Fehn Schiffahrts Gmbh & Company KG v Romani Spa
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Moulder |
| Judgment Date | 27 June 2018 |
| Neutral Citation | [2018] EWHC 1606 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2017-000804 |
| Date | 27 June 2018 |
[2018] EWHC 1606 (Comm)
Mrs Justice Moulder DBE
Case No: CL-2017-000804
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Angharad M Parry (instructed by Davies Battersby Solicitors) for the Appellant
Malcolm Jarvis (instructed by Field Martin) for the Respondent
Hearing dates: 11th May 2018
Judgment Approved
Introduction
This is an appeal by the appellant, under section 69 of the Arbitration Act 1996 (the “Act”) against an award dated 4 December 2017 made by Mr Graham Perry, Mr Richard Faint and Mr Kevin Heylock (the “Award”) pursuant to which the appellant was ordered to pay damages to the respondent in respect of damage to a cargo of sunflower seeds and wheat.
By an order dated 9 March 2018, Cockerill J granted permission to appeal.
Background
The Appellant is the head owner (the “Owners”) of the MV Fehn Heaven (the “Vessel”). By a charterparty dated 29 March 2012, the Owners chartered the Vessel to the respondent (the “Charterers”).
The charterparty was for a voyage from Reni (Ukraine) to Rotterdam (the Netherlands) for a cargo of approximately 1,300 mt of organic sunflower seeds and 1,800 mt of organic wheat (the “Charterparty”). The cargo was loaded at Reni under two straight bills of lading dated 3 and 4 April 2012. The consignee named in the bills of lading was SC Justorganic Srl (“Justorganic”).
It is common ground that at some point after completion of the loading at Reni, and prior to discharge at Rotterdam, the cargo was fumigated.
In the arbitration, the Charterers claimed that, as a consequence of the fumigation, the cargo could not be sold as organic and therefore it had to negotiate a discounted price with the two Dutch buyers to whom it had on-sold the cargo (Greenford International BV and Spack Trading BV). The Charterers therefore sought inter alia to recover the amount of the negotiated discounts from the Owners.
The Award concluded, at paragraph 62, that the Owners were liable for any damages found to have been caused by the unauthorised fumigation of the cargo whilst it was in the Owners' care and custody. The tribunal awarded damages to the respondent relating to the downgrading of the cargoes from organic to conventional cargoes; the amounts claimed being €171,353 against the feed wheat cargo and €153,400 against the sunflower seed cargo.
On 22 December 2017, the Owners applied to the Tribunal under section 57(3) of the Arbitration Act 1996 for clarification of the evidence relied upon by the Tribunal which led to the finding (at paragraph 64 of the Award) that the Charterers had title to sue.
On 30 December 2017, the Tribunal responded as follows:
“The Tribunal accepted Claimants submissions on this point found at paragraphs 32 & 33 of their Reply Submissions of 17 June 2016 and the assignment letter dated 27 March 2013, which the Tribunal felt supported this submission.”
Paragraph 32 of the Reply Submissions referred to the written assignment dated 27 March 2013 which the respondent stated “was executed as “a belt and braces exercise” to avoid any title to sue point being taken”.
Grounds of appeal: alleged error of law
The grounds of the appeal are that the tribunal erred in law when answering the following question in the affirmative and finding that the respondent had title to sue:
“Can a party (A) assigned rights (the “assignee”) claim substantial damages in circumstances where the assignor (B) has suffered no loss and would be entitled (at most) to nominal damages (when the situation is not within any known exception to the principle that an assignee cannot acquire rights more valuable than those of the assignor)?”
The Award
The Award, at paragraph 26, records that:
“Charterers submitted that they had title to sue Owners for all the losses incurred as a result of the … unauthorised fumigation and provided proof that the Bill of Lading Holders, Justorganic, had formally assigned any interest it might have had in this cargo in Charterers' favour.” [emphasis added]
The Tribunal's findings relevant to damages are set out at paragraphs 63 to 68 of the Award:
“63. The Tribunal turns its attention to damages, as claimed by the Charterers. It was Charterers' submission that the breach by Owners resulted in them suffering losses in the total of €369,919.00 plus compound interest and costs…
64. Charterers submitted documentary evidence of the losses claimed and whilst Owners made submissions on the evidence their main issue on quantum appeared to be that the goods were not likely to be organic given the ongoing fraud investigations and that Charterers did not have title to sue…As to the second defence Charterers provided evidence to support their claim and the Tribunal has no problem with accepting and FINDING THAT Charterers do indeed have title to sue.
…
68. The major part of this claim relates to the downgrading of the cargoes from organic to conventional cargoes; the amounts claimed being €171,353 against the feed wheat cargo and €153,400 against the sunseed cargo…Having considered the amounts and the documents submitted and considering the situation, that being that the cargo was arrived at Rotterdam, the Tribunal accepts and FINDS that these two amounts flow directly from the breach and as such are fully recoverable, and are so awarded.” [Emphasis added]
Relevant legal principles on error of law
The court is concerned to decide, on the hearing of the appeal, whether the award can be shown to be wrong in law. In a case such as the present, the answer is to be found by dividing the arbitrator's process of reasoning into three stages: (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.
Stage (2) of the process is the proper subject matter of an appeal under the Act. In some cases an error of law can be demonstrated by studying the way in which the arbitrator has stated the law in his reasons. It is, however, also possible to infer an error of law in those cases where a correct application of the law to the facts found would lead inevitably to one answer, whereas the arbitrator has arrived at another.
For the avoidance of doubt (and contrary to the written submission for the appellant), I make clear that the question for this court is whether or not an error of law has been established. The question of whether the decision is “obviously wrong or at least open to serious doubt” is a threshold question on the application for permission to appeal. It is not the test for this court hearing the appeal.
I also note the general approach to be adopted by the court in seeking to establish what has been decided in an arbitral award, mainly to read it in “ a reasonable and commercial way, expecting, as is usually the case, that there will be no substantial fault to find with it” and without approaching it “ with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults in awards, and with the objective of frustrating the process of arbitration” ( Polaris Shipping Co Ltd v Sinoriches Enterprises Co Ltd [2015] EWHC 3405 (Comm) at [2]).
Appellant's submissions
The Owners say is that it is implicit in the Tribunal's finding that the Charterers...
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