A v B
| Jurisdiction | England & Wales |
| Judge | Mr Butcher |
| Judgment Date | 23 March 2017 |
| Neutral Citation | [2017] EWHC 596 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 23 March 2017 |
| Docket Number | Case No: CL-2016-000608 |
[2017] EWHC 596 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN PRIVATE
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Butcher QC
(Sitting as a Deputy High Court Judge)
Case No: CL-2016-000608
Ms Lexa Hilliard QC (instructed by Field Martin Solicitors) for the Claimant
Mr Thomas Raphael QC (instructed by Hill Dickinson LLP) for the Defendant
Hearing dates: 14 March 2017
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Butcher QC
Mr Butcher QC:
This is an application under s. 68 Arbitration Act 1996 made by the Claimants, A ("the Buyers"), to challenge a Partial Award of three arbitrators dated 21 June 2016.
This s. 68 challenge was commenced by Claim Form issued on 6 October 2016. That Claim Form also included an application for permission to appeal under s. 69 Arbitration Act 1996. By Order dated 28 December 2016, Knowles J. refused permission to appeal under s. 69 Arbitration Act 1996, and gave certain directions in relation to the hearing of the s. 68 application.
The underlying dispute arises out of a contract dated 2 July 2014 ("the contract"), under which the Defendants, B ("the Sellers") agreed to sell and the Buyers agreed to buy a quantity of fertiliser.
The contract specified that the Product to be sold and purchased was "Magnesium Sulphate Heptahydrate in bulk ('Epsomite 98')". The quantity was specified as 4,500 mt +/-5% in Sellers' option at €135/mt CIF one safe port, one safe berth Varna, Bulgaria or Constanta, Romania, at Buyers' option.
The contract was specified to be governed by English law. It also contained an arbitration clause in the following terms:
"Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or validity thereof shall be referred to arbitration by three persons in London, UK, one to be appointed by the seller, one to be appointed by the buyer and the third by the two so chosen, who shall be the Chairman…"
The Buyers made prepayments amounting to €607,500 before loading. They declared Constanta as the destination. The Sellers shipped 4,666.991 mt of goods at Valencia on board a motor vessel ("the vessel") under a bill of lading dated 11 July 2014. The vessel arrived at Constanta on 20 July 2014, and discharged the goods into four barges. On 22 July 2014, the Buyers notified the Sellers that compacted cargo had been found in the holds of the vessel. The cargo was discharged from the barges at Svishtov between 31 July and 19 August 2014. On 1 August 2014, the Buyers complained to the Sellers about the quality of the goods and asked the Sellers to take the product back and reimburse them. The Sellers declined.
The resulting dispute was referred to arbitration. The Buyers nominated Mr G.M. Perry as their arbitrator. The Sellers nominated Mr D. O'Meara as theirs. The two nominated arbitrators appointed Mr R.W. Rookes as third arbitrator. The parties made written submissions and served witness statements and experts' reports. They also agreed that the arbitration should take place on the papers, without an oral hearing.
The three arbitrators produced a Partial Award dated 21 June 2016. It was unanimous. That Partial Award contained, as its concluding section, which was headed "Award", the following:
"[127] We do hereby find that Buyers lost the right to reject the cargo but have not lost the right to claim damages for breach of specifications.
[128] We further find that the assessment of damages, if any, is held over for further submissions and a further award, if the parties are unable to agree.
[129] The costs and expenses of this arbitration are to be borne equally between the parties.
[130] Each party shall bear the fees and expenses of their expert witnesses.
[131] We reserve the right to issue a further award on legal costs, if the parties are unable to agree."
On 18 July 2016 the Buyers made an application under s. 57 Arbitration Act 1996 for the correction of certain paragraphs in the Partial Award, and/or for the clarification or removal of ambiguities therein. On or about 12 September 2016 Mr O'Meara and Mr Rookes, together, provided a response to this application, and, by a short correcting Award, made a limited change to the terms of paragraph 112 of the Partial Award. Mr Perry thereafter provided certain comments on Mr O'Meara and Mr Rookes's response, indicating these to be "the minority view".
Section 68 Arbitration Act 1996
Before considering the specific grounds relied upon by the Buyers, it is helpful to set out the terms of s. 68 Arbitration Act 1996 and to summarise some of the principles which have been held to govern its exercise.
S. 68 Arbitration Act 1996 provides in part:
"(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. …
(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant—
(a) Failure by the tribunal to comply with section 33 (general duty of tribunal);
(b) The tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67);
(c) Failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;
(d) Failure by the tribunal to deal with all the issues that were put to it;
(e) Any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers;
(f) Uncertainty or ambiguity as to the effect of the award;
(g) The award being obtained by fraud or the award or the way in which it was procured being contrary to public policy;
(h) Failure to comply with the requirements as to the form of the award;
(i) Any irregularity in the conduct of the proceedings or in the award which is admitted by the tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award.
It was common ground before me that:
i) There is a "high threshold" to be satisfied for a s. 68 challenge to succeed: Lesotho Highlands Development Authority v Impreligo SpA [2005] UKHL 43, [2006] 1 AC 221, at [28].
ii) The jurisdiction is a "long stop, only available in extreme cases, where the tribunal has gone so wrong in its conduct of the arbitration in one of the respects listed in the section that justice calls out for it to be corrected": Lesotho at [27].
iii) Substantial injustice does not depend on the arbitrator's having come to the wrong conclusion on a matter of fact or law but on whether he was "caused by adopting inappropriate means to reach one conclusion whereas had he adopted appropriate means he might well have reached another conclusion favourable to the applicant": Vee Networks v Econet Wireless International [2005] 1 Lloyd's Rep 192 at [90].
iv) The focus under s. 68 is due process, not the correctness of the decision: Abuja International Hotels Ltd v Meridien SAS [2012] EWHC 87 (Comm), [2012] 1 Lloyd's Rep 461 at [47]–[52].
To these points I would add that, as a matter of general approach, the courts do not look at arbitration awards with a predisposition to find faults in them. The matter was put thus by Bingham J in Zermalt Holdings SA v Nu-Life Upholstery Repairs Ltd [1985] 2 EGLR 14:
" As a matter of general approach, the courts strive to uphold arbitration awards. They do not approach them with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults in awards, and with the objective of frustrating the process of arbitration. Far from it. The approach is to read an arbitration award in a reasonable and commercial way, expecting, as is usually the case, that there will be no substantial fault to find with it."
Such an approach has been held to be the correct one under the 1996 Arbitration Act: see for example Primera Maritime (Hellas) v Jiangsu Eastern Heavy Industry Co [2013] EWHC 3066 (Comm), [2014] 1 Lloyd's Rep 255, at [10].
The Buyers' Challenges to the Award
The Buyers contend that there were serious irregularities falling within subsections 68(2)(a), (d), (f) and (i) of Arbitration Act 1996. I will consider each of these in turn.
Section 68(2)(a)
The Buyers contend that there were serious irregularities within s. 68(2)(a) of Arbitration Act 1996 by reason of the tribunal's failure to comply with s. 33 of that Act in two respects: one in relation to its treatment of the Buyers' witnesses of fact, and one in relation to the expert witnesses.
As to the first, the Buyers contend that the tribunal failed to act fairly and impartially between the parties by ignoring what they describe as the 'undisputed evidence' of their witnesses of fact, and in particular of Mr X.
Specifically, the Buyers complain about paragraph 99 of the Partial Award, which considered whether it had been made known by the Buyers to the Sellers that the cargo of Magnesium Sulphate Heptahydrate was required for direct spreading on fields, rather than dilution and spraying. As part of that paragraph, the tribunal wrote
"Thirdly, Mr X, in his statement, contended that he had made known to Sellers the requirement that the goods be free-flowing but admitted that he had not noticed the absence of these terms in the Contract. Sellers did not put before us a witness statement commenting on Mr X's assertions. Their failure to do so...
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