, 1973, of the Court of Appeal (Lord Denning M.R.,
Megaw and Scarman LJJ.) in favour of the shipowners, E. B. Aaby's
Rederi A/S, dismissing the charterers' appeal from an order dated March
9, 1972, of Mocatta J. answering certain preliminary questions of law
adversely to the charterers.
C The facts are set out in their Lordships' opinions.

Robert Goff Q.C. and John Hobhouse Q.C. for the appellants. Two
questions arise for decision: (1) Whether, in the absence of the letter of
undertaking, the arbitration clause in the charterparty can apply to a
disputed claim for general average contribution. (2) If the answer to
£ the above be in the affirmative, whether the letter of undertaking dated
February 23, 1966, precludes the appellants from invoking the arbitration
clause.
As to (1), the respondents' claim is a claim for £5,995-23. This is a
claim which, quite apart from the letter of undertaking, can only found
in contract. The respondents can only recover this sum by relying on
the York/Antwerp Rules 1950, which are contractual: see Morrison
E Steamship Co. Ltd. v. Greystoke Castle {Cargo Owners) [1947] A.C. 265.
Further, if it were not for the charterparty clause providing for the general
average " to be settled in London," general average would probably
have had to be assessed not in accordance with English law and practice
but in accordance with the law arid practice of India.
The charterparty incorporates an arbitration clause which is in wide
p terms for the arbitrator's jurisdiction extends to " all disputes from time
to time arising out of this contract." The leading authority is Heyman v.
Darwins Ltd. [1942] A.C. 356, where Viscount Simon L.C. said, at p. 360:
" whether a dispute falls within an arbitration clause in a contract must dep­
end on (a) what is in the dispute and (b) what disputes the arbitration clause
covers." Lord Porter said, at p. 399, that disputes " under " a contract
meant any disputes where " the contract must be adverted to in order
G to arrive at their solution " and that disputes " arising out of " a contract
had a wider meaning. The disputes which are raised by the respondents'
claim are clearly disputes arising out of the charterparty contract. They
are clearly covered by the wide words of the arbitration clause: see
Woolf v. Collins Removal Service [1948} 1 K.B. 11 and Government of
Gibraltar v. Kenney [1956} 2 Q.B. 410.
IT [LORD REID intimated that their Lordships would in due course desire
to hear the respondents on this aspect of question (1).]
Apart from the particular language of this clause, the general prin­
ciple of law is that whatever be the propel law of the contract, the law
800
Union of India v. E. B. Aaby's A/S (HX.(E.)) [1975]
governing the question of general average is that of the port of ultimate dis­
charge : see Dicey & Morris, The Conflict of Laws, 9th ed. (1973), rule 160, A
p. 837. If the parties were driven to exercise their ultimate rights the lien
would be exercised under the law of the port of ultimate discharge.
The present clause contains the expression " to be settled in London."
Simonds v. White (1824) 2 B. & C. 805 is of assistance. The word
" adjusted " in that case is to be given the same meaning as " settled " in
the present case: see per Roskill J. in Alma Shipping Corporation v. B
Union of India {The Astraea) [1971] 2 Lloyd's Rep. 494. " Settled in
London" means " adjusted at London" which means " calculated
according to the law and usage prevailing in London." " Settled in
London " is not an exclusive jurisdiction provision. There is nothing
inconsistent between the " settled in London " provision and the arbitra­
tion clause as Megaw L.J. held. The charterparty gives no contractual
right to an adjustment. As was pointed out in Chandris v. Argo Insurance ^
Co. Ltd. [1963] 2 Lloyd's Rep. 65 since adjustment is no more than a
formulation of the shipowner's claim, it has no contractual or legal
significance as such. It need not be prepared by an average adjuster:
Wavertree Sailing Ship Co. Ltd. v. Love [1897] A.C. 373.
The respondents put forward the contention in paragraph 17 of their
printed case that the time limit in the arbitration clause does not bar any D
claim, if the claim has been made in writing, but has not been disputed,
within the 12 month period. It was said that an arbitrator can only be
appointed once the dispute has arisen, and that if a claim is made and
rejected, clearly there is a dispute, but if it is merely not answered or
not admitted, that there is not. The short answer to that contention is
that directly a claim is made there is a dispute: see The Himmerland
[1965] 2 Lloyd's Rep. 353; London and North Western Railway Co. v. E
Jones [1915] 2 K.B. 35 and Agro Co. of Canada v. Richmond Shipping Ltd.
(The Simonburn) [1973] 1 Lloyd's Rep. 392.
Alternatively, " settled in London " means " settled according to the
law prevailing in London (that is English law) and paid in London."
As to (2), on the judgment of the Court of Appeal the Centrocon
arbitration clause is valueless in respect of a general average claim p
because there will always be a bond or guarantee or something of that
nature which according to the Court of Appeal constitutes a new contract
to which the arbitration clause has no application.
The words in the undertaking " may be legally due " mean that the
appellants will not be liable for more than is so found in law. It makes
explicit what is contained in clause 2 of the charterparty. The under­
taking is nevertheless a valuable document in that it is an assurance given G
by a government. Assuming, however, that there is here consideration
and that there is a new contract, nevertheless, the words " legally due "
refer back to the charterparty. This new contract is therefore not an
independent contract.
The form of average bond is to be found in Lowndes & Rudolf, The Law
of General Average, 9th ed. (1964), pp. 467, 468 (British Shipping Laws, u
vol. 7) from which it is clear that the charterparty has to be referred to in
order to discover what are the rights and liabilities of the parties.
Louis Dreyfus <£ Co. V. Atlantic Shipping and Trading Co. Ltd. (1920) 4
 801
A.C. Union of India v. E. B. Aaby's A/S (H.L.(E.) )
. Ll.L.Rep. 424 shows that when a party agrees to pay what is " legally due "
he does not intend to waive any of his rights. " May be legally due "
means " such sum that the appropriate tribunal has found to be legally
due." Accordingly, the Dreyfus case is indistinguishable from the present
for the words in issue there were " found legally due." In the House of
- Lords [1922] 2 A.C. 250, 258, 261, 262 this point was summarily dismissed
by Lord Dunedin and Lord Sumner.
B The point on waiver which was the basis of the decision of Megaw
and Scarman L.JJ. below was never pleaded and was expressly dis­
claimed by the respondents before Mocatta J.
The letter of undertaking is not couched in such terms as would
have led any businessman to have thought that he was giving up any
of his rights. The word " legally " refers the parties back to the document
under which their rights are governed, namely, the contract, which is
^ the charterparty with the Jason clause and the Centrocon arbitration
clause.
As to whether there was consideration moving from the Government
of India if " settled in London " means " adjusted according to English
law," the answer is in the affirmative by virtue of the appointment of a
paying agent in London. But if " settled " imports " paid " then there is
D no consideration because the Government of India is doing no more than
what it agreed to do under the contract. But, alternatively, if the word
"settled" is deemed to be vague and a party clarifies the matter, for
example, by writing the letter of undertaking, this constitutes consider­
ation. It is analogous to the settlement of a dispute, which has always
been considered to amount to consideration. But whether or not there
was consideration is nihil ad rem because the character of the dispute
E remained the same and one goes to the charterparty to ascertain the
rights of the parties.
Christopher Staughton Q.C. and David Johnson for the respondents.
There are five submissions: (1) The Centrocon arbitration clause or,
alternatively, its time limit, does not apply to claims for general average
contributions because the contract provides another and different approach
F to such claims. That was the unanimous view of the Court of Appeal.
(2) The time limit in the clause does not apply to claims for general average
contribution because such claims do not arise out of the contract. This
was the view of Lord Denning M.R. (3) The time limit does not apply
to the claim in this case because the parties agreed by correspondence
that it should not apply. This was the view of Megaw and Scarman L.JJ.
(4) The arbitration clause or, alternatively, the time limit, does not apply
G in this case because the claim arises out of the High Commissioner's
undertaking: per Mocatta J. and Lord Denning M.R. (5) The arbitration
clause does not apply, or, alternatively, the time limit is no bar, because
the claim was made in writing within 12 months and was not disputed
within that period. This point was fully argued in the Court of Appeal,
but was not referred to in the judgments.
H On submission (5), the two sentences of the Centrocon arbitration
clause can and should be severed. It is only when there is a claim and
an answer to it that there is a dispute and only then can it be ascertained
whether the dispute comes within the arbitration clause: see per Lord
802
Union of India v. E. B. Aaby's A/S (H.L.(E.)) [1975]
Wright in Heyman v. Darwins Ltd. [1942] A.C. 356. In re Polemis and .
Furness, Withy & Co. Ltd. [1921] 3 K.B. 560 accurately states the sequence A
of events: a claim, an answer, a dispute.
Does " any claim " in the second sentence of the arbitration clause
mean " any claim, whatsoever "? Obviously it does not and therefore
" any claim " must be limited to " any claim arising out of this contract."
The purpose of the clause is to enable a shipowner to close his books
and not years afterwards find a claim brought against him. There may B
be cases where the claim does not arise out of the contract, but the
dispute does, for example, in In re Polemis. This illustrates that the
claim arising out of the contract in the second sentence is co-extensive
with arbitral disputes in the first sentence. The clause only applies to
disputes which arise within 12 months: see per Roche J. in Pinnock
Brothers v. Lewis and Peat Ltd. [1923] 1 K.B. 690. [Reference was made to
C
The Himmerland [1965} 2 Lloyd's Rep. 353.];
The Centrocon arbitration clause is an international clause, but the
Arbitration Act 1950 only applies to English arbitrations. The lifeline
of section 27 of that Act is very tenuous and is easily lost. It is difficult
to suppose that the parties envisaged disputes which arose after 12 months.
Provided a claim is made within 12 months, the other party can dispute
it and he can appoint an arbitrator. In London and North Western and D
Great Western Joint Railway Companies v. /. H. Billington Ltd. [1899]
A.C. 79 the Earl of Halsbury L.C. applied the principle that an arbitrator
cannot be appointed until a dispute has arisen. This was accepted in The
Himmerland [1965] 2 Lloyd's Rep. 353. Before a " dispute " there must
be formally or informally an assertion and.a confrontation. If that argu­
ment be right then on the respondents' submission (5) this appeal should
be dismissed. E
The other submissions all relate to general average and the con­
struction of the charterparty and the correspondence. In considering these
documents it is important to bear in mind the background of commercial
law and practice. Commercial practice has been uniform for at least
170 years. The doctrine of general average is a curious appendage to
the law of carriage of goods by sea. It has been considered by this p
House both in its judicial and legislative capacities to have special
features: see per Lord Roche in Morrison Steamship Co. Ltd. v. Grey-
stoke Castle (Cargo Owners) [1947] A.C. 265. For statutory authority to
the same effect see the Administration of Justice Act 1956, s. 1 (a);
and the Hague Rules, Article 5 in the Schedule to the Carriage of Goods
by Sea Act 1924. [Reference was made to Lowndes & Rudolf, The Law
of General Average, 9th ed., para. 465.] • G
General average is in effect the reverse of unjust enrichment. The
importance of general average to the present case is twofold and may be
approached historically. (1) There is the difficulty of enforcing rights.
Originally making good any loss was done on the quayside: see Lowndes
& Rudolf, 9th ed., para. 458, and contribution was in kind. That
happens no longer, but now. the shipowner has a right of action against JJ
the owner of the cargo at.the time of expenditure-or sacrifice: see Abbott's
Merchant Ships and Seamen, 14th ed. (1901), ch. 8, p. 751 et seq. The cargo
owner has a personal right against -the ship and against other cargo owners.
 803
A.C. Union of India v. E. B. Aaby's A/S (H.L.(E.) )
These rights, however, may be of little value, for example, the cargo owners
may be men of straw. There is therefore invariably a lien. Although the
shipowner has a lien which he can exercise at the port of discharge, it is for
practical purposes impossible for him to calculate at that stage, how much is
due. The shipowner is bound to exercise his lien even though nothing is due
to himself, for example, if a cargo of one owner has been sacrificed, the ship­
owner must exercise a lien on the cargo of other owners. The position at
B the port of discharge may thus be that the shipowner has no personal claim,
the consignees have no personal liability, and nobody can calculate the
amount for which a lien should be exercised. To meet these difficulties,
therefore, it is standard practice to have a bond: Svendsen v. Wallace
Brothers (1885) 10 App.Cas. 404, 409, 410, per Lord Blackburn. [Reference
was made to Abbott's Merchant Ships and Seamen, 14th ed., p. 804, n. (o).]
For the modern form of average bond, see Lowndes & Rudolf, 9th ed., para.
C
1061 et seq.
(2) The other feature of general average is the time taken to prepare a
statement and the procedure that must be observed: see the York/Antwerp
Rules, Lowndes & Rudolf, 9th ed., para. 908, rule G, para. 942, rule XXI.
It is common knowledge that average adjustments take a long time to
complete. There would be no purpose in appointing an arbitrator before
D the completion of the adjustment, at any rate if the consignees know that a
claim for general average contribution will be made as the appellants knew
in this case. In Chandris v. Argo Insurance Co. Ltd. [1963] 2 Lloyd's Rep.
65, Megaw J. reviewed the practice on general average and held that there
was an obligation where the York/Antwerp Rules applied to produce an
adjustment statement before a claim can succeed. A perusal of the Rules of
Practice to be found in Lowndes & Rudolf, 9th ed., para. 991 et seq.,
makes plain that the adjuster's duties are far more extensive than merely
making calculations. In Schothorst and Schuitema v. Franz Dauter
G.m.b.H. (The Nimrod) [1973] 2 Lloyd's Rep. 91 an adjustment of a
single cargo took two and a half years yet no criticism is to be
found in the case of the length of time involved.
The respondents adopt as part of their argument Megaw L.J.'s reasons
F below for disagreeing with Mocatta J. at first instance and with Roskill J.
in The Astraea [1971] 2 Lloyd's Rep. 494 which he described as " good
commercial reasons " ([1973] 2 Lloyd's Rep. 494, 515). Megaw L.J. said
that the general average clause was a clause which gave " a contractual right
on the part of the shipowners to have an average adjustment made," and that
" it does not make good commercial sense that these two pieces of
Q machinery—the one an arbitration, the other an adjustment—should be
required contractually to proceed . . . side by side."
If submission (1) be correct, then the second sentence of the arbitration
clause would read as follows: " any claim (except a claim for general
average for which see clause 2 ) . . . " If the two sentences of this clause cannot
be severed, then the words in brackets above should appear in the first
„ sentence after the words " all disputes."
The words " settled in London " are in commercial practice inconsistent
with arbitration within 12 months. " Settled in London " means " adjusted
in London in accordance with English law and paid in London." The
804
Union of India v. E. B. Aaby's A/S (H.L.(E.)) [1975]
expression confers jurisdiction in London. The word " settled " by its very
nature includes payment. "■
The clause does not apply to general average contribution because it
does not arise out of the contract. The York/Antwerp Rules in this case
make no difference to substantive rights: they are mere matters of
machinery. [Reference was made to Lowndes & Rudolf, 9th ed., paras. 941,
942 and 992.]
The expression " legally due " refers to one point of time only, namely, g
that contained in the second paragraph of the letter of undertaking dated
February 23,1966, the time of release. This is a contract varying the original
contract in certain respects. It is a new contract superimposed on the old
contract: (i) It removed a doubt as to where payment was to be made:
(ii) there was a release of the respondents from the time bar. It is
emphasised that the effect of the correspondence was such as to make
the time bar no longer applicable. It is consensual variation (a) which ^
contains no time bar, or (b) the terms of this new bargain were incon­
sistent with the terms of the arbitration clause.
It was said that the respondents' argument on this point lay in waiver
and that the respondents had disclaimed waiver. This is not so. The
respondents have always disclaimed unilateral waiver.
Hain Steamship Co. Ltd. v. Tate and Lyle Ltd. (1936) 41 Com.Cas. j>
350 is a striking example of a case where a bond may make all the differ­
ence as Mocatta J. observed. It supports the view that a bond or under­
taking is a new contract.
Goff Q.C. was called upon to reply on the second question only.
Their Lordships took time for consideration.

June 13, 1974. LORD REID. My Lords, for the reasons given by my
noble and learned friends, Lord Morris of Borth-y-Gest and Lord Salmon,
I would dismiss this appeal.

LORD MORRIS OF BORTH-Y-GEST. My Lords, the questions which arise

in this appeal can best be stated after narrating the relevant facts. By a p
charterparty which was dated London, January 14, 1966, and which was the
Form C approved Baltimore Berth Grain Charterparty, the Chief Controller
of Chartering, Ministry of Transport, New Delhi, Government of India,
chartered the Norwegian motor vessel Evje from her owners. The charter
was for a voyage with a cargo of wheat in bulk. The voyage was to be
from one North Pacific United States safe port to Bombay or at the
charterers' option to Kandla (India). G
Clause 2 of the charterparty began with the words " General average
shall be payable according to York/Antwerp Rules 1950 and to be
settled in London." These words were followed (some words in the printed
form in relation to an average bond and to security having been deleted) by
words setting out the Jason clause. The clause deals, in the terms set out,
with the entitlement of the owners to general average contributions even if a JJ
general average act has resulted from unseaworthiness provided that they
have exercised due diligence to make the vessel in all respects seaworthy
and to have her properly manned, equipped and supplied.
 805
A.C. Union of India v. E. B. Aaby's A/S (HX.(E.)) . LOT* Morris
of Borth-y-Gest
, By clause 6 the vessel was to have a hen on the cargo for all freight,
dead freight, demurrage or average. The charterparty was further to in­
clude special provisions as clauses numbers 7 to 38 inclusive. The
incorporated "Centrocon" arbitration clause (amended) has the two
following opening sentences:
" All disputes from time to time arising out of this contract shall,
unless the parties agree forthwith on a single arbitrator, be referred to
° the final arbitrament of two arbitrators carrying on business in London,
who shall be members of The Baltic and engaged in the shipping and/
or grain trades, one to be appointed by each of the parties, with power
to such arbitrators to appoint an umpire. Any claim must be made in
writing and claimant's arbitrator appointed within twelve (12) months
of final discharge and where this provision is not complied with the
C claim shall be deemed to be waived and absolutely barred."
The vessel went to Portland, Oregon, and there loaded a full cargo of
wheat. It was in bulk about 17,600 tons. On January 23 she set out
to proceed to Bombay or Kandla. The owners say that when she left
Portland the vessel had adequate bunkers (plus a normal surplus) to enable
her to reach Yokohama. She was to call at Yokohama for bunkers. On
~. February 12 when partly across the Pacific on her way to Yokohama she
ran out of fuel oil and stopped. It is said that she had encountered severe
weather and as a consequence had consumed an excessive quantity of
bunkers. It became necessary to arrange by cable for the services of a tug.
The vessel was presumably in a position of some peril. In due course a
tug arrived (probably on February 15) and began to tow the vessel towards
Yokohama. Here was the general average act resulting in expenditure in
E respect of which there was a later claim for general average contribution.
The tug towed the vessel for some period and then was able to supply
her with some fuel and so enable her to reach Yokohama. That she did on
February 18, 1966. Having refuelled she sailed for Bombay. She reached
Bombay on March 8, 1966. The cargo was then discharged. That dis­
charge was completed on March 12, 1966.
P After the vessel had come to a stop (on February 12) and before she
reached Yokohama, her owners, considering the case to be of a general
average nature, communicated with their London agents and asked them to
get into touch with Messrs. William Richards & Son as average adjusters.
The owners desired to leave the average adjustment in Messrs. Richards'
hands and also wished them to make suitable arrangements which would
secure the contribution of the proportion of general average attaching to
G the cargo. Both the owners' agents and Messrs. Richards knew that it was
not the practice of the Government of India to give either a general average
bond or a cash deposit.
Having been instructed, Messrs. Richards wrote to the Director General
of the India Supply Mission in London. By their letter dated February
17, 1966, Messrs. Richards explained all that had happened and concluded
„ with the words:
" We shall therefore be obliged if you will let us have the usual under­
taking by the Indian Government to pay their cargo's proportion of
general average when this has been determined."
806
i l rBorth°-rr-Ges« Union of tadia v
' E* B* Aab
y's A
/ s (HX.(E.) ) [1975]
A reply came dated February 23, 1966. It was in these terms: .
" I have for acknowledgement your letter No. G/MP dated February
17, 1966, and I am to say that the High Commissioner for India in
London hereby gives an undertaking that any general average con­
tribution which may be legally due from the Government of India as
cargo owners will be paid by this mission. In view of the above
undertaking you are requested to contact the shipowner's agents in
•India, by cable if necessary, to release government cargo immediately "
the vessel arrives at an Indian port."
Messrs. Richards on February 25, 1966, gave instructions that the
cargo was to be released to the consignee on the vessel's arrival in India
without further security being obtained. On the same date they wrote to the
Director General of the India Supply Mission.in these terms: " We thank
you for your letter of February 23, and note that we may apply to you
for settlement when our adjustment of general average is completed."
There was in the letter also a request to be furnished in due course with
particulars of the value of the Indian Government cargo. Messrs. Richards
proceeded with their work and in due course prepared their general average
adjustment. It was dated February 24,1967.
It is to be noted that a period of 12 months from the final discharge of D
the cargo at Bombay expired on March 12, 1967. On March 30, 1967,
the owners' agents sent a copy of the general average adjustment to the
Director General of the Indian Supply Mission. Request was made for
the sum of £5,995 4s. 7d. which was the amount shown in the adjustment
as being due from the cargo. That sum was therefore what the average
adjusters considered was the appropriate contribution which was payable
towards the total general average expenditure incurred which was some *1
£12,070.
The solicitors acting on behalf of the appellants (the Government of
India) wrote in reply on June 7, 1967. No suggestion was made that
any time bar operated to defeat the claim, but, while reserving rights to
question any other aspect of the claim it was, at least " initially," repudiated
on the ground set out in this sentence: F
"We have examined the average adjustment statement and we have
come to the conclusion that the incident alleged to give rise to general
average arose due to the poor quality of the fuel oil by virtue of the
presence of impurities in the same and as such we contend that the
vessel was unseaworthy at or before the commencement of the relevant
voyage and that it was the said unseaworthiness that caused the alleged Q
incident giving rise to general average."
In reply to this it was stated on July 31, 1967, on behalf of the owners that
they had ordered oil of a particular quality from reputable suppliers and
that there had been no failure to exercise due diligence to provide a sea­
worthy vessel.
Further correspondence followed in 1968 in reference to proceedings and JJ
the acceptance of service but between October 1968 and April 1971, there
was a complete interval. After the claim was renewed in April 1971, the
. point was for the first time raised on behalf of the appellants that any
 807
A.C. Union of India v. E. B. Aaby's A/S (H.L.(E.)) . £0,d1;M«?rl»
* ' '' of Borth-y-Gest
. claim for a contribution towards general average would be by way of
arbitration in London and that as no arbitrator had been appointed within
12 months of the final discharge of the cargo the claim had been waived
and was absolutely barred. The fact that the point thus taken had not
been raised earlier did not, in my view, in any way preclude its being
raised.
On behalf of the owners it was pointed out that the claim that was
B being made was made pursuant to and in order to enforce the undertaking
given in the letter of February 23, 1966. A writ was issued dated June 4,
1971, and endorsed with points of claim. The claim for the sum of £5,995
was founded upon the February 1966 undertaking. In the points of
defence several issues were raised. One was that the plaintiffs (the ship­
owners) had at no time appointed an arbitrator and that under the amended
" Centrocon " arbitration clause any claim for a general average contribu-
tion had been waived and had become barred on or about March 12, 1967.
Another issue which was raised concerned the questions whether the ship­
owners had exercised due diligence to make the vessel seaworthy and
whether they had been negligent.
On November 16, 1971, the learned judge (Mocatita J.) ordered that
there should be a preliminary trial of the following questions of law:
D " (1) Whether the defendants are entitled to rely on the amended
' Centrocon' arbitration clause contained in a voyage charterparty
dated London, January 14, 1966, and made between the plaintiffs as
owners of the M.V. ' Evje' and the defendants as charterers thereof,
in answer to the plaintiffs' claim and, if so, (2) Whether under that
clause the plaintiffs' claim was waived and became barred on or about
E March 12,1967."
In the result the learned judge (Mocatta J.) and 'the members of the
Court of Appeal all answered the questions so raised in the negative. They
did so, however, for various reasons. The learned judge held that had there
not been the letter of undertaking the arbitration clause and time bar would
have applied to the claim for general average contribution: he held, how-
p ever, that the arbitration clause did not apply to a claim based upon the
letter. The members of the Court of Appeal for somewhat varying reasons
held that even without the letter of undertaking a claim for general average
contribution could have been the subject of a claim which would be un­
affected by the arbitration clause and its time bar. They also all held that
a claim lay under the letter of undertaking and that the arbitration clause
and its time bar did not apply to such a claim.
G It may here be mentioned that there was a summons before the learned
judge under section 27 of the Arbitration Act 1950. In view of his decision
there was no need for an extension of time but he indicated that had there
been such a need he would not have been disposed to allow an extension.
I propose first to express my opinion on the question whether (if there
were no special undertaking) a claim for general average contribution
JJ would be a claim covered by the arbitration clause. If such a claim was
made and if when made it was rebutted or denied it seems to me that a dis­
pute would arise. Would it be a dispute " arising out of " the charterparty?
In my opinion, it would. It would arise out of a charterparty which con-
808
ifrBortli0."-Gert Union of India v. E. B. Aaby's A/S (HX.(E.)) [1975]
tained a clause providing that general average was to be payable according .
to York/Antwerp Rules 1950 and to be settled in London and which (in
terms of the Jason clause) enabled an owner, even in certain named
circumstances, to recover contributions provided that he had, in defined
respects, exercised due diligence. In my view, a disputed claim for a
general average contribution which might involve disputes concerning
matters and questions referred to in the Jason clause would essentially and
clearly arise out of the charterparty. Any such disputes would, in my view, B
be even more clearly within the arbitration clause than were the disputes
which arose in Heyman v. Darwins Ltd. [1942] A.C. 356. In that case
there was an arbitration clause which provided that " if any dispute shall
arise between the parties hereto in respect of this agreement or any of the
provisions herein contained or anything arising hereout the same shall be
referred for arbitration." A question whether one party had repudiated the
agreement was held to be within the terms of the arbitration clause. In
his speech Viscount Simon L.C. said, at p. 366:
" But, in a situation where the parties are at one in asserting that they
entered into a binding contract, but a difference has arisen between
them whether there has been a breach by one side or the other, or
whether circumstances have arisen which have discharged one or both
parties from further performance, such differences should be regarded D
as differences which have arisen ' in respect of,' or ' with regard to,'
or ' under' the contract, and an arbitration clause which uses these,
or similar, expressions should be construed accordingly."
In the same case Lord Porter said, at p. 398:
" There remains the question: What result follows where the original £
existence and efficacy of the contract is not in dispute but one party
has, or it is claimed that he has, refused to be bound by its terms and
has disregarded it in toto and the other party has accepted his repudia­
tion? In such a case the question of damage has still to be determined
and the question whether there has been repudiation may be still in
issue. Are these disputes under the contract—I use the word ' under'
advisedly since expressions such as ' arising out of' or ' concerning' F
have a wider meaning? I think they are. The contract must be
adverted to in order to arrive at their solution."
Though claims for general average contribution have their origin in the
common law so that they need not necessarily be the creature of contract I
feel satisfied that in the present case (leaving aside the letter of February
23, 1966) a claim for general average contribution relating to events during G
the operation of the charterparty would have been a claim arising out of
the charterparty. The term that general average should be payable was
contractual as was the further term that the York/Antwerp Rules 1950
were to apply—as was the further term " to be settled in London "—as
was the inclusion in clause 2 of the Jason clause.
It is not necessary in the present case to express any concluded view as JJ
to the meaning of the words " to be settled in London " but at least I
think that they denote that an adjustment is to be made in accordance,
not with the law of the port of destination of the cargo, but with the law
 809
A.C. Union of India v. E. B. Aaby's A/S (H.L.(E.) ) BSSh—cEit
and practice of London: the words reinforce the view that any claim for
A
general average contribution was to be advanced as a contractual claim.
As such it would be a claim under or arising out of the charterparty
contract. The contract which contains provisions concerning general
average and regulates the circumstances under which general average
contributions are to be payable also contains the provision which requires
disputes to be referred (in prescribed manner) to arbitration and also the
B severe provision that unless a claim is made in writing and unless an
arbitrator is appointed within the specified time a claim is to be " deemed
to be waived" and "absolutely barred."
In the present case and in a recent case (Alma Shipping Corporation
v. Union of India, The Astraea [1971] 2 Lloyd's Rep. 494) it has
been acknowledged that for many years experienced average adjusters
thought that arbitration clauses had generally no application to claims
C for general average contribution. This circumstance coupled with
the fact that distinguished judges who speak with authority on this branch
of the law have differed compels a close consideration of the questions now
raised. It is pointed out that in many cases the tasks of average adjusters
are complicated and involve much investigation so that they cannot be
performed speedily or within the rigidity of a time limit. It is also pointed
D out that the time limit in the " Centrocon " clause was formerly much
shorter than 12 months. On the other hand, it is pointed out that where
there is a cargo of grain in bulk and one consignee-owner of such cargo the
tasks of an average adjuster lack the complications that may arise in other
and different circumstances. It is pointed out that in the present case the
adjustment statement of Messrs. Richards was dated February 24, 1967,
which was within the 12 months' period. Doubtless it could have been
E prepared earlier had the need for an earlier date been urged upon the
average adjusters. So also is it pointed out that the letter of February 17,
1966, was in effect a claim made (and made even before the 12 month
period began) for a general average contribution the amount of which
would later be assessed and quantified. On the facts of the present case I
think that there is little doubt that a quantified claim could, had it been
p thought necessary, have been presented in ample time to enable the appoint­
ment of an arbitrator to be made within the specified 12 months' period.
Though there may be competing weight in these considerations the
questions which arise are purely questions of the interpretation of the
contract which was entered into. Can it be said that by clause 2 of
the charterparty questions concerning general average are specially provided
for and as a result are withdrawn from the provision as to arbitration? In
G my view, this cannot be said. Clause 2 deals with questions as to whether
general average is to be payable and with questions as to the law applic­
able. It does not deal with the method of settling disputes which may arise
or with the method of recovering an amount which may be disputed.
Though clause 2 may contemplate that an average adjuster will be employed
and though the incorporation of the York/Antwerp Rules may have the
JJ result that one will be employed the clause certainly does not involve that
the decision or assessment of an average adjuster is to command or compel
acceptance on the part of the parties to the contract. An average adjuster
is not by clause 2 made an arbitrator.
810
U n i o n o£ I n d i a v- E
orBorth-^Gest " B- Aab
y's A s
/ (H.L.(E.) ) [1975]
In argument it was submitted and in two of the judgments in the Court .
of Appeal the view is expressed that the second sentence of the " Centra-
con " clause (the sentence imposing the time limit for a claim and a waiver
and barring of any claim not timeously presented) does not apply to a
claim for general average contribution. This view may or may not involve
that the first sentence of the clause would apply but without the second.
With every respect I do not find myself able to share either view. In my
opinion, the second sentence cannot be divorced from the first. B
It was pointed out that the arbitration clause begins by referring disputes
to arbitration. It was contended that in the present case there was a claim
made within 12 months but that the claim was not disputed until after
the 12 months' period and that as no dispute had arisen within the 12
months' period the arbitration clause did not apply. The clause only
applied, so it was contended, to disputes arising within the 12 months' c
period. The second sentence, it was contended, should be interpreted as
though the words were that any claim must be in writing and if disputed
the claimant's arbitrator appointed within the 12 months' time limit; or as
though there was an exception for a claim for a general average contribu­
tion. I cannot accept these contentions. The arbitration clause must be read
as a whole without severing or excluding any part of it or without making
additions to it. The words are imperative and decisive which say that JJ
unless a provision is complied with any claim " shall be deemed to be
waived and absolutely barred." What, then, is the provision? It is
twofold, viz., (a) a claim in writing must be made within the 12 months'
period and (b) the claimant must appoint his arbitrator within the 12 months'
period. His arbitrator must have the qualification or description set out in
the first sentence. It seems to me to follow that, being subject to a com­
pelling time bar and time limit a claimant must take all such steps as may E
be necessary to ensure not only that his claim in writing is in time but also
that within time he has appointed his chosen and qualified arbitrator to be
one of two arbitrators to settle a disputed claim. In the case of a voyage
charter for the carriage of a cargo of wheat in bulk a time limit expiring
12 months after the date of final discharge of the cargo may not be thought
to be oppressive. In certain circumstances and in a proper case the powers p
of the court under section 27 of the Arbitration Act 1959 could possibly
be invoked.
For the reasons which I have set out I agree with the conclusion of
Mocatta J. on this part of the case and consequently with the conclusion,
on the matters now under discussion, in The Astraea [1971] 2 Lloyd's
Rep. 494.
I pass then to consider the questions arising from the letters of "
February 1966, to which I have earlier referred. The letters were
written some time before the vessel reached Bombay. On her arrival
at Bombay the owners would have been entitled to exercise a lien on the
cargo in respect of a contribution towards the general average expenditure.
It was not the practice of the appellants either to give security or to give
an average bond in a customary form under which in consideration of a JJ
promise by a shipowner to deliver goods a promise is made to pay a general
average contribution. So the letters were exchanged. There was a request
for the " usual undertaking " to be given by the Indian Government that
 811
A.C. Union of India v. E. B. Aaby's A/S (H.L.(E.) ) 0f B£U, "c"it
. they would pay their cargo's proportion of general average when that had
been determined. In reply the promise was made to pay the legally due
amount of such general average contribution. That amount was to be paid
" by this mission "—which was the India Supply Mission in London. The
promise was given so that the cargo would not be made the subject of any
lien but would be released immediately the vessel arrived at an Indian port.
The clear expectation was that there would be an adjustment of general
B average, which would be followed by a claim for contribution from the
Indian Government, which as a result of the promise given would result in
payment being made by the India Supply Mission of such amount as was
legally due. Both parties understood that they were then to wait until the
average adjusters had completed their task and made their adjustment and
that a request for payment of the contribution amount would then be made.
If when payment was demanded it was asserted that payment was being
C demanded of a sum that was not legally due then for a determination of the
issue so raised it would of course be necessary to refer to the provisions of
the charterparty. But would the question fall to be determined by the
ordinary processes of law or would the question be a dispute within
the arbitration clause of the charterparty, as the appellants contend, with the
result that any claim for payment would be deemed to be waived and barred
rj in default of compliance with the terms of the arbitration clause? This is
by no means an easy question but I have come to the conclusion in agree­
ment with Mocatta J. and the Court of Appeal that there was a new
promise for which there was clearly good consideration. There was a new
contractual obligation. Rights of lien were given up in exchange for it.
It did not contain an arbitration clause. A claim under it would be resolved
by the ordinary processes of law. I consider that Mocatta J. was right in
E distinguishing the present case from the case of Atlantic Shipping and
Trading Co. v. Louis Dreyfus & Co. [1922] 2 A.C. 250. In that case a
letter was relied upon as being a waiver. In the present case the claim
arises out of a new contract. It was on that basis that the claim was
formulated, pleaded and presented.
I would dismiss the appeal.
F
VISCOUNT DILHORNE. My Lords, by a charterparty dated January 14,
1966, the appellants chartered the Evje from the respondents to carry a
cargo of wheat from the west coast of America to India. The vessel was
to call at Yokohama for bunkers and on her way there she ran out of
fuel and, it appears, was in consequence in some peril. A tug was hired
to tow her to Yokohama. After a few days of towing, fuel was transferred
G from the tug to the Evje and she was then able to complete her journey
to Yokohama under her own power. She ran out of fuel on February 12,
1966, and on February 17, 1966, William Richards & Son, who had been
appointed by the respondents' general average adjusters, wrote to the
Director General of the India Supply Mission saying that the extra expenses
in hiring the tug appeared to give rise to general average and asking that
IT they should be given the usual undertaking by the Indian Government to
pay their cargo's proportion of general average when that had been
determined.
On February 23, 1966, the reply came that
812
Viscount Dilhorne Union of India v. E. B. Aaby's A/S (H.L.(E.)) [1975]
" the High Commissioner for India in London hereby gives an under­
A
taking that any general average contribution which may be legally
due from the Government of India as cargo owners will be paid by
this mission. In view of the above undertaking you are requested to
contact the shipowner's agent in India, by cable if necessary, to release
government cargo immediately the vessel arrives at an Indian port."
Relying on this undertaking, instructions were given by William Richards g
& Son for the release of the cargo to the consignee on arrival in India
without further security being obtained. The same day William Richards &
Son wrote to the Director General saying that they noted they might apply
to him for settlement when the adjustment of general average was completed.
The vessel arrived in India and her cargo wasfinallydischarged on March
12, 1966. But for the undertaking the respondents would have been
able to exercise a lien on the cargo for the appellants' general average C
contribution. To do so is a tiresome business and to avoid it, an average
bond and security are usually given. The Government of India instead of
giving such a bond and security normally give an undertaking such as that
given in this case.
William Richards & Son completed their average adjustment on February
24, 1967. It showed that the cargo's proportion of general average was ^
£5,995 4s. 7d. Over a month later, on March 30, 1967, the appellants
were asked for their cheque for this sum. On June 7, 1967, they repudiated
liability on the ground that it was unseaworthiness of the Evje at the
commencement of the voyage which caused her to run out of fuel.
It was then, and only then, that, in my opinion, a dispute can be said to
have arisen between the appellants and the respondents.
It was not, however, until June 4, 1971, that a writ was issued by the "
respondents claiming the £5,995-23. After the pleadings were completed,
Mocatta J. ordered that the following two questions should be tried as a
preliminary issue:
"(1) Whether the defendants are entitled to rely on the amended
' Centrocon' arbitration clause contained in a voyage charterparty
dated London, January 14, 1966, and made between the plaintiffs F
as owners of the M.V. ' Evje' and the defendants as charterers
thereof, in answer to the plaintiffs' claim and, if so, (2) Whether under
that clause the plaintiffs' claim was waived and became barred on or
about March 12, 1967."
The amended "Centrocon" arbitration clause was in the following
terms: G
"All disputes from time to time arising out of this contract shall,
unless the parties agree forthwith on a single arbitrator, be referred to
the final arbitrament of two arbitrators carrying on business in
London, who shall be members of The Baltic and engaged in the
shipping and/or grain trades, one to be appointed by each of the
parties, with power to such arbitrators to appoint an umpire. Any JJ
claim must be made in writing and claimant's arbitrator appointed
within twelve (12) months of final discharge and where this provision
is not complied with the claim shall be deemed to be waived and
 813
A.C. Union of India y. E. B. Aaby's A/S (H.L.(E.)) Viscount Dilhorne
absolutely barred. No award shall be questioned or invalidated on
the ground that any of the arbitrators is not qualified as above, unless
objection to his acting be taken before the award is made."
The unamended "Centrocon" arbitration clause provided that the
claim must be made and the claimant's arbitrator appointed within three
months of final discharge.
B So if the dispute between the appellants and the respondents arose out
of the charterparty, the respondents' claim had to be made and they had
to appoint their arbitrator by March 12, 1967. A dispute may arise
without a claim being preferred. The claim may be formulated only after
a dispute had arisen. From the way in which this clause is drafted, it seems
likely that the claim referred to is the one made in the arbitration and so
after the dispute has arisen. In this case, one has fortunately not to decide
C to what kind of claim the clause refers, as the claim for £5,995-23 was not
made until after March 12, 1967, and no arbitrator was appointed by
the respondents before then. The appellants consequently contend that,
by virtue of this clause, their claim is to be deemed to have been waived
and to be absolutely barred.
The making of an average adjustment usually takes a considerable time
n and the " Centrocon " arbitration clause makes no provision for a case
where a dispute arises, as it did in this case, more than 12 months after
final discharge. The parties in this case must have known that average
adjustment frequently takes more than a year to complete and that a dis­
pute with regard thereto, either as to liability or quantum or both, might
not arise until after 12 months after final discharge. They chose to
agree that all claims should be deemed to be waived and absolutely barred
E if not made and the claimant's arbitrator appointed within 12 months
of final discharge and effect must be given to that provision. I see nothing
in the clause or in any other part of the charterparty to justify the conclusion
that when the clause refers to " All disputes," those words are to be read as
meaning "All disputes save disputes as to general average arising after
12 months from final discharge " and, in my view, it is not the function
of the courts to rewrite a contract to insert provisions to which the parties
F
could have agreed to deal with a situation which might arise.
I do not think, as Scarman L.J. appears to have thought, that it is
possible to sever the second sentence of the arbitration clause from the
first and to hold that while a dispute as to general average is a dispute
arising out of the contract, it is not one to which the second sentence need
necessarily apply, for, as a matter of construction, I do not think that the
G second sentence can be divorced from the first, It was, in my opinion,
intended to and does apply to all disputes covered by the first sentence.
So if the dispute in this case as to the general average contribution is a
dispute arising out of the contract, if there had been no undertaking by the
appellants, in my opinion it follows that the respondents' claim was by
virtue of the " Centrocon " arbitration clause to be deemed waived and
„ absolutely barred.
I now turn to the question whether the dispute was one arising out of
the contract. Lord Denning M.R. held that it did not, saying ([1973] 1
Lloyd's Rep. 509,513):
814
Viscount Dilhorne Union of India v. E. B. Aaby's A/S (H.L.(E.)) [1975]
" It arises ' in the course of it.' It arises in the course of the voyage.
It arises out of the perils encountered in carrying out the contract, "
and not out of the contract itself."
I respectfully agree that the dispute in this case had its origin in events
in the course of the voyage out of perils encountered in carrying out the
contract but I do not myself see that that precludes the dispute being
one which arises out of the contract. If the parties to a contract make
provision in it as to their rights should certain events occur in the course
of the contract and a dispute arises between them as to their rights fol­
lowing the occurrence of those events, then, in my opinion, that dispute
as to their rights arises out of the contract.
It was agreed that clause 2, which the charterparty provided should be
contained in the bill of lading, is to be treated as applying to the appellants
and the respondents. It reads as follows: C
" (2) General average shall be payable according to York/Antwerp
Rules 1950 and to be settled in London. If the owner shall have
exercised due diligence to make the steamer in all respects seaworthy
and to have her properly manned, equipped and supplied, it is hereby
agreed that in case of danger, damage or disaster, resulting from
faults or errors in navigation, or in the management of the steamer, [
or from any latent defect in the steamer, her machinery or appur­
tenances, or from unseaworthiness, whether existing at the time of
shipment or at the beginning of the voyage (provided the latent defect
or the unseaworthiness was not discoverable by the exercise of due
diligence), the consignees or owners of the cargo . . . shall contribute
with the shipowner in general average to the payment of any sacrifices,
losses or expenses of a general average nature that may be made or ^
incurred for the common benefit, or to relieve the adventure from
any common peril. .."
The printed form of the charterparty contained the following sentence
which appeared after the words " York/Antwerp Rules " " Average bond
with values declared therein to be signed, also sufficient security to be
given as required by master or agents." These words were struck out and *
" 1950 and to be settled in London." typed in in their place.
It is thus clear that to determine whether the respondents were entitled
to a general average contribution from the appellants, recourse has to be
made to this clause and that its terms govern the matter. The respondents
seek to rely not on their rights at common law but on their rights under
this clause. And in my. opinion any dispute as to their rights under the G
clause is a dispute arising out of the contract and so covered by the
arbitration clause.
In Heyman v. Darwins Ltd. [1942] A.C. 356, 398 Lord Porter said
that the words "arising out of a contract" have a wider meaning than
the words " under a contract," a view which was repeated by Sellers J. in
Government of Gibraltar V. Kenney [1956] 2 Q.B. 410, 421. Although the ,,
words are different, I must confess my inability to discern any difference
in their content.
All the members of the Court of Appeal were agreed that disputes
 815
A.C. Union of India v. E. B. Aaby's A/S (H.L.(E.) ) Viscount Dilhorne
about general average did not come within the arbitration clause as pro-
A
vision for dealing with them was made by clause 2. I do not consider
that agreement that general average should be payable according to
York /Antwerp Rules leads to the conclusion that a dispute with regard
thereto is excluded from the arbitration clause; nor do I consider that the
words "to be settled in London" have that effect. At first sight those
words appear to me to mean no more and no less than that the contribu-
B tions to be made have to be determined in London and paid there, and
that implies determined in accordance with English law. The clause does
not prescribe machinery for the determination and is silent on whether
in default of agreement it is to be a litigation or arbitration. I see no
conflict between this clause and the arbitration clause which provides for
arbitration in London. The words in question may have been inserted to
secure that the law applicable should be that of England and not that of
C the port of discharge. Determination of the amount payable according
to the York/Antwerp Rules and whether there is liability to pay under the
clause can be made in an arbitration.
In my opinion Roskill J. in Alma Shipping Corporation v. Union of
India (The Astraea) [1971] 2 Lloyd's Rep. 494 and Mocatta J. in this
case were right in holding that the arbitration clause applied, so if the
j) India Supply Mission had not given the undertaking, in my opinion this
appeal should be allowed.
Average adjusters have long held the view that the " Centrocon " arbitra­
tion clause did not apply to general average claims. If the charterparty
was in the printed form used in this case unamended, the explanation may
be that the charterparty which provided that the bills of lading signed
pursuant to the charterparty should supersede the contract contained in
E the charterparty, required the bills of lading to contain the clause set out
above. In the absence of any express stipulation, the bills of lading would
not incorporate the " Centrocon " arbitration clause in the charterparty. In
this case the bill of lading was, however, overstamped with a provision
stating that all the terms and conditions of the charterparty were
incorporated therein.
p It was not until April 23, 1971, that the appellants took the point that
the respondents' claim was absolutely barred, the undertaking having been
given on February 23, 1966, and the appellants' repudiation of liability
prior to April 23, 1971, being based on alleged unseaworthiness of the
vessel.
In a note of a judgment given in chambers by McNair J. in an un­
reported case, he is reported to have said:
" Where a person who signs a Lloyd's average bond turns out to
be the consignee, new obligations are created for a valid consideration.
The shipowner gives up valuable rights of lien and gives them up
in exchange for the obligations in Lloyd's average bond. I accept
Mr. Phillips' submission that one of the purposes of the Lloyd's
average bond procedure is to crystallise the situation and so that the
H parties need not have regard to time limit provisions in other
documents."
In this case the undertaking took the place of a Lloyd's average bond
816
Viscount Dilhorne Union of India v. E. B. Aaby's A/S (H.L.(E.)) [1975]
and the acceptance of that undertaking in my opinion constituted a fresh
contract which did not contain or import the " Centrocon " arbitration "■
clause. If the words " Average bond with values declared therein to be
signed, also sufficient security to be given as required by master or
agents " had not been struck out and a bond and security had been given,
it might perhaps have been possible to contend that, as the giving of the
bond and security was in performance of the contract, the giving and
acceptance of it did not constitute a fresh contract. However, that is not g
this case and, in my opinion, the Court of Appeal and Mocatta J. were
right in the conclusion to which they came on this question.
For these reasons I would dismiss the appeal.

LORD SIMON OF GLAISDALE. My Lords, I have had the advantage of

reading in draft the speeches prepared by my noble and learned friends,
with which I agree. I would therefore dismiss the appeal. ^

LORD SALMON. My Lords, if this appeal turned solely upon the true
construction of the charterparty, I would hold that the claim for general
average contribution arises out of the charterparty and is barred by the
" Centrocon " arbitration clause which the charterparty incorporates and
that the appeal should, therefore, succeed. I respectfully prefer the reasons jy
given by Roskill J. (as he then was) in The Astraea [1971] 2 Lloyd's Rep.
494 and adopted by Mocatta J. in the present case for so construing the
charterparty to the diverse reasons which commended themselves to the
Court of Appeal for construing it in a contrary sense. I think that but
for the correspondence to which I shall later refer, the claim for general
average contribution would arise solely out of or under the charterparty
and it would follow from the " Centrocon " clause that since the ship- E
owners' arbitrator was not appointed within 12 months of final discharge,
the claim for contribution would be " absolutely barred."
I recognise that even if the charterparty had made no reference to
general average, general average would still be payable under the common
law in the event of a general average act occurring. The charterparty
does, however, provide by clause 2 that " General average shall be payable p
according to York/Antwerp Rules 1950 and to be settled in London."
There are many differences between the liability to pay general average
contribution under the common law and the liability to pay such con­
tribution under the charterparty which incorporates the York/Antwerp
Rules. At common law, e.g., no general average would be payable by the
charterers if the general average expenditure had been due to a breach of
the shipowners' warranty of seaworthiness. Under the York/Antwerp G
Rules, however, even if the expenditure had been incurred by reason of
the ship's unseaworthiness, general average contribution would nevertheless
be payable by the charterers unless the unseaworthiness was caused by lack
of due diligence on the part of the shipowners. Indeed, in the present
case, the real dispute between the parties seems to be whether or not the
general average expenditure has been so caused. U
The shipowners' claim for general average contribution no doubt arose
in the course of the voyage, as such claims always do, but this does not
prevent it from arising out of or under the charterparty.
 817
A.C. Union of India v. E. B. Aaby's A/S (H.L.(E.)) Lord Salmon
We have been referred to a statement by Lord Porter in Heyman v.
A
Darwins Ltd. [1942] A.C. 356, 399, to the effect that the words "arising
out of " a contract have a wider meaning than the words " arising under "
a contract. LOQI Porter did not, however, define the difference, and I con­
fess that I find difficulty in understanding what it is. Nor do I think that it
has any significance for the purposes of the present appeal.
In addition to applying the York/Antwerp Rules to general average,
B clause 2 of the charterparty provides for general average to be settled in
London. At common law it would be settled at the port of final discharge.
This is an additional reason for concluding that claims for general average
are governed by and arise out of or under the charterparty. It is not
seriously disputed that the words " to be settled in London " mean to be
adjusted in accordance with an adjustment prepared in London and con­
forming with normal English practice. It is unnecessary to express any
C final view as to whether these words also mean " to be paid in London "
although, as at present advised, I am inclined to think that they do.
Neither party is bound by an average adjustment whether or not it is
made by a professional average adjuster. Disputes can and often do arise
both before and after an adjustment has been made. I am afraid that I
cannot accept the view expressed by Lord Denning M.R. that clause 2
D provides the means by which such disputes are to be decided when they
arise. If it did, no doubt the maxim generalia specialibus non derogant
would apply and such disputes would implicitly be excluded from the
" Centrocon " arbitration clause. As it is, however, in my respectful view,
that clause alone provides the means of resolving all disputes and claims
arising out of the charterparty. In my opinion, claims arid disputes
relating to general average, for the reasons I have already indicated, fall
E squarely within the clause. No doubt it may not seem sensible that a
general average claim should be barred unless the claimant appoints his
arbitrator within 12 months of final discharge when the odds are that
the adjustment will not be completed until after this period has expired.
No doubt there may also be other sound commercial reasons (referred to
by Megaw L.J.) why parties might well exclude general average claims
p from the "Centrocon" arbitration clause or modify that clause in its
relation to such claims. The parties, however, have not done so; and there
is no power in the courts to do so for them.
I recognise that prior to The Astraea [1971] 2 Lloyd's Rep. 494, the
general view was that clauses such as the " Centrocon " arbitration clause
had no application to claims for general average contribution. I doubt
whether this view was based on any consideration of the language of
O charterparties in general or the " Centrocon " clause in particular. I think
that the general view is more likely to have been based on the language
of the Lloyd's general average bond which, when applicable, may have
afforded it a much firmer foundation. However this may be, whilst I have
the same respect for the experience of the distinguished average adjusters
who gave evidence in The Astraea as had Roskill J., like him, I cannot
JJ think that their views are relevant on a point concerned solely with the
true construction of a charterparty. It must be remembered that in the
report of The Astraea there is no mention of any general average bond.
That case, turned on the construction of the charterparty alone.
A.C. 1975—30
818
Lord Salmon Union of India v. E. B. Aaby's A/S (H.L.(E.) ) [1975]
I find difficulty in agreeing with Scarman L.J. that, even if the arbitra- .
tion clause applied, as I think it does, to claims for general average, it does
not follow that the time limit stipulated in the second sentence of the clause
need apply to such claims. In my view, there is nothing, in the charter-
party which would justify the exclusion or modification of the second
sentence in the arbitration clause. That sentence reads as follows:
"Any claim must be made in writing and claimant's arbitrator
appointed within twelve (12) months of final discharge and where "
this provision is not complied with the claim shall be deemed to be
waived and absolutely barred. . . . "
The words "any claim" are very wide and, in my view, clearly cover
general average claims. Had the parties intended to exclude such claims
from the ambit of the second sentence of that clause or to modify the time
limit for the appointment of the claimant's arbitrator nothing would have **
been easier than for them to have done so. They have not, however, made
any alteration to the clause. The courts cannot rewrite their contract for
them, even if to do so may appear to be reasonable and to make far better
commercial sense.
Accordingly, had this appeal depended solely upon the construction of
the charterparty, I should have concluded that it ought to be allowed, D
There is, however, the letter from the Supply Mission of the High Com­
mission of India in London dated February 23, 1966, and addressed to the
shipowners' agents, William Richards & Son. This letter contains the
clearest undertaking that: "any general average contribution which may
be legally due from the Government of India as cargo owners will be paid
by this mission." The letter goes on to say that: " In view of the above
undertaking you are requested to contact the shipowners' agents in India "
..'. . to release government cargo immediately the vessel arrives at an
Indian port."
This letter clearly offered the undertaking in consideration of the ship­
owners releasing the lien which they undoubtedly could have lawfully
exercised over the cargo until the Government of India had given security
for general average contribution. Since it is not the normal practice of that p
government to give a general average bond or any other security, they
offered the undertaking instead. The shipowners accepted that offer (a) by
a letter from their agents dated February 25, 1966, in the following terms:
" We thank you for your letter of February 23, and note that we may
apply to you for settlement when our adjustment of general average is
completed " and (b) by releasing the cargo in reliance on the undertaking
after the vessel had completed her voyage to India and the cargo had been G
finally discharged on March 12, 1966.
■ The general average expenditure had been incurred when the vessel,
being short of bunkers, was towed into Yokohama on February 15, 1966.
Thereupon the general average contribution became legally due from the
charterers, see Morrison Steamship Co. Ltd. v. Greystoke Castle {Cargo
Owners) [1947] A.C. 265, 283, 312. This liability was, of course, subject H
to the expenditure not having been caused by any negligence on the part
of the owners. The charterers' contingent liability to contribute was
therefore in existence, to their knowledge, when they wrote their letter of
 819
A.C. Union of India v. E. B. Aaby's A/S (H.L.(E.)) Lord Salmon
February 23, 1966. This letter contained a clear undertaking to pay
unconditionally "any general average contribution which may be legally
due." The contract which came into existence upon the acceptance of
the undertaking was a fresh contract which varied the charterparty. The
charterparty imposed an obligation upon the charterers to pay any general
average contribution which might be legally due conditionally upon the
claim being made and the claimants' arbitrator being appointed within 12
B months of final discharge. The fresh contract imposed an unconditional
obligation upon the charterers to pay any general average contribution
which might be legally due. Under the fresh contract the shipowners'
claim to any general average contribution due to them was subject to no
time limit for bringing proceedings save such as may be imposed by
statute. I am inclined to think that these are the only respects in which
the fresh contract altered the rights and obligations arising under the
C charterparty in relation to general average.
My Lords, for these reasons I would dismiss the appeal.

Appeal dismissed.

Solicitors: Stocken & Co.; William A. Crump & Son.

D
J. A. G.

E [HOUSE OF LORDS]

SCOTT APPELLANT
AND
METROPOLITAN POLICE COMMISSIONER . . RESPONDENT
[On appeal from REGINA V. SCOTT]
F
1974 July 1, 2, 3, 4, 8; Lord Reid, Viscount Dilhorne, Lord Diplock,
Nov. 20 Lord Simon of Glaisdale and Lord Kilbrandon

Crime—Conspiracy—Conspiracy to defraud—Conspiracy to copy

and distribute films without consent of owners—Count alleging
conspiracy to defraud containing no reference. to deceit—
G Further count alleging conspiracy to contravene statute—
Whether both counts would lie—Whether conspiracy to defraud
abolished—Whether deceit essential to conspiracy to defraud
—Copyright Act 1956 (4 & 5 Eliz. 2, c. 74), s. 21 (1) (a)—Theft
Act 1968 (c. 60), j . 32 (1) (a)
The appellant agreed with employees of cinema owners
that in return for payment those employees would, without
IT their employers' consent, temporarily abstract cinematograph
films for the purpose of enabling the appellant to make and
distribute copies of the films on a commercial scale; such
abstraction, copying and distribution being made without the
knowledge and consent of the owners of the copyright in, or