Universal Petroleum Company Ltd v Handels und Transport G.m.b.H.

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE KERR
Judgment Date17 Feb 1987
Judgment citation (vLex)[1987] EWCA Civ J0217-4
Docket Number87/0135

[1987] EWCA Civ J0217-4

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

(MR. JUSTICE WEBSTER)

Royal Courts of Justice

Before:

Lord Justice Kerr

and

Lord Justice Nourse

87/0135

AC 28/56

IN THE MATTER OF THE ARBITRATION ACTS 1950–1979

and

IN THE MATTER OF AN ARBITRATION

Between:
Universal Petroleum Company Limited (In Liquidation)
Appellants—Defendants (Respondents in the Arbitration)
and
Handels-Und Transport Gesellschaft MBH
Respondents—Plaintiffs (Claimants in the Arbitration)

MR. ALISTAIR SCHAFF (instructed by Messrs. McKenna & Co., Solicitors, London, WC2R OHF) appeared on behalf of the Appellants/Defendants (Respondents in the Arbitration).

MR. DERRICK TURRIFF (instructed by Messrs. Richard Stokes & Co., Solicitors, Godmanchester, Cambridgeshire, PE18 8HG) appeared on behalf of the Respondents/ Plaintiffs (Claimants in the Arbitration).

LORD JUSTICE KERR
1

This is the judgment of the court on appeal from an order made by Mr. Justice Webster in Chambers in the Commercial Court on 21st May 1986. It raises matters of general importance to section 1 of the Arbitration Act 1979 and in particular on the scope of the jurisdiction to order an arbitrator to give further reasons for his award under section 1(5) for the purpose of deciding subsequently whether or not leave to appeal should be granted pursuant to sub-sections (2), (3) and (4). The judge recognised that the order which he made, albeit in Chambers, might have far-reaching consequences and therefore gave leave to appeal.

2

In effect, the first and main issue turns on the scope of the jurisdiction properly exerciseable under section 1 of the 1979 Act to question or seek to "go behind" the primary findings made by an arbitrator as set out in a reasoned award. Or, to put it in another way, assuming that a reasoned award is intrinsically consistent and in no way appealable by reference to the principles laid down by the House of Lords in The "Nema" (1982) Appeal Cases 724 and Antaios v. Salen (1985) AC 191, can the court nevertheless properly order the arbitrator to give reasons for his primary findings in order to enable the court to determine whether or not the findings were such as no reasonable arbitrator could have made, and thereby turn an apparently unappealable award into one which may be appealable?

3

Since the issues turn largely on the question whether it is permissible to go behind a reasoned award which is unappealable on its face, there is obviously a preliminary problem about the extent to which—if at all—it is proper to inform the court about matters which do not appear from the award, nor from any apparent gaps in its reasoning. But in order to deal with these issues, one cannot avoid setting out extrinsic matters about which Mr. Justice Webster and we were informed, going beyond the "four corners" of the award. We therefore do so, but strictly on a de bene esse basis, as we constantly reminded counsel, without prejudice to the admissibility of any of this material.

4

The dispute was of a fairly routine nature. HTG were the Buyers and UPC the Sellers under a contract for the sale of a cargo of oil sold fob Porto Torres concluded on or about 8/13th April 1983 which provided for arbitration in England. The contract was made by telex and/or correspondence and there was a dispute about its terms and about the document(s) in which these were to be found. The terms included a specification dealing with the required density and Reid Vapour Pressure ("RVP") and with their ascertainment and certification. These can be measured and stated with precision according to the number of decimals used, and are expressed as permissible maxima. It was common ground that the parties ultimately agreed upon a density expressed to three decimals and an RVP expressed to two decimals. We deliberately mention no figures, because these merely detract from the issues. The first issue was whether the specified maximum density and RVP formed part of the contractual description of the cargo, so that compliance with them was a condition by virtue of section 13 of the Sale of Goods Act 1979, or whether the contractual description of the cargo was merely "unleaded gasoline", so that the terms of the specification were only concerned with the quality of the cargo.

5

That was one area of dispute. The second concerned the inspection and certification of the cargo by independent surveyors before loading. It was common ground that this was to be done by a "Saybolt" analysis and certificate. But it was in dispute whether or not the certificate constituted conclusive evidence of its contents. This in turn depended upon the contractual provisions which had been agreed in regard to it. If the contract was simply subject to INCOTERMS (1980 with the latest amendments), then the Saybolt certificate was not conclusive. But if the contract also incorporated the EXXON terms to the extent that the INCOTERMS were silent, then the certificate was made conclusive and binding.

6

That was a second area of dispute. The final matters concerned the significance of the analysis in the Saybolt certificate which was ultimately provided. This stated the density to four decimals and the RVP to three decimals. The contractual requirements for the first three and two decimals respectively were complied with in both cases. The Sellers therefore contended, on various grounds, that the additional decimals, purporting to show an excess in density of less than 1/10,000 and in RVP of less than 1/1,000, were in any event irrelevant. We refer to these various grounds hereafter compendiously as "the Sellers' additional reasons". The Buyers, on the other hand, contended that the Certificate conclusively demonstrated that the tendered cargo constituted a breach of condition of the contract. They accordingly treated its tender as a wrongful repudiation of the contract, ordered the vessel to sail away without loading, and claimed substantial damages on this basis.

7

Mr. Bruce Reynolds, a member of the Bar, was appointed as sole arbitrator. There was no "exclusion agreement", although the parties could have entered into one, which excluded an appeal to the courts. The arbitrator was requested to make a reasoned award pursuant to section 1(6) of the 1979 Act. He did so on 11th February 1986 and dismissed the Buyers' claim with costs. He concluded that the specified density and RVP did not form part of the contractual description but were only relevant to the quality of the cargo. On that basis he regarded them as "innominate" terms, in the sense that it depended on the circumstances and gravity of any breach whether this could be treated as a repudiation or only as giving rise to damages. Due to the extra decimals stated in the Saybolt certificate he held that the cargo was not in accordance with the contract. But he concluded that the Sellers "were in no way in repudiatory breach". If the claim had been for damages for breach of warranty he would have allowed a small sum to the Buyers since the extra decimals could in his view not be disregarded as de minimis. But since the claim had been solely for wrongful repudiation, he dismissed it altogether. He did not deal expressly with any of the other issues to which we have referred.

8

On 3rd March 1986 the Buyers issued a notice of motion for leave to appeal and/or to remit the award for reconsideration and further reasons on seven grounds marked (A) to (G). These need not concern us for present purposes. They were all based on matters alleged to be apparent on the face of the award in the sense of alleged errors of law in the arbitrator's Reasons or gaps in their contents sufficient to justify a remission for more detailed reasons to be given. We have heard no argument about them. While they have not been abandoned, it seems clear that an application on these grounds alone was regarded as having little prospect of success. The explanation lies in the arbitrator's findings in paragraph 1 of his Reasons, i.e., in paragraph 1 of the award. We only quote the material parts and have underlined the three findings of particular relevance for present purposes.

"1. On 8th April 1983 the Claimants confirmed by telex that they had bought from the Respondents 8000 metric tons… of unleaded gasoline from the Respondents at a price of US $286 per metric ton FOB Porto Torres to be lifted between 10th and 20th April 1983. In a section of this telex message entitled quality the Claimants set out various detailed specifications of the product purchased. These included:

Density…

RVP…

————————

Inspection at load port (if requested) by agreeable independent inspectors…General Terms and Conditions: As per INCO Terms 1980 latest amendments……"

9

This was the point of departure on which the whole of the rest of the arbitrator's reasoning was based. He continued on the lines already indicated. There was an agreed variation in the figures for density and RVP to three and two decimals respectively; the final Saybolt Certificate accorded with this variation subject to the addition of an extra fourth and third decimal respectively; and he then stated his legal conclusions which we have already summarised. There was no reference to EXXON terms or to the question whether the Certificate was conclusive evidence of its contents, as the Buyers contended. Nor was there any reference to the Sellers' additional reasons for contending that the extra decimals in the Saybolt certificate were in any event irrelevant.

10

On 21st March 1986 Mr. Justice Gatehouse granted an adjournment of the Buyers' notice of motion to enable them to file evidence. They did so, and the adjourned...

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