England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice The Strand London WC2A 2LL
		8 November 2001

MR JUSTICE TOULSON: This application under section 68 of the Arbitration Act 1996 to set aside or remit an arbitration award for serious irregularity depends on the answers to four short questions. These are:

(1) What is the meaning of the arbitrator's critical finding?

(2) Was that finding properly open to the arbitrators on the way in which the case was presented?

(3) Did the award deal with the essential issues?

(4) If there was irregularity, was it such as to cause serious injustice?

The award under challenge was made by the GAFTA Board of Appeal ("the Board") dismissing an appeal from a GAFTA first tier tribunal, which had awarded damages of $365,000 to Olam for breach by Ascot of a contract dated 24 July 1998, by which Ascot agreed to sell to Olam 3,000 metric tonnes of Vietnamese white rice +/- 10% C&F Owendo(?), Gabon. By the time the dispute reached the Board, liability was not in dispute. The damages awarded were for Olam's loss in respect of 1155 metric tonnes of the cargo.

The claim had some unusual complications. The breach consisted of Ascot interfering with the contract of carriage by causing the cargo to be off-loaded at Havana in Cuba rather than at Owendo. The essential issues concerned Olam's interest in the 1155 metric tonnes and the loss that it suffered.

The background was this. Ascot chartered a vessel originally called the Agra, but later renamed the Lemania, to carry three parcels of rice to West Africa, two of which were for Olam, ie the Owendo parcel of 3,000 metric tonnes and a parcel of 5,500 metric tonnes destined for Tema, Ghana. The cargo was loaded at Saigon on 28 August 1998. In the following month the vessel was arrested by her crew in Singapore for non-payment of wages. This was the start of trouble. The vessel's management company was insolvent.

Olam had in July 1998 sold the Owendo parcel to a company called AEA at $399 per metric tonne, and AEA had paid for it by a letter of credit. Bills of lading had been endorsed by Olam to AEA.

On 22 October 1998 Olam entered into a further contract with AEA for the sale by Olam to AEA of 1,000 metric tonnes +/- 10% Vietnamese white rice at the same price of $399 per metric tonne, shipment per MV Far East, for which an irrevocable letter of credit was to be provided by 30 November 1998 or before the arrival of the Agra in Owendo. Olam bought the 1,000 tonnes of rice ex-Far East from Ascot for $365,000. The contract between Olam and AEA for this parcel of rice contained the following special condition:

"The buyer has provided the seller as collateral on MV Far East, the BL No A, three originals of 880 MT and BL No E, three originals of 275 MT of MV Agra. This is under the condition that the buyer will make arrangement for payment of rice on MV Far East as per contract conditions latest 30 November 1998 or prior to arrival of MV Agra in Owendo Gabon, whichever is earlier."

These bills of lading totalling 1155 metric tonnes of the Agra cargo were re-endorsed to Olam and it is those documents (or the goods to which they relate) which lie at the heart of this dispute.

Arguments developed between Ascot, Olam and AEA. It would have been a good thing if there could have been a tripartite arbitration between them, but that was not possible.

Olam began arbitration proceedings against Ascot in March 1999. On 11 May 1999, Ascot agreed to buy the Owendo parcel from AEA. I continue to refer to it for convenience as the "Owendo parcel", although what in fact happened was that an associate company of Ascot bought the Agra and caused here to be sailed to Cuba, where the cargo was off-loaded. This constituted the breach of the sale contract between Ascot and Olam with which the Board was concerned.

Olam's case was that it owned the 1155 metric tonnes covered by bills of lading A&E, having re-acquired it from AEA in exchange for the 1,000 metric tonnes of rice ex Far East and that its loss was the sum of $365,000, which it paid Ascot to acquire the Far East rice. I will come to how Olam's case developed.

Ascot's case was that Olam did not own the 1155 metric tonnes in question. The first tier tribunal summarised its conclusions as follows:

"The crux of this matter is whether or not the buyers had at the relevant time title to the goods. We do not accept the seller's submission that taking back the documents of title and holding them as security for 1155 metric tonnes of rice has somehow diminished their entitlement to take delivery of that rice. Buyers had in their possession documents of title for 1155 metric tonnes of rice and were thereby entitled to expect to take delivery of that rice in Owendo, and sellers, by interfering with the contract of carriage, prevented said delivery from occurring and are therefore liable to reimburse the buyers for the loss that they suffered in replacing the rice, namely US $365,000."

Ascot appealed. The Board heard the appeal on 23 November 2000 and delivered its award approximately eight months later on 20 July 2001. After a brief introductory section, the Board in its award set out major parts of the parties' written submissions. At paragraph 2.6 they reproduced the following section of Ascot's submissions, which set out its case on appeal:

"Ascot's case is that in those circumstances:

(1) following its sale to AEA in October 1998 of the 3,300 metric tonnes cargo ex the Lemania, Olam had no interest in the cargo entitling it to maintain any claim against Ascot for detention or conversion or breach of the sale contract.

(2) Even if it had such a right of action its loss would not be US $365,000, this being the full price it paid to purchase the MV Far East cargo of 1155 metric tonnes. Instead, its true loss, if it had suffered any, was whatever it had lost through being deprived of its security afforded by its possession of bills A&E for payment by AEA for the MV Far East cargo. Olam do not suggest AEA is unable to pay for the Far East cargo, simply that it has not done so. If Olam chooses to enforce its rights against AEA, which is the party who should pay for that cargo, and it does so successfully, it will have suffered no loss. There is no evidence from Olam that AEA cannot pay and no reason to suppose that is the case.

(3) The arbitrators rightly regarded the question of the nature and extent of Olam's interest in the 1155 metric tonnes as the crux of the case. It is also the crux of this appeal. Ascot is willing to limit this appeal simply to that aspect of the case and it does not seek to challenge any of the other matters dealt with by the arbitrators."

The award went on to quote from Ascot's appeal submissions the critical paragraphs in the award of the first tier appeal to which I have already referred. The award then set out Ascot's complaints about the first tier tribunal's approach as follows:

"2.7 The arbitrators made no specific finding on the factual issue as to whether Olam had re-purchased from AEA the 1155 metric tonnes on board the Lemania or whether were provided by AEA with bills of lading A&E simply as security for payment for that quantity of cargo sold to them ex MV Far East. Nor is any such finding elsewhere in the award. The arbitrators found it was sufficient to make good Olam's claim for breach of contract that it had possession of those bills of lading which, they said, 'thereby entitled Olam to expect to take delivery'. The arbitrators then concluded that the consequence of the frustration of that delivery was a loss to Olam of US $365,000.

2.8 Sellers submit the arbitrators were wrong in that approach since:

(1) mere possession of the bill of lading did not by itself make Olam owner of the cargo. The nature of Olam's interest in the cargo covered by those bills depended on the intention of AEA/Olam at the time the bills were transferred. .... If Ascot is right that the bills were intended only to provide Olam with security for the price of the Far East cargo then endorsement/delivery of those bills to them could not and did not make them owner of the cargo to which they related.

(2) If Olam was not owner of the cargo but simply had a security interest in it, its loss necessarily was limited to the effect on it of being unable to enforce that security interest. Olam has produced no evidence whatever that it has or will suffer any such loss. Nor is there any reason to suppose that it has or will suffer loss. It can simply take effect to pursue AEA for the price of the Far East cargo."

In section 3 of its award, under the heading "Olam's submissions as respondents", the Board have cited a combination of Olam's initial submissions to the first tier tribunal and its written submissions to the Board. At paragraph 3.19 the Board recorded the following submission:

"As a result of Ascot's breaches of contract, Olam claimed that they had sold the goods and received payment for the entire 3,300 tonnes from AEA Gabon. In order to mitigate the situation Olam took back 1155 tonnes from AEA and provided them with a substitute quantity of rice ex MV Far East, also purchased from Ascot."

This came from Olam's initial submissions. Before carrying on with the Board's summary in its award of the case presented to it, I should observe that after those initial submissions had been served, Olam had produced its October 1998 contract with AEA for the sale of the 1,000 metric tonnes ex Far East. This had prompted Ascot to observe that there had not been a cargo swap and that Olam were merely pledgees of bills of lading A&E for the 1,000 metric tonnes +/- 10% on the Agra.

Shortly before the adjudication by the first tier tribunal, Olam's solicitors had forward supplemental submissions in which they had said:

"The rice aboard the Far East was delivered to AEA on or around 26 October 1998. However, AEA did not pay for this rice by 30 November 1998. Hence buyers did not return bills of lading A&E to AEA. As the parties intended, buyers simply held on to these bills which constituted documents of title giving buyers constructive possession of the 1155 metric tonnes of rice on the Lemania and the right to demand its delivery at Owendo."

I return to the award. The Board then continued with the submissions of Olam, drawing now on their written submissions to the Board. In particular, they recorded the following:

"3.24(iii) Although Olam did receive payment from AEA for the Owendo parcel they subsequently took back bills of lading A&E in respect of 1155 metric tonnes of this parcel as security for payment in respect of a substitute parcel of 1,000 metric tonnes rice on board the Far East, also purchased from Ascot. This was on condition that AEA pay for the substitute parcel of rice by 30 November 1998 or prior to the arrival of the vessel to Owendo, whichever was the earlier. The deadline of 30 November passed without payment b AEA and Olam therefore seized the relevant portion of rice on board the Lemania under the bills of lading A&E as their collateral.

....

3.26 This arbitration concerns the conduct of Ascot. Olam repeat that AEA did not pay for the substitute portion of rice on board the Far East by 30 November 1998. Hence Olam were entitled to seize their collateral under bills of lading A&E and as re-endorsed to them by AEA in the form of the clear words Livre a laudre d'Olam International Limited adjacent to AEA's stamp and signature.

....

3.33 Olam did not have a mere security interest (whatever Ascot may mean by that phrase). Once the deadline of 30 November 1998 passed without AEA making payment for the Far East parcel, Olam held bills of lading A&E as documents of title to the equivalent portion of rice on board the Lemania. Neither Olam nor their representatives misrepresented the position to Ascot at any time. From the outset Olam emphasised that they held these original bills as endorsees from AEA and that they owned the 1155 metric tonnes rice represented by the bills. Ascot were aware of the position. They had sold the Far East parcel to Olam in the first place. Olam were the lawful holders of bills of lading A&E. They owned this portion of rice and Ascot stole it."

In its summary of the arguments, the Board finally set out at section 5 Ascot's submissions in reply. These were largely a repetition of what had been said previously. However, because it has been referred to in argument, I should mention paragraph 4.2, in which the Board recited the following submission:

"As to the issues in this appeal, it is clear from its submissions to the Board:

(1) Olam's case on its alleged beneficial ownership of the goods is simply a repetition of its earlier stance and is (a) the near endorsement in its favour of bills of lading made it owner of the goods to which they related; and (b) it had seized the goods, as Olam describes it, after 30 November 1998 because, it alleges, AEA failed to pay for the Far East cargo.

(2) Olam admits (a) it sold the cargo to AEA and was paid for it; (b) it never repurchased the cargo from AEA: see the endorsement of bills A and E were solely for the purpose of providing collateral for AEA's obligation to pay the price of the Far East cargo.

(3) Although Olam's case was anticipated and thoroughly answered by Ascot's appeal submissions, by contrast Olam's submissions contain no answer to the critical objections Ascot made to that case, viz (a) Olam's security interest in the goods was not ownership of them in the language of the Sale of Goods Act 1979, section 61. The interest was one of special property, not general property of goods. As chargee of the goods, Olam's rights over them could only be exercised by and to the extent necessary for it to obtain payment on the Far East cargo. Its interest in the goods was limited to obtaining such payment, despite Ascot's explicit submissions on this point that if AEA can pay for those goods Olam cannot suffer loss. Olam has not produced any evidence that AEA cannot pay for the goods. Its case is simply that AEA has not as yet done so but, even if there were such evidence, Olam's loss would necessarily be limited to that part of the price of the Far East cargo which it could have recovered through selling the rice at Owendo."

In section 5.2 the Board set out certain oral evidence given, including evidence from Olam's Vice-President, Mr Ashok Krishen. In a supplemental written statement, which had stood as his evidence in-chief, he had said:

"The allegation made by Ascot that these bitts of lading were only pledged to Olam by AEA and that we had no right to demand delivery of the rice for Owendo, nor any title to it,is incorrect. Under the substitute contract, which Olam concluded with AEA for another parcel of rice on board the Far East, AEA were to pay us by 30 November 1998. However, AEA emphasised to me, and I knew all along, that they would not actually pay for this rice and we accordingly seized the bills once that deadline passed. Olam therefore held bills of A&E for the 1155 metric tonnes rice on board the Agra as documents of title."

Mr Krishen was not cross-examined on that part of his evidence. I mention this because Mr Young QC for Olam says that it was important, unchallenged evidence going to the nature of the October 1998 agreement between Olam and AEA. Mr Wormington for Ascot says that it is more significant for what it does not say, ie it does not suggest that the October 1998 agreement was in any sense a sham and that that document speaks for itself as to its effect. The Board made no reference to this part of Mr Krishen's evidence.

Finally, before coming to the Board's findings, reference has been made to the notes of Mr Rookes, who represented Olam at the hearing before the Board, to indicate the way in which he planned to, and did, present Olam's case in his oral submissions. Reference has been made to the following parts of those notes:

"22.10.98: Because of delay, Olam agreed to give AEA 1000 tonnes on Far East. Bought from Ascot CLC 23.10.98 and take bills A&E 1155 tonnes as collateral provided payment is made. AEA endorsed bills back to Olam. Note: payment to be made by 30.11.98.

30.11.98: Payment not made. Olam assume ownership of bills A&E."

I come at last to the Board's findings. In paragraph 6.7 the Board began as follows:

"We find that Olam were given title to 1155 tonnes when bills of lading were endorsed by Ascot to Olam's order and were paid for under the letter of credit. From Olam's submission it was acknowledged that these goods were invoiced to and paid for by AEA Gabon. Olam endorsed the bills of lading to AEA to obtain this payment."

Thus far the findings were uncontroversial. Then came the following critical words:

"and subsequently AEA did re-endorse them to Olam in consideration for receiving alternative goods from another shipment. We therefore find that olam do have title to 1155 tonnes carried on MV Agra/Lemania."

The Board went on to say at paragraph 6.15:

"Ascot are bound to remedy their breach and to satisfy the claim for damages entered by Olam in the sum of US $365,000 in respect of their replacement of 1155 tonnes of undelivered goods."

I now come to the critical questions. (1) What is the meaning of the critical words in paragraph 6.7? Mr Wormington says that the finding meant that Olam acquired full beneficial ownership of 1155 metric tonnes by the re-endorsement to them of bills A and E. Mr Young submitted that the finding meant the following. Bills of lading were re-endorsed to Olam, expressed as collateral but intended to convey beneficial ownership, but postponed because it was uncertain which vessel would arrive first and AEA was to have an option. It was a defeasible transfer of the beneficial ownership -- defeasible at the option of AEA. If the Agra arrived first, AEA would take the Agra rice, and the sale of the Far East rice would be rescinded. If the Far East arrived first, AEA would take the Far East rice and relinquish all interest in the Agra rice. It is Mr Young's primary submission that that is the meaning of what the Board found. He submits in the alternative that the finding of the Board meant that by one means or another Olam acquired either beneficial or possessory title, sufficient to establish the loss claimed.

I have read and re-read the Board's words. They do not convey to me either of the meanings which Mr Young suggest that they carry. To me their natural meaning is that which Mr Wormington suggests. If I were wrong about that, and they were capable of meaning either or both versions put forward by Mr Young, I would be driven to the conclusion that they were so ambiguous to amount to no clear finding on a central matter. Subject to the question of serious injustice, that would be a serious irregularity within section 68C(f) which refers to uncertainly or ambiguity as to the effect of the award.

Question (2) "Was that finding properly open to the Board on the way in which the case was presented?" Arbitrators are not necessarily bound by the way in which parties present their cases, but it is likely to be an irregularity -- and potentially a serious irregularity -- if on an important point arbitrators decide an issue on a basis not raised before them without at least giving opportunity to the parties to address it. Having studied the way in which Olam's case developed and finally came to be presented in their submissions to the Board, it seems to me clear that, whilst Olam's case originally appeared to be that this was a simple cargo swap, by the time the case was decided by the first tier tribunal, and certainly at the time when it was argued before the Board, its case was that bills of lading A&E were delivered as security and seized after non-payment of the purchase price for the 1000 metric tonnes ex Far East. Olam also said that this was always envisaged, but that did not alter the fact that under the October 1998 agreement between Olam and AEA the bills were expressly provided as security.

Mr Young fastened in his submissions on paragraph 4.2 of the award, to which I have already referred, and in particular, on the recitation from Ascot's submissions in reply as follows:

"As to the issues in this appeal, it is clear from its submission to the Board: (1) Olam's case on its alleged beneficial ownership of the goods is simply a repetition of its earlier stance, viz (a) the mere endorsement in its favour of bills of lading A&E to the owner of the goods to which they related; and (b) it had seized the goods, as Olam describes it, after 30 November 1998 because it alleges AEA failed to pay for Far East cargo."

So, says Mr Young, Ascot plainly understood and acknowledged that they were meeting a case that this was simply a cargo swap and that full beneficial ownership of the goods passed on mere endorsement of the bills of lading.

I have re-read the whole of the submissions of Ascot in reply and also the submissions of Olam to which those submissions were responding. It seems to me, as I have already indicated, plain that it was Olam's case that the bills of lading were collateral, as stipulated by the October agreement, but seized for non-payment, and that this was the case which Ascot was addressing. I do not think it fair to read paragraph 4.21(a) in isolation as indicating that Ascot was meeting a case, by the time it reached the Board that there had been a simple cargo swap.

Mr Young accused Ascot of trying to introduce subtle and legalistic arguments about the difference between outright ownership and pledge. I do not think there is anything subtle about the distinction. It is a perfectly common one. If there is subtlety, it is in the elision of the two through the notion of the defeasible transfer of beneficial ownership by transferring bills of lading expressed to be collateral in a way intended to cover full beneficial ownership, but defeasible at the option of the recipient. That is a subtlety which may or may not have been introduced before the Board. The understanding of those who represented by the parties seems to differ. But I see no indication that the Board accepted the subtle analysis now put forward.

Standing back from the matter, it seems to me that the plain and natural meaning of the award is that the Board analysed the case in a way which Olam had initially put forward, but was no longer its case. Having regard to the way in which Olam was putting its case, based on forfeiture of the Agra 1155 metric tonnes for non-payment of the Far East 1,000 metric tonnes, I do not think that it was properly open to the Board to accept what had been Olam's original case without prior notice to the parties.

Question (3) is closely related to question (2): Has the Board dealt with all essential issues? GAFTA findings are habitually brief. Many would regard that as a virtue. It is certainly not an irregularity. Nor is it incumbent on arbitrators to deal with every argument on every point raised. But an award should deal, however concisely, with all essential issues. One of the heads of serious irregularity recognised in section 68(2)(d) is "Failure by the tribunal to deal with all the issues that were put to it". The central point raised by Ascot on its appeal was that if the bills of lading were pledged as security, as appears on the face of the October 1998 contract, Olam's loss was not to be approached in the same way as if they were beneficial owners of the cargo. The point has, with respect, not been addressed.

Mr Young reminded me of the line of authorities beginning with Egmarcher v Marco Trading (1999) 1 Lloyds Rep 862, in which the court has stressed that section 68 is a long-stop provision not to be lightly invoked. It is only to be invoked in cases where something has gone so wrong that justice calls out for the matter to be corrected.

Since the whole process of arbitration is intended as a way of determining points at issue, it is more likely to be a matter of serious irregularity if on a central matter a finding is made on a basis which does not reflect the case which the party complaining reasonably thought he was meeting, or a finding is ambiguous, or an important issue is not addressed, than if the complaints go simply to procedural matters. Mr Young submitted that Ascot's real complaint is that its arguments were not accepted and that this cannot be an irregularity. He noted that there has been no application for permission to appeal. He also submitted that if the terseness of the Board's findings made it legitimate for Ascot to have requested further reasons, they could have asked for them but have not done so.

On a fair reading of the award it seems to me that this is not case in which the tribunal has directed itself to, and rejected, the central issue argued by Ascot but has, in truth, missed it. I acknowledge that I may have missed what the Board intended, but I can only go on the brief words in paragraph 6.7 in which their findings were expressed. As to requesting further reasons, I accept Mr Wormington's point that where there is a finding which addresses a central issue, but leaves its reasoning unclear, the appropriate course is to ask for further reasons. But if an award, as delivered, fails to contain a finding on a central issue, it would be odd to ask for reasons for something which is not there.

Question (4): Was there serious injustice? It is inherently likely to be a source of serious injustice if irregularities occurred of the kind to which I have referred. Since the purpose of arbitration is to determine central issues between the parties, if there has been a flaw in that this has not been done, that is likely in the very nature of things to be a matter of serious injustice. In this case Mr Young has submitted that no serious injustice was caused on any view because even if Olam were merely pledgees of bills of lading A&E, they were bound as a matter of law to succeed for the full amount of their claim. He submits that the value of any rights which Olam may have had against AEA were legally irrelevant and factually nil.

In support of the proposition that those matters are legally irrelevant, he has referred me to the well-known case of The Wakefield (1902) Probate 42, The Sanex Ace (1987) 1 Lloyds Rep 465, and The Jag Shakti [1986] 1 AC 337. In the last of those cases Lord Brandon, delivering the opinion of the Privy Council said at page 345:

"It is not in dispute that the pledging of a bill of lading is entitled on presentation of it to the ship at the port of discharge to the possession of the goods represented by it. It has further, in their Lordships' opinion, been established by authority of long-standing that where one person A, who has or is entitled to have possession of the goods is deprived of such possession by the tortious conduct of another person B, whether such conduct consists in conversion or negligence, the proper measure in law of the damages recoverable by A from B is the full market value of the goods at the time when and the place where possession of them should have been given. For this purpose it is irrelevant whether A has the general property in the goods, as the outright owner of them, or only a special property in them as pledgee, or only possession or a right to possession of them as a bailee. Furthermore, the circumstances that if A recovers the full market value of goods from B he may be liable to account for the whole or part of what he has recovered to a third party C is also irrelevant as being res inter alios acta."

Mr Young submitted that the same principle must apply in the present case.

It may apply, by analogy, but whether it must apply is another matter and raises an interesting and debatable point of law. This is a claim for breach of a contract of sale. On ordinary principles, the injured party is to be put in the same position, so far as money can, as if there had been no breach. If there has been damage to Olam's security interest, the question arises: what is the true amount of the loss suffered by it?

It is argued by Ascot that in considering the extent to which it suffered loss through inability to enforce the particular security, it was relevant to take into account any remedy it might have against AEA. The relationship between the parties was not the same as the relationship in the Jag Shakti or in the well-known line of cases in which a bailee sues for a tort of damage to goods. In assessing the compensation due to Olam through interfering with the contract of carriage and thus preventing their ability to realise the security provided by the bills in the way they would have been able to do if the cargo had been landed at Owendo, was there to be taken into account that on Ascot's case, Olam was well able to recover the amount form AEA by another means? This is a point of some nicety raised squarely in Ascot's appeal, but not addressed by the Board. I do not think that it would be right for me to determine summarily that Ascot's case is self-evidently bad, such that I can say that they have suffered no serious injustice. It is a point well capable of giving rise to an issue which might have to be decided in this court, but I am not persuaded that I can reach a summary conclusion that Ascot's case is self-evidently bad without full and proper argument on the point.

As to whether any rights against AEA were hopeless on the facts, that again is a matter on which I think it would be wrong to conclude summarily that Ascot's case was hopeless. It was entitled to have those matters considered by the forum to which its dispute was referred.

Accordingly, I have come to the conclusion that this award cannot stand. The question therefore arises whether it should be set aside or remitted for further consideration. I am conscious that there is a real practical problem here in that time has marched on far more than, I suspect, the parties would have anticipated. It is now a year or thereabouts since the appeal was heard and there is no common understanding between those who -- Mr Young, you are rising to your feet?

MR YOUNG: My Lord, yes. Your Lordship is entering on an area where --

MR JUSTICE TOULSON: Did you want to make submissions?

MR YOUNG: Well, I was not anticipating that your Lordship was going to get on to this issue when I was making submissions before.

MR JUSTICE TOULSON: Right. Well, I will hear your submissions.

MR YOUNG: There is a matter arising under section 68(3) to which I have not drawn your Lordship's attention.

MR JUSTICE TOULSON: Yes.

MR YOUNG: It is probably a provision of which your Lordship is well aware.

MR JUSTICE TOULSON: Yes.

MR YOUNG: But I think it quite wrong of me at least not to draw your Lordship's attention to it.

MR JUSTICE TOULSON: What submission would you like to make?

MR YOUNG: My Lord, I am sure it is a passage of which your Lordship is well aware, but it is: "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."

MR JUSTICE TOULSON: Indeed.

MR YOUNG: And my understanding from the authorities -- at the moment it is just a summary -- is that one is really looking to whether this tribunal is an appropriate tribunal or whether another tribunal is an appropriate tribunal, irrespective of whether the tribunal itself requires further submissions to refresh its memory. My Lord, perhaps drawing the provision to your Lordship's attention is all I can and ought properly to do. I have a copy of the Arbitration Act.

MR JUSTICE TOULSON: I have the Act, but in Colman J's case, did he say that it needed to go to a different tribunal?

MR YOUNG: Yes.

MR JUSTICE TOULSON: He set it aside.

MR YOUNG: What he said was: "It would be quite wrong for the arbitrators to build anything on the structure of the award --"

MR JUSTICE TOULSON: Exactly, yes. But did he say that it should go to a separate tribunal?

MR YOUNG: My Lord, no, I do not think he did in fact. I merely draw the passage to your Lordship's attention.

MR JUSTICE TOULSON: Let me invite your comments on this. The practical problem is this. It is now a year on.

MR YOUNG: Yes.

MR JUSTICE TOULSON: People have forgotten what happened. It would be hopeless to expect the Board to reconsider and deliver an award without further submissions.

MR YOUNG: That was frequently not the way even in the old days of misconduct.

MR JUSTICE TOULSON: Quite.

MR YOUNG: When awards were remitted it was then left to the tribunal to decide whether they wished to hear more submissions or not.

MR JUSTICE TOULSON: One cannot help some feeling in this case, knowing what it is like trying to write a judgment months after the case has been heard, that the tribunal probably found it quite difficult writing the thing seven months afterwards.

MR YOUNG: Yes.

MR JUSTICE TOULSON: It is very obvious that the parties who represented Olam are now having difficulty in recalling quite how the thing went.

MR YOUNG: Yes.

MR JUSTICE TOULSON: It just seems to me a recipe for injustice if this tribunal were now to scratch its head and re-decide the matter without further argument.

MR YOUNG: Well, my Lord, as I say, in the old days when one had the choice in days of misconduct -- though I am not sure that the principles are necessarily any different -- one set aside the award when it was fundamentally unsound and simply could not represent anything at all. One remitted it to the tribunal if it was merely a question of, broadly speaking, not considering a particular point and left it up to the tribunal as to whether they asked for more reasons. Now, in this particular instance your Lordship has decided that some of the submissions have not been made, so the arbitrators would almost certainly ask for further submissions.

MR JUSTICE TOULSON: There would be plain irregularity if they did not.

MR YOUNG: Absolutely, my Lord.

MR JUSTICE TOULSON: Then looking at the thing practically from there, the question is: where would the representative start? Nothing could be more unsatisfactory than they start with a big wrangle about what they argued last time.

MR YOUNG: My Lord, I think possibly in terms of the approach of the Board, it was always the case that a set-aside award produced as it were a more serious rap on the knuckles from the court than a remitted award. It is a question of appreciation by GAFTA, my Lord.

MR JUSTICE TOULSON: Yes.

MR YOUNG: I am not sure that the substance of a remission or a setting aside would alter what the tribunal do, but it is the message which is going from the court.

MR JUSTICE TOULSON: I certainly would not propose to say that the same Board should not go back to the matter.

MR YOUNG: Yes.

MR JUSTICE TOULSON: There is no suggestion of any personal impropriety in any sense.

MR YOUNG: No.

MR JUSTICE TOULSON: The question is how the matter is now to go, given the lapse of time and the effect it has had on everybody's memories.

MR YOUNG: Yes.

MR JUSTICE TOULSON: And also one has to bear in mind that it is another case where you have got an award where all sorts of other points are standing up and there is one bit which is being sent off for reconsideration.

MR YOUNG: My Lord, that is not quite right. My Lord, I accept one part of that, but could I just mention that the whole point of an appeal to the Board of Appeal of GAFTA is that it is a complete re-hearing of the case. All of the matters have to be resolved again -- all of the other issues. It was only one small particular -- important -- point. There is another point, my Lord, that the Tema appeal in relation to the other aspects of the case are coming up and it can probably all be embraced within that same hearing, so that each party can make its submissions. If it is set aside, it may produce slightly more difficulties within GAFTA itself. My Lord, I thought it right before your Lordship entered into this because you have not heard submissions --

MR JUSTICE TOULSON: No.

MR YOUNG: I have not specifically drawn your Lordship's attention to this.

MR JUSTICE TOULSON: Mr Wormington, what do you have to say about this?

MR WORMINGTON: My Lord, what I would suggest is that as the point here is that the tribunal failed to deal with the central issue, that the award should be set aside. So far as the provision that Mr Young referred you to at the bottom of subsection (3) is concerned, where the provision refers to remitting the matter for reconsideration, what the draftsman had in mind there -- what he is dealing with is a situation where they dealt in part with the issues, but where the situation is that they have not actually dealt with them it is not reconsideration, it is actually consideration.

MR JUSTICE TOULSON: Yes.

MR WORMINGTON: What I would suggest is if the award is set aside, the matter will go back. There will have to be fresh submissions on each side and a decision made and that will have to take its course. Clearly the parties are both well up to speed on what the issues are. One might have thought that GAFTA itself will make sure that this matter can reach a conclusion before it without further delay.

So far as Tema is concerned, it is right that that is before the Board of Appeal at the moment. There is going to be a hearing on 29 November -- so in about three weeks' time -- and time has been set aside to deal with Tema. There have been a lot of problems between the parties in arranging that date and getting sufficient time for all the Board to be together on that day. The suggestion somehow that this case could be dealt with at the same time I rather suspect is impracticable because we do not have the time now to deal with both, not without prejudicing dealing with the Tema.

So the Board of Appeal is seized of the other related matter. I am certainly not suggesting that there needs to be a different Board of Appeal to deal with this. The Board of Appeal which is dealing with the other one is the same -- it comprises the same individuals. I am certainly not suggesting that it should go to anyone else. But effectively, as the award has been made upon a completely wrong basis, it would simply be wrong in principle to allow the award to stand because the true situation is that the tribunal have not determined the issues that could give rise to a proper award.

MR JUSTICE TOULSON: What protection do the other side have that you are not going to seek to raise other points than the limited appeal that you are seeking to raise?

MR WORMINGTON: My Lord, it is already limited and I am instructed that I can give an undertaking that we will persist with that limitation of our case to the points we have raised.

MR JUSTICE TOULSON: Yes. Mr Young, do you want to say anything more?

MR YOUNG: No, my Lord, other than that in a sense it is being sent back to the tribunal to say: "You have not actually quite finished the job." My learned friend says he has not done it -- well, they have done it.

MR JUSTICE TOULSON: Yes.

MR YOUNG: But, in my submission, remission is all that is necessary. There are undertones of setting aside with which your Lordship may very well be familiar.

MR JUSTICE TOULSON: Yes.

MR YOUNG: Which are undesirable, save in the appropriate case. I would submit that remission would achieve precisely the same effect. The tribunal can then order such further submissions as they want and they may look back and say, "Well, old Young completely misunderstood what we were deciding and we will set out our full thinking in greater detail. We do not need any help." That is, in truth, all that is necessary. In my submission, guided by section 68(3), I would urge your Lordship only to remit an leave it up to the good sense of the tribunal, which is in a sense what you would be doing in any event. My Lord, I have nothing further to add.

MR JUSTICE TOULSON: The question arises whether the award should be remitted or set aside. I make it plain that this is not a case where there has been any personal impropriety on the part of the Board in any possible sense. It sometimes happens that a court may take the view that an essential matter has not been addressed and therefore there is in law a serious irregularity without imputing anything in any way personally censorious of the arbitrators concerned. I see no reason at all why the people who heard this appeal should not continue to deal with the matter.

But the question is whether, in the state of affairs the case has now reached, it is appropriate that there should be a fresh start or a reconsideration. I do think there are serious problems about a reconsideration. Reconsideration implies working upon the earlier material plus such supplementary submissions as may be allowed. The problem here is that, twelve months on from the appeal, I doubt whether anybody has a clear or reliable recollection of exactly how things were argued. The fact that there are now differences of recollection between those who represented the parties demonstrates that only too clearly.

This is not a case where there has been an award only part of which is under challenge. The challenge successfully has been to the whole of the award because of a failure to address the central point in the way that was required.

I think that in those circumstances justice requires that there should now be a clean start. For that reason, and not because of any suggestion of any personal impropriety on the part of the arbitrators, I think that the appropriate course is to set the award aside. Mr Wormington has indicated that Ascot will not seek to widen the points which it took on this appeal. If anybody is not content with that being publicly recorded, it could be put into the form of an undertaking. I doubt that that will be necessary.

MR WORMINGTON: My Lord, as part of a stay on the enforcement of the award, we have provided security and I ask for an order to be made releasing the security consonant on the discharge of the award.

MR JUSTICE TOULSON: I do not suppose that is contested, is it?

MR YOUNG: It catches me completely cold, my Lord.

MR JUSTICE TOULSON: With the award going, then clearly any security given to support a stay of execution has to go.

MR YOUNG: Yes. That sounds right, my Lord. I have only one point, my Lord. Would your Lordship just give me a moment? I am afraid this just catches me completely cold. (Pause) My Lord, I am going to ask your Lordship in a moment for -- whether it is permission to appeal or leave to appeal, I am not entirely sure.

MR JUSTICE TOULSON: Yes.

MR YOUNG: I would ask your Lordship not to order the setting aside of the security until that matter has been resolved.

MR JUSTICE TOULSON: I had better get on and deal with your application for permission to appeal.

MR YOUNG: Indeed. It is to some extent also tied up with an issue of costs as well because very substantial costs have been incurred in this application.

MR JUSTICE TOULSON: Do you want to make your application for permission to appeal?

MR YOUNG: Yes, my Lord, I do. It relates, my Lord, to the question essentially of substantial injustice.

MR JUSTICE TOULSON: Yes.

MR YOUNG: In my submission, there is a point of considerable importance in relation to section 68 applications. If a point of law is raised as an answer to substantial injustice, it is my submission that the court really has got to go on and determine it, particularly if it would have been a point -- or it may yet be a point on leave to appeal -- on which the argument is otherwise successful. It is a question which certainly -- one is always harking back to the old days, but there was a judgment of Brandon J where he decided that there had been misconduct, but that it did not make any difference. He analysed the case and said it actually would not make any difference as a matter of law.

Your Lordship has taken the view that it is simply not a matter that can be dealt with summarily. In my respectful submission, I tried not to deal with it summarily. I tried to show your Lordship all of the authorities on the point, and indeed your Lordship was good enough to read the Jag Shakti as well. In a sense the point of law, I say, is very simple and whether your Lordship views it as being dealt with summarily or not is perhaps therefore an important point. But it is my submission that when the court is faced with a section 68 application, and there is a case which as a matter of law it is an entirely futile act, then the court has to resolve it. Your Lordship has said it is either summarily or we will not deal with it at all.

I would suggest that there is a rather important question arising on section 68 as to what is the correct approach to serious injustice when there is a point of law involved -- and it is a pure point of law.

MR JUSTICE TOULSON: Yes.

MR YOUNG: That is essentially my application, my Lord.

MR JUSTICE TOULSON: Do you want to say anything about that, Mr Wormington?

MR WORMINGTON: My Lord, the question essentially is whether there is substantial injustice. That is in the context of a failure by the tribunal to deal with issues put to them which I think your Lordship said in your judgment is a matter which is inherently likely to be productive of injustice. What I say here is that if there is some point -- some legal point -- which is a complete answer to our case in the arbitration award that a court should determine that itself, notwithstanding that the parties have agreed in the arbitration tribunal to have the necessary issues determined by then, your Lordships has, for reasons you have given in your judgment, declined to follow the course he is inviting. I would suggest that this is a matter which goes to the factual question of whether there has been substantial injustice and does not raise any point of principle where a court has to lay down guidelines on whether there has or has not been substantial justice in a particular case.

MR JUSTICE TOULSON: Yes. I approach this question from a slightly different angle. I do not see it involving a point of general principle of how a court ought to approach these matters under section 68. There may be circumstances clearly in which the respondent to such an application may be able to say: "But here is a point of law which makes the result plainly right, however it was come by". But practicalities enter into the question.

The point raised by Mr Young is, as I have indicated, an interesting one. I would not feel able to deal properly with that point without a much fuller citation of authority than I had. I would have wanted to look at what I have termed "security cases". I would have wanted to look, for example, at Scandia, at the cases of borrowers' convenance in loans supported by charges over land. A half day to a day was allowed for the hearing of this application. To have had full and proper argument on this point would have required additional time and the blunt reality of the matter is that we are now on Thursday. From Monday I shall be in Truro. To have put this argument over in order that that aspect could have been fully and properly addressed would simply not have been possible form a listing viewpoint.

If the court on an application of this kind is to go into a separate question of law of the kind here raised, adequate time has to be allowed for it. I do not see the application for permission to appeal on this ground as raising any principle of law about the way in which section 68 applications ought to be approached. For those reasons I am not going to give permission to appeal.

Now, Mr Young, you want the security to stay in force pending an attempt to persuade a single judge?

MR YOUNG: Yes, my Lord, if I could.

MR JUSTICE TOULSON: Let me just hear Mr Wormington on that. If I extend it for 21 days and thereafter until the determination of the matter by a single judge, do you want to resist it?

MR WORMINGTON: No.

MR JUSTICE TOULSON: No? Very well.

MR YOUNG: I am very much obliged for that, my Lord. I am not for one instant, my Lord, suggesting that we will actually apply to a single judge. We have got to look at the practicalities, but I was anxious to make the application.

MR JUSTICE TOULSON: Yes.

MR YOUNG: It seemed to me that it was not entirely devoid of a question of principle.

MR JUSTICE TOULSON: Right. Now, where do we go to?

MR WORMINGTON: My Lord, I would ask for the costs of the application.

MR JUSTICE TOULSON: Are you asking for them to be assessed summarily?

MR WORMINGTON: My Lord, no.

MR YOUNG: My Lord, I have lost on everything else so far, so I do not necessarily hold out very much hope, but in the old days -- once again one is looking at the old days -- on an application of this sort where there was no allegation of impropriety, the normal order was on a misconduct -- on remission -- is to say: "We do not yet know whether the victory is pyrrhic", and therefore to leave the matter of the costs either to be reserved until the remitted award has come back or, as was frequently done, let the costs follow the costs order of GAFTA.

My Lord, I would respectfully suggest that that would be the proper order here, to see whether actually anything comes of it in a material sense. I would urge your Lordship to order either costs reserved until we see the award, or that the costs of this application follow any costs order made by the Board of Appeal. That would be the normal one.

MR WORMINGTON: I would suggest, my Lord, that here the defendants have sought to defend the indefensible, but they did not have to do so. They could have taken the same view of the meaning of the award and its sustainability as we have. Not to pay costs following the event in relation to this application is really to encourage parties in other instances to hang on to things when more impartial reasoned assessment of the situation would demonstrate to them that they are wasting everybody's time and costs by resisting the application.

MR YOUNG: My Lord, may I just make one point? I have already prevailed upon your Lordship's goodwill. That is a wholly unrealistic submission for my learned friend to make because he has made an allegation against the Board of Appeal of serious irregularity. The one thing that a party cannot do is, absent the Board of Appeal saying, "Yes, we have got it wrong," is to join in with that. I respectfully submit that the proper way would have been to have asked the Board of Appeal and to have got a conclusion from them. It is not our fault that the Board have gone wrong. But we could not possibly have acceded to what is undoubtedly a very serious allegation that has been made.

MR JUSTICE TOULSON: The application has been heavily resisted and I think that the successful party should have its costs of the application.

MR WORMINGTON: My Lord, I am grateful. My Lord, I will draw up a minute of order which I will submit.

MR JUSTICE TOULSON: Right. Thank you all very much.