Buyuk Camlica Shipping Trading & Industry Co Inc v Progress Bulk Carriers Ltd

This is the hearing of a number of applications by the Claimant under the Arbitration Act 1996 including applications in two arbitration references under Sections 68 and 69 and, as those applications were made out of time, for an extension of time in order to make them pursuant to CPR 62.9. Since the issues that are raised by these applications are of some complexity, it is necessary to set out the background in a little detail.

The Claimant (to whom I shall refer as the Owners) chartered their vessel “Hilal I”, a bulk carrier built in Japan in 1977, flying the Turkish flag, to the Defendant (to whom I shall refer as the Charterers) under two separate time charterparties for two consecutive charter periods. The first charterparty (“the 2004 charterparty”) was dated 8th September 2004 and lasted from 1st October 2004 until 30th March 2005. The second charterparty (“the 2005 charterparty”) was dated 15th February 2005 and, in direct continuation from the 2004 charterparty, lasted from 30th March 2005 until 24th August 2005. Each of the charterparties was on an amended NYPE (1946) form and the terms of each were substantially the same although the hire rates were different.

A number of disputes arose between the Owners and the Charterers out of the performance of the two charterparties. Those disputes were referred to arbitration in two separate arbitration references, one in respect of each charterparty. Both arbitration references were conducted pursuant to the LMAA Terms 2002. The Arbitral Tribunal was the same in both references and comprised Mr Michael Baker-Harber, Mr Charles Measter and Mr Brian Williamson. The Arbitral Tribunal issued two Awards each dated 26th March 2009, one under each arbitral reference, and one set of Reasons common to both Awards.

The two major disputes between the parties in the arbitrations related to the refusal by the Owners under the 2004 charterparty to carry a cargo of HBI (hot moulded briquettes of direct reduced iron) from Misurata in Libya; and the refusal by the Owners under the 2005 charterparty to carry a cargo of DRI (direct reduced iron) from Point Lisas, Trinidad to New Orleans, USA. The Charterers claimed, and the Arbitral Tribunal found, that there were orally agreed variations of both charterparties that entitled the Charterers to carry cargoes of HBI and DRI notwithstanding the terms of Rider Clause 38 of each of the charterparties which had specifically excluded from the categories of permitted cargoes to be loaded any cargoes of Direct Reduced Iron in any form. The Owners do not challenge the Arbitral Tribunal’s findings thatoral variations were made to the two charterparties but, in a variety of ways, now seek to challenge the Arbitral Tribunal’s conclusions that the Owners’ refusals to implement the orally agreed variations constituted breaches of contract by the Owners entitling the Charterers to damages under each of the charterparties.

The Arbitral Tribunal dealt with all of the legal submissions on the basis of written arguments but heard oral evidence concerning the orally agreed variations of the charterparties and the HBI and DRI disputes over three days between 9th and 11th July 2008. On 23^rd September 2008, the Arbitral Tribunal received detailed written Closing Submissions from both parties, which covered not only the oral evidence but also the parties’ legal arguments. The written Closing Submissions submitted on behalf of the Owners extended to some 305 paragraphs and occupied 81 pages of print. As for the Charterers, they produced 481 paragraphs of written submissions over 115 pages of print. The Owners then served a short set of Reply Submissions on 24th October 2008.

It appears that the arguments raised by the parties were not, at least initially, found by the Arbitral Tribunal to be easy to resolve. By an email dated 4th March 2009, Mr Baker-Harber informed the parties that the delay in producing an award was attributable to the Arbitral Tribunal’s “inability to agree a really rather fundamental point on the two largest claims relating to the HBI / DRI cargoes.” Having said that, by another email dated 10th March 2009, Mr Baker-Harber informed the parties that the Arbitral Tribunal was now “ad idem on the point that was troubling us and we are proceeding at full ahead.”

Shortly thereafter, on 26th March 2009, the Arbitral Tribunal produced its Final Award in each of the arbitration references and a common set of Reasons for both. In the 2004 charterparty Award, the Arbitral Tribunal concluded at paragraph B (c) that “[t]here was a legally binding agreement between Owners and Charterers that an HBI cargo would be carried and Owner’s subsequent refusal to undertake a voyage carrying such a cargo was a breach of that agreement, entitling Charterers to damages”. At paragraph B (b) of the 2005 charterparty Award the Arbitral Tribunal concluded that “[t]here was a legally binding agreement between Owners and Charterers that a DRI cargo would be carried to the USA and the Owners’ subsequent refusal to undertake a voyage carrying such a cargo was a breach of that agreement, entitling Charterers to damages”. In both Awards, the Arbitral Tribunal expressly reserved to itself jurisdiction to deal with all outstanding matters in the references including “quantum issues”.

The one set of Reasons supporting both Awards has to be read and understood against the background of the terms of the two charterparties in issue, the adduced oral evidence, and the detailed written submissions served by the parties.

So far as is relevant to the Owners’ applications, each of the charterparties provided: that the vessel’s moulded depth was 14.05 metres (Rider Clause 53 - Description Clause); that the employment of the vessel was to be in the carriage of lawful merchandise in lawful trades between safe port and/or ports and always via safe berths, safe anchorages and always safely afloat (lines 24 – 32); and that the permitted cargo or cargoes should be laden and/or discharged in any dock, wharf or place in port or elsewhere where the Charterers may direct, provided that the vessel can safely lie always afloat at any time of tide (Clause 6).

It was common ground between the parties, at latest by the time when they came to serve their written Closing Submissions, that the vessel’s actual moulded depth, described in Rider Clause 53 of the charterparties as 14.05 metres, was in fact 16.10 metres. The relevance of this misdescription is that a vessel’s air draft (i.e. the distance between the waterline and the vessel’s hatch coamings) is a product of her moulded depth: the latter is one of the principal factors used to calculate the former, which is done by subtracting the vessel’s actual draft from the sum of the vessel’s moulded depth, hatch coaming height and the rise in the deck.

The air draft restrictions for vessels loading at Misurata in Libya (to which the Charterers ordered the vessel to load a cargo of HBI under the 2004 charterparty as varied) and at Point Lisas in Trinidad (to which the Charterers ordered the vessel to load a cargo of DRI under the 2005 charterparty as varied) were respectively 10.5 and 11.0 metres. If the vessel’s actual moulded depth had complied with her described moulded depth as set out in Rider Clause 53 of each of the charterparties, her air draft would have come within the applicable restrictions at both of those ports. As it was, however, the vessel’s actual moulded depth meant that the vessel’s actual air draft inevitably exceeded the air draft restrictions at Misurata and Point Lisas by some margin.

The most substantial parts of the parties’ written Closing submissions were devoted to the issue whether the parties had orally agreed variations under each of the charterparties permitting the Charterers to load what would otherwise have been forbidden cargoes: HDI and DRI. It is apparent from paragraphs 249, 254, 365, 370, 387 and 447 of the Charterers’ written Closing Submissions, that the Charterers were claiming that the two orally agreed variations were: in respect of the 2004 charterparty that the vessel should load a cargo of HBI at Misurata in Libya; and in respect of the 2005 charterparty that the vessel should load a cargo of DRI at Point Lisas in Trinidad. The Charterers alleged that they relied on those orally agreed variations of the two charterparties by entering into two sub-charterparties of the vessel for the loading and carriage of HBI and DRI out of Misurata and Point Lisas respectively; so that, when the Owners refused to go to those ports to load those cargoes, they suffered substantial loss and damage.

The Owners’ primary defence in relation to the Charterers’ allegations concerning HBI and DRI was that no oral variations to the two charterparties were ever agreed or, if they were agreed, that they were unsupported by consideration and/or were too uncertain to be enforceable. The Owners’ secondary defence was that, even if the two charterparties were subject to binding oral variations permitting the loading and carriage of respectively HBI and DRI, nevertheless there was no actionable breach of the charterparties by the Owners because the Charterers could not validly have ordered the vessel to load the cargoes at Misurata or Point Lisas either because, given her actual moulded depth and air draft, the vessel could not physically load those cargoes or because it would have been unsafe for the vessel to have done so; or, put another way, because the Owners can never be obliged under a charterparty to load cargo which it is physically impossible or unsafe for a vessel to do or attempt: see paragraphs 99 – 109, 126, 192 – 197 and 201 - 205 of the Owners’ written Closing Submissions. The Owners relied upon the safe berth / port warranties in the charterparties to support their arguments.

In this context, it is to be noted that apparently the inability of the vessel to meet the air draft restrictions at the proposed load ports was not, and has never been said to have been, at the time the reason why the Owners refused to permit the vessel to load the cargoes of HBI and DRI at the ports in question. The air draft restrictions and consequential physical impossibility or unsafety issues were not originally advanced by the Owners in their pleadings; they were only formally introduced in the Re-Amendment Defence on 23rd June 2008, shortly before the oral hearing took place.

In response to the Owners’ case that, even if orally agreed variations had been made, nevertheless there could be no actionable breach because the vessel could not physically or safely have loaded at either load port (paragraph 99 of the Owners’ written Closing Submissions), the Charterers’ first argument was that, since the Owners agreed to load the vessel with HBI out of Misurata and DRI out of Point Lisas, they accepted the risks of the vessel not being able to do so (paragraphs 254 and 447 of the Charterers’ written Closing Submissions). Their second answer was divided into a variety of alternative formulations each of which ultimately depended on the fact that, in breach of warranty, the vessel’s moulded depth of which the calculation of the vessel’s air draft was a product was significantly in excess of that described (paragraphs 254 ff of the Charterers’ written Closing Submissions). The net effect of Charterers’ arguments was that, if it was impossible or unsafe for the vessel to have loaded the cargoes of HBI and DRI at respectively Misurata and Point Lisas, that would not have been the case if the vessel’s moulded depth had been as described in the charterparties and it was only the case because of the Owners’ original breach of charterparty. Therefore, one way or another (and the Charterers relied variously on estoppel, on the principle that a party should not be entitled to avoid liability for one breach of contract by reliance on his own breach of another contractual obligation, and finally on a claim for damages for misdescription) Charterers maintained that the Owners were liable in damages for (adopting the language of the Arbitral Tribunal) having reneged upon binding agreements to load those cargoes.

The reply of the Owners in their written Closing Submissions was in three parts: first, in answer to the Charterers’ case that the Owners were estopped from denying the vessel’s moulded depth of 14.05 metres, the Owners argued that there was no reliance by the Charterers on the charterparty description in their calculations of the vessels’ air draft. The Owners said that the Charterers’ operations manager, Captain Prasad, relied on the vessel’s master to calculate the vessel’s air draft and that, if the Charterers did not actually know the vessel’s true moulded depth, they (i.e. Captain Prasad) had the information “at [their] fingertips” – even before they entered into the sub-charterparties: paragraphs 132 - 140. Secondly, in answer to the case that they could not rely on their own breach of contract to avoid liability for another, the Owners argued that this was a principle of construction and inapplicable to the case before the arbitrators: paragraphs 141 - 154. Included in this answer was the Owners’ contention that the breach of contract was known to and waived by the Charterers when Captain Prasad received a deadweight scale from the Owners and/or when they received air draft calculations from the Owners of the vessel’s air draft: paragraph 153.

Thirdly, in answer to the Charterers’ claim for damages for misdescription, the Owners set out their case in five short paragraphs in their written Closing Submissions, which they repeated with only slight variations in relation to the similar claim under the varied 2005 charterparty at paragraph 201 of their written Closing Submissions:

“155.

The short answer to this claim is that the Charterers cannot establish that they suffered any loss or damage by reason of any breach of contract.

156.

The Charterers did not rely on the charterparty description of the moulded depth in fixing the vessel for sub-charter to Shams Marine. There is no reference to the moulded depth in the sub-fixture. Captain Prasad says in terms that he relied on the master to calculate the air draft; he does not say that he relied on the charterparty description.

157.

Even if the Charterers could mount the hurdle and prove causation, which they cannot, the Charterers have clearly failed to mitigate their loss and/or acted unreasonably by sub-chartering the vessel in circumstances where the master had been giving information to the Charterers indicating that the vessel could not load the cargo at Misurata.

158.

Further the Charterers waived any breach by reason of their being in possession or information concerning the real moulded depth in December 2004 and/or having received air draft calculations from the master in February 2005 which demonstrated that the vessel would not be able to load at Misurata.

159.

Accordingly, the claim for damages for breach of charterparty description of the moulded depth should be dismissed.”

The Arbitral Tribunal began its Reasons with an introductory paragraph which, since the basis of the Owners’ section 68 application is that the Arbitral Tribunal failed to deal with all the issues put to it, assumes some significance. In paragraph 1 of its Reasons, the Tribunal stated:

“We add, by way of introduction, that [the HBI and DRI disputes] involved substantially greater sums than the remainder and we heard oral evidence relating to them in London in July 2008. The remaining disputes were addressed by way of written submissions, running in total to some 200 pages. This was clearly a case where the matter of principle between the parties was as or more important than the sums at stake. For us to address every point made by counsel, whose thoroughness and painstaking attention to detail was to be admired, would we feel be disproportionate. We trust we will be forgiven for not reciting every point made, although we have, we hope, taken them all on board.”

In relation to the Charterers’ case that there were orally agreed variations of both charterparties, the Arbitral Tribunal clearly preferred the Charterers’ evidence. As to the 2004 charterparty, it is clear from paragraphs 11 and 16 of their Reasons that the Tribunal concluded (as the Charterers had submitted at paragraphs 175 – 177 of their written Closing Submissions) that in December 2004 the Owners agreed to a variation of the charterparty and to load an HBI cargo probably out of Misurata in Libya on which the Owners subsequently reneged. It is also in my judgment clear from paragraphs 14 and 17 of the Reasons that the Tribunal accepted the Charterers’ submissions at paragraphs 235 and 236 of their written Closing Submissions and found that, in reliance on the Owners’ agreement, the Charterers committed themselves and the vessel to sub-charterers, Sham Marine, specifically to load an HBI cargo out of Misurata. As for the 2005 charterparty, it is apparent from the two paragraphs numbered 24 in the Reasons that the Tribunal accepted the Charterers’ case at paragraphs 365, 370, 379, 380 and 387 of their written Closing Submissions that the Owners agreed to a variation of the charterparty and to load a cargo of DRI from Trinidad (probably or possibly, it would appear, Point Lisas) for carriage to New Orleans, in reliance on which the Charterers sub-chartered the vessel to an important client of theirs, Mittal, specifically for such a voyage.

The Owners do not challenge the Tribunal’s findings as to the oral agreements. As Mr. Peter MacDonald Eggers, who appears on their behalf, explains at paragraph 38 of his Skeleton Argument, the Owners’ complaint is with the Tribunal’s “decision that the Charterers were entitled to damages for the Owners’ failure to load HBI and DRI cargoes in accordance with the oral agreements found to exist”, not with the oral agreements themselves. The Owners limit “their challenge to the arguments based on the fact that the vessel would not have been able to load the cargoes in any event, because of an excessive air draft”.

In the light of the Owners’ complaint, both parties’ counsel accepted that the critical analysis in the Arbitral Tribunal’s Reasons was to be found in paragraph 17 which, while it dealt with the HBI cargo under the 2004 charterparty as varied, was said by the Tribunal at paragraph 28 of the Reasons to apply also to the DRI cargo under the 2005 charterparty as varied (although the facts as to draft restrictions at Point Lisas were “less clear cut”). Paragraph 17 was as follows:

“Our conclusion that there was a binding agreement which Owners had reneged on, lead us to an inquiry as to what damages Charterers might recover. Mr Mazman said, and we accept, that he offered the vessel to Sham’s on 25^th February (and indeed fixed Hilal I or sub on 1^st March for this quantity) to load a basic 20,000mt cargo and would have been able to secure a ‘top up’ 10,000mt for Indian buyers which would have made the voyage hugely profitable, essentially because the 10,000mt went more or less straight to the bottom line. In the event he was obliged to insert a smaller vessel to lift his basic commitment of 20,000mt and thereby lost that bonus. However, the story does not stop or indeed start there: the vessel could not have loaded any cargo at Misurata. It could not meet the air draft restriction, even juggling with ballast or part loading some holds and completing them later. It transpired that the main reason for this was that the vessel’s moulded depth was 16.1 metres and not the 14.05 meters as appears in the charterparty description. This caused us some difficulty. Was it open to Charterers to base their claim for damages for reneging on the agreement to load HBI on a voyage that the vessel could not physically perform? After some considerable debate, between the members of the tribunal, we concluded that the two breaches, namely refusal to perform the voyage plus the misdescription rendering performance physically impossible, when combined, entitled the Charterers to damages based upon the difference between the notional voyage the vessel should have performed and what business she did instead…”

The Owners’ primary application, Mr. MacDonald Eggers explained in the course of his written and oral arguments, is under section 68 of the Arbitration Act 1996. The Owners only apply for permission to appeal under section 69 of the same Act by way of secondary case. Furthermore, in the light of Mr. MacDonald Eggers’ further explanation in his written Skeleton, it is apparent that, notwithstanding the way in which the Claim Form has been formulated, the Owners do not now ask under section 68 for orders setting aside those parts of the two Awards that conclude that there were legally binding agreements between the Owners and the Charterers that HBI and DRI cargoes would be carried. The Owners’ position is set out at paragraph 39 of Mr. MacDonald Eggers’ Skeleton argument where it is argued that, in making its Awards:

Mr. Mark Jones, who appears on behalf of the Charterers, meets these arguments in a variety of ways to which I shall come later in the course of this judgment. He has, however, two anterior arguments under the Arbitration Act 1996 which, if accepted, he suggests deny the Owners in the first instance an entitlement to mount any application at all under sections 68 and 69. First, he reminds the court that the Tribunal decided that the Owners committed two breaches of contract under each charterparty (a breach of the oral agreement and a breach of the contractual warranty as to the vessel’s moulded depth in Rider clause 53) and that it was a combination of those two breaches that entitled the Charterers to damages. He points out that, before the Tribunal, the Charterers had advanced two arguments based on the breach of Rider clause 53: namely, (i) that the Owners were precluded from relying on the vessel’s actual moulded depth of 16.1 metres as a justified reason for not loading the vessel with the permitted cargoes at the two ports in question, on the basis that a party may not take advantage of his own wrong: see Alghussein Establishment v Eton College [1988] 1 WLR 587; and (ii) that the Charterers are entitled as damages to the sum that they would have earned from the vessel but for the fact that the vessel’s actual moulded depth was 16.1 metres and not 14.05 metres as warranted: see paragraphs 248 - 269 and 441 - 448 of the Charterers’ written Closing Submissions. Mr. Jones suggests that it is likely that the Tribunal accepted the simpler of the two arguments: that based simply on damages for breach, as to which he referred me to Coghlin & Others on Time Charters, 6^th edition, paragraph 3.17. As he puts it in his Skeleton Argument at paragraphs 26 - 29:

“In this case, the inability to load, and for that matter any related lack of safety of port and/or berth at Misurata or Point Lisas, were a quite obvious result of the Vessel not being as warranted in Clause 53.

However Owners try to dress it up, the simple fact remains:

a.

had she been as warranted, then she could have been loaded (and safely loaded), and so Charterers could have performed the lucrative sub-fixtures (and so Owners would have no defence to the claim for reneging on the relevant oral agreements)

b.

however, she was not as warranted and so – as a direct result - loading was impossible (and hence unsafe), and so Charterers could not have performed the lucrative sub-fixtures.

Hence, the conclusion that “the two breaches, namely refusal to perform the voyage plus the misdescription rendering performance physically impossible, when combined, entitled the Charterers to damages based upon the difference between the notional voyage the vessel should have performed and what business she did instead…”

It was the combination of the two breaches of contract that lead to the entitlement to damages for the lost sub-fixtures. It is not a case where the Tribunal was considering a measure of loss attributable to one sort of breach, as opposed to that attributable to another sort of breach..”

As to the Owners’ proposed answers to this case as put to the Tribunal, set out at paragraphs 156 – 158 of the Owners’ written Closing Submissions, Mr. Jones remarks that they were all based on the factual allegations that the Charterers knew or should have known about the vessel’s actual moulded depth and/or knew or should have known or been able to work out that the vessel’s air draft meant that the vessel would not be able to meet the air draft restrictions at Misurata and Point Lisas before they entered into the sub-charterparties. Mr. Jones acknowledges that the Reasons do not expressly cover these answers but submits that it is to be inferred and is more likely that the Arbitral Tribunal concluded that they simply did not impinge on its decision and so omitted to include its precise reasoning on the points in its Reasons.

Therefore, if the Owners have anything about which to complain in relation to the Reasons, Mr. Jones says that it is that they are ambiguous or could be clearer - in which case section 57 of the Arbitration Act 1996 provides the Owners with appropriate means of recourse. Mr. Jones concludes that, since by virtue of section 70 of the Act no application under sections 68 or 69 may be brought if the applicant has not first exhausted any available recourse under section 57 and since the Owners have not availed themselves of the recourse available to them under that section, they are precluded from making any such application.

The second argument that Mr. Jones advances to defeat the possibility of any application being made by the Owners under sections 68 and 69 of the Arbitration Act 1996 is that the Owners failed to make their applications within the 28 day period stipulated in section 70(3) of the Arbitration Act 1996 and should now be denied an extension of time under section 80(5) of the Act and CPR 62.9. Since, however, one of the factors to be considered in connection with an application for an extension of time is the strength of the substantive application (whether under section 68 and/or 69), it may be sensible to consider the substantive applications in this case first, and also the impact (if any) of section 57, before turning to what some others might consider to be the logically anterior question of whether the Owners should be permitted to mount any substantive application in the first instance.

The Owners’ application under section 68 is based on sub-section (2)(d): the Owners have to show (i) a failure by the Tribunal to deal with all the issues that were put to it, (ii) which the court considers has caused or will cause the Owners substantial injustice.

It is clear that, contrary to the assertion made on behalf of the Owners at paragraph 39(1) of Mr. MacDonald Eggers’ Skeleton Argument, the Arbitral Tribunal dealt specifically with the issue whether or not the Charterers were entitled to damages. That paragraph in Mr. MacDonald Eggers’ Skeleton Argument conflates issues with submissions: he says there that the Tribunal did not deal with all the critical issues, “in particular the Owners’ submissions that the Charterers were not entitled to damages...” It may be that the Tribunal did not deal explicitly with all of the Owners’ submissions but that does not mean that it did not deal with the issues, let alone the critical issues. A failure to deal with an argument is not the necessary equivalent of a failure to deal with an issue under the section: Margulead Ltd. v Exide Technologies [2004] EWHC 1019. As Griffiths L.J. said in Egil Trust Co. Ltd. v Pigott-Brown [1985] 3 All ER 119, 122, there is no duty on a judge, in giving reasons, to deal with every argument presented by counsel in support of his case. The same applies to arbitral tribunals: Checkpoint Ltd. v Strathclyde Pension Fund [2003] EWCA Civ 84.

However, the principal issue (i.e. the very dispute that the Tribunal had to decide), whether or not the Charterers were entitled to damages, could not be decided fairly in this case unless the Tribunal also dealt with such issues as had been raised by the parties that were essential to be dealt with for the Tribunal to come fairly to its decision on that principal issue. Section 68(2)(d) of the Arbitration Act 1996 is designed to cover only those essential issues which were put to the Tribunal and were necessary to be dealt with by the Tribunal for a fair decision on the claims or the specific defences raised in the course of a reference: World Trade Corporation v Czarnikow Sugar Ltd. [2005] 1 Lloyds Rep. 422, paragraphs 16 – 20.

The requirement in section 68(2)(d) does not mean that the tribunal has to decide all issues raised by the parties one way or another. It may be that the tribunal will deal with certain of the issues in such a way that other issues which might have appeared at least on the pleadings or in submission or on a particular view of the case to be relevant issues arising for resolution, will fall away and not require ultimate determination (Checkpoint Ltd. v Strathclyde Pension Fund [2003] EWCA Civ 84 para. 49) - although a tribunal might wish in the course of its reasons to articulate what it might have decided on those other issues, had it proved necessary to do so. Provided that the tribunal decides all those issues put to it that were essential to be dealt with for the tribunal to come fairly to its decision on the dispute or disputes between the parties, it should, in my view, have complied with the requirements of section 68(2)(d). Therefore if, because of the tribunal’s reasoning and decision on some issues, certain other issues fall away and are not decided, that does not mean that the tribunal will not have dealt with all essential issues in accordance with section 68(2)(d) although it may be that for separate reasons, whether of analysis or clarity, its decision will be open to criticism or deserving of an application for clarification.

In this case, it seems to me that, in order to decide the principal issue, whether or not the Charterers were entitled to damages in respect of the refusals to load the cargoes of HBI and DRI, the issues that, on the basis of the written Submissions presented to it, the Arbitral Tribunal was bound to consider and, if critical to a fair decision on that principal issue, to deal with were:

Were the charterparties orally varied, as the Charterers alleged?

Reading the Awards and Reasons in a reasonable and commercial way (the normal approach to be adopted towards arbitration awards: Zermalt Holdings v Nu-Life Upholstery Repairs [1985] 2 EGLR 14) in the context of the submissions made to it, it is clear in my judgment that the Arbitral Tribunal decided in favour of the Charterers that:

It is clear, in my judgment, therefore, that the Arbitral Tribunal decided Issues (i), (ii), (iii), (iv), (v) and (vii). The combination of the Owners’ two breaches under each charterparty caused loss to the Charterers: it was a breach of contract under each of the charterparties as varied for the Owners to refuse to load the cargoes, and in so far as it was impossible (and, as Mr. MacDonald Eggers submitted, therefore, unsafe) for the vessel to load the cargoes at the two ports in question, that was attributable to the breach by the Owners under each of the charterparties of the vessel’s warranted description. Given the basis of the Arbitral Tribunal’s decision, Issues (ix) and (x) fell away and, to that extent, can be seen to have been disposed of by the Arbitral Tribunal even if not explicitly.

As for Issue (viii), it seems to me clear that, on the basis of the Arbitral Tribunal’s approach and conclusions, this argument also fell away: the relevant reliance by the Charterers, as found by the Tribunal, was the entering into the sub-charterparties on the basis of the agreements by the Owners to load the formerly prohibited cargoes onto the vessel at (probably or possibly) the specified load ports. Even if it had been the case that the Charterers did not rely on the vessel’s warranted moulded depth when fixing the sub-charters or when ordering the vessel to Misurata and Point Lisas, on the basis of the Arbitral Tribunal’s approach and reasoning that was irrelevant. The Owners might criticise the correctness of that approach and reasoning but, given the manner in which the Tribunal analysed the matter, the question of reliance (or absence of reliance) on the vessel’s warranted moulded depth was neither essential to its conclusion nor, in the event, necessary for a fair determination of the principal issue between the parties.

Issue (xi) was also not explicitly addressed by the Arbitral Tribunal in its Reasons but, in my judgment, this is largely for the same reasons as apply to Issue (viii). After having heard the oral evidence from the two main protagonists, Mr. Mazman of the Charterers and Mr. Topal formerly of the Owners, the Tribunal found that Mr. Mazman committed the Charterers to the two sub-charterparties in reliance on Mr. Topal’s agreement on behalf of the Owners to load the specific cargoes onto the vessel at (probably or possibly) Misurata and Point Lisas. There was never apparently any suggestion on behalf of the Owners that Mr. Mazman’s reliance on those agreements in fixing the sub-charterparties was unreasonable, or that Mr. Mazman should have known or learned about any impediment as to the vessel’s ability to load the specific cargoes at those specific ports. If Mr. Mazman’s entering into the two sub-charterparties in reliance on the Owners’ specific agreements was not unreasonable, then the contention that the Charterers failed to mitigate their loss, based as it was on an allegation that the Charterers’ operations manager might have been or was aware, or was able to calculate, that the vessel would not be able to load at the two ports, falls away.

I have to add that the Owners’ complaint about the Arbitral Tribunal’s Reasons in this context (Issue xi) is surprisingly unfair. It would appear that, until their written Closing Submissions, all that the Owners had chosen to say in relation to mitigation, notwithstanding that the burden of proof lay squarely on them, was to not admit that the Charterers had mitigated their loss. It was only in their written Closing Submissions that the Owners made what might be described as a positive case of failure by the Charterers to mitigate by entering into the sub-charterparties. Even then, it was a brief mention (see paragraphs 157 and 205) and the Owners appear – no doubt for good reason - to have made no attempt (at least not in any direct sense) to criticize the reasonableness of Mr. Mazman’s reliance on what had been specifically promised to him by Mr. Topal or to allege that Captain Prasad should have passed on to Mr. Mazman what he had learned from the vessel’s master. It comes as no surprise, in those circumstances, that in their very detailed written Closing Submissions which were exchanged with those of the Owners, the Charterers did not contemplate or address any allegation that the sub-charterparties had been entered into unreasonably. (The Charterers did, however, predict the possibility that an entirely different case of failure to mitigate might be advanced against them by the Owners in respect of the 2005 charterparty, and this was addressed in detail both by the Charterers in their Closing Submissions (paragraphs 412 ff) and also by the Tribunal in its Reasons (paragraphs 24 – 27).)

This leaves Issue (vi): if there was a breach of the description warranties in clause 53 of each of the charterparties, did the Charterers waive it by reason of their being in possession of information concerning the real moulded depth in December 2004 and/or having received air draft calculations from the master in February 2005 which demonstrated that the vessel would not be able to load at Misurata / Point Lisas? There is no explicit sign in the Awards or Reasons that this issue was addressed by the Arbitral Tribunal. I am not at all surprised. The argument of waiver (other than in respect of the Charterers’ alleged state of knowledge) was nowhere properly advanced or developed by the Owners in their written Closing Submissions (all that they said substantively on the subject, other than in relation to knowledge, was confined to the short assertion occupying paragraph 158), was not apparently predicted or dealt with by the Charterers in their written Closing Submissions, and can in any event be seen to have been bad. As the Owners explained in another context in their own written Closing Submissions (paragraph 118), there are only two types of waiver: waiver by election and waiver by estoppel. Assuming (because they did not explain anywhere) that the Owners were referring in paragraph 158 to the latter (there being no relevant election to which Charterers were put), they made no attempt in their written Closing Submissions (or, so far as I am aware, anywhere else) before the Arbitral Tribunal to identify any of the necessary elements of estoppel, whether by representation or otherwise. In the course of his oral submissions to me, Mr. MacDonald Eggers suggested that the Owners’ case entailed an allegation that “the Charterers unequivocally represented or promised to the Owners that they would not rely on the charterparty description of the vessel in clause(s) 53” and “and that they would not insist on their strict legal rights to claim damages for misdescription”. However, even before me, the Owners did not satisfactorily identify any statement or conduct amounting to such an unequivocal representation by the Charterers to the Owners or any reliance by the Owners to their detriment sufficient to begin any sustainable argument of waiver. Moreover, there is no sign or hint of any such representations or detrimental reliance having been alleged before in the arbitration references.

It is against this somewhat unpromising background that the Owners suggest that a serious injustice has been done to them by the Arbitral Tribunal in that, it is said, the Tribunal failed to deal with an essential issue in the references, namely Issue (vi). Nevertheless, it seems to me that the question whether or not the Tribunal failed to deal with an essential issue, viz. an issue that was crucial to the Tribunal’s decision, cannot be decided on the basis of whether or not the issue has any merit: the presence or absence of merit might be relevant to whether or not a substantial injustice might have been done to one or other of the parties but it cannot resolve the question whether or not the issue was dealt with in the first instance. Having said that, what if the issue is one that is so devoid of merit that one might be able to contemplate the possibility that it was dismissed by the Tribunal which, given the quality of the issue in relation to the complexity of the case overall, did not then think it necessary to articulate as much in its Reasons? In my judgment, the answer to this question is that it should not be left to the parties, or the task of the court, to engage in speculation of that kind. If the determination of an issue is crucial to the result, as in these references waiver was crucial to the question whether there was an actionable breach of contractual warranty, then however unmeritorious the arguments might be in favour of that issue the Arbitral Tribunal is bound to deal with it and, in my view, to do so in such a way, normally by reference in the Award or Reasons, as to make it evident to the parties that the Tribunal has indeed dealt with it: as His Honour Judge Humphrey Lloyd Q.C. observed in Weldon Plant v Commission for New Towns [2001] 1 All ER 264, 279: “.. where the decision cannot be justified as a particular key issue has not been decided which is crucial to the result .... the tribunal has not done what it was asked to do, namely to give the parties a decision on all issues necessary to resolve the dispute or disputes..” In similar vein was the observation of Toulson J. in Ascot Commodities N.V. v Olam International Ltd. [2002] 2 Lloyd’s Rep. 277, 284: “Nor is it incumbent on arbitrators to deal with every argument on every point raised. But an Award should deal, however, concisely, with all essential issues.” As those observations recognise, there should be some form of communication, normally in the form of a decision, by an arbitral tribunal to the parties from which the latter can ascertain whether or not an essential issue has dealt with. It is not sufficient for an arbitral tribunal to deal with crucial issues in pectore, such that the parties are left to guess at whether a crucial issue has been dealt with or has been overlooked: the legislative purpose of section 68(2)(b) is to ensure that all those issues the determination of which are crucial to the tribunal’s decision are dealt with and, in my judgment, this can only be achieved in practice if it is made apparent to the parties (normally, as I say, from the Award or Reasons) that those crucial issues have indeed been determined.

I cannot see from the Reasons or Award that Issue (vi) was dealt with by the Arbitral Tribunal and I do not consider that paragraph 1 of the Reasons cures this deficiency. In my judgment, therefore, out of all the relevant issues with which the Owners complain that the Arbitral Tribunal did not deal, only Issue (vi) appears to qualify. Despite this, Mr. Jones on behalf of the Charterers submits that the Owners are not entitled to bring any application under section 68 of the Arbitration Act 1996 because they have not exhausted the recourse available to them under section 57, and he relies on section 70 of the Act which provides:

“(1)

The following provisions apply to an application or appeal under section 67, 68 or 69.

(2)

An application or appeal may not be brought if the applicant or appellant has not first exhausted

(a)

any available arbitral process of appeal or review, and

(b)

any available recourse under section 57 (correction of award or additional award).”

So far as relevant to this argument, section 57 of the Arbitration Act provides:

“(1)

The parties are free to agree on the powers of the tribunal to correct an award or make an additional award.

(2)

If or to the extent there is no such agreement, the following provisions apply.

Mr. Jones also points out that the references were conducted under the LMAA Rules (2002) which, he says, comprise an agreement within the meaning of section 57(1) of the Act. Those Rules state, so far as material to the present matter, as follows:

“25.

(a)

In addition to the powers set out in Section 57 of the Act, the tribunal shall have the following powers to correct an award or to make an additional award:

(i)

The tribunal may on its own initiative or on the application of a party correct any accidental mistake, omission or error of calculation in its award.

(ii)

The tribunal may on the application of a party give an interpretation of a specific point or part of the award.

(b)

An application for the exercise of the powers set out above and in Section 57 of the Act must be made within 28 days of the award unless the tribunal shall think fit to extend the time.

(c)

The powers set out above shall not be exercised without first affording the other parties a reasonable opportunity to make representations to the tribunal.

(d)

Any correction or interpretation of an award may be effected in writing on the original award or in a separate memorandum which shall become part of the award. It shall be effected within 90 days of the date of the original award unless all parties shall agree a longer period.”

I do not consider that section 57(3)(a) of the Act applies in this case in relation to Issue (vi), which in my judgment has not been dealt with by the Arbitral Tribunal within the meaning of section 68(2)(d). It does not appear to me in relation to Issue (vi) that there is an ambiguity in the Reasons (and thus in the Awards) that requires clarification or removal: the Arbitral Tribunal did not, in this case, address the Owners’ waiver defence to the Charterers’ claim for damages for misdescription and thus did not deal with an essential issue: see, by parity of reasoning, the judgment of Christopher Clarke J. in Van der Giessen-de-Noord Shipbuilding Division BV v Imtech Marine & Offshore BV [2009] 1 Lloyd’s Rep. 273 para. 43.

There might be some cases where there is an element of real doubt as to whether or not an issue has been dealt with by an arbitral tribunal in its Reasons and/or Award, in which case section 57(3)(a) might apply. However this, I hazard, would normally arise in cases where there is doubt as to whether a tribunal has left over for future determination some issue or claim in the reference (in which case section 57(3)(b) might also be applicable), or where a tribunal has come to a decision but there is some inadequacy or absence of analysis in its reasoning that leaves it unclear whether and, if so, how it has dealt with certain issues in order to arrive at its decision. An example of the former arose in the case of these references: upon receipt by the parties of the Awards, there was doubt as to whether the Arbitral Tribunal had dealt with the Owners’ claim for unpaid hire. This was clarified by an exchange among the parties and the Arbitral Tribunal on and after 28^th May 2009. An example of the latter arose in Torch Offshore LLC v Cable Shipping Inc. [2004] 2 Lloyd’s Rep. 446 where an arbitration tribunal had decided that Torch was not entitled to rescind a charterparty on the basis of two misrepresentations, and it was argued that it was unclear from the tribunal’s reasoning whether or not the tribunal had decided against Torch on inducement by the second of the two misrepresentations. Cooke J. said as follows:

“28.

If however Torch had reverted to him, applying for clarification as to whether he had decided against it on inducement by the second representation, it would have been clear in this court whether or not he had determined the issue. It seems to me that s. 57(3)(a) can be used to request further reasons from the arbitrator or reasons where none exist. The policy which underlies the Act is one of enabling the arbitral process to correct itself where possible, without the intervention of the Court. Torch contended that it was clear that the arbitrator had not decided the issue and that therefore: there was no ambiguity in the award which required clarification, but the very existence of a genuine dispute on this question militates against that argument. If there was unarguably a clear failure to deal with an issue, it could be said that there was no ambiguity in the award, but as set out in AI Hadha at par. 70, an award which contains inadequate rationale or incomplete reasons for a decision is likely to be ambiguous or need clarification. There was therefore room for an application by Torch under s. 57, as an exchange of letters with the owners in relation to this part of the Award would have revealed, so that the time limit of 28 days (for which s. 57(4) provides) applied. In these circumstances Torch had available recourse under s. 57, which had not been exhausted and s. 70(2) therefore presents an insurmountable bar to Torch’s s. 68 application. …”

The problem in relation to Issue (vi) is not an inadequacy or absence of analysis in reasoning such as was argued to exist in Torch Offshore LLC v Cable Shipping Inc.. Whilst I accept that there is a fine line sometimes between an issue, on the one hand, and a line of reasoning, on the other, it seems to me that what happened in relation to Issue (vi) was a failure to deal with an issue rather than a breakdown or ambiguity in reasoning in relation to it in respect of which the Owners were bound by virtue of sections 70(2)(b) and 57(3)(a) of the Arbitration Act first to have recourse to the Arbitral Tribunal.

Having said that, it seems to me, having regard to the applicable principles and the explanation of their application in Torch Offshore LLC v Cable Shipping Inc. that, if I am wrong in my interpretation of the Reasons with regard to any of the other Issues identified above (in particular, Issues (viii), (ix), (x) and (xi)), there is in the Arbitral Tribunal’s reasoning in connection with those other Issues precisely that quality and degree of ambiguity or lack of clarity as to engage the powers of the Arbitral Tribunal under section 57(3)(a), whether on its own initiative or on the application of a party, to provide the clarification required and dispel any doubts as to whether those Issues have been dealt with or have fallen away in the manner analysed above. There was, therefore, available recourse to the Owners in respect of those other Issues under section 57 of the Arbitration Act 1996 and, in my judgment, Clause 25(a)(ii) of the LMAA Rules (2002) which has not been exhausted. In those circumstances, section 70(2) bars the Owners from bringing any application under section 68 in relation to those Issues.

It is also too late for the Owners to make an application, as they seek to do, under section 79 of the Arbitration Act 1996 for an extension of time within which to apply to the Arbitral Tribunal under section 57 in relation to these issues. Section 57(4) provides that an application under that section must be made within 28 days of the award or such longer period as the parties may agree. The Owners’ application, in their arbitration Claim Form, was outside the 28 day period. Section 79 gives the court jurisdiction to extend that 28 day time limit but only if it is satisfied that any available recourse to the arbitral tribunal in that regard has been exhausted. In this case such available recourse has not been exhausted: clause 25 of the LMAA Rules (2002) gives the Arbitral Tribunal the jurisdiction to extend the 28 day period for the making of an application to it for an interpretation of a specific point or part of an award which, in my view, would cover the ambiguity and lack of clarity discussed above. However, the Owners have never made any such application to the Tribunal. Their failure to do so, in circumstances where they could have done so in order to secure similar relief to that which might have been provided in this case under section 57, bars them now from applying to the court for an extension of time under section 79. This is entirely consistent with the philosophy underpinning the Act which, as Cooke J. said in Torch Offshore LLC v Cable Shipping Inc. paragraph 28, is one of “enabling the arbitral process to correct itself where possible, without the intervention of the court”.

Returning to Issue (vi), it should already be apparent from what I have said that I consider the fact that it was not dealt with has not caused and will not cause substantial injustice to the Owners. I have well in mind that, in determining whether there has been substantial injustice, it is sufficient for it to be shown that, if the issue had been dealt with, the tribunal might well have reached a different view in favour of the applicant: Vee Networks Ltd. v Econet Wireless International Limited [2005] 1 Lloyd’s Rep. 192, ABB AG v Hochtief Airport GmbH [2006] 2 Lloyd’s Rep. 1. I do not consider that it was reasonably arguable that the Charterers waived the breach of the description warranties in clause 53 of each of the charterparties by reason of their being in possession of information concerning the real moulded depth in December 2004 and/or having received air draft calculations from the master in February 2005 which demonstrated that the vessel would not be able to load at Misurata / Point Lisas. Quite apart from the manner in which the waiver defence was made but never properly explained or developed, and irrespective of the fact that no case of detrimental reliance was ever apparently advanced by the Owners, the possession of such information and calculations is, in and of itself, wholly inadequate and insufficient to make it even respectably arguable that the Charterers made some unequivocal representation to the Owners that, in the submission of Mr. MacDonald Eggers, “they would not rely on the charterparty description of the vessel in clause(s) 53” and “and would not insist on their strict legal rights to claim damages for misdescription”. I have no hesitation in deciding that, even if there was an irregularity in relation to Issue (vi), it was not a serious irregularity within the meaning of section 68(2) of the Arbitration Act 1996. I am fortified in this conclusion by the explanation at paragraph 280 of the Departmental Advisory Committee Report:

“The test of ‘substantial injustice’ is intended to be applied by way of support of the arbitral process, not by way of interference with that process. Thus it is only in those cases where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process that we would expect the court to take action. The test is not what would have happened had the matter been litigated. To apply such a test would be to ignore the fact that the parties have agreed to arbitrate, not litigate. Having chosen arbitration, the parties cannot validly complain of substantial injustice unless what has happened simply cannot on any view be defended as an acceptable consequence of that choice. In short, clause 68 [now section 68] is really designed as a longstop, only available 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 is not such a case.

It follows from all the above that I reject the Owners’ application under sections 68 and 79 of the Arbitration Act 1996.

The Owners’ application for permission to appeal under section 69 of the Arbitration Act 1996 is, explicitly, their secondary case. Mr. MacDonald Eggers submits that it is obvious that the Arbitral Tribunal made an error of law in concluding that the Charterers are entitled to damages for breach of the oral agreements to carry HBI and/or DRI.

The Tribunal found, as I have described, that the Owners orally agreed with the Charterers under the 2004 charterparty to load an HBI cargo probably out of Misurata in Libya, and under the 2005 charterparty to load a cargo of DRI from Trinidad (probably or possibly Point Lisas) for carriage to New Orleans. The Tribunal also found that the Charterers relied on those agreements by concluding sub-fixtures providing for the vessel to load those cargoes at those load ports. The Owners having breached those agreements by refusing to implement them, it is not, in my view, obviously wrong as a matter of law to conclude that, if the vessel was in fact not able to load those cargoes at those ports because of a yet further breach of contract by the Owners, the Charterers are entitled to damages. The Arbitral Tribunal concluded that the Charterers’ entitlement to damages arose as a result of a combination of both these breaches. Its reasoning stopped there, and so its legal analysis is not immediately apparent although it may safely be inferred. It is not obviously wrong to conclude that, where in a charterparty a charterer charters a vessel with a specific description and promises to employ that vessel only at and between safe ports and/or berths, his promise applies to that vessel as described: the charterer has not made any promises to the owner in respect of a ship with materially different physical characteristics. Even putting that to one side, if it is not safe for the vessel to load at a particular port because, in breach by the Owners of their contractual warranties, the vessel is not as they had described, it is not obviously wrong to conclude in circumstances where the Owners have agreed to load the vessel at that port that the subsequent refusal by the Owners to do so on the ground that no such agreement was ever made is a breach of that specific agreement entitling the Charterers to damages which cannot be avoided because the accrual of the alleged entitlement of the owners to refuse to load was itself the result of yet another breach by the Owners. It is moreover not obviously wrong to conclude, when considering the entitlement of the Charterers to damages in such circumstances, that the fact that owners of ships should not be obliged to expose their vessels to conditions of unsafety has no bearing on a charterer’s entitlement to damages in circumstances where that unsafety has been brought by the Owners upon themselves by their own commission of a further breach of contract. Once again, if it is right as the Owners suggest that they could not have been obliged to load the cargoes on board the vessel at the ports in question because, as a matter of fact, the vessel could not physically or safely do so, the correllative diminution in the Charterers’ rights was the result of the Owners’ breaches of warranty: therefore, whichever way one looks at it, the Owners’ breach or breaches of contract caused the Charterers loss to the recovery of which they are entitled as against the Owners.

The Owners complain that there can have been no breach to load the HBI/DRI cargoes if it was unsafe or impossible to do so, and that the only relevant breach, if there was one, was the misdescription of the vessel. I disagree. The Owners agreed to load those cargoes on board a vessel that was warranted to have the described characteristics of clause 53. If the vessel had been as warranted, there could be no basis on which the Owners could have contended (after the event) that the Charterers could not recover damages because the vessel could not physically or safely have loaded those cargoes. It was only because of the Owners’ own breach of warranty that the Owners felt able to advance that contention. Therefore, there was under each charterparty, as varied, both a breach of that agreement (the Owners refused to load those cargoes on board the vessel as described) and a breach of warranty. It is perfectly understandable, in those circumstances, why the Arbitral Tribunal concluded that the combination of those breaches caused, and entitled the Charterers to recover, damages of the nature claimed, and that conclusion was, in the circumstances, not obviously wrong.

The Owners also complain that the Charterers did not, they say, rely on the contractual description of the vessel in deciding to sub-charter the vessel to load at Misurata and Point Lisas, and therefore it would be wrong that they should be entitled to damages. Where Mr. Mazman of the Charterers, as the Arbitral Tribunal found, entered into the sub-charters in reliance on the Owners’ oral agreements to load the cargoes on board the vessel probably or possibly at those ports, and there was no evidence that he was aware of the contractual misdescription of the vessel or any physical impediment to the ability of the vessel to perform the operation that the Owners had promised, the issue of reliance on the charterparty description is not, in my judgment, relevant. The Owners, the Tribunal found, reneged on their oral agreements and tried unsuccessfully to contend that no such oral agreements had been made or, if they had been made, that they were unsupported by consideration, or that they lacked certainty or contractual intent. They did not apparently renege on the agreements because of any physical or safety issues attributable to the vessel’s moulded depth or air draft. These issues have only apparently arisen because they are seen by the Owners as a defence to the Charterers’ claims for damages. I do not consider, on the facts found by the Tribunal and in the light of the Tribunal’s findings as to the specific oral agreements and Charterers’ reliance, that it was obviously wrong for the Tribunal not to take account of the fact (if correct) that the Charterers did not rely on the contractual description of the vessel in deciding to sub-charter the vessel to load at Misurata and Point Lisas. On the contrary, it seems to me to be right. (I add that, if there is any doubt as to how the Tribunal analysed the issue, the correct course for the Owners to have taken would have been to seek clarification under section 57 of the Arbitration Act. They did not do so. However, I prefer to base my decision in relation to the Owners’ application under section 69 on the fact that the Tribunal’s decision on the relevant question of law is not obviously wrong.)

The Owners also suggest that the question of law raises “a question of public importance in that [it] concern[s] how charterparty descriptions of a vessel interact with a charterer’s obligation to nominate safe ports or berths”. I do not agree. This is a one-off case where, under each charterparty, the Owners made a specific promise to load a specific cargo at (or probably at) a specific port on board a vessel having specifically warranted characteristics. The Owners then broke that promise and seek to avoid a liability for damages for that broken promise on the basis of the vessel’s physical characteristics notwithstanding or ignoring that, in further breach of contract, those physical characteristics materially differed from those warranted. The question and answer that arise are confined to the coincidence of those specific facts and whether one or a combination of those breaches was causative of loss and damage which the Charterers are entitled to recover. There is no question of public importance. Moreover, it seems to me that, one way or another, the Owners were liable to the Charterers in damages for their refusals to load the respective cargoes at the ports in the question and/or breaches of warranty. I do not consider that the decision of the Arbitral Tribunal is at least open to serious doubt.

Therefore, I have no hesitation in rejecting the Owners’ application under section 69 of the Arbitration Act 1996.

I now turn back to the fact that Owners failed to make their applications under sections 68 and 69 within the 28 day period stipulated in section 70(3) of the Arbitration Act 1996. They have accordingly applied for an extension of time under section 80(5) of the Act and CPR 62.9. Since I have rejected both applications under sections 68 and 69, the question of an extension of time might be thought academic. However, since it was argued fully before me, I shall deal with it.

The time limit is set out in Section 70(3):

“Any application or appeal must be brought within 28 days of the date of the Award...”

The Commercial Court Guide states at O9.2:

“The court has power to vary the period of 28 days fixed by section 70(3) of the 1996 Act: rule 62.9(1). However, it is important that any challenge to an award be pursued without delay and the court will require cogent reasons for extending time.”

The factors to be considered in relation to an application for an extension of time were set out by Colman J. at paragraph 59 of his judgment in Aoot Kalmneft v Glencore International AG [2002] 1 Lloyd’s Rep. 128 in the following terms:

In this case, the Awards were made on 26^th March 2009. Therefore the 28 day period within which to make an application under sections 68 and/or 69 of the Act expired on 23^rd April 2009. The Owners made their applications and applied for an extension of time five weeks after the expiry of the time limit, on 28^th May 2009.

The factual background against which the Owners’ application has to be considered is set out in considerable detail, and accurately, by Mr. Jones in Appendix A to his Skeleton Argument. I shall only set out here the more significant facts.

On 4th March 2009, the Tribunal wrote to the parties saying that, having spent a considerable amount of time producing the Awards, “we would welcome an assurance from one or other or both parties that our Award will be taken up promptly after it has been published”.

On 16th March 2009, the Tribunal provided details of each Tribunal member’s fees. Perhaps in anticipation of a possible objection to the level of fees proposed to be charged, the Tribunal also drew specific attention to the provisions of the Arbitration Act 1996 which cover issues that might arise in connection with the level of an arbitral tribunal’s or arbitrator’s fees. In response, the Owners’ solicitors, Elborne Mitchell (“EM”), objected to the reasonableness of one of the arbitrators’ fees, reserved the Owners’ rights generally and proposed a fee-sharing arrangement as between the Owners and the Charterers. On receipt of EM’s objection and proposal, the Charterers’ solicitors, Marine Law (“ML”), forwarded that objection to their clients informing them also that they needed to decide whether they wanted to pick up the awards, when published, within the 28 day period for making an applications in relation to it. Mr. Young of ML offered his personal view that “we want to draw a line underneath this entire arbitration .... it would be better to end this once and for all.” This was said in the context of an arbitration that had proved extremely expensive to litigate and about which the Tribunal would later say, “This was clearly a case where the matter of principle between the parties was as or more important than the sums at stake.”

On 20th March 2009, EM suggested, in an email to one of the arbitrators, that each party pay the fees of their respective appointed arbitrator and pay 50% of the fees of the chairman. ML responded on 23^rd March saying that they were taking their clients’ instructions but indicating that the issue should not delay the publication of the awards. They also advised the Charterers in the following terms:

“..even if we do agree .. to split the costs – the next point is WHEN to make payment. We discussed the situation with appealing an award. A party is only allowed 28 days from the date of publication it’s not the date when they pick up the award. That means that if an award is not collected within the 28 days it automatically becomes unappealable. It’s always a tough call to make. However, you have seen how this man deals with files. The chances are that he will appeal anything he absolutely can – and waste yet more time and money. Practically speaking, this arbitration dealt mainly with points of fact. While there is always a legal debate on how important a principle might be – we really don’t think it is worth keeping this matter alive any further if we can help it.”

On 25^th March 2009, the Tribunal chairman spoke to both EM and ML and it was agreed, but always expressly subject to clients’ instructions, that each party would pay 100% of the fees of its appointed arbitrator and 50% of the chairman’s fees. That provisional agreement said nothing about the timing of any payment of the Tribunal’s fees. It was solely concerned, as EM made clear in their email to one of the arbitrators dated 27^th March 2009, with overcoming the problems caused by the Owners’ concerns as to the level of fees charged by one of the arbitrators.

On 26^th March 2009, the Arbitral Tribunal made its two Awards and notified the parties that they were published and would be released on payment of the Tribunal’s fees. On the same day, EM informed the Tribunal that they had asked the Owners to put them in funds in order to pay the Owners’ appointed arbitrator in full and 50% of the chairman’s fees, and stated that they would notify the Tribunal when those funds had been received.

Nothing thereafter crossed the line either between the parties and their respective legal advisers, or between either of the parties and any member of the Arbitral Tribunal, until 27^th April 2009: four days after the 28 day time limit for the making of any section 68 and/or 69 application had expired (23^rd April 2009). On 27^th April, the Tribunal chairman sent a polite chaser in respect of the Tribunal’s fees and stated, as was the fact, that there was still no indication from the Charterers on what their position was towards payment of the Tribunal’s fees. The chairman also asked EM to confirm that they were in funds from the Owners. EM responded on 28^th April to inform the Tribunal that they had been advised that day that the Owners expected to be able to put EM in funds for that part of the Tribunal’s fees that the Owners were prepared to pay by 15^th May 2009. It is apparent, as Mr. Jones pointed out, that it was only the chairman’s communication that had prompted EM to take any steps to find out from their clients what the position was in relation to the advancement of funds. On the same day, ML also responded to the chairman’s communication to say that they had overlooked the matter and hoped to be able to revert very shortly. On 29^th April 2009, ML reverted to say that they had in fact overlooked their clients’ reply and that they were already in funds to pay 50% of the chairman’s fees. They asked their clients’ appointed arbitrator whether he wished to be paid by the Charterers direct or via ML. The Charterers paid their appointed arbitrator 100% of his fees on 4^th May and paid the chairman 50% of his fees on 6^th May. Also on 6^th May, EM notified the Tribunal that the Owners had put them in funds. On 7^th May, EM on behalf of the Owners paid the outstanding balance of the Tribunal’s fees. The Awards were released by post and email later that day, 7^th May 2009.

One week later, on 14^th May 2009, EM sent an email giving the first indication that the Owners were considering an appeal. ML immediately objected, pointing out, correctly, that the time limit had expired “quite some time ago”. A number of emails were exchanged between EM and ML over the two days of 19^th and 20^th May during the course of which EM again stated that they were still “discussing a possible appeal with clients”. On Friday 22^nd May, EM wrote to ML saying that they had been instructed to seek permission to appeal the Awards out of time and that they intended to issue the application early in the following week.

The Owners finally issued their Arbitration Claim Form on Thursday 28^th May 2009, some 5 weeks after the expiry of the 28 day time limit and some 9 weeks after the publication of the Awards.

Length of the delay. The length of the delay was not excessive.

Reasonableness of the Owners’ conduct. In my judgment, the Owners have produced no satisfactory explanation or reasonable excuse as to why they allowed the time limit to expire or why, having received the Awards and the Reasons after the time limit had expired, it then took them three weeks to produce an Arbitration Claim Form. Throughout the arbitration references, the Owners have been represented by highly experienced solicitors and counsel. It is obvious that, from the day in early March 2009 when the Arbitral Tribunal indicated to the parties that they were in the final stages of producing their Awards, the Owners were in close communication with their solicitors. There is no doubt in my mind that, throughout the relevant period, the Owners (like the Charterers) will have been well aware of the existence of the 28 day time limit running from the date of publication of an award for the purposes of making any application challenging the Tribunal’s Awards for serious irregularity and/or error of law, and equally aware of the consequences of not making an application within that time: a competent solicitor in the position of EM would or should have made sure that the Owners were aware, there is no doubt in my mind that EM were more than competent solicitors in the handling of these references, there has been no suggestion by EM that they were not throughout fully alive to the existence of the time limit and the possible consequences of not complying with it, there has been no suggestion whatsoever by the Owners that they were ignorant of these matters, and there has been no suggestion by EM that they did not make the Owners aware of these matters if they were not already aware. I am of the view, in these circumstances, that the Owners were aware of the consequences of what they were doing when they allowed the time limit to expire without taking steps (by the payment of the Tribunal’s fees) to collect the Awards. It seems to me that they were taking a risk that the Awards would be in their favour, in which event the expiry of the time limit would of course suit their interests. I add that I draw this conclusion without taking into account the facts that the Charterers were behaving in exactly the same way and that the Owners have foreborne from responding to precisely this suggestion in the Witness Statement dated 18^th June 2009 of Mr. Young of ML at paragraph 33: “It could well be that [Mr. Miles of EM] advised his own clients, the Owners, in similar terms to ourselves. He may have taken a risk ... that the Award would be favourable to his clients. Now that the Award has gone against him – he now wishes to overcome the issue of finality.”

In his first Witness Statement on behalf of the Owners dated 28^th May 2009, Mr. Miles of EM said that it “was only natural and reasonable for the Owners not to pay all of the Arbitral Tribunal’s fees in circumstances where a tentative payment arrangement had been agreed .. and where the Owners had objected to the fees of one of the arbitrators.” In his second Witness Statement dated 25^th June 2009, Mr. Miles states that, pending the delivery of the Awards, the Owners were awaiting the Charterers’ confirmation as to the payment arrangements. I do not regard these statements as offering a reasonable excuse for permitting the time limit to expire (“reasonable excuse” is the phrase used by Colman J. in Aoot Kalmneft v Glencore International AG [2002] 1 Lloyd’s Rep. 128 paras. 62 and 65 among others, and I respectfully adopt it). There is no suggestion anywhere that the Owners were incapable of paying all the arbitrators’ fees if they had wished. There is no suggestion that EM and the Owners were not aware of section 28 of the Arbitration Act 1996 which makes provision for an adjustment and, if payment has already been made, for the possibility of reimbursement of arbitrators’ fees. There is no suggestion anywhere that the decision not to pay all the fees was made other than in the full knowledge that, by not doing so, the Owners ran the risk of allowing the time limit for challenging any award to expire. It might have been natural and reasonable not to pay all the Arbitral Tribunal’s fees in circumstances where a tentative payment arrangement had been agreed but it was not, in my judgment, natural or reasonable to permit the time limit to expire on the basis of a mere tentative arrangement in circumstances where, one infers, the Owners could have paid all those fees as and when they wished before the expiry of 28 days after publication of the Awards in order to preserve the possibility of challenging the Awards within time. I repeat that in my judgment it is clear that the Owners knowingly allowed the time limit to expire, no doubt in the hope that the Awards would be favourable to them and, because of the expiry of the time limit, would be unchallengeable by the Charterers. The Owners are the conscious authors of their own predicament.

I note, in this context, the observations in Ambrose, London Maritime Arbitration (3^rd ed.) at p.364:

“This means that when the arbitrator notifies the parties that the award is ready for collection on payment of his fees they have to decide whether to pay the arbitrator’s fees and to take up the award. This is a tactical decision: by waiting more than 28 days before taking up the award a claimant (or respondent) may obtain an award in its favour against which a challenge is out of time; however, it also risks losing its own right of challenge. The courts have regarded a failure by a party to take up an award within the time limit as a conscious decision to confer additional finality on the award and to lose the right to challenge the award in court.”

It seems to me that, in this case, the Owners had taken precisely the tactical decision adverted to in this passage. Having done so, there was moreover no excuse for the Owners then permitting 3 weeks to elapse between receiving the Awards and mounting their challenge to the Awards. The facts that they indicated to the Charterers that they were considering a challenge, and that Easter intervened, are not, in my view, good enough. Given the nature of the Owners’ primary case, viz. that the Arbitral Tribunal failed on the face of the Awards to deal with a number of allegedly essential issues, that was an argument that was not hard to recognise. According to the Owners, it is patently clear. The Owners have not offered any satisfactory explanation in any Witness Statement for this further delay. I am satisfied that, in the circumstances, it was unreasonable.

Any contribution to the delay. I do not consider that either the Charterers or the Arbitral Tribunal contributed to the delays. ML might have been more forthcoming about the Charterers’ own tactics but, if they had been, that would have defeated the object of those tactics. And, from what I infer, the Owners had adopted exactly the same tactics. The Owners always possessed the power and wherewithal to procure delivery of the Awards within the time limit for challenging them. The Charterers neither induced them to delay taking delivery of the Awards nor deprived them of their ability to pay for them and thereby secure their collection within time. In any event, the Owners never chased the Charterers regarding payment of the Tribunal’s fees and, themselves, did not bother to put EM in funds until after the 28 day time limit had expired. As for the period after the Owners’ receipt of the Awards, there can be no argument other than the Owners have only themselves to blame.

Irremediable prejudice to the respondent. In my view there is none, although I accept that, if an extension of time is permitted, the Charterers’ tactic that was designed to ensure, so far as possible, the finality of the Awards will be defeated.

Progress in the arbitration. I do not regard this as a significant factor in this case.

The strength of the application. For the reasons that I have already expressed, I am of the view that the sections 68 and 69 applications are, at best, weak. I have had no hesitation in rejecting them.

Unfairness to the applicant. There is, in my view, no unfairness to the Owners by the denial of the application for an extension of time in circumstances where (i) as I infer and conclude the Owners knowingly allowed to the time limit to expire and (ii) the substantive applications are weak at best. Moreover, general considerations of fairness should always be viewed in the context that Parliament and the courts have repeatedly emphasised the importance of finality and time limits for any court intervention in the arbitral process (Nagusina Naviera v Allied Maritime Inc. [2002] EWCA Civ 1147, para. 42 per Mance L.J.). In circumstances where, it would appear, both Owners and Charterers knowingly permitted the time limit to expire, the latter in order to achieve finality and the former probably doing likewise so long as the result was in their favour, it would not, in my judgment, be unfair to enforce that time limit. Moreover, on the evidence, these references have already proved disproportionately expensive and time consuming. It does not seem to me to be sensible or fair to extend this arbitral adventure any longer than is necessary.

Every case depends on its own peculiar facts. I am satisfied that, on the facts of this case, taking into account all the relevant factors above and according to each of them the weight that it deserves, it would be contrary to the principles underlying the Arbitration Act 1996 to permit the Owners the extension of time that they seek for the making of their section 68 and 69 applications, even in a case of not excessive delay. The policy of finality should, in the circumstances of these references, prevail. In this regard, I pay attention to the words of Hobhouse J. in The Faith [1993] 2 Lloyd’s Rep. 408, 411-12 which (although the length of the delay was significantly greater and the arbitration regime was different), I consider apposite in the circumstances of the instant case:

“…Different legal systems strike a different balance between the Courts and the arbitral tribunals. Some allow appeals on questions of law; some allow no appeals whatsoever. Some allow Courts to review the conduct of the arbitrations and some do not except on very restricted grounds. In England we have a relatively liberal system which allows appeals on questions of law within carefully controlled limits and we entertain a range of grounds for saying that arbitrators have misconducted themselves including what we describe as technical misconduct or procedural mishap. But all this was to be viewed against the fundamental principle that the parties have chosen their tribunal, that is to say, the arbitral tribunal, and have agreed to be bound by the decision of that tribunal. They have agreed that the award is to be final, subject always to any question of jurisdiction.

Courts will only interfere with the decision of arbitrators within very carefully controlled limits. One of those limits is the time within which the matter may be brought before the Court. If it is not brought before the Court within the 21 days then an award made with jurisdiction becomes effectively final for all purposes. This applies both ways, it applies to both parties. So, following the publication of an award, each party has to make up its mind whether it wishes to take up the award within 21 days. In making that choice they no doubt have regard to both their own position and that of the opposite party. It must be always borne in mind that the purpose of an application to the Court is that the party so applying may obtain at the end of the exercise a different award from that which has originally been made by the arbitrators.

Here it is the charterers that are trying to get the award altered but it could equally well have been the owners. The parties when they exercised their choice not to take up the award within 21 days were achieving that additional finality for both parties. It is not open to a party to argue, as have the charterers here, that they were waiting for the other party to take up the award; that they did not know that there was any point they wanted to raise on the award. They have to take that decision for themselves. The position is, in a sense, a stark one: a party who wishes to reserve his right to take the matter to the Court either by way of appeal or under s. 22 of the 1950 Act must ensure that the award is taken up in time to enable the application to be made.

The present case is a clear example where, despite the small sum of costs involved, that is to say, some £6000, each party preferred not to take up the award in 21 days or indeed at all until about 12 months had elapsed.

There are cases where within the spirit of the 21 day rule a party has done its best to comply with that timetable though in some way it has reasonably but unintentionally allowed the time limit to expire. The Court has a discretion to extend time and can do so wherever in the interests of justice it is appropriate to do so. The power is clearly stated in O. 3, r. 5. It enables the Court to do justice in that way and in appropriate cases the Court will extend the time.

But I consider, and I consider it must be clearly stated, that where parties voluntarily allow the time limit to expire, not marginally but by a very substantial factor, a party should not be allowed later, save in exceptional circumstances, to challenge the finality of the award. The parties have by their agreement to arbitrate agreed that the award should be final; they have agreed to be bound by the award and they have agreed to pay the award.

It is true that this agreement is subject to the powers of the Court in relation to arbitration agreements and the conduct of arbitrations. But the powers of the Court should only be exercised taking into account what is the agreement of the parties. The fundamental agreement of the parties is the same as the policy of the law, that is, that an award made with jurisdiction should be final.

The charterers' application for an extension of time in the present matter is therefore fundamentally flawed. It overlooks the basic principle of finality and should not be entertained. There are no exceptional circumstances in this case except the enormity of the lapse of time that has occurred and the total inadequacy of the reasons that are given for it…”

Therefore, I reject the Owners’ applications under section 80(5) of the Act and CPR 62.9.

In conclusion, I reject the Owners’ applications for extensions of time to make their applications under sections 68 and 69 of the Arbitration Act 1996 in both references and, furthermore, if extensions of time were to have been granted, I reject the Owners’ applications to challenge the Arbitral Tribunal’s Awards under either and both of those sections. The Owners’ applications in the Arbitration Claim Form are dismissed.