Hyundai Merchant Marine Co. Ltd v Americas Bulk Transport Ltd (Re: PACIFIC CHAMP)

This judgment deals with three applications by Hyundai Merchant Marine Company Ltd (“HMM”) under ss. 67, 68 and 69 of the Arbitration Act 1996 (the “1996 Act”) challenging an arbitration award dated 22 November 2011 (the “Award”).

The focus of the proceedings is the alleged fixture of a vessel, the mv Pacific Champ (the “vessel”), in February 2008 between HMM as disponent owners and Americas Bulk Transport Limited (“ABT”) as charterers. The negotiations for the present alleged fixture were conducted by phone and emails between two individuals who were based in New Jersey, USA i.e. on behalf of HMM by Mr Ho Jong Baek (HMM's General Manager and Head of their HandyMax Team) and on behalf of ABT by Mr Charlie Song (a chartering broker at Eastmark Shipping). In summary, it is ABT's case that a binding contract (or at least a binding arbitration agreement) was contained in or evidenced by an e-mail sent by Mr Song to Mr Baek at 1527 on Tuesday, 12 February 2008 (the “second recap”). (There is some confusion as to the precise timing of this email. It might have been sent at 1627 rather than 1527; but the parties agree that this difference in timing is not crucial and, for present purposes, I shall refer to it as having been sent at 1527.) It is HMM’s case that no binding contract or arbitration agreement ever came into existence. That is the basis of the three applications now before the court.

At all material times, HMM was the bareboat charterer of the vessel under an amended Barecon Charterparty (the “Bareboat Charterparty”) dated 14th July 2006 whereby HMM bareboat-chartered the vessel from the registered owner, Iris Owning Company Limited (“Iris”) for approximately 8 years from the date of delivery on 1st August 2006. Importantly, additional clause 19 of the Bareboat Charterparty set out the vessel’s trading limits, namely “Wor[l]d wide trading always afloat, always within IWL and always via safe ports and ice free areas excluding ... Orinoco River ...” (emphasis added).

In January 2008, HMM sent open messages to the market with a view to trying to fix new business for the vessel. There were some preliminary discussions between Mr Baek and Mr Song. However, detailed negotiations did not commence until Monday 11 February 2008.

On 11 February 2008, detailed negotiations commenced on the phone between Mr Baek and Mr Song for the possible charter of the vessel by ABT for the carriage of a cargo of HBI (hot-moulded briquettes of direct reduced iron) from Houston via the Orinoco River, Venezuela, and back to the US Gulf. It is HMM’s case that during these discussions, Mr Baek informed Mr Song that the vessel was bareboat-chartered by HMM; that he (ie Mr Baek) would have to check with HMM’s head office in South Korea that the proposed carriage - HBI via the Orinoco River - was permitted by the Bareboat Charterparty; that the proposed fixture would have to be based on a proforma time charterparty which he was to obtain from HMM’s head office; and that after their telephone conversation, during the evening of 11 February 2008 (which was the following morning in Seoul), Mr Baek called Mr Young-Dong Ma at HMM’s head office in Korea to inform him of these discussions and requested that he (i.e. Mr Ma) send Mr Baek a copy of the Bareboat Charterparty and a time charterparty form which could be used as the basis for negotiations with Mr Song.

Although it is common ground that Mr Song was indeed aware that HMM was the bareboat charterer, it is ABT's case that Mr Baek never suggested that he needed to check the Bareboat Charterparty to see if HMM could comply with the proposed business; and that this never happened.

In any event, at 2036 on 11 February 2008, Mr Song sent an email to Mr Baek which was in material part as follows:

“AS PER TLECONV FIXED ASF

M/V PACIFIC CHAMP……

OPEN HOUSTON 17 FEB 2008

ACCT AMERICAS BULK TRANSPORT LIMITED, MONROVIA, LIBERIA.

1: DELIVERY DLOSP HOUSTON, USA ATDNSHINC

2: LAYCAN 16/21 FEB, 2008 (00:00/24:00) – ETD 16/17^TH FEB, 2008, IAGW W/P

3: REDELIVERY WWR MISS RIVER ATDNSHINC

4: FOR ONE T/C TRIP VIA SBS SPS SAS AAAWIWL WITH HBI IN BULK, DUR ABT 20/25 DAYS WOG.

5: USD 35,000 DIOT

6: BOD IFO ABT REVERTING (BUT HAVE SUFFICIENT QTTY PERFORM HOUSTON VIA ORINOCO REIVER TO MISSREVER) BOR ABT SAME QNTY AS ON DELY

7: BUNKER PRICES SAME BENDS REVPERT

8: ILOHC – BTB

As to this email, two main points should be noted. First, although this email as drafted by Mr Song stated in its opening “AS PER TLECONV FIXED ASF” and was referred to as the “first recap”, Mr Davey accepted that there was no binding fixture at this stage because the parties were not then agreed on item 3 ie the place of redelivery. Thus, Mr Davey also accepted before me that the assertion by Mr Song in this email that the vessel was at that time “fixed” was untrue and must have been known to be untrue by Mr Song when he sent the email. Second, one of the central disputes between the parties concerns the meaning of Item 12 i.e. “SUB REVIEW OWNRS HEAD CP BTB”. I revert to this dispute further below.

Mr Baek saw the “first recap” the following morning i.e. 12 February. In addition, he saw what he had received overnight from Mr Ma i.e. an email attaching what was described in the heading of the email as “Pacific Champ - proforma CP” (i.e. the Proforma Charterparty). The Proforma Charterparty was an unsigned time charter on the NYPE form with additional typed clauses and provided for a single time charter trip of 20-30 days. In the Proforma Charterparty, HMM was named as charterer. At first sight, this is difficult to understand given that HMM was, as I have said, the bareboat charterer under the Bareboat Charterparty. However, the explanation may be that it (i.e. the Proforma Charterparty) is dated 28th April 2003 (i.e. long before the date of the Bareboat Charterparty). Under clause 51, “DRI/HBI and their products” were excluded from carriage. In addition, the Proforma Charterparty included (in clause 17) an arbitration clause providing for arbitration in London and English Law to govern; and also clause 54 entitled “Hold Condition on Delivery/Redelivery”.

It is common ground that Mr Baek forwarded the Proforma Charterparty by email to Mr Song shortly thereafter i.e. at 0858. However, there are important disputes between the parties with regard to the phone calls which took place during the day. I consider these disputes further below.

In any event, later that afternoon at 1527, Mr Song sent to Mr Baek the second recap as referred to above. This was in substantially similar form to the first recap Mr Song had sent the night before save that Item 3 stated: “REDELIVERY DLOSP USG ATDNSHINC”; and Item 13 stated: “SUB CHTRS RECONFIRMATION 0900 HRS NYT FEB 13, 2008”. As stated above, it is this email which ABT submitted contained or evidenced the “binding contract” – although this requires some explanation. In effect, it was ABT’s case that at latest after that e-mail was sent, HMM was contractually bound in the sense that it (i.e. HMM) was not entitled unilaterally to withdraw from the fixture or to vary the terms which had been agreed but that ABT was not bound unless and until it (i.e. ABT) had provided its “reconfirmation” as referred to in Item 13 of the second recap. This was disputed by HMM. In particular, it was HMM’s case that there was, in any event, no binding contract nor any arbitration agreement unless and until the subjects were lifted and ABT had given its “reconfirmation”; and that until that time, HMM was entitled unilaterally to seek to vary the terms set out in the second recap and indeed withdraw from the proposed fixture. I deal briefly with this aspect further below.

Following receipt of the second recap, it is HMM’s case that at around 1700 hours, Mr Baek spoke to Mr Ma (which would have been around 0700 hours the following day i.e. 13 February in Korea) and was informed that, although the Bareboat Charterparty contained no restriction on the carriage of HBI, it did not permit trading via the Orinoco River; and that at around 1800 hours, Mr Baek then spoke to Mr Song on the telephone and told him that although the carriage of HBI was permitted under the Bareboat Charterparty, trading via the Orinoco River was not. This is disputed by ABT. In particular, it is ABT’s case that (i) Mr Baek informed Mr Song about HBI being a permitted cargo under the Bareboat Charterparty before, not after, the second recap; and (ii) there was no discussion between Mr Baek and Mr Song about the Orinoco River restriction in the Bareboat Charterparty, at least before Mr Baek’s email at 1941 as referred to below.

At 1941, Mr Baek sent Mr Song an email which set out what he described in the body of that email as “CP comments”. These were, in effect, proposed amendments to the Proforma Charterparty, including (i) the deletion and replacement of clause 51 (“Cargo Exclusions”) so as to permit, in effect, the carriage of HBI; and (ii) the deletion and replacement of clause 52 (“Trading Exclusions”) so as to expand the trading exclusions also to exclude Orinoco River. According to Mr Baek, these proposed amendments had been discussed with Mr Song on the telephone earlier that evening; although Mr Song had no recollection of such conversations. On behalf of ABT, Mr Davey submitted that this email was “quite extraordinary” because, as he said, the proposals which it contained did not make commercial sense and were not genuine suggestions. For example, Mr Davey submitted that not only was one of the proposed terms an exclusion of the Orinoco River, in circumstances where HMM knew that was the intended business, but another suggestion was a proposed amendment to a stevedore damage notice clause (clause 40) which, in effect, imposed a more burdensome obligation on HMM requiring HMM to give notice within 24 rather than 48 hours. Be that as it may, Mr Song acknowledged that he saw this email and relayed the contents to Mr Coll of ABT, prior to 0847 hours the following day i.e. 13 February.

Immediately prior to 0900 hours on 13 February (i.e. the deadline in Item 13 of the second recap), Mr Song telephoned Mr Baek and purported to “lift the subjects” of the second recap. Mr Baek did not accept that this subject could be lifted because trading via the Orinoco River was not permitted under the Bareboat Charterparty as Mr Baek maintained he had told Mr Song after the second recap and as referred to in his email of 1941 on 12 February.

At 1000 on 13 February, Mr Baek then sent an email to Mr Song asking for his comments on his (i.e. Mr Baek’s) email of 1941 the previous evening setting out the proposed amendments to the Proforma Charterparty. At 1102, Mr Song informed Mr Baek by email that ABT considered that the vessel was “fully fixed”. Mr Baek spoke to Mr Song the following morning, 14 February, and told him that he did not accept that there was a binding fixture.

ABT subsequently asserted that HMM was in repudiatory breach and advanced a claim for damages which was referred to arbitration in accordance with Item 10 of the second recap.

HMM objected to the jurisdiction of the arbitral tribunal on the grounds that no binding or concluded charterparty and therefore no binding arbitration agreement existed between the parties. There then followed a three day hearing of HMM’s objections to the arbitral tribunal’s jurisdiction. In the course of that hearing, the parties relied upon evidence in the form of written statements from Mr Baek (on behalf of HMM) and Mr Song (on behalf of ABT) as well as from Mr Ed Coll (the President of Phoenix Bulk Carriers and agent of ABT) also on behalf of ABT. All three witnesses gave oral evidence at that hearing.

During the hearing HMM advanced four main submissions.

Submission 1: The “subject” in Item 12 of the alleged fixture (“Sub Review Ownrs Head CP BTB”) had not been complied with. In particular, HMM contended that Item 12 should be read to mean: “Sub Review [of] Ownrs Head CP [to ensure it is] BTB [back to back with this charter]”. More specifically, HMM contended that (i) the “Ownrs Head CP” is a reference to HMM’s actual head charterparty, namely the Bareboat Charterparty; (ii) the “Review” was to be an objective or mechanical review the purpose of which was to ensure that the charterparty being negotiated was “BTB” or back to back with the Bareboat Charterparty i.e. in other words, the review was to ensure that the charter to be negotiated was compatible with the Bareboat Charterparty and was permitted thereunder; and (iii) this interpretation accommodates both the natural reading of each of the terms used in Item 12, the holistic reading of the entire provision and also, where relevant and admissible, the discussions between Mr Baek and Mr Song. On the other hand, ABT argued that (i) “Owners Head CP” in Item 12 referred not to the Bareboat Charterparty but rather to the Proforma Charterparty; (ii) “Review” was a subjective review by ABT giving it (i.e. ABT) a complete discretion to accept or to reject the proposed fixture; and (iii) “BTB” was, in effect, an incorporating provision by which the terms of the Proforma Charterparty were incorporated into the proposed fixture.

Submission 2: Item 12 was a condition precedent to the existence of a binding contract and HMM withdrew from the proposed fixture before the subjects had been lifted as it was entitled to do with the result that no binding charterparty (or arbitration agreement) had come into existence when HMM withdrew. This was disputed by ABT.

Submission 3: The parties did not enter into a binding contract or arbitration agreement because no detailed provisions or charterparty form had been agreed. This was disputed by ABT.

Submission 4: There was no “consensus” between the parties. This was disputed by ABT.

Following the hearing, the tribunal published its Award in favour of ABT declaring that a valid and binding contract had been concluded between ABT and HMM; and reserved to itself all other issues and matters in the arbitration. The reasons for that conclusion appear in different parts of the Award. However, the main part of such reasoning is contained in the following paragraphs of the Award:

“35.

We found that Mr Baek’s reference to ‘pro forma’ in his emailed attachment sent at 0858 on 12 February was the charter upon which the Owners wished the fixture to be based and he forwarded it to the Charterers for their approval so they could lift the subject in Item 12. We do not accept that in this instance the BBC was the head charter when referred to as such by both Mr Baek and Mr Song for two main reasons.

36.

Firstly, we decided and were absolutely certain that a timecharter trip fixture would not be based on a bareboat charter for obvious reasons. The terms in the BBC, as in any demise charter, are very different to those in a New York Produce Exchange form. We considered that it would be most inappropriate and unlikely that the Owners, who are professional and experienced operators in shipping, would base the fixture on such a document. It made no commercial sense and was unlikely in the extreme.

37.

Secondly, all of the amendments forwarded by Mr Baek were based on clause numbers from the proforma charter he emailed to Mr Song and not the BBC. That told us that the Owners were well aware upon which charter this fixture was to be based and it was not the BBC. We should say here that Mr Baek received the amendments from his Korean office and he was merely a ‘postbox’ in that he passed the email on to Mr Song.

38.

We were completely satisfied that the creator and author of Item 12 in the fixture recap was Mr Song. There was no evidence to suggest otherwise and it was normal commercial practice for a charterers’ broker to send a fixture recap followed by the drafting of the Charter Party. Furthermore, there was no time limit attached to the ‘subject’ which indicated to us that it was a subject to be lifted by the Charterers as was Item 13. If it had been the Owners’ option we were certain that we would have seen some correspondence between Mr Song and Mr Baek on this point as to a time limit but there was none.

39.

We consequently make a finding that on a true construction the meaning of the words “SUB REVIEW OWNERS HEAD CP BTB” is that it is for the Charterers to review the Charter Party produced by the Owners. In this instance, the Owners’ head Charter Party is the proforma charter which Mr Baek emailed to Mr Song at 0858 on 12 February.

40.

We further find that the Charterers accepted the terms of the proforma charter in full satisfying the back to back requirement and they lifted the subjects within the agreed time limit. The wording referring to the exclusion of HBI in the proforma charter would have been deleted as being a logical amendment to reflect the main terms agreed by the parties. Consequently we find that a binding contract was agreed and entered into by the Charterers and the Owners on 13 February 2013 2008, the main terms having been agreed on 12 February 2008 as set out in the recap.”

Following publication of the Award, the solicitors for HMM wrote to the tribunal seeking further clarification of the Award pursuant to s.57(3) of the 1996 Act and/or paragraph 25 of the LMAA terms 2006. In particular, the letter stated that on HMM’s reading of the Award, it considered that the tribunal dismissed Submission 1 and gave reasons for its decision; but that it was unclear whether the tribunal, in reaching its decision, considered and determined the other Submissions i.e. 2, 3 and 4 as set out above. The letter concluded by asking for responses to four specific questions by way of clarification. In response, the tribunal stated: “All arguments from both sides were given our full consideration at all times. Not only did we consider the issues you now raise but it is clear and implicit on our reasons that they received our consideration. We have nothing further to add.”

It is against that background that HMM issued the present applications in this Court which, as I have said, involve three separate applications by HMM under ss. 67, 68 and 69 of the 1996 Act.

As to the application pursuant to s.67 of the 1996 Act, HMM seeks an order varying the award “…to declare that no valid fixture and binding contract was concluded and entered into by [HMM] and [ABT] and that no arbitration agreement was concluded and entered into by HMM and ABT in respect of the vessel Pacific Champ…” In support of that application, HMM relies upon the same four submissions which it relied upon before the tribunal as summarised above.

The application under s.68 of the 1996 Act is made in the alternative i.e. on the grounds of what is said to be “serious irregularity, namely the failure of the tribunal to deal with all of the issues that were put to it…” In particular, HMM relies upon s.68(2)(d) of the 1996 Act. In that context, HMM says that the said irregularities caused a substantial injustice to HMM.

Further or alternatively, HMM seeks an order granting it leave to appeal the Award pursuant to s.69 of the 1996 Act on the following questions of law namely:

In support of that application, HMM says that the determination of these questions of law will substantially affect the rights of the parties, that the decision of the tribunal was obviously wrong or is at least open to serious doubt, that the questions of law are of general public importance and that it is just and proper in all the circumstances for the Court to determine each and all of those questions.

By consent, the Court ordered that all three applications, and the appeal on the questions of law if permission is granted, be determined at a single hearing.

With regard to HMM’s application under s.67 of the 1996 Act, it is common ground that such challenge is as of right and involves a full rehearing: Dallah Real Estate v Ministry of Religious Affairs of the Government of Pakistan [2011] 1 AC 763 at [26], [96]. It is also common ground that the evidence adduced in the arbitration including the written statements and transcripts of evidence of Mr Baek, Mr Song and Mr Coll are admissible for the purposes of this s.67 application.

However, on behalf of ABT, Mr Davey submitted that such full rehearing was limited to the jurisdiction issue namely whether there was an arbitration agreement i.e. it is not a rehearing of the different (and broader) question as to whether there is also a binding contract for the charter of the vessel. Thus, he submitted that there is an important difference between a binding arbitration agreement and a binding fixture. In particular, Mr Davey submitted that it is to be presumed that the parties intended the tribunal to decide any dispute arising out of the relationship into which they had entered and that the principle of separability in s.7 of the 1996 Act means that the arbitration agreement can only be challenged on grounds which relate directly to the arbitration agreement and not merely to the main agreement: see Fiona Trust v Privalov [2008] 1 Lloyd’s Rep 254; and that this approach includes questions as to whether the main agreement has come into existence: see [10] and [18] per Lord Hoffmann.

Further, Mr Davey submitted as follows: (i) This approach applies to a situation where it is alleged that there is a “condition precedent”. In UR Power GMBH v Kuok Oils & Grains PTE Ltd [2009] 2 Lloyd’s Rep, Gross J at [40] said that it was a powerful argument that where there was consensus on the arbitration clause, the parties intended the question whether there was a condition precedent to a binding main contract to be determined by arbitration. (ii) This is the correct approach unless the parties have made it clear that the condition precedent also governed the arbitration agreement. (iii) There is no basis for construing the “subjects” in the present fixture as undermining the parties’ agreement to arbitration and every reason (as per Fiona Trust) to presume that the parties intended a single forum for all disputes arising out of the recap including this particular dispute.

On this basis, Mr Davey submitted that there was here, at the very least, a binding arbitration agreement; that therefore the tribunal had the necessary jurisdiction to determine whether or not there was a binding fixture; and that any challenge under s.67 of the 1996 Act is thus bound to fail.

Although these submissions were advanced by Mr Davey most persuasively, I am unable to accept them broadly for the reasons submitted by Mr MacDonald Eggers QC. In particular:

For these reasons, it is my conclusion that the questions whether there was a binding fixture and/or a binding arbitration agreement stand or fall together; and, as stated above, these are to be determined on the basis of a full rehearing.

On this basis, it seems to me that HMM’s application under s.68 of the 1996 Act falls away. Given that the challenge under s.67 of the 1996 Act involves a full rehearing and also my conclusion that the questions whether there was a binding fixture and/or a binding arbitration agreement stand or fall together, it is, in my view, irrelevant whether or not the tribunal properly considered Submissions 2, 3 and 4. There is no dispute that these submissions were all properly advanced by HMM before the tribunal.

However, this presents the Court with some difficulty. As appears below, there is a number of factual disputes between the parties in particular with regard to the substance of certain important telephone calls between Mr Baek and Mr Song on 11 and 12 February 2008. The resolution of such disputes is problematic for a number of reasons. First, on certain points at least, there is a direct conflict of evidence. Second, these calls took place some 5 years ago. Third, the contemporaneous documents (which often provide the most reliable guide to matters in dispute) are sparse. In particular, there are no contemporaneous notes of any calls and, apart from one particular email from Mr Baek to his Head Office in South Korea, virtually no internal documents on either side which is perhaps surprising. Fourth, there was no oral evidence from these or any other witnesses in these court proceedings. Sadly, Mr Song has passed away. Apart from the very few contemporaneous documents, the only evidence is, as I have said, in the form of written statements from Mr Baek, Mr Song and Mr Coll and the transcripts of their oral evidence in the arbitration proceedings as referred to above. Fourth, it has to be said that the evidence of both Mr Baek and Mr Song is unsatisfactory for a number of reasons. In particular (i) it is, in certain respects, vague and unspecific; (ii) there are certain noticeable gaps; (iii) the original statement from Mr Baek in September 2011 was subsequently said by him to be incorrect in part resulting in a supplementary statement from him being served (shortly before the commencement of the arbitration) and there is therefore an important issue concerning this change in his evidence and which version is correct; and (iv) as to Mr Song, not only are there are also inconsistencies and important “gaps” in his evidence (e.g. he had no recollection of the phone calls on the evening of 12 February) but given, as I have said, that the statement in the first recap which he sent that the vessel was “fixed” was untrue and must have been known to be untrue by Mr Song when he sent the email as stated above, this severely undermines the credibility and reliability of his evidence. Although some but not all of these difficulties are perhaps understandable because the relevant events took place so long ago, the result is that the task faced by the Court in the present circumstances is particularly difficult.

Against that background, I return then to consider the substance of HMM’s application under s.67 of the 1996 Act. In so doing, I propose to focus initially on what I have referred to as Submission 4. I do so because it seems to me that whether or not there was “consensus” between the parties is logically anterior to any question of construction of the second recap which lies at the heart of Submissions 1, 2 and 3. Although this was not dealt with (at least expressly) in the Award, it is, as I have stated, common ground that this submission was advanced by HMM in the arbitration and is available to HMM in support of its case under s.67 of the 1996 Act.

I have already referred as necessary to the emails exchanged between Mr Baek and Mr Song. However, as I have said, there were also important phone calls between them which are, at least potentially, highly material. In particular, according to a summary telephone log agreed between the parties, it appears that early on that morning ie 12 February, Mr Baek spoke to Mr Song for 1 minute at 0801. This was followed by two much longer calls from Mr Baek to HMM’s Head Office in Korea at 0814 (4.6 minutes) and 0830 (8.9 minutes) respectively. In his original statement, Mr Baek stated as follows:

“17.

Upon review of the proforma charterparty, I saw that it restricted carriage of HBI cargoes. At around 8.30/8.45 am on 12 February 2008, there was another telephone conversation between Mr Song and me….. I explained that as HBI was an excluded cargo under the pro forma charterparty, I would need to check the head bareboat charterparty. However, Mr Song did not believe me and said that as the head charterparty was a bareboat charterparty, HMM should be able to do what they wanted with the vessel. On this basis, he asked me to revert to my head office to check the position again and I agreed to do so. He also requested that the time limit for reconfirmation of the fixture as set out at Item 13 in the recap be extended to over 09:00 am on 13 February 2008. I agreed to this extension on the condition that I check with head office that the head bareboat charter party terms did not conflict.

18.

After our telephone conversation and in order to show Mr Song that HBI carriage was not permitted (as I had explained), I sent a copy of the proforma charterparty to him by email at 8:58 am. As we had discussed the HBI issue over the telephone, I did not refer to this issue in this covering email.

19.

I then contacted Mr Young-Dong Ma at HMM’s head office and asked them to check whether the head bareboat charterparty did in fact restrict HBI carriage. They checked the position and advised me that the proforma charterparty and the head bareboat charterparty terms actually differed and that, in fact, the head bareboat charterparty did not restrict HBI cargo, but did prohibit trading via the Orinoco River. I did not at this time have a copy of the head bareboat charterparty and so relied on the information received from head office.

20.

Before I contacted Mr Song to discuss this information at 4.27 pm on 12 February 2008, he sent an amended summary of terms to me....”

So far as this account is concerned, there are three points which are noteworthy so far as timing is concerned. First, Mr Baek places the first discussion between him and Mr Song with regard to HBI being an excluded cargo under the Proforma Charterparty before he (i.e. Mr Baek) forwarded a copy to Mr Song. Second, he says that he then (i.e. after forwarding the Proforma Charterparty to Mr Song) contacted Mr Ma at HMM’s office to check the position. Third, he says that "they" (i.e. presumably those in the HMM office in Korea) then checked the position and advised him with regard to both the non-restriction of HBI cargo and the fact that the bareboat charterparty prohibited trading via the Orinoco River. It is plain from paragraph 20 that Mr Baek was saying in his statement that this information was provided some time prior to receipt of the second recap.

However, Mr Baek subsequently changed this account in a further supplementary statement served very shortly before the commencement of the arbitration as follows:

“4.

At paragraphs 17 and 18 of my witness statement, I stated that, in the morning of 12 February 2008, I reviewed the proforma charterparty received from my head office, saw that it restricted HBI and called Mr Song to discuss this restriction prior to sending him a copy of the proforma charterparty

5.

This is not correct. I actually forwarded the proforma charterparty to Mr Song without reviewing first any of its terms. It was only after I had sent it to Mr Song, that I reviewed its terms and noticed that HBI was restricted. I then called Mr Song to alert him to this issue and we agreed that I would check the position under the head bareboat charterparty with my head office.

6.

At paragraph 19 of my witness statement, I stated that I then called Mr Ma at HMM’s head office and asked him to check the terms of the head bareboat charter party, and that he advised that, although HBI was permitted under the head bareboat charterparty, trading via Orinoco River was restricted. Further at paragraph 20 of my witness statement, I stated that, before I contacted Mr Song to discuss this information, he sent me this second summary of terms.

7.

It is correct that, after speaking to Mr Song about the HBI restriction in the proforma charterparty, I spoke with Mr Ma and asked him to check the terms of the head bareboat charterparty. However, it is not correct that I received an answer from Mr Ma before receiving the second summary of terms from Mr Song. When I spoke with Mr Ma, it was morning time in New York but, as Seoul was 14 hours ahead of New York (at this time), it was late in the evening for Mr Ma. Mr Ma was not able to provide an answer until he returned to the office the next day Seoul time.

8.

I spoke again to Mr Ma when he returned to head office in Seoul early on the morning of 13 February, Seoul time. This was likely around 5 pm on 12 February 2008, New York time. It was during this conversation that Mr Ma advised me that, although HBI was permitted, Orinoco River trading was prohibited.”

As submitted by Mr Davey, these are significant corrections to what was stated in Mr Baek’s original statement. In particular, it is noteworthy that in this later supplementary statement, Mr Baek places his initial discussion with Mr Song with regard to HBI being an excluded cargo after (rather than before) he sent the Proforma Charterparty to Mr Song; and says that he then spoke to Mr Ma before receipt of the second recap asking him to check the terms of the Bareboat Charterparty but Mr Ma was not able to provide an answer until the following morning Seoul time i.e. around 5pm New York time which was after the second recap. If these changes are viewed in isolation, they inevitably throw considerable doubt on the reliability of Mr Baek’s evidence.

However, in evaluating Mr Baek’s evidence, it is necessary to consider ABT’s case and the other evidence referred to below.

As to ABT’s case, Mr Davey accepted that Mr Baek spoke to Mr Song in the morning of 12 February and that because the terms of the Proforma Charterparty excluded the carriage of HBI, there was a discussion between them as to whether the vessel would be able to carry HBI under the proposed charter. However, it is ABT’s case that either before the Proforma Charterparty was sent by Mr Baek to Mr Song (i.e. at 0858) or after it was sent, but before the second recap at 1527 he (i.e. Mr Baek) told Mr Song that he had checked with his Head Office in Korea and that the vessel could carry HBI under the proposed charter. What then is the evidence to support that case?

The starting point is paragraphs 9-11 of Mr Song’s first witness statement:

“9.

I spoke again with Mr Baek later that same day (11^th February) in which this issue of the redelivery position was discussed. The next morning (and I see from my phone record it was at 8.01am, I spoke again with Mr Baek and I recall we discussed the fact that now the main terms were all but agreed we needed to deal with the rest of the terms.

10.

Following on from that, at 0858 hours on 12 February 2008 I received from HMM a copy of the proforma Charterparty. It was this proforma Charterparty which I later referred to in the recap message (item “12 sub review owners head cp btb”) The Charterparty for “PACIFIC CHAMP” was to be based on those terms and conditions but subject to the main terms which had been agreed in the telephone conversations to which I refer to above and below and subject to those issues set out in the recap which I sent out on that afternoon of 12^th February 2008. The proforma excluded HBI. I discussed this with Mr Baek and he told me that he had checked with Korea and HBI could be carried. Mr Baek definitely did not mention that he needed to check a bareboat charter before the recap was sent or whether Orinoco trading was permitted. So when I sent out the recap on 1527 on 12^th February 2008 the agreement was that the “PACIFIC CHAMP” Charterparty was to be on the basis of all those terms set out in the proforma Charterparty. subject to those specific two subjects in the recap and, further, for the proforma to be amended as per the rest of the terms set out in the recap.

11.

Still on the morning of 12^th February the Charterers agreed to redelivery dlosp but subject to Charterers overall re-confirmation by close of business 12^th February. Mr Coll and I discussed the pro forma terms very briefly as well at that time. That conversation was at 9.35am and the content was relayed by me to Mr Baek the same morning. Mr Baek agreed to that in that phone conversation. ”

The question of timing of the various calls is also addressed by Mr Song in paragraph 9 of his Supplementary Statement:

“9.

Mr Baek and I did not dismiss the HBI exclusion until some time after he sent me the proforma charterparty at 8.58am on 12 February. My telephone records show five calls between Mr Baek and me on that day. Mr Baek told me that he had checked with his head office and that this was no problem with HBI.”

That there was no discussion between Mr Baek and Mr Song with regard to the HBI exclusion until after the Proforma Charterparty was sent at 0858 was also confirmed by Mr Song in his oral evidence. To this extent, Mr Song’s evidence is also consistent with that of Mr Baek in his further supplementary statement and in his oral evidence. On this basis, the case advanced by Mr Davey that such a discussion might have taken place before the Proforma Charterparty was sent is, in my judgment, unsustainable.

So, the question then is: what evidence is there to support ABT’s alternative case that some time after 0858 and before 1527 Mr Baek told Mr Song that he had checked with his Head Office and that he had been told that the vessel could carry HBI under the proposed charter ? It is true that the passages from Mr Song’s witness statements which I have quoted above are to such effect. However, such evidence needs to be scrutinised in light of (i) Mr Song’s oral evidence and (ii) the contemporaneous telephone logs.

As to Mr Song’s oral evidence, this topic was dealt with in the course of his cross-examination in the arbitration. It is fair to say that Mr Song was uncertain about some of the timings. Given the gap in time between the original events (i.e. February 2008) and the time of giving evidence (i.e. November 2011), this is perhaps unsurprising. However, he was adamant that (stage 1) his discussion with Mr Baek about the HBI exclusion took place after receipt of the Proforma Charterparty i.e. after 0858; (stage 2) Mr Baek told him during such discussion that he (i.e. Mr Baek) will (i.e. in the future) check whether HBI was excluded from the Bareboat Charterparty; and (stage 3) Mr Baek subsequently confirmed on the phone to Mr Song (either when Mr Song phoned Mr Baek or vice-versa) that he (i.e. Mr Baek) had spoken to his Head Office and confirmed that HBI could be carried. The foregoing appears in particular from the passages in the Transcript at Day 2 p48 line 10 – p50 line 6.

The above is largely uncontroversial. Moreover, the fact that this account is consistent with Mr Baek’s evidence in his further supplementary statement lends support to Mr Baek’s credibility.

However, what is controversial – and crucial to the issue of “consensus” - is whether or not what I have identified as stage 3 occurred before the second recap was sent i.e. at 1527. Mr Song’s oral evidence was that that was indeed the case. Thus at Day 2 p50 line 6, Mr Song stated: “At least I know it’s before I make the second recap.” Although a later passage in the transcript at Day 2 p57 line 12 – p58 line 22 is at the very least somewhat less dogmatic.

The difficulty with this evidence of Mr Song is that it does not square with the contemporaneous telephone records. After 0858 on 12 February (ie when the Proforma Charterparty was sent by Mr Baek to Mr Song), the summary telephone log does indeed show that there were various telephone calls between Mr Song and Mr Baek during the course of the morning and early afternoon on that day before the second recap at 1527 - including one long call at 1039 (31 minutes). In addition, it appears that Mr Song also spoke to ABT (presumably Mr Coll) at 1205 (4 minutes). It is common ground that at some stage during these calls between Mr Baek and Mr Song, an agreement was reached to extend the deadline in Item 13 of the first recap from COB (ie close of business) New York time on 12 February to 0900 New York time on 13 February.

However, importantly the summary telephone log does not show any calls between Mr Baek and Mr Ma after the Proforma Charterparty was sent to Mr Song at 0858 and before the second recap at 1527. According to the telephone log, it is only after the second recap that Mr Baek contacts Mr Ma in South Korea ie at 1712 (2.8 minutes) and 1736 (5 minutes). In the next two hours, the log then shows numerous calls between (i) Mr Baek and the HMM Office in South Korea (5 calls) as well as (ii) Mr Baek’s office/mobile to Mr Song’s office/mobile (6 calls) including two long calls ie one from Mr Baek’s office to Mr Song’s office/mobile at 1813 (23 minutes) and Mr Song’s office to Mr Baek’s mobile at 1849 (17 minutes). Thus, the telephone log would seem to indicate that it must have been after receipt of the second recap that Mr Baek was informed by Mr Ma that although the Bareboat Charterparty did not restrict the carriage of HBI, the Orinoco River fell within the trading exclusions; and that, contrary to the evidence of Mr Song, it must have been sometime after 1800 that he (i.e. Mr Baek) then spoke to Mr Song and passed this information on to him..

It is fair to say that the above does not square entirely even with Mr Baek’s evidence even in his later supplementary statement; and that Mr Song had no recollection of any phone conversations with Mr Baek at approximately 1800 that evening (see Transcript Day 2 p.73). However, the telephone log speaks for itself and the timings stated above are at least consistent with the main point in the further supplementary statement and oral evidence of Mr Baek i.e. that it was not until after the second recap that he (i.e. Mr Baek) was told that HBI was not prohibited.

For these reasons and despite the significant and troubling changes in the evidence of Mr Baek, it seems to me that on this important point, the account given by Mr Baek in his further supplementary statement and in his oral evidence is, on a balance of probability, to be preferred i.e. Mr Baek was not informed that the vessel was able to carry HBI and did not pass on such information to Mr Song before the second recap.

That conclusion is, in my view, also supported by a number of other matters viz.

Given all of the foregoing, it seems to me inherently unlikely that Mr Baek was aware or told Mr Song that HBI was not prohibited under the Bareboat Charterparty before the second recap.

The main counter-argument is, of course, that if Mr Song had not been told that HBI was not an excluded cargo before the second recap, why did Mr Song send the second recap at all ? Thus Mr Davey submitted: the fact that the second recap was sent is itself contemporaneous evidence that Mr Baek must have told him that HBI was not an excluded cargo before it was sent. However, I am not persuaded by this argument. First, it seems to me that such argument is substantially undermined by the fact that Mr Song was prepared to say the previous evening in the first recap that the vessel was “fixed” when, as Mr Davey accepts, that was not the case. To my mind, that is a most serious misrepresentation for any broker to make which, as Mr Davey accepts, must have been known by Mr Song to be untrue when the first recap was sent and, in my judgment, undermines the reliability of Mr Song’s evidence. Second, as stated above, it is noteworthy that the second recap does not in terms refer to any oral discussions or otherwise say that HBI is, after all, not excluded; it simply repeats the first recap apart from the two amendments. Third, there are other possible good reasons why Mr Song decided to send the second recap e.g. to confirm the extended deadline under Item 13.

I recognise that none of these points taken individually is necessarily conclusive of the argument one way or another. However, taken together they generally point in the same direction and support the case advanced by HMM, i.e. that contrary to the evidence of Mr Song, Mr Baek did not confirm that HBI could be carried before the second recap was sent and that there was therefore no “consensus” prior to the second recap.

In support of ABT’s case, I should mention that Mr Davey relied upon two further matters. First, he relied on an email sent on 13 February by HMM’s brokers to Iris’ brokers requesting their approval to allow the vessel’s trading through the Orinico River. In particular, the email states: “..We have had much difficulties in finding other biz, so we had no choice but to fix the biz requiring trading of Orinoco River…” On its face, I agree that this suggests that HMM subjectively considered that the vessel had been fixed to ABT. However, there was no evidence from the author of the email (Ken Lee) as to how this email came to be written; and it seems to me at least consistent with an attempt by him to put pressure on head owners to permit this fixture to go ahead as, no doubt, both HMM and the brokers were keen to achieve if possible. In any event, it does not seem to me that this email compels a conclusion different from the one I have reached on the basis of the evidence as referred to above. Second, Mr Davey relied upon alleged “admissions” made subsequently by Mr Baek. However, these were not accepted by Mr Baek; and in any event it seems to me that whatever might have been said by Mr Baek was in the context of “without prejudice” discussions and, as such, inadmissible.

For these reasons, it is my conclusion that there was no consensus and therefore no binding contract before or at the time of the second recap and, given my earlier conclusion, that there was no arbitration agreement. It follows therefore that HMM’s challenge concerning the tribunal’s jurisdiction under s.67 of the 1996 Act succeeds, that the Award must be set aside or varied and that HMM is entitled to a declaration that there was no valid binding contract.

In effect, this conclusion is based upon the acceptance of HMM’s Submission 4 above. It follows that it is strictly unnecessary to address the other submissions advanced by HMM which only arise in the event, contrary to my conclusion, that the second recap reflected a binding consensus between the parties. However, since the other submissions (i.e. Submissions 1, 2 and 3) were all advanced before me and since the tribunal dealt expressly and at some length with, in particular, Submission 1, I should say something with regard to the parties’ respective arguments in this regard and my conclusions in relation to them. In so doing, I should emphasise that I proceed on the basis, contrary to the conclusion which I have reached, that the second recap contained or evidenced terms which had been agreed by the parties.

As to Submission 1, I have already summarised the main thrust of the argument advanced on behalf of HMM in that regard. In particular, Mr MacDonald Eggers QC advanced a series of detailed submissions which may be summarised follows:

For these reasons, on the assumption stated above i.e. that the second recap contained or evidenced the terms which had been agreed by the parties, I am unable to accept Submission 2.

As to Submission 3, Mr MacDonald Eggers QC’s case proceeded on the assumption that the parties did not intend that the Proforma Charterparty was (subject to review and confirmation) incorporated. Given my conclusion stated above in relation to Submission 1, I am unable to accept Submission 3.

This application was only advanced by HMM in the alternative to its other applications under ss 67 and/or 68 of the Act and given my conclusion with regard to the former does not therefore strictly arise. However, it can, in my judgment, be dealt with quite shortly and it is convenient to do so. The first point to note is that although this is one of those very rare cases involving a “rolled-up hearing”, consistent with the decision of the Court of Appeal in HMV UK Ltd v Propinvist [2012] 1 Lloyd’s Rep 416 and as was common ground, the Court is required to consider first the threshold question i.e. whether or not the case is one where it is appropriate to grant leave to appeal. As stipulated in s.69 (1) of the 1996 Act, any appeal to the Court is limited to one “on a question of law arising out of an award made in the proceedings”. Further, as stipulated in s.69(2) of the 1996 Act, an appeal shall not be brought under that section except (a) with the agreement of all the other parties (which does not here apply) or (b) with the leave of the Court; and that such leave to appeal shall be given only if the Court is satisfied of the matters set out in s.69(3) of the 1996 Act. I have already set out the relevant questions of law in respect of which HMM seeks leave to appeal. Although I am prepared to accept that some of the questions posed (in particular, questions (1), (3) and (4)) can properly be characterised as constituting questions of law arising out of the Award within the meaning of s.69(1) of the 1996 Act, I am much more doubtful as to whether the other questions can be so categorised. However, be that as it may, none of the questions posed can, in my judgment, properly be said to be of “general public importance” within the meaning of s.69(3)(c)(ii) of the 1996 Act; nor do I consider that the decision of the tribunal on any of the questions posed can properly be said to be “obviously wrong” within the meaning of s.69(3)(c)(i) of the 1996 Act. In my view, they are, at best, all “one-off” questions of law which do not satisfy the high hurdle of being “obviously wrong”. For these reasons, I refuse leave to appeal.

As stated above, I accept Submission 4 i.e. the second recap did not contain or evidence a binding contract or binding arbitration agreement between HMM and ABT. It follows that HMM’s challenge concerning the tribunal’s jurisdiction under s.67 of the 1996 Act succeeds, that the Award must be set aside or varied and that HMM is entitled to a declaration that there was no valid binding contract. Given that conclusion, it is unnecessary to consider Submissions 1, 2 and 3 but, if I were wrong on Submission 4 and insofar as may be necessary, I would reject Submissions 1, 2 and 3. Insofar as may be necessary, I also refuse leave to appeal under s.69 of the 1996 Act.

Accordingly, Counsel are requested to seek to agree an order to reflect the terms of this judgment and consequential matters. Failing agreement, I will deal with any outstanding issues.