DHL Project & Chartering Ltd v Gemini Ocean Shipping Company, Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jacobs |
| Judgment Date | 31 January 2022 |
| Neutral Citation | [2022] EWHC 181 (Comm) |
| Docket Number | Case No: CL-2021-000071 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 181 (Comm)
Mr Justice Jacobs
Case No: CL-2021-000071
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Charles Holroyd (instructed by Reed Smith) for the Claimant
Timothy Young QC (instructed by Holman Fenwick Willan) for the Defendant
Hearing dates: Monday 24 th January 2022
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.
A: The issue and the applications
The Claimants (“the Charterers”) seek to challenge an arbitration award made by Mr Stuart Fitzpatrick as sole arbitrator (“the arbitrator”) in respect of a claim by the Defendant (“the Owners”) for damages consequent upon (what the arbitrator considered to be) the Charterers' repudiation of a charterparty. The arbitrator awarded US$ 283,416.21 as damages and made ancillary orders against the Charterers for the payment of costs. In broad summary, the shape of the parties' arguments are as follows.
The Charterers contend that no binding contract was concluded between the parties, and that there was also no binding arbitration agreement between them. The basis of their argument is that the parties' negotiations towards a charterparty fixture did not reach the stage of a binding contractual agreement in any respect. That was because although the parties had agreed upon the terms of a fixture, the agreement was on “subjects” or “subs”, meaning that there were preconditions to contract which remained outstanding. The “sub” or “subject” in question concerned “shipper/ receivers approval”. The Charterers contend that this subject was never (to use the terminology frequently used in the charterparty context) “lifted”. Since there was no binding contractual agreement in any respect, including no binding arbitration agreement, the arbitrator had no jurisdiction to make the award that he did.
The Charterers' principal application is therefore made under section 67 of the Arbitration Act 1996 (“the 1996 Act”), which is concerned with challenges to an arbitration award on the basis that the arbitrator lacked substantive jurisdiction.
In the alternative, the Charterers seek leave to appeal under section 69 of the 1996 Act. The section 69 application only arises if the section 67 application is unsuccessful. The Charterers contend, in summary, that if the arbitrator did have jurisdiction to decide disputes between the parties, including jurisdiction to decide whether or not a binding contract was concluded, his decision that there was a binding contract was wrong in law because he failed to give proper effect to the “shipper/ receivers approval” subject by wrongly construing it as qualified by other contractual terms.
An application for leave to appeal is usually dealt with by the Commercial Court on the papers, without a hearing. In the present case, however, there is a close connection between the arguments under section 67 and 69. Ultimately, they are both based on the “shipper/ receivers approval” subject. Given this connection, Cockerill J ordered that the leave application (and any appeal) under section 69 should be addressed at the oral hearing of the application under section 67, so that there was one “rolled-up” hearing addressing section 67, the leave application under section 69 and any appeal pursuant thereto.
The critical “subject” provision concerning shipper/receivers' approval was contained in an e-mail containing a fixture “recap”. The e-mail was dated 25 August 2020 and was sent by a chartering broker, Ms Jill Wu, to the Charterers. The e-mail concerned the Owners' vessel MV Newcastle Express, and a proposed voyage from Newcastle, Australia to Zhoushan, China in late September 2020. The relevant subject appears in bold text at the start of the e-mail, with clauses 1 – 20 thereafter set out. These opening words are set out below. In the “subject” clause, I have added a word which (as the parties agreed) was missing, and I have also expanded an acronym (again as to which the parties were agreed). More generally in this judgment I have corrected typographical or spelling errors in the recap and expanded certain relevant abbreviations for ease of understanding.
AS PER YOUR AUTHORITY/INSTRUCTIONS, IN LINE WITH NEGOTIATIONS/ EXCHANGES, PLEASED TO CONFIRM HAVING – FIXED MAIN TERMS AS FOLLOWS:
SUBJECT SHIPPER/RECEIVERS APPROVAL WITHIN ONE WORKING DAY AFTER FIXING MAIN TERMS & RECEIPT OF ALL REQUIRED CORRECTED CERTIFICATES/DOCUMENTS
⇉ RIGHTSHIP INSPECTION WILL BE CONDUCTED ON 3 RD/SEPT. OWNERS WILL PROVIDE REQUIRED CERTIFICATES LATEST BEFORE VESSEL SAILING (INTENTION 5/SEP). OWNERS WILL ENDEAVOR TO PROVIDE ALL REQUIRED CERTIFICATES/DOCUMENTS EARLIEST POSSIBLE.
The Charterers contend that:
a. The effect of the “subjects” was that there was no concluded contract between the parties (neither a charterparty nor an arbitration agreement) unless and until the “subjects” were lifted, which they were not. There was therefore no arbitral jurisdiction. This was the section 67 application.
b. If, contrary to this, there was a concluded arbitration agreement, then the arbitrator made an error of law in holding that (as a result of provisions in an attached proforma charterparty) that shipper/receivers' approval for the purposes of the “subject” could not be unreasonably withheld. This was the section 69 application.
The Owners contend that the parties clearly and expressly agreed to arbitration, and that therefore there was a binding arbitration agreement between the parties. Accordingly, they submit that it was for the arbitrator to decide whether or not there was a binding contract between the parties. The arbitrator had substantive jurisdiction and therefore no challenge under section 67 is permissible. Any challenge to the award must therefore be made under section 69.
The Owners oppose the application for permission to appeal under section 69 on various grounds. Their initial argument is that the requirements for the grant of leave under that section were not satisfied. Any question of law raised by the arbitrator's decision was not of general public importance. The Charterers therefore had to show that the arbitrator's decision was “obviously wrong”. The Owners submitted that the arbitrator's decision was neither obviously wrong nor indeed open to serious doubt.
A feature of the arbitration was that the Charterers did not participate in the case at all. The arbitrator did not therefore have the benefit of any submissions from the Charterers. The Owners submit that this provides a further reason why the court should decline to grant leave to appeal: on the basis that leave to appeal a question of law should only be given (under section 69 (3) (d) of the 1996 Act) if it was “just and proper in all the circumstances for the court to determine the question”. They submit that it is not just and proper for the court to assist, by way of granting leave to appeal, a party which decided not to participate in an arbitration.
The Charterers have, however, provided an explanation as to why they did not participate. This was because the individual with responsibility for the fixture negotiations, their chartering manager Mr James Zhan, failed to advise his superiors in the company that there was a dispute which had been referred to arbitration. This was a breach of his duty. The existence of the arbitration only came to light accidentally when, after the award had been made, his e-mails were examined for another purpose.
If permission were to be granted, the Owners seek to uphold the award on the basis of the reasons given by the arbitrator and, to some extent, on the basis of other arguments as well.
It was common ground that it was appropriate for the court to address the application under section 67 first. If the award was indeed made in the absence of substantive jurisdiction, then it would be appropriate to set aside the award. The application under section 69 would then become academic.
A section 67 application takes place by way of a rehearing: see Dallah Real Estate v ministry of Religious Affairs [2010] UKSC 46, para [26]. In the present case, the parties agreed that there would be no oral evidence, but that each party would simply rely upon the witness statements that it had submitted. In the event, the parties' arguments have very largely been legal arguments based on undisputed documents, in particular as to the legal effect of the “subject” wording set out above in the context of the recap terms as a whole. Neither side therefore placed any significant reliance, in the context of the section 67 arguments, on the evidence given by witnesses, although reference was made to certain contemporaneous post-recap exchanges described in Section B below.
B: Factual background
In August 2020, the Charterers and the Owners negotiated the terms of a fixture through the intermediary of a broker, M.I.T. Chartering & Agency Co Ltd. The individuals involved were (i) James Zhan, the Charterers' chartering manager; (ii) Jill Wu, the broker; and (iii) an individual who is not identified by name in the documents but who communicated with Jill Wu on Owners' behalf. A number of messages on “WeChat” (the Chinese equivalent of “WhatsApp”), between Ms Wu and the Owners' representative, were exhibited in evidence. Some of the messages from Ms Wu passed on, to the Owners, messages which had been sent by Mr Zhan.
On 25 August 2020, Ms Wu circulated a recap (“the recap”) by email. It is common ground that the recap accurately reflected what had been agreed. The main body of the recap contained 20...
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