Primera Maritime (Hellas) Ltd and Others v Jiangsu Eastern Heavy Industry Company Ltd and Another [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Flaux J. |
| Judgment Date | 15 October 2013 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 15 October 2013 |
Queen's Bench Division (Commercial Court).
Flaux J.
Robert Bright QC (instructed by Reed Smith LLP) for the claimants.
Graham Dunning QC and Jern-Fei Ng (instructed by DLA Piper UK LLP) for the defendants.
The following cases were referred to in the judgment:
Abuja International Hotels Ltd v Meridien SASUNK [2012] EWHC 87 (Comm).
Pace Shipping Co Ltd v Churchgate Nigeria LtdUNK [2009] EWHC 1975 (Comm); [2009] 2 CLC 446.
Petrochemical Industries Co (KSC) v Dow Chemical CoUNK [2012] EWHC 2739 (Comm); [2013] 2 CLC 864.
Petroships Pte Ltd of Singapore v Petec Trading & Investment Corp of Vietnam (The Petro Ranger)UNK [2001] 2 Ll Rep 348.
Safehaven Investments Inc v Springbok Ltd (1996) 71 P & CR 59.
Stocznia Gdanska SA v Latvian Shipping Co [2003] 1 CLC 282.
White Rosebay Shipping SA v Hong Kong Chain Glory Shipping LtdUNK [2013] EWHC 1355 (Comm); [2013] 2 CLC 884.
World Trade Corp Ltd v C Czarnikow Sugar LtdUNK [2005] 1 Ll Rep 422.
Yukong Line Ltd of Korea v Rendsburg Investments Corp of Liberia (The Rialto)UNK [1996] 2 Ll Rep 604.
Zermalt Holdings SA v Nu-Life Upholstery Repairs LtdUNK [1985] 2 EGLR 14.
Shipping — Shipbuilding — Arbitration — Serious irregularity — Renunciation — Affirmation — Alleged failure by arbitrators to deal with issues put to them — Arbitrators found defendant shipyard renounced shipbuilding contracts but claimant buyers had waived breach and affirmed contracts — Arbitrators dealt with overall issue of renunciation and with sub-issue of repeated or continuing renunciation, including by silence — Since arbitrators had dealt with issues, findings on evidence not challengeable — Arbitration Act 1996, s. 68(2)(d).
This was an application by buyers under two shipbuilding contracts challenging an arbitration award which held that, although the defendant shipyard had renounced the contracts, the buyers had thereafter waived the breach and affirmed them.
The buyers claimed that the yard had been in anticipatory breach of contact by refusing to perform the contracts in accordance with their terms, specifically in relation to delivery by the contractual delivery dates in 2011, and hence renounced the contracts. The tribunal dismissed the claims.
The buyers applied under section 68(2)(d) of the Arbitration Act 1996 to set aside the award and remit it to the tribunal, on the grounds that the tribunal failed to deal with two issues put before it: (i) that the renunciation by the defendants was continuous; and (ii) in relation to the quantum of the buyers” claim, that they would have “flipped” the contracts by selling them on to third parties at a profit.
Held, dismissing the buyers' s. 68 application:
1. The buyers” written submissions, far from making separate arguments about repeated renunciation on the one hand and continuing renunciation on the other, essentially dealt with them as aspects of the same overall issue. That issue was whether, subsequent to the affirmation, the shipyard had renounced the contracts, reviving the buyers” right to terminate. Once it was recognised that that was the “issue” for the purposes of s. 68(2)(d), the suggestion that the tribunal did not deal with it in its award was unarguable. However, even if continuing renunciation was an “issue” rather than an argument within an issue, the tribunal clearly dealt with that issue. It was clear from their reasons that the tribunal had the concept of continuing renunciation well in mind. Any distinction between repetition and continuation of a renunciation was more apparent than real in this case. The tribunal considered whether there was repeated or continuing renunciation after the buyers affirmed the contracts, including whether silence amounted to a renunciation. The tribunal applied the right test and was entitled to find on the facts that there was no renunciation after the buyers had affirmed. Once it was recognised that the tribunal had dealt with the issue under s. 68(2) (d), it was wrong in principle to look at the quality of the reasoning.
2. The issue whether the buyers would have sold on the contracts was academic in light of the conclusion on renunciation. The burden of proof was on the buyers and they could not point to any evidence of a firm buyer for the ships. In the circumstances, the tribunal's conclusion that that head of claim failed was not only understandable, but correct. Furthermore, it was beside the point whether the tribunal's conclusion on the evidence was correct, since it could not seriously be suggested that the tribunal had not dealt with the issue.
Flaux J: Introduction
1. The claimants were the buyers under two shipbuilding contracts with the defendants dated 12 July 2007 in relation to two Kamsarmax bulk carriers to be built at the defendants' yard in China. Disputes arising under both contracts were referred to arbitration in London pursuant to the LMAA Terms 2006 before the same tribunal, David Aikman, Mark Hamsher and Michael Howard QC. The basis for the claimants' claim for damages, so far as currently relevant, was that from 19 October 2007, the defendants had been in anticipatory breach of contact by refusing to perform the contracts in accordance with their terms, specifically in relation to delivery by the contractual delivery dates in 2011, and hence renounced the contracts.
2. The arbitration hearing took place over two-and-a-half weeks, with eight days of oral evidence, both parties being represented by leading counsel. In all over 700 pages of written submissions in opening and closing were presented to the tribunal which stated at [12] of its Reasons that: “It is because of the thoroughness of those submissions that we have been able to express our Reasons in comparatively concise terms”. Nonetheless, the tribunal's third Interim Award dated 29 November 2012 was supported by detailed Reasons running to 84 pages. By that award, the tribunal dismissed the claims, holding that although the defendants had renounced the contracts in an e-mail of 19 October 2007 and at a meeting on 6 November 2007, the claimants thereafter affirmed the contracts.
3. The claimants now apply under section 68(2)(d) of the Arbitration Act 1996 to set aside that award and remit it to the tribunal, on the grounds that the tribunal failed to deal with two issues which the claimants had put before them: (i) that the renunciation by the defendants was continuous; and (ii) in relation to the quantum of the claimants” claim, that the claimants would have “flipped” the contracts.
4. Notwithstanding the elegant and well-reasoned submissions of Mr Robert Bright QC on behalf of the claimants, by the end of the hearing of the application under section 68 I had concluded that the application should be dismissed. I informed the parties that that was my decision and that I would give a judgment setting out my reasons at a later date. This is that judgment.
5. Section 68 of the Arbitration Act 1996 provides, inter alia, as follows:
“68 Challenging the award: serious irregularity
(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award.
A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).
(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–
…
(d) failure by the tribunal to deal with all the issues that were put to it;”
6. In order to succeed under section 68 an applicant needs to show three things. First of all, a serious irregularity. Secondly, a serious irregularity which falls within the closed list of categories in section 68(2). Thirdly, that one or more of the irregularities identified caused or will cause the party substantial injustice. As Hamblen J said in Abuja International Hotels v Meridien SASUNK[2012] EWHC 87 (Comm) at [48] to [49], the focus of the enquiry under section 68 is due process, not the correctness of the tribunal's decision. As the DAC Report states, and numerous cases since have reiterated, the section is designed as a long-stop available only in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected. This point, that section 68 is about whether there has been due process, not whether the tribunal “got it right”, is of particular importance in the present case, where, for the reasons set out below, the claimants” real complaint is that they consider that the tribunal reached the wrong result, not a matter in relation to which an arbitration Award is susceptible to challenge under section 68.
7. In cases under section 68(2)(d), there are four questions for the court: (i) whether the relevant point or argument was an “issue” within the meaning of the subsection; (ii) if so, whether the issue was “put” to the tribunal; (iii) if so, whether the tribunal failed to deal with it; and (iv) if so, whether that failure has caused substantial injustice: see per Andrew Smith J in Petrochemical Industries Co v Dow ChemicalUNK[2012] EWHC 2739 (Comm); [2013] 2 CLC 864 at [15].
8. Andrew Smith J goes on to discuss what constitutes an “issue” and summarises the earlier authorities at [16]:
“16. A distinction is drawn in the authorities between, on the one hand, ‘issues’ and, on the other hand, what are variously referred to as (for example) ‘arguments’ advanced or ‘points’ made by parties to an arbitration or ‘lines of reasoning’ or ‘steps’ in an argument (see, for example, Hussmann (Europe) Ltd v Al Ameen Development & Trade Co[2000]...
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