Latvian Shipping Company v The Russian People's Insurance Company (Rosno) Open Ended Joint Stock Company

Consequences of incident: LOSS OF 27 HRS

Bottom condition of site of grounding?

*Soft mud/sand – YES

….

*Sharp rocks – NO

….

Situation at site of running aground

*Is vessel seriously damaged? – NO

….

Assistance required:

*Divers for inspection of bottom – NO ..

It appeared that the Class survey at Wilmington covered the proper operating condition of the vessel’s navigation, steering and propulsion systems and the integrity of the hull as required by the USCG order. (Footnote: ³)

If the damage to the propeller as seen at Dakar had been sustained during the grounding, it was highly surprising Mr Utrobin’s inspection did not reveal some evidence of it. (Footnote: ⁴)

There was evidence that the damage to the propeller caused a measure of thrust either ahead and astern notwithstanding that the propeller was set at zero pitch and it was highly unlikely that those on board the vessel at Wilmington would not have noted that she was surging on her lines and moving ahead or astern when the setting was at this pitch. (Footnote: ⁵)

A local attorney instructed on behalf of the vessel’s owners through their P&I Club came on board and took statements from Captain Korolovs, Captain Zakks and from the Chief Mate, Mr Filipovs. None of the statements so taken mentioned any possibility of propeller damage. (Footnote: ⁶)

The average speed over the ground for the seven hours twenty minutes to noon on 3 February was 9.2 knots which was less than to be expected (Footnote: ⁷).

The first mention of possible propeller damage came when Mr Piskunovs sent out fax messages to two shipyards on 4 February which included a request for a quote for damaged propeller blades. These messages were prompted by the lower than expected speed on 3 February. (Footnote: ⁸)

For LSC to contend that the propeller was seriously damaged during the grounding when Mr Aizenstadts had informed the Class surveyor that LSC had not found any negative consequences of vessel’s grounding: loss of speed, vibration or any leakages, was most unsatisfactory. It was a point Mr Aizenstadts would have had to address if he had given evidence and was one on which the cross-examination of Mr Piskunovs would have been most illuminating. (Footnote: ⁹)

The bottom damage which the vessel sustained in the grounding at Wilmington was not consistent with the vessel grounding on rock or other hard material. The photographs taken in Dakar showed the plating to be set up “lazily” and there was no penetration as would be expected if the vessel had grounded on rocks or other hard objects. (Footnote: ¹⁰)

It was difficult to imagine how the propeller could have suffered such severe damage as seen at Dakar by striking rocks or other hard material on the seabed at Wilmington, without the rudder having also suffered significant damage, but the rudder, the base of which was only a short distance above the tips of the propeller blades, was undamaged. (Footnote: ¹¹)

The contemporaneous reports made by those on board the vessel were not consistent with the vessel having sustained serious damage during the grounding. (Footnote: ¹²)

Had anything like the propeller damage which was later revealed at Dakar existed at Wilmington, it would have produced vibrations through much of the propeller’s pitch range, and would have been noted by the USCG inspectors and/or the Class surveyor; and any competent Master would have been concerned that with such damage, a voyage of a significant length in the North Atlantic in winter was inherently hazardous. (Footnote: ¹³)

By the evening of 10 February the vessel was proceeding through very close pack ice i.e. floating ice in which the concentration is 9/10 to less than 10/10. (Footnote: ¹⁴)

On 11 February the ice coverage in the area was 9/10 plus very close pack ice, of which 3/10 was up to 70 cm thick and 2/10 was brash ice --- an accumulation of fragments of floating ice which can extend several metres below the surface. By 17.40 hours she was beset in ice up to 60 cm thick from which she managed to free herself but by 20.00 hours she was again beset in ice 40-60 cm thick (Footnote: ¹⁵).

During the morning of 12 February the vessel was able to free herself by going astern for about two ships’ lengths and then ahead, but at 9.50 hours she was stuck where she remained for 24 hours waiting for an ice breaker. Another attempt was made in the late afternoon to move her but this was abandoned because of the Master’s concern about straining the engine. (Footnote: ¹⁶)

After the arrival of the icebreaker the vessel continued towards Quebec. About 140 miles from her destination she encountered areas of brash ice and during berthing operations in the morning of 14 February, 60% of the water was covered in brash ice, 40% of which was at least 1-2 metres thick, extending in some areas to over 4 metres thick. (Footnote: ¹⁷)

The vessel berthed at Quebec at 09.00 hours 14 February. Her aft freshwater draught was about 8.2 metres, meaning that her propeller was immersed by about 1.54 metres. (Footnote: ¹⁸)

When the vessel completed discharging on 15 February her mean draught was 4.6 metres, so that her propeller would have been either at or slightly above the surface of the water. After ballasting, her draught upon departure was likely to have been between 6.50 metres and 6.80. When she left the berth the ice coverage was 8/10. (Footnote: ¹⁹)

The vast majority of ice damage sustained by propellers occurs when vessels go astern in ice whilst trying to get free from being beset or from forcing a passage through ice – which would include backing and ramming. (Footnote: ²⁰)

The serious damage to the propeller portrayed in a sketch provided by diving contractors who examined the propeller at Las Palmas could not all have occurred during the grounding at Wilmington and gone un-noticed during normal operation of the vessel. In any event, LSC consistently reassured Class that following the grounding there was no loss of speed, vibration or leakages. (Footnote: ²¹)

During the vessel’s outbound voyage from Quebec she passed through an area with 1/10 coverage of 30-70 cm ice and up to 7/10 coverage of brash ice which in a few places would have extended to more than 4 metres below the surface. (Footnote: ²²)

There was a number of obvious possibilities for the propeller to have hit ice and it was entirely credible that she might have done so. (Footnote: ²³)

The extent of the propeller damage seen at Dakar suggested that it was unlikely that all concerned with the vessel would have taken the risk of concealing unusual vibrations from USCG. (Footnote: ²⁴)

The reports of those on board were not consistent with the propeller having sustained serious damage at Wilmington. If the catastrophic damage seen at Dakar had occurred at Wilmington it was surprising that the inspections at Wilmington had not mentioned the possibility of propeller damage. Furthermore, if the crew had suspected damage of such a serious nature to the propeller, the Tribunal were surprised that they were prepared to undertake two voyages in the North Atlantic in winter. (Footnote: ²⁵)

The propeller damage was consistent with the propeller having hit ice. (Footnote: ²⁶)

The documentary and witness evidence on which the Claimant relied was “far from satisfactory.” (Footnote: ²⁷)

The evidence of those on board the vessel at the time of the grounding might have been of considerable assistance had it been possible to test it in cross-examination. (Footnote: ²⁸) Instead, it was impossible to form any general view of the competence or reliability of the Claimant’s factual witnesses. (Footnote: ²⁹)

It was appropriate to infer that the Claimant’s factual witnesses would have given evidence which was consistent with their contemporaneous evidence if they had been called. (Footnote: ³⁰)

It was also appropriate to draw adverse inferences against the Claimant:

On the balance of probabilities, damage to the propeller occurred during the time spent steaming through the ice and attempting to break out of the ice in addition to damage sustained as a result of grounding and efforts to refloat using the main engines. (Footnote: ³²)

The section 68 application

Section 68 provides:

Challenging the award: serious irregularity.

(1)

A party to arbitral proceedings may (upon notice to the other parties and to the Tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the Tribunal, the proceedings or the award. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).

(2)

Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant—

(a)

failure by the Tribunal to comply with section 33 (general duty of Tribunal);

(b)

the Tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67);

(c)

failure by the Tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;

(d)

failure by the Tribunal to deal with all the issues that were put to it;

(e)

any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers;

(f)

uncertainty or ambiguity as to the effect of the award;

(g)

the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy;

(h)

failure to comply with the requirements as to the form of the award; or

(i)

any irregularity in the conduct of the proceedings or in the award which is admitted by the Tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award.

(3)

If there is shown to be serious irregularity affecting the Tribunal, the proceedings or the award, the court may—

(a)

remit the award to the Tribunal, in whole or in part, for reconsideration,

(b)

set the award aside in whole or in part, or

(c)

declare the award to be of no effect, in whole or in part.

The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the Tribunal for reconsideration.

(4)

The leave of the court is required for any appeal from a decision of the court under this section.

Section 33 provides:

General duty of the Tribunal.

(1)

The Tribunal shall—

(a)

act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and

(b)

adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.

(2)

The Tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it.

The authorities on s. 68 of the Act were extensively reviewed by Tomlinson J in ABB AG v Hochtief Airport GmbH [2006] 2 Lloyd’s Rep 1. I agree with the conclusions Tomlinson J came to on the basis of these decisions. He held that their effect is that an applicant under s.68 has a high hurdle to overcome: there will only be a serious irregularity if what has occurred is far removed from what could reasonably be expected from the arbitral process (p. 17). If the issues in question have been “put into the arena”, there is no serious irregularity in extracting an alternative case from the submissions of the parties (p. 18, citing Warborough Investments v Robinson [2003] EGLR 149). It is not a ground for intervention that the court considers that it might have done things differently or expressed its conclusions on the essential issues at greater length (p.19). If a party had a fair opportunity to address its arguments on all of the essential building blocks in the Tribunal’s conclusion, the fact that the Tribunal did not refer back to the parties its analysis of the material before it and the conclusion it reached on it does not constitute a serious irregularity resulting in substantial injustice (p.21).

In The Magdalena Oldendorff [2008] 1 Lloyd’s rep 7, Waller LJ observed:

In my view the authorities have been right to place a high hurdle in the way of a party to an arbitration seeking to set aside an award or its remission by reference to section 68 and in particular by reference to section 33. Losers often think that injustice has been perpetrated when their factual case has not been accepted. It could be said to be "unjust" if arbitrators get the law wrong but if there is no appeal to the court because the parties have agreed to exclude the court, the decision is one they must accept. It would be a retrograde step to allow appeals on fact or law from the decisions of arbitrators to come in by the side door of an application under section 33 and section 68.

The alleged grounds of serious irregularity

Serious irregularity 1 – despite finding that damage was sustained by an incident covered by the policy, the Tribunal failed to make an award for recovery.

Mr Riches for LSC submitted that, having found (Footnote: ³³) that some damage had been caused to the propeller by the grounding (an insured peril), the Tribunal should have found that the losses incurred in respect of that damage were recoverable under the policy, but did not do so. It was argued that this failure was an irregularity under s.68 (2) (a), in failing to act fairly. Given the finding of damage, the fair and proper way to proceed was to permit LSC to recover in respect of that damage. Mr Riches also contended that it was an irregularity under s. 68 (2) (c) in failing to accord with the agreed procedure arising from the choice of English law and the LMAA arbitration clause, and/or under s. 68 (2) (d), in failing to deal with all the issues put to the Tribunal.

Mr Riches further submitted that the Tribunal’s reasons for not making an award in LSC’s favour in respect of the damage sustained during the grounding were an additional serious irregularity under s.68 (2) (a), (c) and/or (d). The argument here focused on the last two sentences of paragraph 9 of the Reasons:

However, LSC maintained that the admission by ROSNO during the course of the arbitration that some damage might have been sustained to the propeller during the grounding was crucial in that it meant that it (LSC) had proved its case in respect of that part of the damage that was admitted. The implication seemed to be that ROSNO having made this admission, could not escape a measure of liability and that it was for ROSNO to explain how much of the damage (and repair costs) it accepted.

Mr Riches contended that here the Tribunal are referring to LSC’s submissions in respect of ROSNO’s concession as to possible damage when the Tribunal should have been talking about its finding of damage. The Tribunal had confused themselves. The difficulty of quantifying the extent of the damage to which ROSNO was admitting was no reason for not making an award in respect of the propeller damage the Tribunal found to have been sustained at Wilmington. Mr Riches further argued that the admission made by the Tribunal in their Reasons (Footnote: ³⁴) for the Additional Award amending paragraph 13 of the original Reasons that they had confused their own finding as to damage at Wilmington with ROSNO’s concession as to possible damage at Wilmington, made it equally likely that the Tribunal were confused as to the exercise they should be conducting as to quantum once they had found that some propeller damage had been sustained during grounding.

Mr Riches then submitted that it mattered not that LSC had made no submissions to the Tribunal on the question of quantum in the event of a finding that only part of the repaired damage was sustained at Wilmington. He said that no such submissions had been made because LSC’s sole case was that all of the propeller damage was sustained at Wilmington and it was unrealistic to expect LSC to have advanced an alternative case on the basis that some damage was incurred at Wilmington and some during the voyage through ice-affected waters.

Mr Riches also argued that there was evidence from which the Tribunal could have deduced what proportion of the cost of the repairs was referable to the damage sustained at Wilmington. The evidence in question was: (i) a report on the breakdown of the cost of repairs; (ii) the messages sent by LSC to various shipyards before the vessel sailed into ice affected waters requesting estimates for straightening four propeller blades; (iii) the loss of speed of the vessel following the grounding; and (iv) on the basis that it was unlikely that any damage was sustained on the inbound voyage to Quebec, the results of the claimed inspection of the propeller at Quebec.

Furthermore, argued Mr Riches, it was open to the Tribunal to have taken a broad brush approach similar to that taken in Equitas v R & Q Reinsurance Company Ltd [2009] EWHC 2787 (Comm). At the very least, the Tribunal should have awarded LSC 5% of the repairs cost ($75,000) by way of nominal damages, plus their costs in the reference.

In my judgement, this first cluster of alleged irregularities is not made out. The submission that the Tribunal failed to make an award in respect of the Wilmington propeller damage because it mistakenly took into account the submissions it had heard as to the significance of ROSNO’s concession as to possible grounding damage is far-fetched and insupportable. In the opening sentence of paragraph 9 of the Reasons the Tribunal say

For reasons which we shall explain, on the evidencethat was before us we felt bound to conclude that although some damage had probably been sustained to the propeller during the grounding at Wilmington, it was impossible to quantify the extent of that damage. [Emphasis added]

In my judgement, on a fair and reasonable reading of paragraph 9 in the context of the Reasons as a whole, the Tribunal were not in the grip of the confusion suggested by Mr Riches. Rather, they were making a straightforward finding of fact, on the evidence they had heard, that it was impossible to quantify the extent of the damage sustained at Wilmington. In my judgement, this finding is entirely understandable. Given their findings set out above in paragraph 27 (ii), (ix), (xi), (xix), (xxii), (xxiii), and(xxiv), I think it plain that the Tribunal were of the view that any propeller damage suffered at Wilmington was not only sustained prior to the catastrophic damage seen at Dakar, but was also comparatively minor, and it is easy therefore to see the impossibility of determining what that damage consisted of and proportion of the Dakar repair costs that was referable to the Wilmington damage.

Further and in the alternative, given the Tribunal’s finding that the propeller was damaged by ice and the obvious difficulty in determining what portion of the repair costs was referable to the damage probably sustained at Wilmington, I do not accept that the Tribunal was under any obligation to attempt to establish the quantum of the Wilmington damage. Throughout the reference, LSC made it absolutely clear to the Tribunal that its claim was an all or nothing claim: its sole case was that all the damage seen at Dakar was sustained at Wilmington, and consistently with this stance they deliberately advanced no alternative case claiming a partial recovery.

In my opinion, once ROSNO had admitted that it was possible that some damage was incurred at Wilmington whilst at the same time maintaining that the whole of the damage was caused by ice, LSC must or ought to have appreciated that that there was a risk that the Tribunal might find that some damage was sustained at Wilmington and some through contact with ice encountered to and from Quebec. However, LSC persisted in advancing an all or nothing claim when they could have kept the option of a partial recovery open by pleading an alternative claim deploying the evidence which came into being before ice was encountered as to damage incurred when grounding. Instead, for whatever reason, they elected to persist with an all or nothing claim and made no submissions as to how the Tribunal should proceed if they found that damage was incurred at and after Wilmington. Nor did LSC ask for a split hearing with quantum to be determined in light of the Tribunal’s findings as to what damage was incurred where.

LSC having made its bed in the above fashion, it must lie on it. It cannot complain that the Tribunal may have taken the view that its claim was all or nothing even though there might be a finding that damage was sustained both at Wilmington and when the vessel encountered ice.

Accordingly, for all the above reasons, I find that the Tribunal committed no serious irregularity in making no award in favour of LSC in respect of such damage as was probably incurred at Wilmington.

Serious irregularity (2) – the Tribunal failed to permit recovery because LSC had not asserted an alternative case for part of the damage.

The provisions of s. 68 relied on are: s. 68 (2) (a) and (c). LSC contends that the fact it had not asserted an alternative case for part only of the damage was a free-standing reason given by the Tribunal for making no award in respect of the Wilmington damage, and in adopting this stance the Tribunal were acting unfairly and in breach of the agreed procedure arising from the choice of English law and the LMAA arbitration clause. It is argued that there was unfairness and a breach of procedure because: (i) until ROSNO’s late admission that it was possible that some propeller damage was sustained at Wilmington, ROSNO had been asserting a blanket defence to which there was no alternative defence for LSC to meet; and (ii) there was no way in which LSC could have advanced any alternative claim to meet ROSNO’s admission because ROSNO did not specify what damage may possibly have been sustained at Wilmington.

In support of the contention that the Tribunal did not make an award in respect of the Wilmington damage because LSC did not advance an alternative claim for partial recovery, LSC relies on the italicised words in paragraph 9 of the Reasons set out below:

For reasons which we shall explain, on the evidence that was before us we felt bound to conclude that although some damage had probably been sustained to the propeller during the grounding at Wilmington, it was impossible to quantify the extent of that damage. For that reason it was impossible to form any reliable view as to what part of the total repair bill for the propeller was referable to the repairs which were necessary to remedy the propeller damage suffered at Wilmington. It was doubtless this evidential difficulty which prevented LSC from putting forward in the arbitration any alternative claim for part of the repair costs. However, LSC maintained that the admission by ROSNO during the course of the arbitration that some damage might have been sustained to the propeller during the grounding was crucial in that it meant that it (LSC) had proved its case in respect of that part of the damage that was admitted. The implication seemed to be that ROSNO having made this admission, could not escape a measure of liability and that it was for ROSNO to explain how much of the damage (and repair costs) it accepted.

This passage is to be read in the light of paragraphs 8 and 9 of the Reasons set out in paragraph 26 above.

In my judgement, on a fair and reasonable reading of the Reasons, the absence of an alternative claim by LSC was not a reason or the reason why the Tribunal did not make an award in respect of the Wilmington damage. Instead, the reason why no such award was made was because, on the evidence, such damage was impossible to quantify. As the Tribunal saw it, it was this evidential difficulty that prevented LSC from advancing an alternative case. But it was the evidential difficulty, not the absence of a positive alternative case, that was the Tribunal’s reason for concluding not to make a partial award in favour of LSC.

In any event, for the reasons given in paragraphs 43-45 above, I do not think the Tribunal in the circumstances of this reference were obliged to embark on the highly problematical task of trying to determine the portion of the propeller repair costs that were referable to the less serious prior damage probably sustained at Wilmington.

Serious irregularity (3) – the Tribunal failed to deal with the issue of vibrations.

Mr Sofijans said in his witness statement that when the vessel grounded it sounded as if the propeller had hit something and there were strong vibrations from the stern of the vessel which led him to believe that the propeller blades were damaged. Captain Zakks stated in his witness statement that during the attempts to move the vessel after she had grounded there was a series of big jolts which occurred when the engine was engaged which he thought were caused by the propeller coming into contact with the seabed. He also noticed that whilst the vessel was moving to anchor there was an abnormal vibration when the propeller was in neutral or very low pitch which decreased to vanishing point as the pitch was increased. (Neither Mr Sofijans nor Captain Zakks was called to give oral evidence).

It was part of ROSNO’s case that the crew’s readiness to put to sea from Wilmington into the North Atlantic in winter, notwithstanding an apprehension that the propeller had been damaged, supported the contention that the serious propeller damage seen at Dakar had not been sustained at Wilmington. In response to this contention, LSC submitted that it was not clear to those on board how seriously the propeller had been damaged. They were aware of vibrations at low pitch, and the Class surveyor had attempted as a result of these vibrations (unsuccessfully) to sight the propeller from the quayside. It was therefore reasonable for the crew to leave the decision whether to put to sea in the North Atlantic in the hands of those carrying out the inspections at Wilmington. Moreover, even if ROSNO had a valid criticism of the crew’s decision to sail on from Wilmington to Quebec despite knowing of the propeller damage, that point could equally be made in respect of the voyage from Quebec to Dakar, which on ROSNO’s case would have involved abnormal vibration throughout the range of pitch settings. ROSNO’s case therefore involved an inconsistency. In LSC’s submission, the readiness of the crew to undertake this voyage was because the vibrations at all stages of the voyage from Wilmington to Quebec and on to Dakar were felt only across a very small range of the propeller’s pitch.

Mr Macey-Dare for ROSNO responded to this submission in his oral closing address to the Tribunal. He argued that, unlike at Wilmington, there was an inspection of the propeller after the departure from Quebec that had led to a pictorial representation of the propeller damage that was faxed on 17 February. The damage shown in this drawing indicated considerably less serious damage than that seen at Dakar and this drawing explained why the vessel had sailed to Dakar notwithstanding the vibrations that would now be being felt across the full pitch range. Mr Macey-Dare made this submission at the same time contending throughout the hearing that the LSC’s assertion thatMr Parkhomeko, the Chief Engineer, had visually inspected the propeller by torch light in the dark when she was berthed at Quebec, was untrue. There had been an inspection after the vessel left Quebec and before 17 February but not in the circumstances claimed by LSC.

In his reply closing oral submissions Mr Riches argued that it was incredible that the vessel would put to sea when there were vibrations across the pitch range and he observed that Mr Macey-Dare’s reliance on the knowledge that the crew had of the damage supported LSC’s case that the fax sent on 17 February was the product of Mr Parkhomenko’s berthside inspection.

In paragraph 83 of the Reasons the Tribunal say:

On balance, it seems to us that any vibration resulting from propeller damage which occurred at Wilmington was therefore either so small as not to be noticeable by the Pilot or the USCG, or according to Capt Zakks not of any severity as to cause noticeable vibrations throughout any pitch above “half ahead.” It was likely in our view that damage of such severity as seen at Dakar would have produced vibrations throughout much of the pitch range and that any competent Master would have been concerned that with such damage, a voyage of significant length in the North Atlantic in winter was inherently hazardous. Furthermore, since we assumed that the USCG inspectors at Wilmington (or, at least, the Class surveyor) would have tested the vessel’s propulsion systems, it seemed highly unlikely to us that damage of the order noted at Dakar would not have led to vibrations which would have been noted at the time.

And paragraph 86 of the Reasons reads:

If such catastrophic damage [as was observed at Dakar] had occurred at Wilmington it was most surprising in our view that the inspections at Wilmington had not mentioned the possibility of propeller damage. Furthermore, if the crew had suspected damage of such a serious nature to the propeller, we were surprised that they were prepared to undertake two voyages in the North Atlantic in winter.

The Tribunal made no reference to ROSNO’s submission based on the drawing of the propeller damage faxed on 17 February.

In support of this third cluster of alleged irregularities, Mr Riches submitted that one of the issues for determination in the reference was how the vibrations caused by damage to the propeller would affect the Master’s decision to put to sea (a) upon leaving Wilmington after the grounding and (b) upon exiting ice after leaving the Gulf of St Lawrence. In his submission, the Tribunal failed to deal with this issue and had therefore failed to deal with LSC’s contention that ROSNO’s case was inconsistent in that ROSNO argued that the Master would not have sailed for Quebec from Wilmington if there were serious propeller vibrations, yet the vessel sailed from Quebec to Dakar when on ROSNO’s case there would have been serious vibrations across the pitch range by reason of the damage seen at Dakar having occurred during the voyage through ice. Mr Riches argued that the Tribunal must be taken to have failed to deal with the inconsistency point because it made no findings on Mr Macey-Dare’s closing oral submission that the crew had relied on the drawing faxed on 17 February which showed significantly less serious damage than that seen at Dakar.

It has been said in numerous cases that it is only those issues whose determination was essential for the making of the award which are within s. 68 (2) (d); see eg Weldon Plant v Commission for New Towns [2001] AER (Comm) 264 at 279; Ascot Commodities N.V. Olam International Ltd [2002] 2 Lloyd’s Rep 277 at 284; World Trade Corporation v C Czarnikow Sugar Ltd [2005] 1 Lloyd’s Rep 422 at 427 (para 20). In my opinion, the issue as to whether ROSNO’s submission that the attitude of the Master to sailing from Wilmington into the North Atlantic involved an inconsistency given his readiness to sail from Quebec to Dakar was not an issue that was essential to the overall finding that the damage seen at Dakar had not all been sustained at Wilmington. Accordingly, the failure of the Tribunal to deal with the inconsistency point was not a serious irregularity within s. 68 (2) (d). Nor has it or will it cause substantial injustice to LSC. The reasons given by the Tribunal for finding that the catastrophic propeller damage seen at Dakar was not sustained at Wilmington were (a) such damage would have produced vibrations across much of the pitch range and not only at low pitch (para 83); (b) any competent Master would have been concerned that, with such damage, a voyage of a significant length in the North Atlantic in winter was inherently hazardous; (c) the absence in the contemporaneous reports of those on board of anything to suggest that such catastrophic damage had been incurred during the grounding (para 86); (d) the non-discovery of serious propeller damage during the inspections ordered by USCG including an inspection of the vessel’s propulsion system (para 83); (e) the nature of the bottom damage caused by the grounding and the lack of damage to the rudder foot, neither of which was consistent with the vessel grounding on rock or other hard material; (f) there was a number of obvious possibilities for the propeller to have hit ice (para 89); and (g) the nature of the ice conditions whilst the vessel was in the Gulf of St Lawrence and the St Lawrence River made it entirely credible that the propeller might have hit ice. Given reason (a) and reasons (c) to (g), particularly reasons (c), (d) and (e), it cannot be said in my view that if the Tribunal had expressly dealt with the inconsistency point, it “might well have” reached the conclusion that all of the catastrophic damage was sustained at Wilmington. Indeed, in my opinion, the chances of their reaching such a conclusion on the predicated hypothesis are so remote as to fall well short of making that conclusion reasonably arguable.

I am also of the view that the failure to deal with the inconsistency point was not an irregularity falling within s. 68 (2) (c). The Tribunal received the parties’ respective submissions on the inconsistency point. The fact that they chose not to give reasons for implicitly not accepting it was not a breach of such agreed procedure as can be derived from the English law clause and the LMAA arbitration agreement. An arbitral Tribunal does not have to deal with every point raised but only those issues that are essential for the making of the award. In any event, for the reasons I have given in paragraph 60 above, the failure of the Tribunal to deal with the submissions they received on the inconsistency point has neither caused nor will it cause substantial injustice to LSC.

Founding on the fact that it was common ground that the propeller damage seen at Dakar would have caused a drop in the vessel’s performance, LSC submitted to the Tribunal that the question arose as to when this drop in performance occurred. If the vessel’s performance did not change significantly after the grounding, or changed only so much as was caused by the hull damage caused by grounding, that would suggest that the propeller was not damaged at grounding. But if the vessel’s performance changed significantly after the grounding but then did not change in any significant respect after the call at Quebec, that would suggest that the propeller was damaged at grounding and not afterwards.

LSC’s expert, Mr Arnott, produced a revised spreadsheet of complicated calculations of the required propeller power absorption which purported to show that the vessel suffered a deterioration in performance of 36% after Wilmington and only a minor subsequent deterioration of 0.84%, and on the basis of this evidence LSC submitted that this was good evidence that the damage seen at Dakar was sustained during the grounding.

Mr Arnott’s revised spreadsheet was produced after the close of the evidence taken during the first hearing that ended on 7 April 2011. On that day the hearing was adjourned to 4 May 2011 for final oral submissions and the Tribunal ordered LSC to provide the formulae used in the first version of the spreadsheet and a worked example by 4.30 pm 8 April 2011; ROSNO to respond by 4.30 pm 15 April 2011, with liberty to LSC to respond by 4.30 pm on 18 April.

The absence of information as to the formula used by Mr Arnott had prevented Mr Macey-Dare for ROSNO from usefully cross-examining him on his calculations and had also led to Mr Cavagan stating when cross-examined on the spreadsheet that he could not comment on it without knowing the formula that Mr Arnott had used. It was this state of affairs that prompted the Tribunal to make the order it did. In doing so, they acted in the face of an objection from Mr Macey-Dare who argued that LSC had had its chance to produce its expert evidence and ought not to be allowed to add to it.

Mr Arnott set out in a letter dated 8 April 2011 his calculations to which Mr Cavagan responded by letter dated 15 April pointing out an error therein. In answer to Mr Cavagan’s comments, Mr Arnott produced a second spreadsheet of calculations on 21 April 2011.

ROSNO relied on Mr Cavagan’s evidence in which he challenged Mr Arnott’s conclusions on the basis of an analysis he had undertaken of the speed of the vessel over different periods of time pre and post Quebec when the vessel encountered similar metocean conditions. In Mr Cavagan’s opinion, this analysis showed that the vessel’s performance deteriorated after Quebec and the cause was the damage seen at Dakar.

In ROSNO’s written closing submissions it was argued that Mr Arnott’s explanation that accompanied the second spreadsheet remained opaque and the relevance of the calculations a mystery.

Final oral submissions were received by the Tribunal on 4 May 2011. Mr Riches’ first round of submissions began at 10.30 am and concluded at 12.47 pm. Mr Macey-Dare’s submissions began at 1.55 pm and at 4.40 pm he was given a further 15 minutes in which to complete his arguments. It was at this point that he entered upon his submissions concerning the vessel’s speed before and after Quebec and Mr Arnott’s power absorption calculations. In respect of the latter, he observed towards the end of his 15 minutes that there was confusion about exactly what Mr Arnott’s calculations showed and went on to say that the calculations were still wrong in two respects: (i) Mr Cavagan had worked out that Mr Arnott had misapplied part of a formula by multiplying the speed by the wake factor instead of multiplying it by minus 1 times the wake factor; and (ii) the wake factor used was 0.36 when it ought to have been 0.3. Mr Williamson then asked if the Tribunal could take it directly from Mr Arnott (who was present) that the wake factor should be 0.3 and suggested that they could hear some submissions on this issue. The following exchanges then took place between Mr Riches and Mr Williamson:

Mr Riches: If I might make a submission on that point, which is simply that the whole point of the exchange of that information was that my learned friend’s experts would have a chance to look at that. They had a full week to do this. They have not introduced any of that material in the week they were looking at it and it is somewhat unreasonable for that to be introduced now, essentially putting us in a position where we’re having to try to produce evidence now. They have had the opportunity. They have put in a number of comments and we responded to those.

Mr Williamson: The reason I mention it is I have come across this before. When you’re talking about a planned slip and real slip, you have to apply a wake factor. So I am confused about how it fits in here. I haven’t had a week to look at it.

Mr Riches: No absolutely and I entirely take that point and from Mr Arnott’s point of view, his expert opinion is that 0.3 is the appropriate wake factor for a vessel of this type, size and hull proportion.

Mr Williamson: Is there any authority you can refer us to for that?

Mr Riches: Mr Arnott is saying it is standard in text books. I am going to be talking for the next 15 minutes and if there is anything further that Mr Arnott wants to add then I will obviously make that point then.

Mr Riches then made a number of submissions including some on the vessel’s performance after the grounding but at no point did he deal with the alleged errors in Mr Arnott’s calculations described by Mr Cavagan. Nor did Mr Riches say that Mr Arnott had anything else to add arising out of Mr Macey-Dare’s submissions or the questions posed by Mr Williamson.

Paragraphs 84, 85 and 87 of the Tribunal’s Reasons read:

84.

Mr Arnott produced a comprehensive spreadsheet the purpose of which was to show that after the grounding at Wilmington the performance characteristics or the propeller had changed. Calculations were performed, checked by a naval architect within BMT, to determine the required propeller power absorption to deliver the ship speed at the demanded pitch setting. While we see nothing wrong in a theoretical approach it was pointed out by Mr Cavagan that there were some mathematical errors in the first spreadsheet. Mr Arnott accepted this and produced a revised spreadsheet just before closing submissions. However, the matter did not rest there. It was only during the closing submissions that Counsel for ROSNO told us that in his review of the second spreadsheet, Mr Cavagan had “worked backwards” and concluded that although the stated wake factor used in the calculations was said to be 0.30, a figure of 0.36 had actually been used in the calculations and this would have a considerable effect on the calculations. In his final reply speech, Counsel for LSC did not refer to this observation. While Counsel might not have had time to evaluate this comment, his expert, Mr Arnott, was present during the whole day of final submissions.

85.

The Tribunal was therefore left in an awkward position of not knowing how much reliance could be placed on the second spreadsheet of calculations. In fairness, Mr Arnott said in his Supplementary Report that the study of propeller characteristics was not within his expertise. We can see that all things being equal, as the wake factor is increased, propeller efficiency reduces but also the operating point of the propeller in terms of its performance characteristics changes. In short, it is a question of sums and a large number of factors.

87.

As to the vessel’s performance before and after grounding, it was common ground that the vessel’s performance deteriorated after Wilmington compared with what would have been expected at the pitch settings selected. The principal difference between the experts concerns the vessel’s speed through the water between noon on 3^rd February to noon on 4^th February, Mr Cavagan said 11.65 knots, Mr Arnott 9.8 knots. The difference is mainly the result of the currents the experts applied. The number of days available to assess the vessel’s performance on the voyage from Wilmington to Quebec was limited. Mr Arnott and Mr Cavagan agreed that it is impossible to quantify the loss of hydrodynamic efficiency resulting from the damage to the hull in the grounding. Futhermore, the hull was already badly fouled by marine growth at the time of grounding. The combined effect of that fouling and the hull damage caused by grounding is unquantifiable. As with our conclusions in regard to the calculations, we are left with an unclear picture as to the precise loss of performance after the grounding.

I consider irregularity (5) first. LSCs complaint is that the Tribunal wrongly admitted and relied on the evidence as to the errors in Mr Arnott’s calculations recently discovered by Mr Cavagan because: (i) the evidence admitted was expert evidence but was received from Counsel rather than an expert; (ii) the evidence was so vague as to be meaningless; and (iii) the evidence came too late and in the face of Mr Riches’ protest set out above. Mr Riches submitted that in so acting, the Tribunal committed irregularities under: (i) s. 68 (2) (a), in breaching the duty of fairness, in particular in not giving LSC the chance to consider the case against it and put its own case; (ii) s. 68 (2) (b), in exceeding its powers by acting as an expert in matters in which it had no expertise; and (iii) s.68 (2) (c), in failing to conduct the proceedings in accordance with the agreed procedure.

Mr Riches submitted that the Tribunal should either have rejected ROSNO’s attempt to introduce the evidence or have given LSC an opportunity to consider the evidence and respond to it. Mr Riches also argued that the Tribunal wrongly characterised the expertise of Mr Arnott. As a result of the alleged irregularities, LSC had suffered a substantial injustice. If the Tribunal had proceeded as they ought to have done, they might well have concluded that LSC succeeded on its claim.

In my judgement, Mr Macey-Dare was well entitled to draw to the Tribunal’s attention the alleged further errors that ROSNO’s expert had discovered in Mr Arnott’s calculations. Had he not done so there would have been a real risk of the Tribunal relying on evidence that was based on possibly erroneous calculations. I also think there is nothing in the point that it was Counsel rather than Mr Cavagan who alerted the Tribunal to the errors. Mr Macey-Dare was careful to tell the Tribunal that he was passing on Mr Cavagan’s views, and Mr Cavagan was present when he did so.

I am also of the view that the Tribunal were entitled to take note of what they were told about further errors in the calculations. Mr Riches’ protest was much more in the nature of “a whinge” than an outright submission that the Tribunal should not take note of what it was being told, and it was shortly followed by Mr Riches telling the Tribunal that he would be talking for the next 15 minutes and if there was anything further that Mr Arnott wanted to add then he would obviously make that point then. At no time during his 15 minutes did Mr Riches make any observations on the errors mentioned by Mr Macey-Dare and nor did he submit that the Tribunal should take no notice of what it had been told or that LSC should be given yet further time to deal with errors that had been pointed out. It is also clear that Mr Arnott, who was present throughout, made no attempt to bring any points to Mr Riches’ attention before the close of the day’s proceedings and no application was made after the hearing for the admission of further evidence to deal with the further errors. It also has to be remembered that the final calculations put before the Tribunal were the third version. The first was served prior to the first hearing but without the underlying information necessary to make sense of them; and the second and third versions were permitted by the Tribunal on LSC’s application after the evidence had closed. In all the circumstances, the Tribunal were entitled in my opinion to conclude that Mr Cavagan’s observations were not going to be answered by LSC. The position is comparable to that which featured in The “Magdalena Oldendorff” [2008] 1 Lloyd’s Rep 7. There, Counsel for the Charterers took a new causation point in his closing address to the arbitral tribunal. Counsel for the Owners, whose closing address came after that of Counsel for the Charterers made no mention of this new point. The arbitrators held in favour of the Charterers, on the basis of the new point. The Owners’ application to the court under 68 (2) (a) alleging that the tribunal had unfairly failed to give them the opportunity to deal with the point was dismissed. The tribunal were entitled to assume that Counsel for the Owners was aware of the new point and had chosen not to address it. No duty was owed by the tribunal to ask Counsel for the Owners if he had anything further he wished to say on the point.

In my judgement, the Tribunal’s conclusion that the picture was unclear as to loss of performance was a finding of fact that was open to them on the evidence and is beyond successful challenge on s.68 (2) grounds. I would add that the Tribunal plainly understood the methodology underlying Mr Arnott’s evidence on loss of performance and the role played in his calculations by the wake factor. Further, the Tribunal’s view of the extent of Mr Arnott’s expertise was a view that was open to them and does not involve a serious irregularity within any of the paragraphs of s. 68 (2).

I turn to serious irregularity (4). LSC’s complaint is that the Tribunal failed to accept the common ground between the parties that the damage seen at Dakar would have caused a drop in the vessel’s performance. Instead, they carried out an analysis of their own as to the effect of hull damage when they should have treated this as a constant factor and in so doing, they committed a serious irregularity: (i) under s. 68 (2)(a) in that it was in breach of the duty of fairness; (ii) under s. 68 (2)(b), in that the Tribunal exceeded its powers; and/or (iii) under s. 68 (2) (c), in that the Tribunal failed to conduct proceedings in accordance with the agreed procedure.

Mr Riches submitted that what the Tribunal should have done was to have concentrated on Mr Arnott’s evidence as to the vessel’s performance and to have accepted it. In his submission, ROSNO never produced any equivalent table to contradict Mr Arnott’s evidence. If the Tribunal had approached Mr Arnott’s spreadsheet bearing in mind that it was common ground that the propeller damage seen at Dakar must have caused a drop in performance and that the hull damage was a constant, they would have appreciated that the only credible time when that drop occurred was during the grounding and well before the ice passage, or at least they might have done, which would be sufficient for s. 68 (2) purposes.

I agree with Mr Macey-Dare’s submission that the complaint made by LSC under this head is in truth an attempt illegitimately to re-open the Tribunal’s findings of fact. The Tribunal were not obliged to treat Mr Arnott’s calculations as the only credible evidence as to the vessel’s performance. Instead, it was for the Tribunal to assess all the evidence going to the performance of the vessel which included not only the common ground that the catastrophic propeller damage seen at Dakar would have had an adverse effect on performance but also Mr Arnott’s and Mr Cavagan’s reports, the effect of currents, the effect of the hull damage caused by grounding and the effect of marine growth on the hull. In the result, the Tribunal found a comparison of the vessel’s performance before and after Quebec did not assist greatly with their enquiries, (Footnote: ³⁵) no doubt because they were left with an unclear picture as to the precise loss of performance due to uncertainty as to the reliability of Mr Arnott’s calculations, the impossibility of quantifying the effects of grounding damage to the hull and its fouled state and the limited number of days available to assess the vessel’s performance between Wilmington and Quebec. (Footnote: ³⁶) In my opinion, this finding and the reasoning it is based on involved no serious irregularity within s. 68 (2) and is not susceptible to challenge on s. 68 (2) grounds or any grounds.

Serious irregularity (6) --- the Tribunal failed to deal with the ice issue properly or at all.

It was the opinion of LSC’s expert, Mr Duffield, that the propeller was too deeply drafted for most of the time the vessel was in ice-affected waters for it to have made contact with ice. In its Outline Submissions, ROSNO stated that that was probably the case for most of the time the vessel spent in the ice. However, the propeller was at risk of contacting ice when: (a) manoeuvring astern on 11-13 February; (b) manoeuvring on her arrival at Quebec, in the presence of brash ice; and (c) manoeuvring on departure from Quebec, again in the presence of brash ice.

As we have seen, the Tribunal found that there was a number of obvious possibilities for the propeller to have hit ice and the ice conditions throughout the time that she was in the Gulf of St Lawrence and the St Lawrence River made it entirely credible that the propeller might have hit ice. Similarly, the damage to the propeller was consistent with it having hit ice. (Reasons para 89)

Under this heading of serious irregularity, LSC submitted that ROSNO’s case was limited to ice damage occurring during the three periods of time (a) and/or (b) and/or (c) and accordingly it was not open to the Tribunal to find that there were obvious possibilities for the propeller to have hit ice over a much broader time frame, namely, when the vessel was in the Gulf of St Lawrence and the St Lawrence River. If ROSNO was going to contend that there was a real possibility that the propeller might have hit ice at any time she was in ice-affected water in the Gulf of St Lawrence and the St Lawrence River, it should have amended its pleaded case, but this it did not do. What the Tribunal had done was to invent a case which was not being asserted by either party, and in doing so, were guilty of an irregularity under s. 68 (2) (a) in that it was unfair to LSC to require it to meet a case that in fact was not being put.

LSC went further and submitted that, relying on Mr Cavagan’s view in his Main Report that it was “unlikely” that the propeller hit ice during periods (a) and (b), its case before the Tribunal had been that ROSNO’s ice damage case was limited to (c) and the Tribunal had failed to deal with this part of LSC’s case, thereby committing a serious irregularity under s. 68 (2) (d).

LSC also submitted that the Tribunal were guilty of serious irregularities under 68 (2) (c) and (d) in that they failed to deal with the issue whether the vessel in fact hit ice and failed to give reasons for its finding that the damage seen at Dakar was consistent with the propeller hitting ice.

Mr Cavagan’s view that ice damage to the propeller on the vessel’s inbound passage to Quebec was unlikely due to the vessel’s draught at this time was expressed without the benefit of the evidence of Mr Harned, ROSNO’s expert meteorologist. As stated above, in his amended report, Mr Harned reconstructed the ice conditions present when the vessel sailed to and from Quebec in the Gulf of St Lawrence and the St Lawrence River using: (i) ice analysis charts prepared by the Canadian Ice Service; (ii) river ice charts from the Canadian Coast Guard; and (iii) the vessel’s logs. His reconstruction described the type and form of ice present, the ice concentration and its thickness. He also provided a commentary on a DVD shot by the ice pilot, Mr Nunn, during the vessel’s passage to Quebec. He also highlighted in the course of his evidence the fact that the ice was not just a single sheet under which the propeller was safe, but there was a process of ridging and rafting by which ice ends up extending well below the level of an ordinary, uncrumpled ice sheet. In paragraph 48 of their Reasons, the Tribunal say that they “found this information to be of particular significance and relevance.”

Even before Mr Harned gave his evidence in chief, Mr Macey-Dare cross-examined LSC’s expert, Mr Duffield, in the course of which he suggested there was a risk of ice damage at certain stages of the passage to Quebec and questioned him about the possibility that the propeller would have contacted ice while manoeuvring astern when she was beset in ice en route for Quebec and when she was berthing at Quebec in the presence of brash ice.

In his closing oral submissions, Mr Macey-Dare stated that the vessel had moved astern on 11 February and 12 February to get free from ice and reminded the Tribunal that such a manoeuvre posed a particular risk of propeller damage, especially where the ice was thick from ridging and rafting.

In my judgement, given the way in which ROSNO’s case on ice conditions and the risk of damage from ice was developed at the hearings, LSC could have been in no doubt that ROSNO was maintaining the case set out in its response to LSC’s unsuccessful application for an interim final award which the Tribunal ordered be treated as an amplification of the pleadings:

The principal issues in this case are: (a) Whether the damage to the vessel’s propeller and oil distribution box were caused by the grounding at Wilmington …. or by contact with ice en route to, at or from Quebec…

It is certainly clear from paragraph 73 (iv) of their Reasons that the Tribunal understood that ROSNO’s case was not restricted in the manner contended for by LSC.

(We note here that although Counsel for the Claimant in his closing submissions persisted in characterising ROSNO’s case as being that the most likely point at which ice damage had been sustained by the propeller was on leaving the berth at Quebec, it seemed to us that ROSNO’s case as it was developed at the hearing was that the propeller could have been damaged by ice at a number of points during the relevant period.)

In my opinion, the Tribunal’s readiness to receive ROSNO’s case on ice damage as it was developed during the hearings involved no serious irregularity under any of the paragraphs of s. 68 (2). LSC knew the case it had to meet and suffered no unfairness from the broadening of ROSNO’s case beyond that identified in ROSNO’s Outline Submissions and that which was to be derived from Mr Cavagan’s Main Report. I reject LSC’s submission that the Tribunal invented a case that neither party was presenting. ROSNO’s case was that the propeller was damaged by contact with ice at some point as it sailed en route to and away from Quebec in the St Lawrence River and the Gulf of St Lawrence. I also reject the submission that the Tribunal fell into breach of s. 68 (2) by failing to deal with LSC’s contention that the only case it had to meet was an allegation of ice damage whilst departing from Quebec. As I have held, the Tribunal committed no irregularity in receiving ROSNO’s expanded case founded on Mr Harned’s evidence whilst at the same time expressing disapproval of Mr Riches’ persistence in his closing submissions in characterising ROSNO’s case as being limited to deberthing at Quebec.

As to the complaint that the Tribunal failed to make a finding whether the propeller in fact hit ice, it is clear from the concluding sentence of paragraph 89 of the Reasons that they did make such a finding. (Footnote: ³⁷) True it is that they did not find at what precise stage in the ice passage voyage the propeller hit ice but this involved no s. 68 (2) irregularity. Nor did they commit any s. 68 (2) irregularity in expressing their finding that the damage seen at Dakar was consistent with ice damage in the way in which they did.

Serious irregularity (7) – the Tribunal failed to consider the evidence properly or at all.

LSC submit that the Tribunal failed to consider parts of the evidence and a number of submissions placed before it and in so doing failed to deal with issues that LSC was putting before them. In proceeding in this way the Tribunal committed serious irregularities under s. 68 (2) (a), (c) and (d).

The failures to consider parts of the evidence alleged by LSC are:

LSC also alleges that the Tribunal’s statement in paragraph 61 of the Reasons: “serious propeller damage [alleged by LSC to have been spotted at Quebec] could not all have occurred during the grounding at Wilmington and gone un-noticed during the normal operation of the vessel,” is inconsistent with the Tribunal’s own findings in paragraph 83 of the Reasons that vibrations after the grounding may have been up to “half ahead” and that these were noticed by Captain Zakks after the grounding (paragraph 30).

In my judgement, LSC has failed to established any s. 68(2) irregularities under this head. The Tribunal did not ignore the common ground between Mr Webster and Mr Duffield that there were rocks on the seabed at the grounding site. On the contrary they expressly referred to this in paragraph 76 of the Reasons (Footnote: ³⁸) but took the view (as they were entitled to) that this was irrelevant in light of their finding, based on other evidence, that the vessel had not grounded on rocks and that the propeller had not struck rock (Footnote: ³⁹).

The Tribunal were entitled to ignore the suggestion that the propeller was declutched. This was a speculative suggestion for which there was no evidence. It was also well entitled not to hold against ROSNO the fact that it called no factual witnesses. ROSNO is an insurance company which had nothing do with the operation of the vessel when she grounded and or when she made her subsequent ice passage to and from Quebec.

The Tribunal did not find that the vessel “sprang off” the berth at Quebec. Instead it recorded Mr Cavagan’s evidence as to what would have happened if she had done so. (Footnote: ⁴⁰)

The Tribunal did not find that the propeller damage at Wilmington did not go unnoticed by those on board. On the contrary, it found that no-one on board had any reason to suspect any propeller damage until the vessel suffered a fall in performance a day after leaving Wilmington. (Footnote: ⁴¹)

Mr Macey-Dare accepted that the Tribunal did slip up when they said that none of the rest of LSC’s witnesses shed any light on what Mr Sorins was doing on board. Captain Zakks in his statement explains that Mr Sorins came on board for an internal inspection and audit of the vessel.

However, the presence of Mr Sorins on the vessel during the passage through the ice was a marginal side-issue in the case. The Tribunal’s error falls a long way short in my judgement of amounting to a serious irregularity under any of the paragraphs in s. 68 (2).

Serious irregularity (8) – the Tribunal failed to reflect its finding on damage in its award on costs.

LSC submitted that having found that some damage had probably been sustained to the propeller during grounding at Wilmington (Reasons, para 9) the Tribunal committed serious irregularities under s. 68 (2) (a), (c) and (d) in awarding ROSNO their recoverable legal costs of the arbitration (Reasons, para 90). Mr Riches argued that in making this costs award, the Tribunal failed to act in accordance with s. 61(2) of the Act which provides:

Unless the parties otherwise agree, the tribunal shall award costs on the general principal that costs should follow the event except where it appears to the tribunal that in the circumstances this is not appropriate in relation to the whole or part of the costs.

In Mr Riches’ submission there was nothing which made it not appropriate to follow the usual rule and award LSC its costs in the reference or a part thereof. Implicit in this submission is the contention that the Tribunal’s finding that some propeller damage was probably sustained at Wilmington is “the event”. In my judgement it is manifest that this finding was not “the event” for the purposes of s. 61 (2). On the contrary, looking at the substantive reality of the outcome of the award, “the event” was the finding in favour of ROSNO that the catastrophic propeller damage seen at Dakar was not caused during the grounding, coupled with the finding that on the evidence it was impossible to quantify the extent of the damage that was probably sustained at Wilmington. The burden of proving that the damage repaired at Dakar was sustained during the grounding was on LSC. LSC failed to prove what part of the repair costs was referable to grounding damage. It followed that in substance LSC’s entire claim had failed, notwithstanding the finding that some damage had been sustained at Wilmington.

Even if these findings do not strictly constitute ‘the event’ for the purposes of s. 61 (2), it is obvious that the Tribunal’s cost order was made because: (i) LSC’s claim was an all or nothing claim; (ii) LSC failed to prove that all of the damage to the propeller was sustained at Wilmington; and (iii) LSC failed to prove to what part of the repair costs the Wilmington damage was referable. And it is equally obvious in my opinion that for these reasons the Tribunal was entitled to exercise its power to award costs in the way that they did. It follows that the Tribunal’s award of costs in favour of ROSNO was not a breach of the general duty to act fairly, nor a breach of the agreed procedure, nor a failure to deal with an issue that was put to it.

The s. 69 Appeal

The questions of law for which Burton J gave leave are:

Question 1

(a): Where there is a finding that some of the damage in respect of which an assured claims under an insurance policy has been caused by an insured peril, is it correct that unless the assured can prove all of the damage was caused by the insured peril then its claim under the insurance policy must fail entirely?

(b): Is the answer to (a) different (and if so how) if: (1) the insurer has admitted some of the damage but failed to identify that admitted damage and (2) the assured is claiming in respect of all the damage, with no alternative case for only part of the damage?

Question 2: In circumstances where (1) a tribunal makes a finding on a claim under an insurance policy that some of the total damage in respect of which the claim is brought has been caused by an insured peril and (2) there is no dispute between the parties that the quantum claimed represents the true cost of the damage:

(a)

what steps should the tribunal take to determine which part of the undisputed quantum can be recovered?

(b)

is the tribunal entitled to reach no conclusion as to the identity of the damage and so declare that the claim fails entirely?

ROSNO’s application to set aside the order granting LSC leave to appeal in respect of Question 1.

When applying to the court for leave to appeal under s. 69, LSC relied on a skeleton argument and a first witness statement made by Mr Nicholas Charles Austin, a solicitor employed by LSC’s solicitors, Clyde & Co. Paragraphs 17 – 22 of the skeleton argument proceeded on the basis that ROSNO had admitted that ‘some’ damage was caused by the grounding at Wilmington. Thus paragraph 21 of LSC’s skeleton reads:

The reason this point is particularly relevant is because the Tribunal appears to have based its finding that there was ‘some’ damage at least in part on the admission by ROSNO that there was ‘some damage’. Thus, it is relevant to consider how LSC might have prepared for the Tribunal’s finding of ‘some’ damage by reference to ROSNO’s admission. As illustrated above, it would have been virtually impossible to do so, or so impractical as to have amounted to the same --- requiring possibly multiple alternative claims, one in respect of each dollar of the total repair costs.

Paragraph 24 of Mr Austin’s first witness statement reads:

Very shortly before the hearing, ROSNO’s (sic) changed its case. Through the evidence of one of its expert witnesses and subsequently in submissions, it accepted that some damage had occurred to the propeller during the grounding, or at the very least that it may have done so, but it disputed that the full extent of the propeller damage occurred at that time.

Thereafter, Mr Austin made numerous references to “ROSNO’s admission”, in particular in paragraphs 42-3, 44 (g), 58 – 64, 66, 139 and 145. On occasion he described the admission as an “admission that there was or may have been some damage.” On other occasions the admission was “that there was some damage”. In paragraphs 59 and 61 respectively, Mr Austin says: “ROSNO’s admission that there was ‘some’ damage appeared in its expert’s reports shortly before the hearing” (para 59); “… the effect of [ROSNO’s admission] was to demonstrate that in fact some damage had been sustained at Wilmington” (para 61). And in paragraph 62 he talks of “the admitted damage”.

In paragraph 139 Mr Austin says:

In my view it is of considerable public importance that those using English law – including international businessmen choosing English arbitration – know that they are permitted to make partial recovery for a lesser sum than the total claimed under an insurance policy even if they do not assert alternative claims, particularly in situations where one party has admitted some of that damage. [Emphasis supplied]

In its skeleton argument in opposition to the application for leave to appeal, ROSNO asserted that LSC’s allegation that ROSNO had admitted that some damage occurred during the grounding was untrue and that the application was being made on a false basis. ROSNO also put before the court a first witness statement of Mr Rigden Green, a solicitor employed by ROSNO’s solicitors, Stephenson Harwood, in which Mr Rigden Green dealt with the concession made by ROSNO as follows:

LSC then served an additional skeleton argument and a second witness statement of Mr Austin in both of which it was maintained that the Tribunal had found as a fact in paragraph 13 of the Reasons that ROSNO had admitted that some propeller damage had occurred at Wilmington. (Footnote: ⁴²)

Burton J dealt with LSC’s application for leave on the papers. In the short reasons he gave on 23 September 2011 for granting leave he said:

With regard to subparagraph (B) (1) of Question 1, notwithstanding the repeated denial in the Respondent’s skeleton and witness statement, the Arbitrators appear to have made such a finding in paragraph 13 of the Reasons.

Following the grant of leave, ROSNO applied to the Tribunal under s. 57(3) of the Act and paragraph 25 (a) of the LMAA Terms 1996 to clarify and/or correct paragraph 13 of the Reasons. On 25 November 2011, having received written submissions from both parties, the Tribunal made an Additional Award in which they found that paragraph 13 misstated the admission by ROSNO because ROSNO had never conceded that some damage had probably been sustained at Wilmington but had instead conceded simply that it was possible that some damage had been sustained here and not in the ice. Accordingly, they replaced the word “probably” in paragraph 13 with the word “possibly”.

Mr Macey-Dare submitted that LSC was well aware or ought to have been aware that ROSNO had not admitted that propeller damage probably occurred and that Burton J was misled when he was asked to give leave in respect of Question 1, which includes the words, “Is the answer to (a) different (and if so how) if: (1) the insurer has admitted some of the damage ….” [Emphasis supplied]

The first issue to decide is whether the Court has jurisdiction to set aside an order granting leave to appeal under s. 69. Mr Riches argued that the Court has no such jurisdiction. In his submission, the only course open to a respondent who wishes to have the grant of leave under s. 69 set aside is to appeal the order granting leave to the Court of Appeal, having first obtained leave for such an appeal pursuant to s. 69 (6). Time for an application for leave to appeal Burton J’s order expired at the latest on 21 October 2011. It followed, submitted Mr Riches, that not only did the Court have no jurisdiction to set aside Burton J’s order, but also there was no prospect of any appeal to the Court of Appeal.

Mr Macey-Dare submitted that the court had the necessary jurisdiction under CPR 3.1(7) which provides:

A power of the court under these Rules to make an order includes a power to vary or revoke the order

Mr Macey-Dare argued that this Rule should be construed in light of the Overriding Objective and so construed it applied in this case because the Court had the power to make the order granting leave by virtue of CPR 23.8 and/or CPR 62 PD paragraph 12.12 which confer on the Court the power to grant permission to appeal without a hearing. Mr Macey-Dare referred to Roult v North West Strategic Health Authority [2010] 1 WLR 487 where the Court of Appeal expressed the view that CPR 3.1 (7) was not confined to purely procedural or case management orders and that the discretion it conferred would normally be exercised only where the judge who made the order had been misled by erroneous information, or a subsequent event had destroyed the basis on which the original order had been made.

In the alternative, Mr Macey-Dare submitted that the court could act under its inherent jurisdiction to set aside a grant of leave under s. 69 if the court which granted leave had been misled. He referred to Waller LJ’s judgment in the Ikarian Reefer No. 2 [2000] 1 WLR 603 at 615 D – E, where the view is expressed that if there were a lacuna in relation to CPR 48.2, there must be an inherent power to give leave to join a party and to give leave to serve that party out of the jurisdiction once the application to join has resulted in an order for joinder.

Mr Macey-Dare also referred me to CPR 52.9 (1) (b) which confers a power on the Court of Appeal to set aside permission to appeal in whole or part where there is a compelling reason to do so. In dismissing an application made under that Rule, the Court of Appeal in Barings Bank v Coopers & Lybrand [2002] EWCA Civ 1155 (Laws and Jonathan Parker LJJ) referred with approval to the observation of Longmore LJ in Nathan v Smilovich [2002] EWCA Civ 759 that an applicant under CPR 52.9 (1) “would normally have to show that the single Lord Justice had actually been misled in the course of the presentation of the application.”

In Mr Macey-Dare’s submission, if there was good reason for the Court of Appeal to have the power to set aside the grant of permission if the judge granting permission was misled, I should readily find that the Commercial Court had jurisdiction under CPR 3.1(7) or by an inherent power to set aside the grant of leave under s. 69 in similar circumstances.

In my judgement, the Court does have jurisdiction to set aside an order granting leave to appeal under s. 69 by virtue of CPR 3.1 (7) for the reasons submitted by Mr Macey-Dare. It is not possible nor would it be advisable to define the circumstances in which the jurisdiction may be exercised but those circumstances will include situations where the court making the original order was misled or where there has been a fundamental change of circumstances which has destroyed the basis on which the original order was made.

I am also of the view that if the court does not have the necessary jurisdiction under CPR 3.1 (7), it has it under its inherent jurisdiction, especially where the court making the original order was misled, this being an example of abuse of the Court’s process.

I turn then to the question whether Burton J was misled when the application for leave was made under s. 69 and/or whether the making of the Additional Award has destroyed the basis on which the original order in respect of Question 1 was made.

Mr Riches argued that LSC submitted in the arbitration right up to the close (as it was well entitled to do) that ROSNO’s experts had made an admission of propeller damage during the grounding in that they were saying that not all the damage occurred during the grounding and that loss of performance after the grounding might have been due to propeller damage at the grounding. It mattered not whether ROSNO’s Counsel was contending that no such admission had been made. It was an issue on the evidence for the Tribunal to decide, which they did by their finding in paragraph 13 of the Reasons, a finding that ROSNO had done nothing to disturb until after Burton J’s order granting leave.

In any event, submitted Mr Riches, there had been no reliance on an admission that damage had in fact been incurred at Wilmington since it was made clear in Mr Austin’s first witness statement that LSC’s argument at the hearing had been about an admission of probability of damage and an admission about possibility of damage (see e.g. paragraphs 24 and 133.

Mr Riches accepted that the amendment to paragraph 13 by the Additonal Award constituted a change of circumstances but argued that was very different from the Court being misled. It may be a circumstance the Court could bear in mind on the appeal itself, but it was not a reason to set aside.

Mr Macey-Dare submitted that it was clear from the following extract from the arbitration transcript that in the course of his oral closing submissions Mr Riches explicitly accepted that ROSNO had not admitted that any propeller damage had in fact been incurred at Wilmington.

MR RICHES: So that is the first of those issues, the materials on the seabed. As to the second of those issues, whether the damage that was seen at Dakar to the propeller is consistent with ground damage, the respondents no longer deny that the propeller touched the bottom and no longer deny that it suffered damage to the grounding.

MR MACEY-DARE: We do. I don't know where you get that from. We do deny it. We don't admit (Inaudible).

MR RICHES: That is very different though. You don't deny it. I mean, just to take you there, gentlemen, paragraph 108 of my learned friend's closing submissions, we can see one of the many instances where this point is apparent. So paragraph 108, page 37 of respondent's closing submissions. We see there that we say that underwriters accept that it is possible on the events that some minor propeller damage occurred during the grounding at Wilmington. So it is not denied. My learned friend says it is not admitted but it is certainly not denied.

… So our point is simply that that is quite a change from saying that it is denied to now saying: well, it may have happened and it is possible.

… So from that, it is clear that ROSNO accepts that there is a possibility that the propeller touched the bottom at the grounding and as we say, that is a change of position from the stance they held until very shortly before the hearing.

… Now, we say this is significant because, given that they accept that there is a possibility of the propeller passing through the spoil and given that Mr Webster accepts that there are, in fact, rocks and stones present in that spoil, it is a far easier task for the claimants to show that the propeller hit some of those rocks or stones …

… It is not that they are saying: no, there was never any contact between the propeller and the seabed. They are no longer saying this. They don’t deny that there may have been contact. They do not deny there may have been damage. …

Thus, submitted Mr Macey-Dare, by the end of the arbitration hearing there was no issue for the Tribunal to determine as to whether LSC had admitted actual propeller damage at Wilmington and there was no basis for LSC to believe that there was any such issue. It followed there was no basis for LSC to treat the original wording of paragraph 13 of the Reasons as containing a finding on that issue, a conclusion that was reinforced by the fact that it was evident from paragraphs 14-19 of the Additional Award that the Tribunal did not consider the matter to be in issue and did not regard itself as having determined any such issue. (Footnote: ⁴³)The allegation that ROSNO had admitted actual propeller damage at Wilmington was never true and the Additional Award did not make that allegation untrue. Rather, it confirmed that the allegation was untrue, as it had always been.

Mr Macey-Dare further submitted that there was nothing in Mr Riches’ contention that the Court was not misled on the application for leave to appeal because Mr Austin had repeated LSC’s bifurcated allegation in his witness statements that ROSNO had admitted: (i) that some damage had occurred to the propeller during the grounding, or (ii) at the very least that it may have done so. This was so because the only relevant allegation for the purposes of the application for leave to appeal was the allegation that ROSNO had admitted actual damage: that was the allegation which appeared in Question 1; and that allegation was untrue. The allegation that ROSNO had admitted that it was possible that some propeller damage was irrelevant to the application for permission to appeal. Hence, it did not appear in Question 1.

Moreover, LSC’s skeleton argument in support of the application for leave to appeal did not contain the bifurcated allegation. It only contained the allegation that the Defendant had admitted actual damage. The bifurcated allegation only appeared in LSC’s (voluminous) witness statements. In any event, the bifurcated allegation was itself untrue: it positively alleged that the Defendant had admitted actual damage which was untrue.

In my judgement, Mr Riches’ response in his oral closing submissions relied on by Mr Macey-Dare does not amount to an unequivocal acceptance of Mr Macey-Dare’s insistence that all that was being conceded by ROSNO was the possibility of propeller damage at Wilmington. Accordingly, I think that LSC was entitled to proceed on the basis that it had kept its contention that ROSNO’s experts’ evidence amounted to an admission of actual damage alive. Further, given the Tribunal’s finding in paragraph 13 that ROSNO admitted the probability of some minor propeller damage at Wilmington, a finding that had not been challenged by ROSNO when the leave application was in play, it cannot be said in my view that the court was misled as to ROSNO’s admission. That said, given ROSNO’s clearly expressed insistence throughout the arbitration that it was only admitting the possibility of damage at Wilmington and given also paragraphs 7 and 12 of the Reasons (Footnote: ⁴⁴) that suggest that ROSNO’s admission went to a possibility rather than a probability, I think it would have been much better if LSC’s skeleton argument and Mr Austin’s witness statements had referred to these matters to alert Burton J that the finding in paragraph 13 might not be all it seemed.

Should Burton J’s order in respect of any part of Question 1 be set aside on the ground that the Additional Award is a subsequent event that has destroyed the basis on which the order was made? In my judgement, the question of the impact of the Additional Award on LSC’s appeal under Question 1 can be as easily dealt within the Court’s appellate jurisdiction as it can within the jurisdiction to set aside the order granting leave, and I propose to deal with it under the former rather than the latter.

Mr Riches submitted that the Additional Award was no reason for not deciding the whole of Question 1, including (b) (1). Questions 1(a) and (b) (2) had nothing to do with ROSNO’s admission of possible damage and as to (b) (1), it was the lack of identity of any damage in ROSNO’s admission, be it an admission of possible damage at Wilmington or an admission of probable damage at Wilmington, which was the key. On either scenario, LSC was in the impossible position situation of not being able to advance an alternative case to meet any partial admission, whether that admission went to probable or possible damage. I agree that Question 1 (a) and (b) (2) are unaffected by the Additional Award and remain to be determined. However, I do not accept that Mr Riches’ submission that the Court should answer Question 1 (b) (1). That question manifestly predicates an admission by ROSNO of actual propeller damage at Wilmington and the Tribunal has now found that ROSNO made no such admission. In follows in my opinion that it would plainly be inappropriate to determine Question 1 (b) (1), and I decline to do so.

I turn then to Question 1 (a) & (b) (2) and Question 2.

1 (a) Where there is a finding that some of the damage in respect of which an assured claims under an insurance policy has been caused by an insured peril, is it correct that unless the assured can prove all of the damage was caused by the insured peril then its claim under the insurance policy must fail entirely?

(b): Is the answer to (a) different (and if so how) if: (2) the assured is claiming in respect of all the damage, with no alternative case for only part of the damage?

Question 2: In circumstances where (1) a tribunal makes a finding on a claim under an insurance policy that some of the total damage in respect of which the claim is brought has been caused by an insured peril and (2) there is no dispute between the parties that the quantum claimed represents the true cost of the damage:

(a)

what steps should the tribunal take to determine which part of the undisputed quantum can be recovered?

(b)

is the tribunal entitled to reach no conclusion as to the identity of the damage and so declare that the claim fails entirely?

LSC’s case

Question 1(a) and (b) (2)

LSC’s case is essentially the same as that advanced in respect of Serious Irregularities (1) an (2). Mr Riches, citing sections 55 (4) and 69 (1) (Footnote: ⁴⁵) of the Marine Insurance Act 1906 submitted that it was plain that an assured under a Marine Insurance Policy could recover for part of a loss and this was so even where the assured had not specifically claimed for partial recovery or for the partial recovery ultimately awarded. Further, the tribunal hearing the claim had no discretion in determining what sums should be recovered. The general principle is clear: although a claim is for a greater sum, the assured can still recover for a lesser loss if the evidence only proves the lesser loss.

The reason why LSC had not put forward an alternative claim was because there was no identifiable alternative to assert.

Question 2

Mr. Riches argued that once the Tribunal had concluded that there was some damage covered by the policy, they should have used the available evidence (Footnote: ⁴⁶) to determine referable losses. And to the extent that the Tribunal could not identify the referable losses, it should have taken a “broad brush” approach. The Tribunal had failed to draw the distinction between the question of damage attributable to the insured peril and the quantification of damage proved to be so attributable as they should have done; see Gregg v Scott [2005] 2 AC176 at para 69; Equitas v R&Q Insurance Co (UK) Ltd (above).

Further, to the extent that the Tribunal was in difficulty in quantifying damage suffered at Wilmington, they should have requested further submissions from the parties.

ROSNO’s case

ROSNO’s answers to Questions 1 (a) and (b) (2) is No. The principle on which these questions are predicated has never been in dispute.

ROSNO’s answer to Question 2 is: it depends on the circumstances, including what the parties have agreed in relation to (i) the procedure; and (ii) the findings of fact that are open to the Tribunal on the evidence before it.

In ROSNO’s submission, the appropriate relief under s. 69 (7) of the Act is to confirm the Award for reasons that echo its case under Serious Irregularities (1) and (2). As to Question 1 (a) and (b) (2), the reason the Tribunal decided that LSC’s claim failed entirely was because they concluded on the evidence that it was not possible to determine the extent of the propeller damage caused at Wilmington and the reasonable cost of repairing the same (see paragraph 9 of the Reasons). That was a pure finding of fact and was a matter for the Tribunal alone. And when the Tribunal said in paragraph 13 that there was no justification for adopting a broad brush approach in reaching conclusions as to the extent of the Wilmington damage and then attempting to put a figure on that for repair costs, they were saying that a broad brush was not justified on the evidence.

Further, the Tribunal did not award LSC part of the repair costs for the damage suffered at Wilmington because it was impossible on the evidence to quantify the extent of that damage, not because LSC had not advanced a positive alternative case for a partial award.

As to Question 2, once the Tribunal had found as a fact that it was impossible on the evidence to quantify the extent of the Wilmington damage, it was under no obligation to seek further assistance from the parties. Further, given the impossibility on the evidence of quantifying the Wilmington damage, it was open to the Tribunal to conclude that there was no justification for taking a broad brush approach.

I agree with Mr Macey-Dare’s submissions for the reasons I have given in paragraphs 41-45 and 50 above. In my judgement, the appropriate order to make on LSC’s s. 69 appeal is to confirm the Award.

Conclusion

For the reasons given above, LSC’s applications challenging the Award dated 20 May 2011 are dismissed. The Tribunal committed no serious irregularities under s. 68 (2); nor did they make an appealable error of law. Rather, the Tribunal dismissed LSC’s claim on the facts after a hearing in which nothing happened that could justly be said to have been so removed from what could reasonably be expected of the arbitral process that the Court should be expected to intervene.