Torch Offshore LLC v Cable Shipping Inc. [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Cooke,Mr Justice Cooke |
| Judgment Date | 07 April 2004 |
| Neutral Citation | [2004] EWHC 787 (Comm) |
| Docket Number | Case No: 2003/1081 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 07 April 2004 |
[2004] EWHC 787 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Cooke
Case No: 2003/1081
Mr J McCaughran, QC and Mr J Russell (instructed by Clyde & Co, Solicitors) for the Claimant
Mr N Meeson, QC and Mr P Ferrer (instructed by Marine Legal Services, Solicitors) for the Defendant
Hearing dates: 5 th and 6 th April 2004
Approved Judgment
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 as handed down may be treated as authentic.
Mr Justice Cooke
Introduction
This is the hearing of an application by the Claimants (Torch) under sections 68(2)(d) and 68(3) of the 1996 Arbitration Act, by which Torch seek to have the award of Mr Mark Hamsher dated 5th November 2003 set aside or varied. It is said that he failed to address one of the central issues in the arbitration and that there was a serious irregularity affecting the proceedings and the award in consequence. In addition, by a direction given on 9 th November 2003, Torch's application under section 69 of that Act for permission to appeal from the award on three points of law was listed to be heard orally immediately following the section 68 application.
The claims in the arbitration arose out of the charter of a vessel, the "Midnight Hunter", formerly the "G Murray" which Torch chartered from the defendants (the Owners) to use as a light construction and pipe-laying vessel in the oil industry in the Gulf of Mexico. The charter was on a Supplytime Form (as amended) for a period of three years. In the charter the vessel was described as having clear deck space of "over 1000 sqm @ 10t/sqm", although, at the foot of the next page of the description the words appeared "DETAILS GIVEN IN GOOD FAITH BUT WITHOUT GUARANTEE".
Torch claimed that in deciding to enter into the charterparty it relied on two representations:-
i) A representation that the deck strength of the vessel throughout its clear deck area was 10mt/sqm (the first representation); and
ii) A representation that the vessel's deck could support, without the need for supporting pillars below deck, the concentrated loads imposed by Torch's modular pipe-laying system (MLS), the details of which had been set out in a fax dated 28 th September 2001 from Torch's chief engineer, Mr Lecarme to the Owners (the second representation).
As found by the arbitrator, both of those representations were made and neither was true. He also concluded that the Owners had reasonable grounds for believing that they were true at the time they were made because of assurances given to them by the shipyard which had carried out conversion work on the vessel and supplied them with calculations of the vessel's deck strength. The representations were therefore false but innocently made. Torch complains primarily about the Arbitrator's treatment of the issue of reliance on those representations by Torch in entering the charter.
Torch maintains that there is a serious irregularity in the award inasmuch as the arbitrator failed to address the question whether the second misrepresentation did or did not induce Torch to enter the charter. In addition, Torch seeks leave pursuant to section 69(2)(b) of the 1996 Act to appeal on three questions of law:-
i) Whether the Tribunal erred in law in failing to apply the correct legal test in deciding that the first misrepresentation did not induce Torch to enter the charter.
ii) Whether the Tribunal erred in law in deciding that the second misrepresentation did not induce Torch to enter the charterparty if, contrary to its primary submission under section 68, the arbitrator did address the issue.
iii) Whether the arbitrator erred in law in deciding that Torch was barred from rescinding the contract by reason of lapse of time.
Although Torch had originally terminated the charter on the ground of breach of charter by the Owners, by the time of the hearing it was accepted by Torch that it was not entitled to terminate the charter on the grounds of repudiatory breach or under clause 2Instead Torch claimed it was entitled to and had rescinded the charter on the grounds of innocent misrepresentation. Torch also claimed damages under section 2(1) of the Misrepresentation Act 1967 and, if it had no right to rescind, it claimed damages for breach of the vessel's description in the charterparty, namely its deck strength.
Torch failed in its claim for damages under the Misrepresentation Act but succeeded in the arbitration in its claim for damages for breach of contract. The arbitrator held that the vessel was misdescribed in the charter as having a deck strength of 10 mt/sqm, the quantum of such damages being left over for later assessment. The cost of reinforcement of the deck to the appropriate strength was $77,000 only and the work took some 11 days.
Although there was some argument as to the appropriate relief to be given by the Court, in the end it was accepted that, should the application succeed under section 68, it would be necessary to remit the award to the arbitrator for him to make a finding as to whether or not the second representation did induce Torch to enter the charter. Equally he would have to decide whether any right of rescission in respect of that representation was lost, should he find that there was inducement. Should permission to appeal be given, and such an appeal he heard and succeed, remission would again be the appropriate remedy so that the arbitrator could apply the correct test for inducement. Should Torch succeed on the issue of inducement, the question of loss of the right to rescind would be one of equity, where the facts fell to be taken into account, so that remission would again be appropriate so that the chosen finder of fact could determine the issue.
The Background Facts as found by the Arbitrator
The vessel that was eventually renamed the "Midnight Hunter" was built in Singapore in 1978 for offshore construction work with a large crane but was subsequently converted into a diamond-mining vessel. She was purchased by the Owners at the end of 2000 and in July 2001 they placed a contract with a Polish shipyard for the conversion of the vessel, including the insertion of a new section of 20 metres. Calculations in support of a deck strength of 10 mt/sqm were supplied by the yard to the Owners in August 2001.
It was in the autumn of 2001 that Torch contacted the Owners with a view to chartering the vessel for use as a light construction vessel in the Gulf of Mexico. On 28 th September 2001, Torch asked the Owners whether equipment weighing about 280 mt spread over an area of about 50 square metres could be carried on deck and whether under deck pillars would be required to carry the load. By an e-mail of 1 st October, the Owners responded that the deck loading from frame 31 was ten tonnes per square metre and that no pillars would be required to carry the weight of equipment specified by the charterers in their enquiry. By the end of the hearing, having initially contended that it was true, the Owners admitted that the second limb of that reply was a false unambiguous statement of fact, although at the time they did not appreciate that it was inaccurate. By the end of the hearing, having initially contended that it was made "without guarantee", Owners also accepted that the representation in the email of 10 mt/sqm was also untrue, as were other representations to the same effect made on other occasions, whilst confining themselves to arguing that the representations did not induce Torch to conclude the charter and that the right to rescind had been lost.
Although negotiations had originally proceeded for a bareboat charter with a purchase option, these did not result in such a charter. Instead on 31 st May 2002 the parties concluded a time charter on a Supplytime Form for three years. In that charterparty the vessel was described as having a clear deck space of "over 1000 m 2 at 10mt/sqm."
The vessel was delivered on 19 th August 2002 and was initially used by Torch for a variety of tasks in the Gulf of Mexico. Torch's plan was to install an MLS on the vessel originally with three, but subsequently with four, coils. The weight of that was 280 tonnes which was the reason for the request on 28 th September 2001 which led to the e-mail of 1 st October from the Owners to which I have already referred.
The arbitrator found that by 25 th September 2002, Torch appreciated that the deck strength of the vessel was not 10 mt/sqm. The calculation carried out by one of their employees at that time indicated (wrongly) that the existing deck strength was approximately one-tenth of that figure. The Arbitrator went on to find that Torch had knowledge, both of the facts and the right to rescind, within, at the most, six weeks from the end of September 2002. He found also that Torch traded the vessel between October and December 2002 and made the last payment of hire on 3 rd January 2003. During that period however Torch was constantly pressing the Owners to confirm the actual strength of the deck and was considering both internally and with Owners how the matter could be remedied by appropriate deck strengthening. The arbitrator found that Torch was not affirming the contract by so doing, nor was there was any unequivocal representation by Torch that it did not intend to exercise any right to rescind.
The Owners, during this period ascertained that the yard's calculations of deck strength were flawed. They procured a Finite Element Analysis to establish the true deck strength, the results of which were produced on 18 th...
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