Daewoo Shipbuilding & Marine Engineering Company Ltd v (1) Songa Offshore Equinox Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Bryan,Bryan J. |
| Judgment Date | 16 March 2018 |
| Neutral Citation | [2018] EWHC 538 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No. CL-2017-000557 |
| Date | 16 March 2018 |
[2018] EWHC 538 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice
Rolls Building, Fetter Lane
London, EC4A 1NL
THE HONOURABLE Mr Justice Bryan
Case No. CL-2017-000557
Stuart Catchpole QC and Colin West (instructed by Stephenson Harwood LLP) for the Claimants
Simon Rainey QC and Tom Bird (instructed by Ince & Co LLP) for the Defendants
Hearing date: 5 March 2018
Judgment Approved
A. Introduction
I have before me two applications:
(1) The first is an application by the Defendants, Songa Offshore Equinox Limited and Songa Offshore Endurance Limited (“Songa”), to strike out/summarily dismiss the application of the Claimant, Daewoo Shipbuilding & Marine Engineering Company Limited (“DSME”), under section 69 of the Arbitration Act 1996 (the “Act”) for permission to appeal against two arbitration awards on preliminary issues of construction (the “Awards”) on the ground that the section 69 application was brought outside the 28-day time limit for such applications as set forth in section 70(3) of the Act.
(2) The second is an application by DSME, under section 80(5) of the Act, to extend time for the making of that section 69 application, if and insofar as an extension is necessary.
B. Factual Background
B.1 The Underlying Dispute
The applications arise from two turnkey contracts dated 6 September 2011 for the design, construction and sale of semi-submersible “Cat D” drilling rigs with hull numbers 3031 and 3032 (the “Semi-Rigs”) between DSME as Builder and Songa Offshore SE as Buyer (the “Contracts”). The Contracts were subsequently novated to the Defendants (one to each Defendant).
The Semi-Rigs were to be built for Songa to enable Songa to perform long-term drilling contracts on the Norwegian continental shelf. The hull design was to be provided by Götaverket Arendal, a Swedish marine engineering and design consultancy, who were to provide the front-end engineering design (“FEED”) documentation.
B.2 The Arbitration
On 14 July 2014 DSME referred disputes under the Contracts to arbitration under the LMAA Terms. These disputes arose out of time and cost over-runs in the construction of the Semi-Rigs. The highly experienced Tribunal in each arbitration comprised Sir David Steel, John Marrin QC and Stewart Boyd QC.
In the arbitration, DSME alleged that the front-end engineering design documentation was defective and that this caused the delays and cost over-runs. DSME argued that, if such an error was notified within a 90-day period, then Songa bore responsibility for any additional costs, expenses or delays resulting from the error.
On 11 July 2016 the Tribunal ordered a trial of preliminary issues relating to the proper construction of the Contracts.
i) “Under [the Contract], did DSME's right under Item 2 in the Yard Clarification List to notify Songa of errors in documents and/or drawings apply to errors in FEED (front-end engineering design) documentation?
ii) If so, then in the event that DSME duly notified such an error within the 90-day period, which party bore responsibility for any additional costs, expenses or delays resulting from such errors?”
The trial of the preliminary issues took place at a consolidated hearing in London on 2 and 3 May 2017.
B.3 The Award and the Memoranda of Correction
On 18 July 2017 the Tribunal issued the Awards. It found against DSME on both preliminary issues holding that:
i) DSME's right under Item 2 in the Yard Clarification List to notify Songa of errors in documents and/or drawings did not apply to errors in FEED documentation; and
ii) In the event that DSME purported to notify an error in the FEED documentation within the 90-day period, DSME nevertheless bore responsibility for any additional costs, expenses or delays resulting from such error.
On 4 August 2017 DSME's solicitors, Stephenson Harwood LLP, applied to the Tribunal under section 57(3)(a) of the Act to correct what they described as four “ clerical errors in the Awards arising from accidental slips” namely:
“1. The statement in paragraph 7 that it was Songa which identified the preliminary issue which the Award decides. It was, in fact, DSME which first identified the preliminary issue by way of its application for a trial of preliminary issues dated 31 May 2016;
2. The statement in paragraph 7 that it was DSME which pleaded a claim for rectification, and then abandoned such claim. DSME did not plead a claim for rectification. It was Songa which, by way of Ince & Co's email to the Tribunal dated 9 December 2016, abandoned its rectification plea advanced at paragraphs 89 to 91 of the Songa Equinox Defence and Counterclaim and at paragraph 11 of the Songa Endurance Defence and Counterclaim;
3. At paragraph 8, DSME is said to have been responsible for formulating the preliminary issues, but then at paragraph 15 the formulation of the first issue is said to have been Songa's. The wording of the preliminary issues adopted by the Tribunal at paragraph 8 of the Awards was first set out at paragraph 19 of DSME's application for a trial of preliminary issues dated 31 May 2016;
4. At paragraph 22 the key email of 27 May 2011 is dated in 2014.”
As is evident from the quotation above, these are classic clerical and typographical errors. They are not connected in any way, shape or form with DSME's subsequent appeal. The errors were addressed in two memoranda of correction issued by the Tribunal on 14 August 2017 (the “Memoranda of Correction”). This was 27 days after the Awards had been issued.
B.4 The application for permission to appeal and subsequent events
On 17 August, i.e. some 30 days after the Awards had been issued (and a period of 28 days from the date of the Award had expired on 15 August 2017), there was a telephone conversation between the parties' solicitors. The evidence before me (which has not been challenged by DSME) is that in the course of that conversation, Mr Kim of Stephenson Harwood (DSME's solicitors) informed Mr Ben Moon of Ince & Co LLP (Songa's solicitors) that he “knew that 15 August 2017 was the deadline” and that Stephenson Harwood had yet to receive instructions from DSME to appeal the Awards. The evidence before me is that Mr Kim remarked that it “seemed that DSME had decided not to appeal.”
Mr Moon sent an email to Mr Kim (copied to others within Stephenson Harwood) dated 17 August 2017 (11:33) in which he said:
“The 28 day period for bringing an appeal expired on 15 August. When we spoke this morning you advised that you had not received instructions from DSME to appeal.
Before we incur time and costs engaging with you on the ancillary items, we would be grateful if you would formally confirm that DSME has not appealed, and will not be appealing, the Tribunal's Award.”
A response from Mr Limbrick of Stephenson Harwood sent later that day recounted that Stephenson Harwood were taking instructions and would revert to Ince & Co. In the event, the response came on 7 September 2017 when Stephenson Harwood enquired whether Ince & Co were authorised to accept service of an arbitration claim form.
An arbitration claim form was issued, on behalf of DSME, the next day on 8 September 2017. The form sought permission to appeal under section 69 of the Act on two questions of law arising out of the Awards. The arbitration claim form was then served upon Ince & Co by email on 14 September 2017, with the date of deemed service being the 18 September 2017.
There followed correspondence between the solicitors in which Ince & Co took the stance that the appeal application was made out of time (in a letter on 22 September 2017) and invited DSME to withdraw its application. Stephenson Harwood, on behalf of DSME, denied that this was so in a letter of 22 September 2017 and invited Songa not to take the point. Ince & Co reiterated Songa's stance in a letter on 26 September 2017.
On 28 September 2017 DSME applied for an extension of time for appealing the Awards and for permission to amend the arbitration Claim Form (in order to comply with CPR r.62.9, which provides that an application for an extension of time must be made in the Claim Form). Leggatt J (as he then was) gave DSME permission to amend the claim form on paper (permission being needed as the Claim Form and Skeleton Argument had already been served on Songa).
On 11 October 2017 Songa applied for an order that DSME's section 69 Application be struck out or summarily dismissed on the grounds that it not been brought within the 28-day time limit and that the interests of justice did not require an extension of time for appealing the Awards.
Consequently, the matters that arise for determination are:
(1) Whether DSME's application for permission to appeal the Awards was brought within the 28-day time limit set out in section 70(3) of the Act – this being a question of whether time ran from the date of the Awards or from the Memoranda of Correction; and
(2) If DSME's application for permission to appeal the Awards was not brought in time, whether DSME should be granted a retrospective extension of time for issuing this appeal under section 80(5) of the Act.
The first issue involves a dispute between the parties as to the proper construction of section 70 of the Act. The second issue is an exercise of discretion in light of the guidance set out in previous authorities identifying the relevant principles (which were not in issue between the parties).
C. The Time Limit under section 70 of the Arbitration Act 1996
C.1 The relevant provisions of the Act
The time limit applicable to section 69 appeals (and indeed to in relation to applications...
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