Nestor Maritime SA v Sea Anchor Shipping Company Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Eder |
| Judgment Date | 20 April 2012 |
| Neutral Citation | [2012] EWHC 996 (Comm) |
| Docket Number | Case No: 2012 FOLIO 144 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 20 April 2012 |
[2012] EWHC 996 (Comm)
Mr Justice Eder
Case No: 2012 FOLIO 144
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Michael Bloch QC and Tom Roscoe (instructed by Ince & Co) for the Claimant
Timothy Hill QC and Leigh Williams (instructed by Clyde & Co) for the Defendant
Hearing date: 23 March 2012
Introduction
This is an application by Nestor Maritime SA (the "Sellers") for an extension of time under s.80(5) of the Arbitration Act 1996 (the "1996 Act") and CPR Part 62.9 to bring a challenge under s.68(2)(g) of the 1996 Act against the award of the Tribunal dated 12 May 2011 in an arbitration between the Sellers and Sea Anchor Shipping Co Ltd (the "Buyers"). The latter section in effect gives a party to arbitral proceedings the right to challenge an award on the ground of serious irregularity which is, for present purposes, defined as follows:
"(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant –
(g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy…"
As appears below, it is the Sellers' submission that the award was here obtained by fraud and that although the present application is brought out of time the court should nevertheless extend such time.
The underlying dispute in the arbitration concerned the sale of an oil tanker in 2007 by the Sellers to the Buyers. In essence, it was the Buyers' case that the Sellers misrepresented the condition of the vessel. The Sellers commenced arbitration proceedings against the Buyers for a declaration of no-liability but lost. In the event, the Tribunal upheld the Buyers' counterclaim on the basis that the Sellers had fraudulently and negligently misrepresented the condition of the vessel. By the award, the Sellers were ordered on the Buyers' counterclaim to pay the sums of US$4,838,631 and €20,565 to the Buyers.
Following the publication of the award, the Sellers sought (unsuccessfully) both to challenge and to appeal the award under s.68 and s.69 of the 1996 Act. In addition, I should mention that there are other proceedings (both civil and criminal) relating to the dispute between the parties and still pending before the Greek courts.
The present application is a new discrete challenge issued on 27 January 2012. Under s.70(3) of the 1996 Act, any such challenge is of right but must be brought within 28 days of the date of the award. In the present case, that period of time expired on or about 10 June 2011. Thus the present challenge was brought more than 6 months after the expiry of this time limit. However, it is common ground that the court has a power to extend such time limit under s.80(5) of the 1996 Act and pursuant to CPR 62.9. Hence the present application to extend time.
This application was supported by a witness statement also dated 27 January 2012 by Paul Herring of Ince & Co. (the Sellers' solicitors) and four further witness statements all dated 26 January 2012 by Dimitrios Gkritzapis ("Gkritzapis 1"), Nikolaos Nakos, Evangelos A Bardakos and Georgios Pavlis. Shortly thereafter, a further statement dated 2 February 2012 by Capt Bardakos was served. Following directions made by the court, there was served in opposition to the application a witness statement dated 24 February 2012 by Leigh Williams of Clyde & Co (the Buyers' solicitors). This prompted a further round of witness statements on behalf of the Sellers from Mr Gkritzapis ("Gkritzapis 2") and Capt Bardakos (both dated 8 March 2012) and two new statements from Efthimios Angelopoulos and Andreas Pagalos (dated 8 and 14 March respectively).
Summary of the Sellers' case under s.68(2)(g) of the 1996 Act
Central to the Buyers' case in the arbitration was the Report and the Supplement to it produced by a ship-surveying company called "ANCO", following a survey of the vessel in Tuzla, Turkey, in July-September 2007 (shortly after the sale of the vessel). The Report dated 28 September 2007 and the Supplement produced in early January 2008 contained, or purported to contain, thickness measurements of key steel structural elements of the vessel. By comparing those measurements to others contained in a similar report commissioned by the Sellers in 2005, it was the Buyers' case (upheld by the Tribunal), that the rates of corrosion the comparison revealed were too great to have occurred in reality; leading to the conclusion that the Sellers had fraudulently procured the 2005 report to over-state the true condition of the vessel.
In essence, the Sellers now seek to allege that the thickness measurements in the Supplement were fabricated to the knowledge of the Buyers; that they were then fraudulently presented to the Sellers and fraudulently relied upon in the arbitration by the Buyers when the Buyers knew that those figures were false; and that accordingly the award in favour of the Buyers was procured by the Buyers' fraud. That is the essence of the Sellers' allegation in support of the challenge they seek to make under s.68 of the 1996 Act.
In particular, the Sellers advanced the following submissions:
(i) The fact that the Supplement had been produced after, and in addition to, the Report was common ground in the arbitration. The Supplement (comprising 35 pages of purported measurements of steel thicknesses) related to areas of steel on the vessel that were replaced as part of the works that were carried out by the Buyers in Tuzla. Significantly, these pages included measurements of the "underdeck longitudinals" (structural beams running under the deck of the ship from fore to aft), which were the main items of the vessel's structure considered in the arbitration.
(ii) The Buyers' position during the arbitration was that ANCO (who produced both the 2007 Reports and similar reports in 2005 and 2003) had inserted numbers in the Report higher than those in fact recorded; and that the Supplement corrected this inaccuracy in that it provided the accurate, lower, measurements in fact taken by the ANCO operatives. While the Buyers sought to suggest that this fact was adverse to the Sellers, the explanation did not give rise to any suspicion of collusion between ANCO and the Buyers. To the contrary, the Buyers' explanation suggested that they had caught ANCO's error, or possible impropriety, and corrected it. The Sellers were provided an explanation by ANCO which did not give cause for concern: see Capt Bardakos' first statement at §9 and Mr Angelopoulos' statement at §§18–21.
(iii) Gkritzapis 1 as corroborated in important respects by the witness statement of Mr Nakos sets out a quite different version of events surrounding the production of the Report and the Supplement than advanced by the Buyers in the arbitration. It is to be noted that, in many cases, allegations of fraud are made by way of inferences to be drawn from the evidence. The Sellers' case is stronger than this; they now have two detailed statements from the individual who was integral in producing the fabricated documents which were fraudulently relied upon, explaining how the fabrication was carried out. The Sellers' allegation is a direct allegation of fraud — not an allegation which relies on inferences to be drawn from the documents or other evidence.
(iv) Mr Gkritzapis was the technician (employed by ANCO) who carried out the UTM measurements on the vessel between July and September 2007. As he explains in Gkritzapis 1:
(a) His usual practice, which was known to the Buyers' representatives and the DNV surveyors, was not to record thickness measurements for areas of steel on the vessel which he marked to be replaced (§§38–41).
(b) His instructions while on board the vessel were to mark for replacement (as a general rule) those areas of steel which were up to 0.4mm thicker than the "substantial" limit – i.e. up to 7.7mm in respect of the underdeck longitudinals. (The "substantial" limit being the thickness below which sections of steel required expensive annual inspection (7.3mm), and some way thicker than the "minimum allowable" thickness at which replacement was compulsory (6.8mm).) (§33)
(c) The "clean drafts" of his drawings provided to ANCO for the purposes of producing the Report therefore did not have thickness measurements for the sections of steel to be replaced — but "blanks" were not acceptable in the final report. Consequently, "dummy" figures were inserted for those areas of steel marked for replacement in a range just below the "minimum allowable" thickness (6.8mm for the underdeck longitudinals) to meet Class' requirement for "a number in each box". These figures did not reflect the actual measurements taken and were ordinarily lower than the actual condition of the metal: §58 and §§57–60 of his second statement.
(d) At the same time, Mr Gkritzapis was asked to produce a second set of drawings for John Davaris, at the instruction of Iordanis Melis (both employees of Queensway, the Buyers' ship-managing agents) containing fabricated, and low, numbers for the areas of steel that had been replaced (§§48–51).
(v) Some two or three months after the production of the Report, Queensway requested that ANCO amend that report to include the fabricated figures on the second set of drawings produced by Mr Gkritzapis. The "Supplement" was produced on the basis of the fabricated numbers recorded by Mr Gkritzapis on the second set of drawings. The Supplement was then signed off by the Class society – DNV. (§§59–62)
(vi) Mr Gkritzapis' evidence in relation to how the measurements were actually carried out also contradicts the evidence of Murat Erzaim (the DNV surveyor...
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