Daewoo Shipbuilding and Marine Engineering Company Ltd v Songa Offshore Equinox Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Jefford,Mrs Justice Jefford DBE |
| Judgment Date | 01 September 2020 |
| Neutral Citation | [2020] EWHC 2353 (TCC) |
| Docket Number | Case No: HT-2019-000239 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 01 September 2020 |
[2020] EWHC 2353 (TCC)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mrs Justice Jefford DBE
Case No: HT-2019-000239
Stuart Catchpole QC and John Denis-Smith (instructed by Squire Patton Boggs) for the Claimant
Simon Rainey QC and Mark Chennells (instructed by Clyde & Co LLP) for the Defendants
Hearing dates: 2 and 3 December 2019
Approved Judgment
This is an unusual case both in its factual background and the way in which these applications arise. The applications relate to two arbitral awards (in identical terms) dated 18 June 2019. The applications are for permission to appeal under section 69 of the Arbitration Act 1996 (and for the hearing of the substantive appeal if permission is granted) and to challenge the awards for serious irregularity under section 68. The parties addressed the section 68 application first but I have found it convenient to deal with the section 69 application first.
Introduction
In order to deal with this application, it is necessary to set out the background in some detail which I do below. In summary, however, the disputes arise out of two turnkey contracts dated 6 September 2011 for the design, construction and sale of two “semi-rigs”.
In the arbitrations, DSME, the Builder under the contracts, advanced a claim for costs and extensions of time on the basis that the Songa companies (the Buyer companies referred to collectively as “Songa”) bore contractual responsibility for alleged errors in the FEED documentation, where FEED is an acronym for front-end engineering design. Songa counterclaimed for unliquidated damages arising out of late delivery together with certain discrete claims. The hearing of a preliminary issue on that issue of contractual responsibility and consequent liability was held. DSME lost. In other words, DSME was found to bear the contractual responsibility for the alleged errors. DSME unsuccessfully sought permission to appeal the award out of time (see Daewoo Shipbuilding & Marine Engineering Co Ltd. v Songa Offshore Equinox and another [2018] EWHC 538 (Comm)). DSME then sought to amend its claim in the arbitrations to advance a claim for costs and extensions of time on the basis that Songa had failed to co-operate in the correction of the alleged errors. The same allegations were relied on as defences to Songa's counterclaims.
In both arbitrations, by a majority, the tribunal refused permission to amend, for the reasons that appear more fully below. This decision followed a two day hearing with written evidence and extensive submissions. Putting it in very short summary, the majority's refusal turned on their decision that DSME had agreed that if it lost the preliminary issue that would be an end to its claims.
The Arbitration Act 1996 and the law
The following sections of the Arbitration act 1996 featured in this application.
(i) Section 33 General duty of the tribunal.
“(1) The tribunal shall—
(a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and
(b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.”
(ii) Section 68: Challenging the award – serious irregularity
“(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 the tribunal);
…..”
(iii) Section 69: Appeal on point of law
“(1) Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings. ….
…
(3) Leave to appeal shall be given only if the court is satisfied –
(a) that the determination of the questions will substantially affect the rights of one or more of the parties,
…
(c) that, on the basis of the findings of fact in the award –
(i) the decision of the tribunal on the question is obviously wrong, or
(ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and
(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.
…”
Copious authority was cited to me on the interpretation and application of this section but the following cases and propositions derived from them seem to me to be of assistance in this particular case.
Firstly, section 69 can only be engaged in respect of a question of law. Self-evident though that statement may be thought to be, given the terms of the statute, the position was further analysed by Mustill J in Vinanva Shipping Co Ltd. v Finelvet AG (“The Chrysalis”) [1983] 1 QB 503, a case under the Arbitration Act 1979, cited and followed by Ramsey J in London Underground Ltd. v Citylink Telecommunications Ltd. [2007] EWHC 1749. Mustill J identified that there were three stages in the decision making process:
“(1) The arbitrator ascertains the facts. This process includes the making of findings on any facts which are in dispute.
(2) The arbitrator ascertains the law. This process comprises not only the identification of all material rules of statute and common law, but also the identification and interpretation of the relevant parts of the contract, and the identification of those facts which must be taken into account when the decision is reached.
(3) In the light of the facts and the law so ascertained, the arbitrator reaches his decision.”
It is the second stage of this process that is the proper subject matter of an appeal under section 69. As Ramsey J said at [59] the fact finding stage and the stage of applying the law to the facts are separate from the stage of ascertaining the law. However, an error of law may be inferred from the end result in the sense that the correct application of the law to the facts would inevitably lead to a different conclusion, as in Davies v AHP Land Ltd. [2014] EWHC 1000 (Ch) at [5].
Specifically, once the facts have been ascertained, whether there is a contract is a question of law or a mixed question of fact and law ( Covington Marine Corp v Xiamen Shipbuilding Industry Co. Ltd. [2005] EWHC 2912 at [43]). It seems to me that the terms of the contract and their interpretation must similarly be a question of law or a mixed question of fact and law.
Secondly, at the leave stage, where s. 69(3)(c)(i) is relied upon, the section requires that the tribunal's decision on the question of law must be obviously wrong. In HMVUK v Propinvest Friar Ltd. [2011] EWCA Civ 1708 at [40], Arden LJ emphasised the importance of answering “the anterior statutory questions of section 69” before any statutory appeal is argued. At [34] she further identified the test as one of “being unarguable or making a false leap in logic or reaching a result for which there was no reasonable explanation”. That is patently a high threshold test.
In Braes of Doune Wind Farm (Scotland) Ltd. v Alfred McAlpine Business Services Ltd. [2008] EWHC 426 (TCC), Akenhead J made the point that the test of obviousness is not only passed if the award is obviously wrong to a judge considering leave after half an hour of reading the papers. If it takes 4 hours for the judge to understand the submission and form that view, then the test is still met. In that case, however, the Judge formed an initial view that it was arguable that the arbitrator was obviously wrong in law and held a short oral hearing on both the issue of law and a jurisdictional issue. Following that hearing, he determined that the arbitrator was not obviously wrong. The case, therefore, illustrates that the length of the consideration of the issue is no indication that the decision is or is not obviously wrong.
DSME also sought to argue that each of its questions of law raised a point of general public importance so that the test for permission was the lower threshold of the decision being “at least open to serious doubt”.
Factual background
The Contracts and the arbitrations
I am indebted to the judgment of Bryan J (referred to in paragraph 3 above) for a succinct summary of the factual background to the disputes between the parties and he will, I trust, forgive me for the plagiarism that follows.
As Bryan J set out, the disputes arise out of two turnkey contracts dated 6 September 2011 for the design, construction and sale of semi-submersible “Cat D” drilling rigs including those with hull numbers 3031 and 3032 (“the Semi-Rigs”). DSME was the Builder and Songa Offshore SE the original Buyer. The two contracts (“the Contracts”) were novated, one to each of the Defendants.
The Semi-Rigs were to be built for Songa to enable them to perform long-term drilling...
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