Ali Shipping Corporation v Shipyard Trogir

JurisdictionEngland & Wales
Judgment Date19 December 1997
Neutral Citation[1997] EWCA Civ 3054
Date19 December 1997
Docket NumberQBCMF 97/1288/B
CourtCourt of Appeal (Civil Division)
Ali Shipping Corporation
Shipyard Trogir

[1997] EWCA Civ J1219-23


Lord Justice Beldam

Lord Justice Potter

Lord Justice Brooke

QBCMF 97/1288/B





Royal Courts of Justice


London WC2

MR KENTRIDGE QC with MR T WORMINGTON (Instructed by Messrs Ince & Co, London EC3R 5EN) appeared on behalf of the Appellant

MR FLAUX QC with MR J LOCKEY (Instructed by Messrs Stephenson Harwood, London EC4M 8SH) appeared on behalf of the Respondent


Friday, 19 December 1997




This is the defendants' appeal from the order of Mr Justice Clarke dated 18th September 1997 whereby he discharged an ex parte injunction previously granted by Longmore J. on 10th September 1997 restraining the defendants from deploying in arbitrations against three Liberian companies certain materials generated in the course of an earlier arbitration between the plaintiffs and the defendants. The plaintiffs' inter partes application to continue the injunction having been treated by consent as the trial of the action, the Judge dismissed the claims of the plaintiffs and ordered them to pay the defendants' costs of the action to be taxed if not agreed. Following judgment, the defendants undertook not to send any of the material to the arbitrators pending the hearing of this appeal.




On 22nd December 1998, the plaintiffs ("Ali") became party, by novation, to a ship building contract between Liera Shipping Corporation ("Liera") and the defendants ("the Yard") by which the Yard undertook to build a vessel referred to as Hull 202 ("the Hull 202 Agreement"). On 29th April 1988, the Yard had also entered into other ship building contracts in respect of Hull 200 and Hull 201. These contracts were later novated in favour of Rula Shipping Corporation ("Rula") and Irma Shipping Corporation ("Irma") respectively. Subsequently, and in any event before 30th March 1990, the shares in the plaintiffs, Rula and Irma were all acquired by Greenwich Holdings Limited ("Greenwich"). Greenwich also wholly owned Sea Tankers Management Co. Limited ("Sea Tankers") who acted as agents and managers on behalf of Rula, Irma and Ali.


On 30th March 1990 Addendum No. 1 was agreed to the contracts for Hull Nos. 200, 201 and 202 which contained various provisions including an increase in the contract price of each vessel from $20,900,000 to $21,900,000.


Article 2 of Addendum No. 1 provided that Sea Tankers "on behalf of Company(ies) to be nominated have agreed to enter into contracts for 3 x 333,800/43,000 MTDW". Article 3 provided that all details and conditions were to remain "strictly private and confidential" and Article 4 provided that all other provisions in the Hull 202 agreement were to remain "in full force and effect". The three contracts anticipated were subsequently entered into on 15th April 1990 in respect of Hull Nos. 204, 205 and 206, the buyers being respectively Lavender Shipping Limited ("Lavender"), Leeward Shipping Limited, ("Leeward") and Leman Navigation Inc. ("Leman"). Those companies were also wholly owned by Greenwich. They were single purpose companies the function of which was limited to acquiring and operating their respective hulls.


Each of the ship building contracts contained a London Arbitration clause and was governed by English law.


The Yard failed to complete Hull 202 in accordance with the Hull 202 Agreement, and Ali rescinded the contract and claimed substantial damages. The dispute went to arbitration ("the First Arbitration") and the Sole arbitrator, Mr Bruce Harris, on 14th April 1997 made an award ("the First Award") in favour of Ali for $21,594,391 plus interest (amounting in all to $34,000,000) and costs.


In the First Arbitration, the Yard sought to defend Ali's claims for substantial damages on a variety of bases, including the fact that Lavender, Leeward and Leman had not paid the first instalments of the price of the contracts for Hulls 204–206. In that connection the Yard contended that its obligations to build Hull 202 had become contractually dependent on performance of the subsequent contracts, and that the corporate veil should be pierced and all Greenwich-owned companies treated as one to permit the Yard's plea of justification and/or set-off in respect of its claims against Lavender, Leeward and Leman under the Hull 204–206 contracts. In a lengthy and fully reasoned award, Mr Bruce Harris rejected the Yard's arguments. Although he was satisfied that Lavender, Leeward and Leman were all in breach of the Hull 204–206 contracts in failing to pay the first instalments of the contractual price, he held that, whatever the position under the contracts for Hulls 204–206, it was irrelevant to the issue of the defendant's liability under the Hull 202 Agreement. He refused to pierce the corporate veil, holding that the use of one-ship companies in connection with such transactions was a normal way of doing business, and that the contractual arrangements were made by the parties deliberately observing the separate nature of the legal personalities involved. He ruled that any claims which the Yard might have in respect of Hulls 204–206 could not be set off against the sums due to the plaintiffs under the Hull 202 agreement.


The Yard made no payments in respect of the Award. Instead they reactivated three arbitrations previously commenced against Lavender, Leeward and Leman in respect of the Hull 204–206 contracts ("the Hull 204–206 Arbitrations"). Until February 1997 when Points of Claim were served, those arbitrations had not progressed since their commencement some 6 years before. In 1994, Lavender, Leeward and Leman had effectively gone into liquidation. We are told that their status in Liberian law is something short of that. However, it is clear that they are dormant save for the purpose of defending and counterclaiming in the Hull 204–206 Arbitrations. In June 1997 each served Points of Defence raising inter alia a number of matters which were the subject of investigation and/or findings in the First Arbitration. Each Defence pleaded that it was "without prejudice to any application the Respondent..may make under section 13A of the Arbitration Act 1950, as amended, for an order dismissing the claim .. on the grounds of inordinate and inexcusable delay".


The Yard has applied for interim awards in the Hull 204–206 Arbitrations in respect of the first instalments of the contractual price under the respective shipbuilding contracts and for damages to be assessed in respect of the alleged repudiation of each of the contracts. In response Lavender, Leeward and Leman have stated their intention to submit that the arbitrators have no jurisdiction to hear the Yard's claims as presently formulated, alternatively to seek to strike out the Yard's claims for want of prosecution. We have been informed that (by an order which is not before us) the arbitrators in the Hull 204–206 Arbitrations have ordered that, by a date now passed but in suspense depending the outcome of this appeal, the Yard are to serve all the evidence upon which they wish to rely in support of their application for an interim award, following which Lavender, Leeward and Leman are to serve their evidence.


On 5th September, the Yard served a draft affidavit of Mr Nicholas Phillips, the Yard's solicitor (the truth of which has since been deposed to in his absence by a colleague) which set out the documents upon which the defendants sought to rely pursuant to the arbitrators' order. The documents included certain materials generated in the course of the First Arbitration and which, but for the discharge by Clarke J of the original injunction granted upon 10th September by Longmore J, the Yard would be prevented from producing to the arbitrators, namely:

(1) The Award (including Reasons) of Mr Harris in the First Arbitration.

(2) The written opening submissions of Ali in the First Arbitration.

(3) Transcripts of the oral evidence given by certain witnesses for Ali in the First Arbitration: Mr Maehle and Captain Hoem.


The Yard state that they wish to rely upon those documents (collectively referred to as "The Phillips material") as evidence in order to rebut various contentions being advanced for Lavender, Leeward and Leman in the Hull 204–206 Arbitrations, and to rely upon the reasons of Mr Harris in support of a plea of issue estoppel which the Yard proposes to advance in the Hull 204–206 Arbitrations.


Upon learning of these intentions, Ali's solicitors, who also act for Lavender, Leeward and Leman in the Hull 204–206 Arbitrations, sought and obtained the ex parte injunction from Longmore J on the basis that use of the material would amount to breach of the Yard's implied obligation of confidentiality in respect of the First Arbitration.




In the outline of issues contained in his award in the First Arbitration, Mr Bruce Harris listed, inter alia at paragraph 14(B), certain questions which I shall set out below, together (in square brackets) with the answers provided at paragraph 98:

"(a) Did Ali contract as purchaser of Hulls 204–206? [No]

(b) Did Ali agree (or is Ali estopped from denying that it agreed) to be jointly or severally liable for sums payable under the contracts for Hulls 204–206?..[No]

(c) Did Ali agree (or is Ali estopped from denying) that the Yard's obligation to build Hull 202 was conditional upon either

(i) Performance of the buyer's obligations under the contracts for Hulls 204–206?


(ii) Payment of the first...

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