Tame Shipping Ltd v Easy Navigation Ltd
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr. Justice Moore-Bick,Mr. Justice Moore-Bick |
| Judgment Date | 28 July 2004 |
| Neutral Citation | [2004] EWHC 1862 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2004 Folio 150 |
| Date | 28 July 2004 |
[2004] EWHC 1862 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
The Honourable Mr. Justice Moore-Bick
Case No: 2004 Folio 150
Mr. Gavin Geary (instructed by Richards Butler) for the claimant
Mr. Chirag Karia (instructed by Hill Taylor Dickinson) for the defendant
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version may be treated as authentic
Mr. Justice Moore-Bick :
This application under section 68 of the Arbitration Act 1996 raises once again the question whether, and if so in what circumstances, a party to arbitration proceedings who seeks to challenge the award may rely in support of his application on reasons published by the arbitrator separately from the award and expressly on terms that no use shall be made of them in any proceedings relating to it.
On 14 th February 2003 the claimant (to whom I shall refer as "the Buyers") and the defendant ("the Sellers") entered into a contract for the sale and purchase of the vessel Easy Rider. The contract was contained in a Memorandum of Agreement on the Norwegian Saleform 1993 with certain additions and amendments. Only two of the clauses in the MOA are relevant for present purposes, namely clauses 11 and 19, which provided as follows:
"11. Condition on delivery
The vessel with everything belonging to her shall be at the Sellers' risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this Agreement she shall be delivered and taken over as she was at the time of inspection, fair wear and tear excepted.
However, the Vessel shall be delivered with her class fully maintained and with all continuous surveys fully up to date, without conditions/recommendations, free of average damage affecting the Vessel's class ……
……………… . .
19. No drydocking clause to apply, however prior to delivery the Buyers shall have the option to arrange with the assistance of the Sellers, and [sic] the Buyers' sole option and expense, for a class approved diver to carry out an underwater inspection at delivery port in the presence of the DNV Classification Society surveyor and Sellers' and Buyers' representatives, to ascertain the condition of the vessel's underwater parts below the Summer Loadline. For pre-arranging the presence of DNV surveyor, the Buyers shall declare within 48 hours whether they like to carry out diver's inspection or not from when the 7 days notice of delivery is received from Sellers.
Should damage(s) and/or defect(s) be found to the underwater parts which affects vessel's clean certificates of class, but which, in the opinion of the class surveyor present, does not require drydocking prior to the next scheduled drydock of the vessel, then Sellers and Buyers to apply to two reputable shipyards at the port of delivery, but in case no shipyard at the port of delivery, then Sellers and Buyers to apply at the nearest port that shipyards exist, one to be selected by Buyers and one to be selected by Sellers, in order to obtain quotations for the direct cost of repairs to the said damage only, such quotations to cover the direct cost of repair to specified damages(s) and/or defect(s) only. Thereafter it shall be in the Sellers' option whether to repair said damage at Sellers' time and expense prior to delivery, or to deliver the vessel with the said damage against a reduction in price of the cost of repairs, which to be defined as the average of the two quotations obtained.
In the event that damage(s) and/or defect(s) is found to the vessel's underwater parts in respect of which the DNV Classification Society surveyor present requires the vessel to be drydocked for repair prior her next scheduled drydocking, the Buyers to declare immediately either to cancel the sale or take delivery of the vessel and put in a drydock by themselves at their own account with Sellers compensating the cost of repairs which to be defined as the average of the two quotations obtained from two reputable shipyards in delivery port or nearest port, one selected by Sellers and one selected by Buyers.
…………"
On 28 th April 2003 the Sellers tendered notice of readiness for delivery and the Buyers exercised their right under clause 19 to have the vessel's underwater parts inspected by a diver. That inspection was carried out the next day in the presence of a surveyor representing the vessel's Classification Society, DNV, who imposed the following condition of Class as a result:
"During in water survey for sale purposes the lower rudder pintle clearance was found at 5.3 mm which is above the acceptable maximum limit. Prior to due date but not later than 2003–07–28 lower rudder pintle bearing to be re-examined and dealt with as necessary."
The Sellers informed the Buyers of this development. They indicated that they wished to proceed with the sale on the basis of a reduction in the price as provided for in clause 19, but they gave the Buyers the option of cancelling the contract if they wished to do so. At or about the same time they provided a quotation from a local shipyard for the repair of the rudder as contemplated by clause 19. The Buyers did not wish to cancel the contract, but they did not think that clause 19 applied to the situation because the Class surveyor had not at that stage decided one way or the other whether the vessel would need to be dry-docked before her next scheduled dry-docking in August 2004 and they did not therefore provide any alternative quotation for the cost of repairs. However, the parties were able to agree that the vessel would be delivered on 2 nd May 2003 and that a sum of US$50,000 should be deposited in an escrow account to be released in accordance with any agreement between them or on the issue of an arbitration award.
The dispute between the parties was referred to arbitration under the Small Claims Procedure of the London Maritime Arbitrators' Association. This Procedure is described in the Commentary published in conjunction with it as "a simplified, quick and inexpensive procedure for the resolution of small claims" and was eminently suitable for the resolution of the dispute. Mr. Anthony Scott was appointed to act as sole arbitrator and the parties made extensive submissions to him in writing to which they appended the various documents on which they relied. The Sellers contended that clause 19 applied in the circumstances that had arisen and that their liability was limited to the estimated direct cost of repairs calculated in accordance with that clause by reference to the quotation which they had provided. The Buyers contended that clause 19 did not apply at all because the Class surveyor had not certified that the defect could be repaired without the need for an early drydocking. They made a counterclaim for damages in respect of the cost of repairs and the vessel's loss of earnings during the period of repairs said to be well in excess of the sum paid into the escrow account.
Neither party requested an oral hearing and on 4 th February 2004 Mr. Scott published his award. He held that the Sellers were liable in damages to the Buyers in accordance with the provisions of clause 19, but that since the Buyers had failed to obtain a quotation in accordance with that clause, damages should be assessed by reference to the quotation obtained by the Sellers. Accordingly, he awarded the Buyers US$6,094 out of the escrow account and directed that the balance be returned to the Sellers. He dismissed the Buyers' counterclaim.
The award in this case does not contain the arbitrator's reasons for his decision. These were published separately in a document which contained the following rubric at its head:
"These Reasons are issued subsequently to and separately from the Award and do not form part of the Award. They are given for the information of the parties only and on the understanding that no use whatsoever is made of them on or in connection with any proceedings on or related to the Award."
It cannot have come as any surprise to the parties that the arbitrator's reasons were published in that form. By agreeing to adopt the L.M.A.A. Small Claims Procedure the parties expressly agreed to waive all rights of appeal, thereby making reasons redundant as far as questions of law were concerned. Paragraph 4 of the Commentary expressly draws this feature of the Procedure to the attention of those contemplating making use of it. It also makes it clear that the arbitrator will not publish a reasoned award but will give brief, privileged reasons for his decision. There can be no doubt, therefore, that parties who choose to refer disputes to arbitration under this procedure agree to receive an unreasoned award with "privileged" reasons published separately. Although the Commentary does not state exactly what is meant by "privileged" reasons, the long-established practice among maritime arbitrators in the City of London of publishing reasons which state on their face that they are not to be referred to in any proceedings relating to the award is sufficiently well known not to require further explanation.
The Buyers now seek to have the award remitted to the arbitrator for reconsideration under section 68 of the Arbitration Act 1996. The application is made on two grounds: that the arbitrator based his conclusion on an argument of which they had no notice and to which they were given no proper chance to respond; and that in assessing damages the arbitrator wrongly disregarded an important item of evidence, namely, a quotation for the cost of carrying out the necessary repairs which had been obtained by the Buyers from another...
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