Ga-Hyun Chung (as the Former Statutory Trustee of Homer Hulbert Maritime Company Ltd) (a dissolved Marshall Islands company) v Silver Dry Bulk Company Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Moulder |
| Judgment Date | 17 May 2019 |
| Neutral Citation | [2019] EWHC 1147 (Comm) |
| Docket Number | Case No: CL-2018-000112 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 17 May 2019 |
[2019] EWHC 1147 (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 Mrs Justice Moulder
Case No: CL-2018-000112
Mr T Young QC (instructed by Holman Fenwick Willan LLP) for the Claimant
Mr T Sprange QC & Ms R Byrne (instructed by King & Spalding LLP) for the Defendant
Hearing dates: 15 and 16 April 2019
APPROVED JUDGMENT
Introduction
This is an application made by the claimant pursuant to section 67 of the Arbitration Act 1996. The claimant in this matter is Mr Chung as the “trustee” of Homer Hulbert Maritime Co. Ltd (“HH”).
Background
HH was a corporation incorporated in and under the laws of the Marshall Islands. It is common ground that HH filed articles of dissolution in the Marshall Islands on 28 February 2011.
The application relates to an arbitration award made by Mr Klaus Reichert SC, dated 17 January 2018 (the “Award”).
The arbitration arose out of the sale of a ship, HN 1045 by HH to the defendant, Silver Dry Bulk Co. Ltd (“SDBC”). The memorandum of agreement dated 1 February 2011 contained a London arbitration clause. The only parties to the memorandum of agreement were SDBC and HH.
A notice of arbitration dated 28 October 2014 was filed on 29 October 2014 with the Attorney General of the Marshall Islands. (The claimant's position is that Mr Chung has no record of having received a copy of the notice of arbitration and the claimant says there is no evidence of it being sent by the Attorney General to HH in Korea).
Mr Reichert accepted the appointment as a sole arbitrator on the basis that HH had not responded to the notice of arbitration or appointed its own arbitrator.
Subsequently the notice of arbitration was sent by the solicitors for the defendant to Sinokor Merchant Marine Co. Ltd. and Sinokor Maritime Co Ltd. According to the evidence for the claimant (paragraph 10 of the witness statement of Mr Poynder), HH was not a subsidiary of Sinokor Merchant Marine Co. Ltd (“Sinokor”). SDBC say that Sinokor (or another entity in the Sinokor group) incorporated HH for the purpose of selling the vessel to SDBC and was the “owner” of HH (paragraph 22 of the witness statement of Ms Patel). SDBC also say that Mr Chung is, according to the corporate filings, the sole owner and director of Sinokor Maritime Co Ltd and the son of the chief executive officer of Sinokor.
Sinokor declined to take part in the arbitration proceedings but (through solicitors and counsel) did attend on occasions before the arbitrator to dispute Mr Reichert's jurisdiction and in particular whether there was a valid arbitration and whether the tribunal was properly constituted.
SDBC alleged that the purchase price paid by HH to SDBC for the vessel included the payment by HH of a US$5 million secret commission to Hannibal Gaddafi, the fifth son of Colonel Gaddafi and the then controller of General National Maritime Transportation Company (“GNMTC”), the Libyan state maritime company and the parent company of SDBC. The arbitrator found that HH's payment constituted a bribe and SDBC was entitled to damages.
The claimant's case is that no arbitration was ever commenced against HH as HH had been finally dissolved and wound up some eight months before the notice of arbitration purported to commence the purported arbitration, on 28 February 2014. Accordingly, the arbitration was a nullity.
Evidence
In support of the application I have witness statements from Mr Poynder, a partner in the firm of Holman Fenwick Willan LLP, dated 13 February 2018 and 19 April 2018. Mr Poynder says that he cannot warrant that he has authority on behalf of HH but has been authorised by Mr Chung to the extent that he has power to do so.
For the defendant in opposition to the application, I have a witness statement from Darshna Patel, a solicitor with King & Spalding, dated 12 April 2018.
I also had expert reports from Mr Frederick Canavor Jr dated 19 November 2018 and Mr Dean Robb dated 10 December 2018 as to the law of the Marshall Islands. Mr Canavor and Mr Robb produced a joint memorandum dated 25 January 2019. Both Mr Canavor and Mr Robb gave oral evidence to the court and were cross-examined. Mr Canavor is a lawyer but has not practised and does not practice in the Marshall Islands; however he was Attorney General of the Marshall Islands from 2009 to 2011. Mr Robb is a partner in a Hawaii-based law firm; he has advised on matters of Marshall Islands corporate, finance and maritime law over many years.
The court had expert evidence as to Delaware law in the form of reports from Ms Elena Norman dated 19 November 2018 and from Mr Myron Steele dated 10 December 2018. Ms Norman and Mr Steele produced a joint memorandum dated 31 January 2019. Ms Norman gave evidence via video link and was cross examined. Due to technical difficulties, Mr Steele was unable to give live evidence. Ms Norman is a partner in a Delaware law firm. Mr Steele is currently a partner in a Delaware law firm but prior to that was a member of the Delaware judiciary for 25 years, in particular holding the office of Chief Justice of the Delaware Supreme Court from 2004 until 2013.
Finally, I have a witness statement of Namho Yoon, a Korean lawyer who acts for Sinokor Maritime Co Ltd, dated 30 October 2018 which deals with a meeting with Ms Caroline Chae of the Korean branch of the International Registries affiliated with the Marshall Islands maritime and corporate registries.
Issues for this court
The following issues arise for determination:
i) whether the challenge brought under section 67 is not a challenge as to “substantive jurisdiction” within the meaning of section 67 of the Arbitration Act 1996 because it is a question of Marshall Islands law and is a question of fact already determined by the arbitrator;
ii) whether pursuant to section 105 of the Business Corporations Act of the Marshall Islands (“BCA”), HH existed as a corporate entity on 28 October 2014; in particular whether pursuant to section 105(2) HH continued to exist as a corporate entity in the form of a “trusteeship” of its sole director, Mr Chung for the purposes of defending any claim brought against the company after the expiry of the three year period in section 105(1);
iii) whether HH has waived any right to challenge the arbitrator's jurisdiction.
Waiver
The third issue in the list of issues can be dealt with shortly. SDBC relied on section 73 of the Arbitration Act 1996 (the “1996 Act”) which provides:
“73. Loss of right to object.”
(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Part, any objection—
(a) that the tribunal lacks substantive jurisdiction,
(b) that the proceedings have been improperly conducted,
(c) that there has been a failure to comply with the arbitration agreement or with any provision of this Part, or
(d) that there has been any other irregularity affecting the tribunal or the proceedings,
he may not raise that objection later, before the tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection.”
It was submitted for SDBC that the purpose of section 73 was to prevent parties from seeking to delay payment under an award by raising arguments they could and should have raised earlier. It was further submitted that since HH/Mr Chung was validly served with the arbitration proceedings, the affiliate of the primary party, Sinokor, participated heavily in the proceedings and the primary party now seeks to challenge the outcome, this should be regarded as a case falling within section 73 of the Arbitration Act.
It was submitted for the claimant that HH did not appear and was not represented before the arbitrator since HH had ceased to exist and thus as no representation could have been made on behalf of HH, no question of waiver could be sustained. The claimant relied on the following dicta in Baytur SA v Finagro Holdings SA [1992] 1 QB 610 at 622B:
“I can find nothing in what the plaintiff said or did which could amount to a clear or unequivocal representation on the part of the plaintiffs that they were accepting the board's jurisdiction to determine the issue. On the contrary they made it clear from as early as 7 August that they were accepting no such thing.”
The claimant accepted that counsel and solicitors were instructed by Sinokor to appear before the arbitrator but made it clear that they contested jurisdiction.
SDBC appears to accept the limited role played by Sinokor before the arbitrator (paragraph 6 of counsel for SDBC's skeleton argument). Although a passing reference was made in submissions to piercing the corporate veil, this was not pursued in this context.
In my view on the evidence it is clear that there was no representation by HH that they were accepting the jurisdiction of the arbitrator and although Sinokor did appear, it made it clear that it was contesting jurisdiction. Accordingly, in the circumstances of this case, section 73 does not apply so as to preclude this application by the claimant to the court.
Is the challenge brought under section 67 a jurisdictional challenge within the meaning of section 67 of the Arbitration Act 1996?
Section 67 (1) provides:
“(1) A party to arbitral proceedings may (upon notice to the...
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