Case Facts
The vessel at the centre of this dispute was The Leonidas D, which was chartered by the plaintiffs (shipowners, Allied Marine Transport Ltd) to the defendants (charterers, Vale do Rio Doce Navegacao SA) under a charterparty agreement. Disputes arose under the charterparty, and both parties appointed arbitrators in April 1976. Following the appointment of those arbitrators, both sides allowed the proceedings to fall entirely dormant. For a period of over five years, neither party took any step to advance the arbitration.
In 1981, the defendants sought to revive the arbitration proceedings. The plaintiffs responded by contending that the prolonged inactivity and mutual silence of both parties amounted to an implied agreement to abandon the arbitration altogether. In the alternative, the plaintiffs argued that the defendants' conduct gave rise to a promissory estoppel, precluding the defendants from reviving the claim. The matter came before the Court of Appeal, which was required to determine whether silence and inactivity over such a lengthy period could constitute acceptance of an implied offer to abandon arbitration, or could otherwise found an estoppel.
Held
The Court of Appeal held that the defendants were entitled to revive the arbitration proceedings. Mere silence and inactivity on the part of both parties could not, without more, constitute acceptance of an implied offer to abandon arbitration proceedings. The plaintiffs' arguments based on both implied agreement and promissory estoppel therefore failed.
The court applied and followed the House of Lords decision in The Hannah Blumenthal [1983], which had established the legal framework for the abandonment of arbitration by implied agreement through conduct. Applying that framework, the Court of Appeal concluded that neither party's inactivity met the requisite standard.
Ratio Decidendi
The central legal principle affirmed in this case is that silence alone cannot constitute acceptance of an offer. This is a fundamental rule of English contract law, and the court confirmed that it applies with equal force in the context of offers to abandon arbitration proceedings.
For conduct to amount to acceptance of an implied offer to abandon an arbitration, that conduct must be unequivocal — it must be inconsistent with the continuation of the arbitration and must be such as to lead a reasonable person to conclude that the offeree was agreeing to the abandonment. Silence and inactivity cannot satisfy this standard because they are equally consistent with a continuing intention to pursue the arbitration at a future point. A party who does nothing sends no clear message one way or the other; the mere passage of time and failure to act cannot be read as an unambiguous agreement to relinquish legal rights.
This approach reflects the broader principle, previously articulated in The Hannah Blumenthal [1983], that an implied agreement to abandon arbitration must be established by reference to the objective conduct of both parties, assessed against the standard of what a reasonable person in the position of each party would have understood the other's behaviour to signify. Where conduct is equivocal — capable of bearing more than one interpretation — it cannot ground an agreement to abandon valuable legal rights.
The decision thus draws a clear line: inaction, however prolonged, does not suffice. Something more — some positive act or course of conduct that is unambiguously referable to an agreement to bring the arbitration to an end — is required before the courts will find an implied abandonment by mutual consent.
Obiter Dicta
By way of obiter dicta, the court addressed the alternative argument based on promissory estoppel. The court held that mere silence and inactivity equally cannot amount to a clear and unequivocal representation sufficient to found a promissory estoppel. The doctrine of promissory estoppel requires that one party has made a representation — whether by words or conduct — that is clear, unambiguous, and unequivocal, and upon which the other party has relied to their detriment. A party's failure to take any step in proceedings communicates nothing definite about that party's intentions, and therefore falls short of the standard required to deprive another party of its legal rights. This observation reinforces the principle that estoppel cannot be used as a mechanism to convert equivocal inactivity into a binding waiver of substantive legal entitlements.