Compania Sud-Americana De Vapores SA v Nippon Yusen Kaisha
| Jurisdiction | England & Wales |
| Judge | Mr Justice Beatson |
| Judgment Date | 09 July 2009 |
| Neutral Citation | [2009] EWHC 1606 (Comm) |
| Date | 09 July 2009 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2008 FOLIO 1373 |
[2009] EWHC 1606 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: Mr Justice Beatson
Case No: 2008 FOLIO 1373
MR L. PARSONS QC AND MISS P. MELWANI (instructed by Stephenson Harwood) for the Claimants/Applicants
MR S. CROALL QC AND MR P. FERRER (instructed by Clyde & Co) for the Defendants/Respondents
Hearing date: 9 June 2009
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.
THE HONOURABLE MR JUSTICE BEATSON
Mr Justice Beatson:
This matter comes before the court by way of an application by Compania Sud-Americana de Vapores S.A. (“CSAV”) under section 68 of the Arbitration Act 1996 (“the 1996 Act”) to set aside parts of an Award made by arbitrators on 1 December 2008. The respondent is Nippon Yusen Kaisha (“NYK”). They were parties, with others, to two agreements which established a joint container service between Japan and the Far East and the east coast of South America. In the arbitration NYK claimed some US $786,000 as having accrued to it under the agreements prior to their termination. Only a very small part of the sums claimed by NYK were disputed. The dispute substantially concerned CSAV's counterclaim for damages on the ground that NYK had wrongfully terminated the joint service agreements.
The arbitrators rejected all but one of NYK's defences to CSAV's counterclaim. However, by a majority, they allowed NYK to advance an argument that an agreement had been reached at a meeting on 5 June 2003 to terminate the second joint service agreement. This had been pleaded but CSAV submitted that the tribunal should not have allowed NYK to advance it because, after the pleading and in the light of its written and oral opening submissions and its failure to respond to what was said in CSAV's written and oral submissions, NYK had abandoned the point. At the stage of the arbitration that the point surfaced or re-surfaced, CSAV had concluded its cross-examination of NYK's witnesses without cross-examining on the point, and thus did not have a reasonable opportunity of dealing with the point. It was submitted by Mr Parsons QC on behalf of CSAV that allowing NYK to advance the argument in these circumstances was a serious irregularity that caused CSAV substantial injustice.
Mr Croall QC, on behalf of NYK, submitted there was no serious irregularity because NYK had not abandoned its pleaded case, and the matter relied on by CSAV made no material difference to the conduct of the hearing in that the relevant evidence was adequately tested before the arbitrators. He also submitted that there was no substantial injustice to CSAV. First, CSAV put the issues now before the court to the arbitrators who considered them properly and by a majority rejected CSAV's complaints. Secondly, CSAV did cross-examine on the issue. Thirdly, the arbitrators (albeit by a majority) found that further cross-examination would have made no difference in any event. Fourthly, both parties put their case on the issue and all the relevant documents on that issue before the arbitrators who were best placed to determine whether NYK was entitled to advance the argument.
The evidence before the court consisted of two witness statements (dated 23 December 2008 and 12 May 2009) by Mr Kaiser of Stephenson Harwood, on behalf of CSAV, and one (dated 4 February 2009) by Mr Hodgson of Clyde and Co, on behalf of NYK.
Background
In December 1993 five companies, including CSAV and NYK, entered into an agreement for a joint container service, known as the Good Hope Express or “GEX” agreement. parties to it. In 1996 and 1998 two of the parties to the agreement, Nantai Line Co Ltd and Grindrod Unicorn Group Ltd, ceased to participate in the service. In about July 2002 another of the parties to it, Norsul S.A., ceased to participate. Thereafter CSAV and NYK entered into an agreement for a similar joint container service with Kien Hung Ltd (“KHL”). This agreement was known as the SUPERGEX or “SGEX” agreement. It was common ground in the arbitration that the terms agreed by the parties were contained in a draft pr+epared in March 2003 and that the final agreement for the SGEX service was made on or about 11 March 2003, but it had in fact commenced in the early days of September 2002, shortly after Norsul ceased to participate in the GEX service.
The SGEX agreement proved short-lived. CSAV and NYK considered KHL's vessels had not performed satisfactorily. KHL's financial position also deteriorated to the extent that creditors had started to arrest its vessels, and there were discussions with a number of third parties, for KHL to be taken over. CSAV and NYK started to consider ways of getting KHL to leave the SGEX and they approached other carriers to see if they would be interested in joining the service. On 12 March 2003 a takeover of KHL by Hamburg Sud with effect from the beginning of April 2003 was announced.
CSAV and NYK did not want Hamburg Sud to take over the SGEX service from KHL by stepping into its shoes. They wished to renegotiate and to enter into a new agreement with whoever would be the third party in the joint service. On 7 April 2003, only 7 months after the SGEX agreement started, both CSAV and NYK served termination notices on KHL. NYK relied on clauses 2.1 (90 days notice) and 11 (insolvency or change of control). CSAV relied on clause 11. Negotiations with Hamburg Sud followed. On 28 and 29 April there were two meetings in New York. The first was between NYK and CSAV. The second was between the two of them and Hamburg Sud. The minutes of the first meeting record inter alia that one of the points to be put to Hamburg Sud was to “confirm the current status of the termination notice”, that “NYK/CSAV sent the termination notice to KHL on Apr 7 th and the termination will be in effect after 90 days”. Those of the second meeting record inter alia that “three parties agreed the trinity agreement of SGEX should be the best choice considering of market situations, though the termination is in process”.
The negotiations and discussions continued and, as they did, it turned out that CSAV and NYK had different approaches. There were meetings on 4 and 5 June in Santiago. Messrs Kawate, Ota and Maruyma represented NYK; Messrs Bustamante and Della Maggiora represented CSAV; and there was also a representative of Hamburg Sud present. The arbitrators found (Award paragraph 9(11)) that it was at the Santiago meetings that CSAV first mentioned its understanding that if NYK did not continue the service with them they needed to give notice of termination of their relationship with CSAV. Paragraph 69 of the Award refers to the contemporaneous evidence in relation to the meetings on 4 and 5 June 2003. It states:
“The contemporaneous evidence relied on consisted of the following internal email from Mr Della Maggiora to various personnel within CSAV dated 5 June 2003, stating, inter alia, as follows:—
'For your information, today we have agreed with NYK and KHL that the SGEX service will terminate. The phasing out must be done taking in account full compliance of 4 cycles as from the 3 rd September 2002 that give to me first sailing without KHL should be July 8 th, 2003…
… We don't [k]now yet if we will continue operating with NYK or not, we will receive their intention soon but in the meantime we have a 6 month notice of termination which have not yet exercised nor by NYK nor by CSAV.
There was also a report of the Santiago meeting by Mr Kawate, being likewise an internal [NYK] memorandum, stating, inter alia, as follows:—
…Story of meeting on 4–5 June
— Confirmed 2 lines different positions and SGEX's service termination on 6 July (although it has already in process)
— NYK was in a position that both CSAV/Hsud invited NYK as consortium partner. NYK declared that NYK would decide our position and advise it to both lines by 20 June …
This was followed by an email from Mr Oelckers to Mr Saito [dated 9 June] in the following terms:—
… As you [should be] aware, last Friday June 6 in Santiago, it has been agreed between KHL, NYK and CSAV to terminate the SGEX when the 4 th cycle of the current service will be finished. As per our records… the 4 th cycle will be completed with the MV Conti Bilbao V. 303SB, scheduled to sail from Busan on July 2 nd. She will be the LAST sailing of the current SGEX service and therefore we have to agree a Phase In Schedule between NYK and CSAV to replace KHL to be phase out on NB trip from “NER302N”.
In attached EXCEL file “Phase Out SGEX-Phase In NEWGEX” you will find a summary of the phase in plan to be agreed among NYK and CSAV for the NEWGHEX which we would like to comment very briefly as follows…”
It became clear that the different approaches taken by CSAV and NYK meant that an agreement between the three parties would not be forthcoming. After this was realised, NYK decided to enter into an agreement with Hamburg Sud. On 30 June 2003 it notified CSAV of this, and that the SGEX agreement would terminate on 6 July 90 days after 7 April. Disputes arose, in particular as to whether valid notice had been given terminating the SGEX agreement.
The arbitration
The disputes led to arbitration in London. The arbitrators were Mr Robert Gaisford (appointed by NYK), Mr John Colin Sheppard (appointed by CSAV) and Mr Patrick O'Donovan (appointed by the party appointed arbitrators). NYK maintained that the...
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