Italmare Shipping Company v Ocean Tanker Company Inc. (Rio Sun)

JurisdictionEngland & Wales
JudgeTHE MASTER OF THE ROLLS,LORD JUSTICE GRIFFITHS
Judgment Date31 July 1981
Judgment citation (vLex)[1981] EWCA Civ J0731-5
Date31 July 1981
CourtCourt of Appeal (Civil Division)
Docket Number81/0355

[1981] EWCA Civ J0731-5

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT (SPECIAL PAPER)

(MR. JUSTICE ROBERT GOFF)

Royal Courts of Justice.

Before:

The Master of the Rolls

(Lord Denning)

Lord Justice Shaw

and

Lord Justice Griffiths

81/0355

AC/42/81

In the Matter of Section 1(2) of The Arbitration Act 1979

And In The Matter of an Arbitration

Italmare Shipping Company
Appellants (Respondents)
and
Ocean Tanker Co. Inc.
Respondents (Appellants)

MR. DAVID JOHNSON, Q.C. and MR. TIMOTHY YOUNG (instructed by Messrs. Richards Butler & Co.) appeared on behalf of the Respondents (Italmare Shipping Co.)

MR. NICHOLAS PHILLIPS, Q.C. and MR. DAVID GRACE (instructed by Messrs. Coward Chance) appeared on behalf of the Appellants (Ocean Tanker Co. Inc).

THE MASTER OF THE ROLLS
1

This is the second case to come before this court under the new Arbitration Act 1979. We have before us a reasoned award of Mr. Clifford Clark, one of the most experienced and distinguished arbitrators in the City of London. He was appointed by the parties to be sole arbitrator in a shipping dispute. He has made an interim award in which he has set out the facts—and his reasons—in a manner which is a model of what an award should be. So much so that I will not set out the facts. I will only give a summary.

2

The time charterparty was on a standard form of the New York Produce Exchange—amended to provide for arbitration in London. It contained in clause 5 the usual printed clause for payment of hire and withdrawal. There was added a typed clause 30 an "anti-technicality" clause. It required the owners to give 48 hours' notice before withdrawal.

3

The hire was payable semi-monthly in advance. The charterers duly paid the instalment due on the 6th May,1980 for the semi-month from the 6th May to the 22nd May, 1980. The next semi-monthly payment would be payable on the 22nd May, 1980. The "final payment" would be on the 7th June, 1980 or may be on the 23rd June, 1980 depending on the estimated date of redelivery.

4

The charterers did not pay the instalment due on the 22nd May, 1980. Instead of paying it, they claimed by the second telex on the 27th May to make deductions from it. They made deductions for estimated cost of bunkers and disbursements—a procedure which would have been permissible if it had been a final hire payment. But it was not a final hire payment.

5

The owners did not give the 48-hour notice required by the "anti-technicality" clause. Instead, soon after they received the claim for deductions, on the 29th May they gave notice withdrawing the vessel from the service of the charterers.

6

The arbitrator held that the owners had not given the 48-hour notice required by the "anti-technicality" clause, but that nevertheless the owners could insist on withdrawing the vessel because the charterers, by the second telex (claiming to make deductions) had "waived" any need for a 48-hour notice. So he held that the owners were entitled to withdraw the vessel.

7

Mr. Justice Robert Goff gave leave to appeal. He said that the question of "waiver" was a question of law arising out of the award. He said that it did substantially affect the rights of the parties. He added: "I see no reason why I should not exercise my discretion in favour of giving leave to appeal".

8

Mr. Nicholas Phillips, Q.C., for the owners, said the judge misdirected himself. He had followed his own interpretation of the Arbitration Act 1979 in the "Oinoussian Virtue" (1981) 1 Lloyd's Law Reports 533, and the "Wenjiang" (not yet reported, 21st May, 1981). But his interpretation had been held by the House of Lords in the "Nema" in July 1981 to be erroneous. Mr. Phillips, Q.C. relied especially on this passage in Lord Diplock's speech:

9

"Where, as in the instant case, a question of law involved is the construction of a 'one-off' clause (the application of which to the particular facts of the case is an issue in the arbitration) leave should not normally be given unless it is apparent to the judge upon a mere perusal of the reasoned award itself (without the benefit of adversarial argument) that the meaning ascribed to the clause by the arbitrator is obviously wrong: but if it appears to the judge (on such perusal) that it is possible that argument might persuade him that (contrary to his first impression) the arbitrator might be right, he should not grant leave; the parties should be left to accept, for better or for worse, the decision of the tribunal that they had chosen to decide the matter in the first instance".

10

Mr. Phillips urged us to say that the question of "waiver was a "one-off" point depending on the special circumstances of this case: that the arbitrator was not obviously wrong: so his decision should be accepted.

11

Mr. David Johnson, Q.C. invited us to differ from the observations of Lord Diplock. He told us that the House of Lords had refused to look at the Report on Arbitration by the Commercial Court Committee (1978 Command 7284). It was that report which led to the Arbitration Act 1979. If the Act was read in the light of that Report, the interpretation which Mr. Justice Robert Goff gave was correct.

12

I confess that I was almost persuaded by Mr. Johnson. He pointed out that the purpose of the Arbitration Act 1979 was to do away with the drawbacks of the special case procedure: especially because it was used to delay payment: and next because it had to be requested by a party before he knew what were the findings of fact. Mr. Johnson submitted that the purpose of the Arbitration Act 1979 was not—repeat not—to deprive the parties of recourse to the courts to determine points of law on which their rights depended. He pointed out that the special case procedure had this great merit: It had enabled parties to arbitration to bring points of law to the English courts (in contrast to other countries). In this way our courts have been able to develop English commercial law in line with the changing needs of the times. As the Report says (paragraph 16): "It is an opportunity which has not been neglected by the courts and English law has become the popular choice for commercial interests throughout the world".

13

Another point stressed by Mr. Johnson arose out of a significant incident in the present case. At the hearing before the arbitrator, the charterers "were prepared to accept Mr. Clark's award as final, but the owners asked him for a reasoned award". If the owners also had agreed to accept Mr. Clark's award as final, there could have been no appeal to the court at all. It would be barred by an exclusion agreement, see section 4(1)(i). Seeing that the owners asked for a reasoned award, it is plain that they wanted to have recourse to the courts, if the award went against them. They wanted the arbitrator to "state the reasons for his award in sufficient detail to enable the court, should an appeal be brought under this section, to consider any question of law arising out of the award", see section 1(5)(6). The arbitrator acceded to their request. He said in his award: "I was asked and proceed to make a reasoned declaratory interim award on liability only…"

14

In view of this interchange, it is plain that, by agreement, the award of the arbitrator was not to be final. Although the original arbitration clause said that the decision of the arbitrator "shall be final", nevertheless by this interchange (authorised by statute) it was not to be final. It was to be subject to an appeal to the court on any question of law arising out of the award (section 1(2)) with the leave of the court—section 1(3)(b).

15

Despite Mr. Johnson's able argument, I feel that we must go by the guidelines set out by the House of Lords. Subject to remembering this—they are only guidelines. Ultimately the question is one for the discretion of the judge of the Commercial Court. The only fetter strictly imposed by the statute is that leave is not to be given unless it is a point of law which substantially affects the rights of the parties. Apart from that fetter, the judge has in law a complete discretion. Useful as guidelines often are, nevertheless it must be remembered that they are only guidelines. They are not barriers. You can step over guidelines without causing any harm. You can move them, if need be, to suit the occasion. So let each case depend on its own circumstances.

16

I would just take a parallel from our position in the Court of Appeal. There are many statutes in which an appeal only lies to this court with leave, and then only on a question of law. We do not have any guidelines. We go by the feel of the case. We look at the issues involved, the likelihood of the tribunal being wrong, and so forth. In the first place, we often hear the application ex parte. If we do not think he has much of a case, we reject it at once without troubling the other side. If we think there is something worthy of further consideration, we require notice to be given to the other side. Then we go on to consider it inter partes. We decide the whole thing. Sometimes we refuse leave altogether. At other times, we...

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