Asa v Tl
| Jurisdiction | England & Wales |
| Judge | Sir Ross Cranston |
| Judgment Date | 20 August 2020 |
| Neutral Citation | [2020] EWHC 2270 (Comm) |
| Date | 20 August 2020 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2019-000741 |
[2020] EWHC 2270 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Ross Cranston SITTING AS A JUDGE OF THE HIGH COURT
Case No: CL-2019-000741
and
Paul Key QC & Benedict Tompkins (Instructed by Macfarlanes LLP) for the Claimant
Neil Hart (Instructed by Charles Russell Speechlys LLP) for the First Defendant
Hearing dates: 22 July 2020
Approved Judgment
Introduction
This is an application under section 68 of the Arbitration Act 1996 (“the 1996 Act”). The charterer of a vessel contends that there was serious irregularity within the meaning of section 68(2)(a) in the way the sole arbitrator, Ms Clare Ambrose, dealt with two issues in the arbitration. The crux of its complaint is that she decided the two issues on the basis of points which it did not have a fair opportunity to deal with because they were not put forward by either party or their experts, and as well departed from common ground. Ms Ambrose took no part in the proceedings.
Background facts
The claimant charterer, ASA, was a company registered in Switzerland, with a focus on West Africa and on moving cargo for the on-shore and off-shore oil industry (“the charterer”). At the relevant time the charterer's shares were held by Messrs RT (70 percent) and AV (30 percent). The charterer had a number of so-called managers, including RT and AV. The company was part of a larger group, controlled by RT, with associated entities in other parts of Africa.
In 2005 a landing craft/general cargo vessel was acquired for US $1million. for ASA's operations in West Africa (“the vessel”). A company, the defendant TL, was registered in the Isle of Man to be the vessel's owner (“the owner”). TL's shares were held by RT (40 percent), AV (40 percent) and two of the other managers.
In the ship's particulars, prepared by the managers, the vessel was described as a landing craft/deck cargo vessel, built in China. The class society was named as Bureau Veritas, there was a class ID number, and the class notation was given as “+A1 +AMS”. Later the IHS Sea Web database gave the vessel's description as a landing craft. Under “class history” the Sea Web database listed Bureau Veritas for June 2010 (“in class”). Under the heading “cargo overview”, there was a “0” alongside “liquid”. There were no details for the vessel's tanks.
By a charter party on Supplytime 89 terms, the owner chartered the vessel to the charterer in December 2005 for a term of three years, with the charterer having an option for a one year extension (“the 2005 charter”). The hire rate was US$ 3,250 per day. The area of operation was identified as West Africa.
Between 9 September 2008 and 31 January 2009, the vessel was mainly in dry dock. The process was more expensive than anticipated and repair costs were US$1,314,845. The vessel returned to service in early February 2009.
The parties purported to enter a further charter party dated 1 February 2009, but entered somewhat later, again on the Supplytime 1989 form (“the 2009 charter”). It was for a period of 3 years, extendable for a further year at the charterer's option. The hire rate was US$ 6,500 per day. Although the charter was signed by the owner, it was never signed by the charterer.
There was a valuation of the vessel by Bayside in June 2009 at US$1 million.
In 2012 there was a falling out between RT and AV, and RT dismissed AV from his position in the charterer. On 23 September 2013 the vessel was sold for US$380,000. The following month it was redelivered under the 2009 charter. In November 2013 RT died. In mid-July 2014 AV sold his shareholding in the charterer for US$380,000 to a company majority-owned by RT's family.
In an email to the owner dated 8 September 2015, the charterer asserted that a discount rate of US$1,000 per day was applicable to the 2009 charter, such that a credit of US$1,765,000 was owing to it.
Arbitration launched
On 13 March 2017 the owner issued a notice commencing arbitration notifying the charterer that it would seek a declaration that no discount rate was agreed in respect of the 2009 charter and that, accordingly, no sum was due to the charterer by way of reimbursement against the sums paid under that charter.
In June 2017 the shares in the charterer were sold to a third party.
The charterer served its defence and counterclaim to the owner's notice in early February 2018. In its counterclaim it sought a final award ordering that the owner should pay it US$4,303,000. That was on the basis of overcharged hire of US$3,250 for 1,324 days (3 years plus 228 days). The charterer's pleaded case was that the market rate of hire for chartering from 2009 should have been at the rate of US$3,250 per day – the rate in the 2005 charter — not the US$6,500 per day contained in the 2009 document.
The charterer's counterclaim was founded on a breach of fiduciary duty by the managers in acting for both owner and charterer in fixing the 2009 hire rate. The charterer consequently claimed (i) unjust enrichment — the 2009 charter party was void and that the owner had been unjustly enriched at its expense by payments whereby the hire paid from 2009 exceeded the market rate; (ii) knowing receipt — the owner held the amount of excessive hire on constructive trust as the proceeds of a breach of fiduciary duty; and (iii) dishonest assistance – that amount was held as a result of the owner's dishonesty assisting a breach of fiduciary duty owed to the charterer. The dishonestly of the managers was attributable to the owner.
In outline, the owner's case in the amended reply and defence to the counterclaim was that the 2009 rate of hire was the market rate since the vessel could and did carry marine gas oil (“MGO”) cargoes. Its defences to the charterer's counterclaim were (i) estoppel by convention (since the charterer had proceeded with the hiring arrangements from 2009 for over three years) and (ii) the time bar arising from the Limitation Act 1980.
The expert reports on market charter rates
For the purposes of the arbitration, there were expert reports on market charter rates for the vessel at the relevant time. In her first report of February 2018 the expert for the charterer, JR, described the vessel as a landing craft/general cargo vessel. JR went on to assess the market rate of hire by considering comparable vessels. JR's conclusion was that the market rate for hire was US$3,500 per day. JR appended to the report the ship's particulars, referred to earlier, which had been prepared by the managers.
The expert for the owner, ML, described the vessel in his first report of November 2018 in the same terms as JR, in other words, a landing craft/ general cargo vessel. ML added that it could carry petroleum products in fairly decent quantities, about 600MT per trip. For the purposes of valuation ML referred to tanker indices and to vessels with fuel carrying capacity. ML concluded that the market rate for hire was US$6,500 per day.
In a supplementary report of January 2019, JR commented on the notion that the vessel would attract a higher rate of hire because it could transport oil. JR said:
“There is no evidence, that I am able to see, that this would be the case since there is nothing in the vessel description which suggests any liquid cargo tank capability.”
JR appended to this report the data published by IHS Sea-Web, referred to earlier.
There was a supplementary report by ML in July 2019. ML stated that if it were correct that the vessel had the capacity to act as a short sea tanker carrying gasoil cargoes of around 600MT, any valuation of the vessel should take that into account.
The Award
A sole arbitrator was appointed. There was a four-day hearing and she issued her Award.
After setting out the procedural background, a summary of the claims and issues and the factual background, the arbitrator proceeded to her findings. In a general introduction to these she explained that the foundation of the charterer's claims was that the managers concluded the 2009 charter party in breach of fiduciary duty, as a result of which the owner wrongly received hire for chartering the vessel above the market rate.
The central legal disputes, she continued, were the effect of the 2009 charter (in particular, whether it was binding) and the payments made under it. The central factual disputes were whether the managers had acted dishonestly and whether the hire agreed was above the market rate as at 1 February 2009.
As to the 2009 charter, the arbitrator found that the parties had agreed to enter it on the same terms as the 2005 charter, but with a hire rate of US$6,500 per day. There had already been discussions dating back to late 2007 where it was agreed to increase the hire rate, the arbitrator said, but the catalyst for firm action to agree a new charter with a higher rate was the unexpected level of dry dock costs following the vessel's return to service around 6 February 2009.
After some discussion of quantum, the arbitrator turned to the 11 issues the parties had identified.
Issue 1 was the market rate of hire for the vessel as at 1 February 2009. The arbitrator noted that in this regard the charterer had identified four important aspects in dispute: the effect of the 2008 financial crisis on the relevant charter market in West Africa, whether a premium was payable in the region, whether the vessel should be valued as a tanker, and whether the Bayside valuation of...
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