BRIGGS MARINE CONTRACTORS LTD AGAINST BAKKAFROST SCOTLAND LTD

Factual and Procedural Background

The parties entered into a written contract, the Wreck Fixed Contract (WFC), under which the Plaintiff undertook to recover a barge owned by the Defendant that had sunk, and to provide related services for a fixed fee on a "no cure, no pay" basis. After initial work and the contract formation in April 2022, the Plaintiff began recovery operations. On 28 July 2022, the Plaintiff's divers reported dangerous conditions due to hydrogen sulphide emissions, which the Plaintiff contended frustrated the WFC. Subsequently, the parties allegedly entered into an oral agreement on 15 August 2022 for different services—venting the barge and removing fish feed—on a costs plus 15% basis, which the Plaintiff claims covers work from 2 August to 25 August 2022. The Defendant disputes any sum is due and has raised a preliminary plea of no jurisdiction based on an arbitration clause in the WFC. The court was called to determine whether the dispute falls within the arbitration clause, requiring the action to be sisted pending arbitration.

Legal Issues Presented

1. Whether the dispute between the parties arises out of or is in connection with the Wreck Fixed Contract (WFC) so as to fall within the scope of the arbitration clause contained therein.
2. Whether the alleged oral agreement, distinct from the WFC, is subject to the arbitration clause in the WFC.
3. The proper construction and application of the arbitration clause under English law, including the applicability of the "one-stop" arbitration approach as established in Fiona Trust & Holding Corporation v Privalov.

Arguments of the Parties

Defender's Arguments

• The arbitration clause in the WFC should be liberally construed to cover all disputes arising out of the contractual relationship, including the present dispute.
• The dispute plainly arises out of or is connected with the WFC, as the subject matter relates solely to the salvage operation of the Defendant's barge.
• The arbitration clause is a separate and separable agreement intended to cover all related disputes, preventing fragmentation of dispute resolution across multiple tribunals.
• Any oral agreement alleged by the Plaintiff is, at most, a variation of the WFC and therefore falls within the arbitration clause.
• The Plaintiff did not disapply or modify the arbitration agreement when entering into the alleged oral agreement.

Plaintiff's Arguments

• The WFC and the alleged oral agreement concern wholly different subject matters; the oral agreement relates to new services necessitated by dangerous conditions, not contemplated by the WFC.
• The oral agreement does not contain an arbitration clause and thus disputes arising under it are not subject to arbitration.
• The "one-stop" arbitration approach does not apply because the oral agreement is distinct from the WFC and the initial emergency work contract did not include arbitration.
• The Plaintiff’s right to payment under the oral agreement is independent of whether the WFC was frustrated.
• The WFC prohibits any oral variation, so the Plaintiff cannot rely on an oral variation to establish jurisdiction under the arbitration clause.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by acknowledging the parties' agreement that English law governs the WFC and that the arbitration clause must be construed liberally following Fiona Trust. The court reviewed the nature of the dispute, which concerns the Plaintiff’s claim for payment under an alleged oral agreement entered after the WFC was allegedly frustrated. The Defendant’s plea of no jurisdiction was based on the arbitration clause in the WFC.

The court analyzed the arbitration clause's wording, emphasizing its broad language covering "any dispute arising out of or in connection with" the WFC. It considered the principles that arbitration clauses should be construed to cover all disputes connected to the contractual relationship, applying the "one-stop" arbitration approach to avoid fragmentation of dispute resolution.

The court distinguished the cited authorities relied upon by the Defendant, noting that those cases involved disputes or agreements contemplated by the original contract, whereas the present case involves an alleged oral agreement not contemplated at the time of the WFC. However, the court held that there must be some connection between the dispute and the WFC for the arbitration clause to apply.

Upon examining the facts, the court found that the dispute, concerning entitlement to payment under the oral agreement, was sufficiently connected to the WFC. This was because the oral agreement arose due to the circumstances surrounding the WFC, involved the same barge and fish feed recovery operations, and there was factual overlap and a close causal connection between the two agreements.

The court rejected the Plaintiff's argument that the oral agreement was entirely distinct and not subject to arbitration. It observed that the Plaintiff’s own case involved a dispute over whether the WFC was frustrated or varied orally, both of which fall within the scope of the arbitration clause. The court also noted that the Plaintiff did not allege any express exclusion of the arbitration clause in relation to the oral agreement.

Accordingly, applying the Fiona Trust principles and the facts, the court concluded that the dispute falls within the scope of the arbitration clause in the WFC, requiring the action to be sisted to allow arbitration to proceed.

Holding and Implications

The court sustained the Defendant's preliminary plea of no jurisdiction and ordered the action to be sisted for arbitration, initially for a period of three months, with subsequent monitoring of arbitration progress.

The direct effect of this decision is that the Plaintiff’s claim will not proceed in court at this stage but will be resolved through arbitration in accordance with the WFC’s arbitration clause. No new legal precedent was established beyond the application of existing arbitration law principles to the facts of this case.