Mutual Shipping Corporation v Bayshore Shipping Company Ltd (Montan)

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
Judgment Date21 December 1984
Judgment citation (vLex)[1984] EWCA Civ J1221-5
Docket Number84/0503

[1984] EWCA Civ J1221-5







Royal Courts of Justice.


The Master of the Rolls

(Sir John Donaldson)

Lord Justice Robert Goff (Not Present)


Sir Roger Ormrod


Mutual Shipping Corporation of New York
(Applicants) Respondents
Bayshore Shipping Co. of Monrovia
(Respondents) Appellants

MR. GEOFFREY GRUDER (instructed by Messrs. Norton Rose Botterell & Roche) appeared on behalf of the (Applicants) Respondents.

MR. ROGER BUCKLEY, Q.C. and MR. PETER IRVINE (instructed by Messrs. Lloyd Denby Neal) appeared on behalf of the (Respondents) Appellants.


In this case Homer has nodded and we have to decide what we can and should do about it. Homer, in this instance, was disguised as Mr. Clifford A.L. Clark, the doyen of the London maritime arbitrators. Sitting as sole arbitrator he had to resolve a number of individual disputes on specific items appearing in the final accounts between owners and timecharterers of the "Montan" after about 12 months' service. Having done so, he had to make an award of the balance due from one to the other.


By his award dated 1st August 1983, Mr. Clark ordered the charterers to pay to the owners U.S. $62,402.13 with costs and to bear the cost of the award. It is now clear that he should have ordered the owners to pay to the charterers U.S. $27,527.87 and in such circumstances he might well have made different orders as to costs. I say that this is now clear and it is. However the owners submit that they are entitled to retain this windfall benefit, because the court should not have looked at the documents which reveal the truth. This is a submission which is as important and far-reaching as, on one view, it is unmeritorious.


Mr. Clark was not asked to give reasons for his award, because the issues were purely matters of fact. His award, in essence, consisted of a bare determination that a sum was owing by the charterers to the owners with consequential orders as to costs. However, in accordance with the practice of London maritime arbitrators, he also provided the parties with a document headed:

"REASONS of Mr. Clifford A.L. Clark, not issued contemporaneously with or forming part of or to be used in any way in connection with his Award dated LONDON, the 1st August 1983."


It was this document which revealed to the charterers that Mr. Clark had made a mistake and the nature of that mistake. Amongst other items in dispute had been an adjustment in the hire to take account of fuel oil saved, as compared with a standard daily rate of consumption. The parties were not agreed on how much fuel had in fact been used. A Mr. Sinclair was called by the owners to give evidence that the actual consumption was 7.146 tons per day, a figure which was more favourable to the owners than 4.5 tons per day, which was put forward by a Mr. Ferryman, called by the charterers.


In paragraph (4) of his Reasons, Mr. Clark set out the relevant charterparty clause and added "Charterers calculated a saving of 1429 tons based on 7.146 m.t. per day against the owners' calculation of 900 tons". This was a patent error, since 1429 tons (based on 7.146 tons) would have rendered the charterers liable to pay the owners a very much larger sum than 900 tons (based on 4.5 tons). "Charterers" should have read "owners" and vice versa. We have all made such errors. My pupil master once suggested that it would save both of us a deal of trouble if we included a standard paragraph in our pleadings reading: "In this pleading 'plaintiff' means 'defendant' and vice versa, unless the context otherwise requires". However it is a type of error which normally has no adverse consequences.


Mr. Clark then went on in paragraph (5) to say that he preferred the evidence of Mr. Ferryman. This involved accepting the charterers' figures. When, in paragraph (19), he came to re-constitute the final account between the parties on the basis of his findings, he meant to accept the charterers' figures but incorporated the figure of 1429 tons "because of the unintentional transposition of the parties in paragraph (4)". The quotation is from a letter dated 31st August 1983 which Mr. Clark sent to the parties following a flurry of telex messages.


The charterers have applied to the court for an order under section 22 of the Arbitration Act, 1950, remitting the award to Mr. Clark for re-consideration. Mr. Justice Hobhouse made such an order and the owners now appeal.


I think that it is important to remember why the practice of giving "claused" or "restricted" reasons grew up. They are sometimes described as "confidential" reasons, but this is a misnomer since the only restriction is on using them "in connection with" the award. The reason for adopting this course was simple. Under the law as it existed before the Arbitration Act, 1979, came into force, it was possible to set aside an award on the grounds that it disclosed an error of fact or law "on its face", but it was not permissible to rely upon any such error, if its existence required evidence not appearing on the face of the award. There was much learning as to what constituted the face of the award and the first part of Mr. Clark's rubric is designed to prevent his reasons being in some way linked with and becoming part of the face of his award.


The situation has been changed dramatically by section 1 of the 1979 Act, which abolished all right to set aside or remit an award for error of fact or law on its face and substituted a limited right of appeal on questions of law, based upon the arbitrator's reasons for his award. Unless ordered to do so, arbitrators are not required to give reasons, but the Commercial Court Committee in paragraphs 25 and 26 of the report upon which the 1979 Act is based (Cmnd. 7284 of 1978) said this:

"25. The existing obstacle to a judicial review based upon reasoned awards is the power and the duty of the court to set aside awards for error on their face. This obstacle could easily be removed and this system would then have considerable attractions.

26. In every case an arbitrator would be free to give reasons for his award. This would in itself be an improvement, if arbitrators took advantage of the facility. The making of an award is, or should be, a rational process. Formulating and recording the reasons tends to accentuate its rationality. Furthermore, unsuccessful parties will often, and not unreasonably, wish to know why they have been unsuccessful. This change in the law would make this possible."


The present position is that an arbitrator can (a) give reasons for his award without any restriction upon the use to be made of those reasons, (b) give no reasons or (c) give reasons, subject to a restriction as Mr. Clark has done. But whether any reasons are or are not issued contemporaneously with or do or do not form part of the award is now quite irrelevant for any purpose. Probably Mr. Clark used this formula before the passing of the 1979 Act and has never revised it.


Unrestricted reasons can form the basis of an application for leave to appeal on a question of law, but the burden of persuading the court to grant leave is a heavy one (see Pioneer Shipping Ltd v. BTP Tioxide Ltd, The Nema [1982] A.C. 724 and Antaios Compania Naviera S.A. v. Salen Rederierna A.B. [1984] 3 WLR 592). Where an arbitrator gives no reasons, the court has power to order him to supply them in sufficient detail to enable it, if leave to appeal is granted, to consider the question of law under appeal (1979 Act section 1(5) subject to section 3(1) (b)). However it will not normally make such an order, unless one of the parties requested such reasons before the award was made (s.1(6)). The courts have not yet been asked to order an arbitrator to remove the restriction upon restricted reasons, but I have no doubt that they could do so in circumstances in which, if no reasons had been given, the court would have ordered them to be given. The courts could achieve this result by wholly ignoring the restricted reasons, treating the arbitrator as having given no reasons and ordering new reasons. They must therefore be able to simply "open" the restrictions. That is not, however, this case.


Mr. Justice Hobhouse expressed his view on the status of restricted reasons (which he referred to as "Confidential Reasons") in the following passage from his judgment:

"(A). Confidential Reasons:

The status of Confidential Reasons was discussed by Staughton J. in The "Ross Isle" and "Ariel" [1982] 2 L1.L. Reports 589. I agree with him that as a matter of contract the parties have agreed with each other and the arbitrator or arbitrators to treat such confidential reasons as confidential. This, as a matter of contract, precludes any party, except by agreement, from referring to them on any application to the Court. The contract which imposes and accepts the obligation of confidence is a contract which comes into existence either when the parties concur in asking the arbitrator for such reasons or, when an arbitrator, where there has been no request for reasons, follows the usual practice of London Maritime Arbitrators and supplies the parties with confidential reasons and the parties accept such reasons from the arbitrator."


He went on to say that:

"If I was of the opinion that the Charterers' case before me depended on their referring me to the Arbitrator's reasons, I would have peremptorily dismissed the motion. But this is not the correct analysis of the application before me. The application is founded on the letter of 31st August...

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