Spam Email or Effective Service?

April 2006

In a recent Commercial Court matter, Mr Justice Christopher Clarke heard an application under section 68 of the Arbitration Act 1996, challenging an arbitration award on the grounds of serious irregularity on the basis that the respondent had been unaware of the proceedings.

The charter in question provided for London arbitration with each party to appoint their own arbitrator if they could not agree on a sole arbitrator and further provided for LMAA Small Claims Procedure ("SCP") if the total sum claimed by either party did not exceed US$50,000.

Bernuth Lines, ("Charterers") had chartered the vessel and following redelivery Owners invoiced Charterers for unpaid hire and bunkers in the sum of US$34,100. Charterers responded with an invoice of their own for S$93,384 in respect of alleged breaches of charter by Owners.

Owners' lawyers sent an email to [email protected] advising that absent payment of US$34,100, arbitration proceedings would be commenced and went on to give a notice requiring Charterers to agree a sole arbitrator. The email address used was one appearing in Lloyds Maritime Directory and on a website, www.bernuth.com, although it had not appeared on any earlier communications from Charterers.

After a series of emails from the lawyers, the arbitrator and the LMAA, Owners' lawyer served claim submissions at the same email address. Subsequent applications and orders for service of the defence followed - culminating in a default award. All were sent to the same email address, although the award was also sent by post.

Charterers subsequently made the section 68 application heard by Mr Justice Clarke.

Section 14 (4) of the Arbitration Act 1996 provides that arbitration proceedings are commenced when one party serves a notice on the other in writing requiring him to appoint or agree the appointment of an arbitrator. Bernuth did not dispute that the original email from Owners' lawyers constituted "writing".

Section 76 of the Act addresses service and allows the parties to agree any manner of service but absent such agreement ...

(3) A notice or other document may be served by any effective means.

(4) If a notice or other document is addressed, pre-paid and delivered by post - to the addressee's last known principal residence or, if he is or has been carrying on a trade, profession or business, his last known principal business address, or where the addressee is a body corporate, to the body's registered or principal office it shall be treated as effectively served."

Charterers submitted that Owners had not served them by any agreed nor effective means.

Mr Justice Clarke held that the emails sent to [email protected] had been received at that address and not rejected. Charterers contended that the emails would have been ignored as "spam" by clerical staff but on the evidence it was clear the original email had been seen and ignored. Presumably the same could be said of the others.

Section 76 (4) was purposefully wide and there was no reason why delivery by email, a method habitually used in business, should be regarded as different from post, fax or telex. The emails were received at an address held out to the world as the email address of Charterers. The original email had been seen and ignored. This was no different to a letter someone consciously decided to throw away. The emails did not resemble "spam" but rather called for attention. In this context it was not necessary for effective service that the email address used was one notified as such in connection with the relevant dispute.

This conclusion rendered Charterers second argument a nullity but it was rejected in any event. Charterers had also contended that as the sum of their claim exceeded US$50,000 the dispute could not fall within the ambit of the SCP. However Mr Justice Clarke rejected that submission.

The charter clause applied to disputes where the sum claimed by either party did not exceed US$50,000. This meant a claimant could initiate the procedure for a claim of less than that sum, even though aware of a counterclaim in excess. Only upon notice of a counter claim in excess once served with the notice to agree a sole arbitrator would the SCP fall away.

In any event, the SCP expressly provides at paragraph 5 (i) for communications to be by, inter alia, email.

Bernuth Lines Ltd -v- High Seas Shipping Ltd ("The Eastern Navigator")