England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN THE MATTER OF THE ARBITRATION ACT 1996
IN AN ARBITRATION APPLICATION

		Royal Courts of Justice Strand, London, WC2A 2LL
		8th April 2011

Mrs Justice Gloster, DBE:

Introduction

1. The parties to this dispute are cargo owners Milan Nigeria Limited ("Milan"), a company registered under the laws of Nigeria, and Angeliki B Maritime Company, Owners of the vessel M/V "Angeliki B" ("the Vessel"), ("Owners"). Their dispute arose out of claims by Milan for short delivery and alleged caking/wetting damage to its cargo of bagged rice which had been loaded and carried on board the Vessel from Bangkok to Lagos and Port Harcourt between May and September 2001. The cargo was carried pursuant to bills of lading incorporating the Hague Rules issued by Owners and dated 4, 15 and 21 June 2001. The bills of lading also incorporated charterparty provisions providing for English law and arbitration in London.
2. The Vessel berthed at Lagos on 29 July 2001 and commenced discharge on 30 July 2001. She completed discharge on 17 August and then proceeded to Port Harcourt. She berthed at Port Harcourt on 27 August and completed discharge on 11 September 2001.
3. Milan submitted the dispute to arbitration under LMAA Terms (2002) and claimed damages for short delivery of cargo landed at Port Harcourt and for caking/wet damage to cargo delivered at both Port Harcourt and Lagos. Owners raised a number of preliminary and/or jurisdictional challenges (which included that Milan did not have title to sue) but these were dismissed by the arbitral tribunal (comprising Messrs David Barnett and Alan Oakley) ("the Tribunal").
4. As to the substance of the claim, by a final award dated 16 June 2010 ("the Award"), the Tribunal rejected Milan's short delivery claim but upheld the damage claim in part and awarded Milan US$150,000.00 (out of its total claim for US$396,457.42) on the basis that Milan had not discharged the burden of proving that all of the damage suffered to the cargo was due to Owners' breaches of the contract of carriage.
5. Owners subsequently made an application to the Tribunal under s.57 of the Act "for further clarification/interpretation (and, possibly, correction) to the Reasons for the award". That application related to many aspects of the Award including the two points which Owners now seek to raise in Folio 1040, i.e. Milan's title to sue and the currency of the Award. The Tribunal refused Owners' application on all grounds.
6. Accordingly, in Folio 832 Milan now appeals under s.69 of the Arbitration Act 1996 ("the Act") on a point of law arising out of a Final Arbitration Award dated 16 June 2010 ("the Award"), leave to appeal having been given by Hamblen J on 21 October 2010.
7. In Folio 1040 Owners challenge the Award under s.68 of the Act and apply for leave to appeal on a point of law under s.69 of the Act.
8. Milan's appeal relates to the Tribunal's assessment of the parties' respective liability for damage to Milan's cargo whilst it was being carried on board Owners' vessel and raises the issue as to who bears the burden of proof in establishing the cause of the damage ("the burden of proof issue"). Owners' first s.68 challenge is concerned with Milan's title to sue for the damage suffered by the cargo ("the title to sue issue") and their second s.68 challenge, and their s.69 application for leave to appeal, relate to the currency of the Award ("the currency issue"). These three issues are addressed in turn below.

The burden of proof issue

9. The question of law on which Milan was given leave to appeal by Hamblen J was:

"Did the Tribunal err in law in holding that, despite [Owners'] breaches of contract in respect of the loading, carrying and care of the cargo and/or the state of the vessel, [Milan] bore the burden of proving that [Owners] were not entitled to rely on the exceptions in Article IV rule 2 of the Hague Rules?"^[1]

10. There was no dispute that Milan's cargo carried on board the Vessel suffered considerable damage during the voyage from Thailand to Nigeria. Whether or not Owners were responsible for that damage, and, if so, whether they were responsible for all of it, were the principal substantive issues submitted to the Tribunal^[2].
11. The Tribunal's analysis of these issues runs from paragraphs 43-74 of the Award. It made a number of important findings and observations which are relevant to my determination of the burden of proof issue:

i) The Vessel was inspected at the load port and was approved as clean, dry and free from objectionable odours and suitable for loading bagged rice^[3];

ii) Loading was interrupted by rain and, on the resumption of loading, it was found that water had entered the holds and damaged some of the cargo^[4]. There was evidence that this may have been due to leaky hatch covers or to their design^[5]. Much of the wet cargo was removed but there was a possibility that some of the caked bags discovered on discharge at Port Harcourt were the result of rain water ingress during loading^[6].

iii) The carriage of bagged rice from Thailand to Nigeria, at the time the voyage was completed, carried a risk of cargo sweat or condensation^[7]. This risk could be minimised by appropriate temperature monitoring and hold ventilation^[8].

iv) The Master and/or Owners were responsible for ventilating the cargo and/or dunnaging and stowing the cargo^[9].

v) There was limited and, in some respects, unsatisfactory evidence as to the nature of the Vessel's ventilation system and how the cargo had been dunnaged^[10].

vi) The "prevailing" view as to the cause of the cargo damage was cargo sweating^[11]. This required the Tribunal to consider:

"… whether the sweat was preventable and whether the Respondents were entitled to rely upon the exceptions of the Hague Rules in defeating the Claimants' claim."^[12]

vii) There was some evidence that the cargo had not been properly stowed and dunnaged^[13]. This gave rise to "some concerns"^[14]. There was evidence of a lack of good seamanship in respect of the loading of the cargo^[15].

viii) The crew had not properly ventilated the cargo and had not kept proper or adequate ventilation records^[16]. This led the Tribunal to conclude that:

"[b]ased on the evidence before us we are not entirely persuaded that the Master did everything within his power to care for the cargo."^[17]

and that: "more could have been done"^[18].

ix) The Master's conduct at the loadport pointed to a lack of attention and this appeared to continue during the voyage and possibly contributed to the cargo damage^[19].

x) The sweat damage to the bagged rice could not be characterised as being "a risk of the trade".

xi) The Master would have been under pressure to fill the holds^[20].

12. The key passage of the Award so far as the question on Milan's appeal is concerned is paragraphs 73-74 where the Tribunal set out its conclusion on Owners' responsibility for the cargo damage and whether they were entitled to any protection under the Hague Rules:

"73. We are of the view that the Hague Rules do give the Respondents some protection. However, we are not persuaded that they assist them fully to defeat the claim for caked bags. We take the view that the Claimants must take some responsibility for the cargo damage. The Claimants were aware that this age and type of vessel was unlikely to be mechanically ventilated and that the Master was only able to ventilate the cargo on an ad hoc basis when conditions allowed. ... To this extent, we accept that the Master, although not perfect, since he failed to keep precise records, was not entirely to blame for the poor ventilation that occurred during the voyage. Even then, it is difficult to assess whether the cause of the caking could be laid at the door of the Master's failures, or circumstances beyond his control (where the Claimants bear the burden). ... On balance, having considered all the evidence available to us, we conclude that the Claimants must accept a larger share of responsibility given their failure to discharge the burden placed upon them ....

74. We therefore find on the basis of the evidence available to us, that the Claimants' have not discharged the burden of showing that the Respondents were completely responsible for the caking of the cargo and that their claim should only succeed in the reduced sum of US$150,000." (Emphasis added).

13. Before the Tribunal, Milan alleged that Owners had failed to comply with their obligation under Article III rule 2 of the Hague Rules to "properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried" which had been loaded, as acknowledged on the bills of lading, in apparent good order and condition. Owners attempted to resist liability on the basis of, among others, Article IV rule 2(m) of the Hague Rules, which provides that "Neither the carrier nor the ship shall be responsible for loss or damage arising from ... inherent defect, quality or vice of the goods."
14. As Mr. Ben Olbourne, counsel for Milan submitted, it is well established (and not in dispute before me) that, in such circumstances, it is the owner of the vessel who bears the burden of proving the cause of the damage to the cargo and he will only escape liability for the damage if, and to the extent that, he establishes that such damage was caused by one of the exceptions set out in Article IV rule 2.^[21].
15. The effect of the authorities is summarised in Cooke et al, Voyage Charters (3^rd ed.), paragraphs 85.123 and 85.126-85.127:

"The position may best be explained on the basis that the relationship of goods owner and carrier is also that of bailor and bailee ... the duty of a bailee for reward is to deliver up the goods in the same order and condition as when they were delivered to him, subject to his showing that loss or damage was suffered by the operation of an excepted peril even though he took all reasonable care of them while in his custody. Therefore, in order to found a claim, all that the bailor goods owner need do is establish receipt by the carrier of the goods in good order and condition and short or damaged delivery of the goods by him at the destination. He need not go further and show that the shortage or damage was such as was preventable and ought to have been prevented. ....

There are two separate but related issues on the burden of proof concerning the operation of the exceptions in Article IV rule 2. The first is whether the carrier, who has given short or damaged delivery, need prove merely that the shortage or damage resulted from the operation of one or more of the excepted perils or must he also prove that the loss or damage was not also caused by the operation of other non-excepted perils. ....

As to the first, it is clear that if loss or damage results from a combination of excepted and non-excepted perils, then the carrier is not entitled to rely upon the excepted perils save to the extent that he can show that any specific part of the loss or damage was caused only by that peril. That is the straightforward application of the common law on exceptions clauses."

16. This last point is also made in Scrutton on Charterparties (21^st ed.), p. 403:

"It is not enough for the shipowner to show that the damage done was partly due to some cause for which he is excused if part of the damage is not so caused. He must show how much damage was due to the cause for which he is excused, because it is only in respect of that cause that he can claim protection. If he does not do so, he has failed to show to what extent his prima facie liability for the whole ought to be reduced."

17. In its Award (which I have summarised above), the Tribunal identified a number of factors which it appears to have considered as having played a role in the cargo damage.
18. Mr. Olbourne submitted that, in those circumstances, the Tribunal's approach should have been to hold Owners responsible for all of the damage save to the extent that Owners were able to establish that the damage, or any part of it, was due to a factor for which they were excused. In other words, the Tribunal should have treated the burden of proof as being on Owners to establish what, if any, damage was due to "inherent defect, quality or vice" and then found Owners liable for all other damage. He submitted that the Tribunal took the opposite and wrong approach, by imposing the burden of proof on Milan, which wrongly coloured its approach to the allocation of responsibility to Milan for 62% of the damage.
19. Mr. Chirag Karia, counsel for Owners, accepted that the Tribunal wrongly referred to the burden being placed on Milan in paragraphs 73 and 74 of the Award. However, he submitted that those paragraphs should not be read in isolation or with a legalistic eye. Given that the Tribunal was composed of commercial arbitrators, not lawyers, he submitted that on a fair reading of the Award as a whole, it was clear that the Tribunal did not make the error of law alleged by Milan.
20. In support of this contention he referred to the well-known principle, as reaffirmed by Bingham J in The TFL Prosperity^[22], that:

"… the election of parties to have their disputes resolved by arbitration should be respected in the sense that awards should not be scrutinized with an over-critical eye and that the Courts should exercise restraint both in seising themselves of legal questions and in remitting awards for further findings."

21. He submitted that the Tribunal's references in paragraphs 73 – 74 to "burden" must be read and understood in the context of the detailed analysis carried out by the Tribunal immediately prior in paragraphs 43 – 72 of the Award as to the possible competing causes of the alleged damage; that in paragraphs 43 – 72, the Tribunal carefully weighed all the evidence as to the possible causes of the cargo damage and their relative potency in causing the damage found on discharge; that the Tribunal then undertook an apportionment exercise: it apportioned the loss after considering all the evidence before it and not based on a simple application of some burden of proof.
22. He submitted that if the Tribunal had, in fact, decided that case on the burden of proof after placing that burden on Milan (as Milan alleged), it would have dismissed its claim in its entirety; but that is not what the Tribunal did. He submitted that the Court should look at the substance of the exercise undertaken by the Tribunal, and not scrutinize the words this commercial panel used to describe that exercise "with an over-critical eye". The Tribunal quite correctly carried out a factual assessment exercise; and the Court ought not to interfere with that factual exercise.
23. I cannot accept Mr. Karia's submissions. On my analysis of the reasoning in the Award, the Tribunal clearly adopted the wrong approach to the burden of proof. It expressly, and on a number of occasions, identified the burden of proof of establishing the cause(s) of the damage as being placed on Milan, and it held that Milan was liable for such damage as it had failed to establish was due to Owners' defaults. This is clear from the underlined passages in paragraphs 73 and 74 of the Award, which I have quoted above. In these paragraphs the Tribunal, for example, specifically referred to "[Milan's] failure to discharge the burden placed upon them ..." and the fact that "[Milan has] not discharged the burden of showing that the Respondents were completely responsible for the caking of the cargo".
24. In my judgment, the Tribunal's approach in this respect was wrong and not in accordance with the authorities. I accept Mr. Olbourne's submission that that error almost certainly affected the Tribunal's conclusion that Milan was only entitled to be compensated for approximately 38% of the cargo damage. Had the Tribunal applied the burden correctly, then it would have been for Owners to establish (if they could) how much of the damage was due to "inherent defect, quality or vice" or any other excepted peril. Given the other findings set out in its Reasons as to the causes of the cargo damage, it is, at the very lowest, unlikely that the Tribunal would have held that Owners had established that some 62% of the cargo damage was due to factors for which they were excused: cf. Award, paragraph 73.
25. Accordingly, I allow Milan's appeal on the burden of proof issue. As accepted by both counsel, the appropriate course in that event is that the Award should be remitted to the Tribunal for reconsideration in accordance with the law – namely that the burden of proof is upon Owners to establish that some part of the cargo damage fell within an excepted peril.

The title to sue issue

26. Owners seek to challenge the Tribunal's decision that Milan had established its title to sue in respect of the damage to the cargo, on the grounds that the Tribunal did not act fairly as between the parties in the determination of that issue, and that, accordingly, the Award was affected by a serious irregularity causing substantial injustice to Owners within the meaning of section 68(2)(a) of the Arbitration Act 1996.
27. Owners contended, in the proceedings before the Tribunal, that Milan did not have title to sue because it was not an original party to the relevant bills of lading and had not asserted rights under the Carriage of Goods by Sea Act 1992 ("COGSA") and/or, if it had done so, then it had not established that it had satisfied the requirements of that Act. As Milan was not an original party to the bills of lading (see the Award at paragraphs 1 and 14), it was common ground that it was necessary for it to plead and prove that it had acquired title to sue under those Bills of Lading as a matter of English law.
28. The procedural chronology relating to the title to sue point may be summarised as follows:

i) The reference was started on 12 November 2001.

ii) Milan served its original points of claim, or claim submissions, on 9 September 2004. In those submissions it claimed that it had "contracted with the [Owners]", which was not accurate, if and insofar as the pleading thereby sought to imply that Milan had been an original party to the Bills of Lading. No reference was made to COGSA.

iii) In their defence submissions served on 10 November 2004, Owners joined issue with Milan as to the question of the latter's ownership of the cargo and title to sue, on the basis that Milan had not pleaded any grounds, or adduced any evidence, to show that it was the lawful holder of the Bills of Lading. Owners further contended that the onus was on Milan to do so.^[23]

iv) On 1 December 2004 Owners served a request "for further and better information of the points of claim", which included a request for "all facts and matters relied upon to establish [Milan's] ownership of the cargo in question" as well as the statement that Milan had contracted with Owners to carry the cargo.

v) In its "reply/ amended claim submissions" served on 29 December 2004, Milan submitted that it was "Owners/lawful holders of Bills of Lading ... by reason of endorsement to them by their bankers ...." and "that they were at all material times, Owners of the cargo of bagged rice and/or the persons entitled to possession thereof and/or became the lawful holders of the Bills of Lading."^[24]

vi) There was then a substantial gap in the proceedings of some two years, which I was told by Mr. Olbourne was attributable to delay on the part of Owners. It is not necessary for me to decide whether this was in fact the reason for the delay in proceedings.

vii) In their rejoinder submissions dated 4 September 2006, Owners repeated their non-admissions as to Milan being the lawful holders of the Bills of lading and stated that there was:

"… no plea as to when [Milan] became holders of the Bills of Lading, a matter that was 'crucial to the effect of Section 2 of the Carriage of Goods by Sea Act 1992".^[25]

viii) In their request for further and better information of the reply/amended claim submissions, Owners asked Milan to identify when it became Owners of the cargo and lawful holders of the Bills of Lading.

ix) In its reply to Owners' request for further information and in its reply submissions, both served on 25 October 2006, Milan gave similar answers to those which it had previously given in relation to its title deriving as a result of endorsement of the Bills to it on or about 30 July 2001. Milan supported those allegations with evidence that it had taken possession of the bills of lading which had been endorsed to it, and it identified when it had taken possession.

x) In that context Milan referred to the provisions of the Nigerian Merchant Shipping Act 2004: it submitted that, had the bills of lading not been endorsed to them, it would not have been entitled as a matter of Nigerian law to apply to the Nigerian courts for an order of arrest of Owners' vessel.

xi) At this stage, no reference had been made by Milan to COGSA. However it was clearly asserting that it had rights to ownership of the cargo and title to sue on the basis that the Bills of Lading had been endorsed to it.

xii) On 4^th November 2009, the Tribunal expressly ruled that:

"No new issues/arguments/evidence will be allowed – such will be ignored."

xiii) On 29 December 2009, in its final submissions served on that date^[26], Milan for the first time expressly referred to COGSA. It asserted that;

"The Claimant's case is that they have title to sue as lawful holders of the 5 Bills of Lading within the meaning of [COGSA]. The Claimants have addressed this issue in their Submissions dated 29^th December 2004 (page 49 to 122) and 25^th October 2006 (paged 131 to 141)."

Having set out the relevant section of COGSA, it went on to submit:

"In this case, the Claimants became lawful Owners within the meaning of Section 2(1) and 5(2) in the following manner:

a. Claimants purchased 22,500mt of Rice as evidenced by the purchase invoices (pages 78 to 82).

b. The Bills of Lading were endorsed to the Claimants by their Bankers on or before 30 July 2001 or when the Vessel was discharging at Lagos otherwise the Claimants would not have been able to procure an Order of Court in Nigeria detaining the Vessel albeit which was never served on the Vessel because Respondents provided security (pages 14 to 15).

In the normal scheme of commercial relationships, it would have been unusual for Guaranty Trust Bank (GTB) Plc to endorse and release the Cargo to the Claimants without Claimants paying for the cargo. To do so would have exposed the Bank to a payment liability towards the Suppliers.

c. In summary, there is overwhelming evidence that Claimants have title to sue and that they were lawful holders of the Bills of Lading at the relevant time. The Respondents failed to make a reverse case other than to simply allege that Claimants had no right of suit."

xiv) In their final submissions also dated 29 December 2009, Owners objected that Milan's reliance on COGSA was inconsistent with the Tribunal's ruling of 4 November 2009, on the grounds that Milan was for the first time raising a new argument. Their complaints were repeated in a letter dated 4 January 2010.

xv) On 5 January 2010, the Tribunal sent an email in response, stating:

"We [sic] if, when we come to consider the entirety of the submissions, we find that the claimants have not previously relied on the Carriage of Goods by Sea Act 1992, that part of their closing submissions will be ignored."

xvi) The Tribunal dealt with and rejected Owners' contentions at paragraphs 14-18 and 20-22 of the Award. It held, first, impliedly but unequivocally^[27], that Milan had asserted rights under and/or had relied on COGSA; secondly, that Milan had established that all the bills of lading had been endorsed to them^[28]; thirdly, that Milan had taken possession of the bills of lading on or around 30 July 2001^[29], that being at or about the time of commencement of discharge at the first discharge port, Lagos^[30].

xvii) On 14 July 2010, Owners made an application to the Tribunal under s.57 of the Act "for further clarification/interpretation (and, possibly, correction) to the Reasons for the award". In their s.57 application in relation to this issue, Owners asked the Tribunal to:

"… clarify the basis upon which the Tribunal has concluded in favour of the Claimants (a) that the Claimants had established title to sue, in the absence of any reference in the Claimants' submissions prior to their final submissions dated 22^nd November 2009 to [COGSA] ...."

Owners also referred to the Tribunal's indication on 5 January 2010 that, were it to conclude that Milan had not prior to its final submissions relied on COGSA, then that part of those submissions referring to COGSA would be ignored and invited the Tribunal to conclude that it had accidentally overlooked this indication.

xviii) The Tribunal dismissed this part of Owners' s.57 application. It stated:

"Having considered the entirety of the submissions, we consider that it was sufficient that the Claimants were endorsees of the bills of lading and the fact that they did not initially refer to COGSA 1992 does not affect our decision as to their entitlement to sue."

Owners' submissions

29. Mr. Karia submitted that, in the circumstances:

i) The Tribunal acted inconsistently with its own rulings of 4 November 2009 and 5 January 2010.

ii) The Tribunal adopted this course without: (i) first warning Owners that it was minded to revoke those two rulings; or (ii) allowing Owners to make submission on either: (a) the proposed revocation; or (b) Milan's new COGSA argument. That amounted to a breach of the Tribunal's duties under section 33 of the Act, as the Tribunal failed to give Owners "a reasonable opportunity of putting [their] case and dealing with that of [their] opponent". Accordingly the Tribunal had moved the goalposts. Owners were entitled to, and did, rely on the Tribunal's two rulings of 4 November 2009 and 5 January 2010 in determining what applications to make and how to prosecute their defence to Milan's claims generally.

iii) As a result Owners had suffered a substantial injustice. The test for substantial injustice in this context is whether the Tribunal "might well have reached a different view" but for the serious irregularity; see Compania Sud-Americana v Nippon Yusen Kaisha^[31].

iv) Owners had relied on the Tribunal's two rulings of 4 November 2009 and 5 January 2010 in deciding how to respond to the new COGSA arguments advanced for the first time in Milan's final submissions. The Tribunal moved the goalposts when preparing its Award, after service of all submissions. At the very least, there was a change of focus in the debate about title to sue that, as a result of the Tribunal's two rulings, the Owners could not reasonably have expected; see Apis AS v Fantazia Kereskedelmi KFT (No. 2)^[32], in which Andrew Smith J held that there had been a serious irregularity under section 68 when the tribunal calculated damages based on transport costs when that was not the basis upon which the case had previously been argued on the written submissions.

v) If the Tribunal had informed Owners that it was minded to revoke those rulings, then Owners would have taken the following steps which "might well" have caused the Tribunal to reach a different result: in particular:

a) Owners would have argued against the revocation of the rulings. Such an argument might well have been accepted given that the Tribunal had already twice ruled that it would not consider any such new arguments, and the reference had been pending for over eight years when Milan first cited COGSA in its final submissions.

b) Owners would have applied for further disclosure. Owners did not apply for such disclosure because the Tribunal had already ruled (twice) that it would not consider any new arguments and Milan's reliance on COGSA for the first time in its final submissions served on 29 December 2009 was just such a new argument. The disclosure provided by Milan as to their title to sue was extremely limited, as the Tribunal had noted^[33].

c) If the Tribunal had made it clear that, notwithstanding its two rulings, it was going to entertain Milan's case under COGSA , the following three questions would have been raised and required further disclosure and investigation:

i) When exactly did Milan obtain possession of the Bills of Lading?

ii) Had the Bills of Lading become spent by that time, with the result that Milan acquired no title to sue pursuant to section 2(1) of COGSA?

iii) If yes, were the Bills of Lading endorsed and delivered to Milan pursuant to a pre-existing "contractual or other arrangement" within the meaning of section 2(2) of COGSA?

vi) Those key questions were not explored because the Tribunal's two rulings had made them irrelevant. If those questions had been explored based on the required additional disclosure, the Tribunal might well have concluded that the Bills had been transferred to Milan only after they were spent, and title to sue was not established under either sections 2(1) or 2(2) of COGSA. Milan' own case was that the Bills of Lading "were doing the rounds in the bank".

vii) The point is that, if the Tribunal had made it clear that it was revoking its rulings, it might well have come to different factual conclusions as to the timing of the transfer of the Bills of Lading as compared to the timing of discharge/delivery. Furthermore, there is authority for the view that a bill of lading will become spent upon the commencement of discharge, a proposition that certainly would have merited investigation where (as here) discharge and delivery had taken place simultaneously: see The David Agmashenebeli^[34]: "alternatively, the bills became spent when discharge commenced on 26 June".

viii) However, since the Tribunal never warned Owners that it was minded to reverse its two rulings, Owners had no reason to press for such further disclosure or investigation.

ix) Accordingly the Court should set aside (or, alternatively, remit) the Award in favour of Milan under section 68 of the Act.

Determination

30. In my judgment, largely for the reasons put forward by Mr. Olbourne, there is no basis for Owners' challenge to the Award under s68. In my view the Tribunal did indeed act wholly fairly and appropriately as between the parties in relation to the determination of the title to sue issue.
31. First of all, I consider that there is nothing in Owners' claim that the Tribunal allowed Milan to raise a claim based on COGSA only very late in the day and after it had made its ruling on 4 November 2009 that no new issues, arguments or evidence would be admitted.
32. On my analysis of Milan's pleadings and submissions prior to that date, I conclude that it was clear that, factually, Milan was presenting a case based on the requirements set out in the provisions of COGSA as to who was entitled to rights under a contract of carriage.
33. Sections 2 and 5 of COGSA provide, so far as is material, as follows:

"2. Rights under shipping documents

Subject to the following provisions of this section, a person who becomes:

the lawful holder of a bill of lading ...

shall (by virtue of becoming the holder of the bill ...) have transferred to and vested in him all rights of suit under the contract of carriage as if he had been a party to that contract.

...

5. Interpretation etc.

...

References in this Act to the holder of a bill of lading are references to any of the following persons, that is to say-

...

a person with possession of the bill as a result of the completion, by delivery of the bill, of any indorsement of the bill ...."

34. Milan's submissions, which repeatedly identified the basis of their claim as being that they were "lawful holders" and "endorsees" of the bills of lading could only reasonably have been understood by experienced shipowners represented by experienced commercial and maritime lawyers (as Owners were) as the foundation stone of a claim based on rights accruing by virtue of COGSA. Indeed, it is difficult to see what else Owners could (reasonably) have believed Milan was intending by the use of those terms and what object they intended to achieve by submitting evidence establishing, among other things, that the bills of lading had been endorsed to them, and when they had taken possession of them.
35. I regard Owners' purported ignorance of the basis of Milan's claim as highly artificial. A fair reading of their own submissions and representations demonstrates that Owners and their legal representatives were well aware that Milan was seeking to assert rights under COGSA. Owners' position was that Milan had not established that it had satisfied the requirements of COGSA: see, for instance, Owners' submissions dated 4 September 2006, where they referred expressly to the effect and requirements of s.2 of COGSA and put Milan to proof that they could bring themselves within the terms of that provision.
36. In effect Owners' complaint is a bare technical pleading point, namely that Milan should have referred expressly to COGSA at an earlier stage in its pleadings, in circumstances where Owners could not reasonably have been in any doubt as to the basis of the claim.
37. But in my judgment, Milan pleaded in substance and in terms (even if it did not refer to COGSA expressly) the factual elements necessary to establish its title, from at least the date of its reply/amended claim submissions served on 29 December 2004, and, in any event, well before the Tribunal gave its indications that it would not allow new issues or arguments to be made in the parties' final submissions.
38. Moreover, the Tribunal, on two separate occasions, considered and rejected Owners' contention that, by referring to COGSA expressly for the first time only in their final submissions, Milan was to be regarded, at that time, as raising some new argument or issue. First, the Tribunal, while mindful of Owners' submission that Milan had not asserted its rights under COGSA (see paragraph 14 of the Award), nevertheless concluded that Milan had properly identified and established the basis on which it alleged it was entitled to sue. And, secondly, in its response to Owners' s.57 application, the Tribunal stated that:

"[h]aving considered the entirety of the submissions, we consider that it was sufficient that the Claimants were endorsees of the bills of lading and the fact that they did not initially refer to COGSA 1992 does not affect our decision as to their entitlement to sue."

39. I have no doubt that if the Tribunal had for a moment thought that a new point was being raised, or that Owners were genuinely being faced for the first time with a genuinely new point, they would not have allowed Milan to rely on COGSA. The fact of the matter was that, provided the factual ingredients of the claim to title under the Bills of Lading had been pleaded and proved, there was no requirement upon Milan expressly to plead the relevant sections of COGSA upon which it was relying. No new – let alone arcane – point of law was being raised. It must have been perfectly obvious to Owners, and their experienced solicitors, the basis upon which Milan was claiming title to the Bills and the cargo. In my judgment, the point raised by Owners was no more than a technical pleading point, which, in the context of the issues raised in the arbitration, was devoid of merit.
40. Nor do I accept Owners' submissions that they suffered prejudice as a result of not being expressly informed earlier that Milan was relying on COGSA. First, it must in my view have been perfectly obvious that Milan was seeking to base its claim on endorsement and possession of the Bills of Lading. I find Owners' purported belief that they thought that Milan was relying on the provisions of the Nigerian Merchant Shipping Act 2004 as wholly unconvincing. As they themselves acknowledge, the Nigerian legislation "… could not, on any view, have any application to the subject English law bills of lading"^[35].
41. Secondly, I do not accept that, even if contrary to my view, the Tribunal acted unfairly to Owners by not shutting Milan out of a claim based on COGSA, the Tribunal's conduct caused Owners, in the language of s.68(2), any "substantial injustice".
42. As I have set out above, in their evidence before me, Owners sought to set out in some detail the steps they say they would have taken had Milan not 'ambushed' them with a late claim based on COGSA. I am not impressed by this contention. As Mr. Olbourne pointed out, Owners could have taken those steps at any time: put at the very lowest, Owners were clearly aware that Milan might be making a claim based on COGSA and, in fact, Owners put Milan to proof of various of the elements of such a claim. That was a tactical decision; Owners could have applied at that time for orders for disclosure but chose not to. It may well be that that tactical decision was based on Owners' choice to take the bare technical pleading point that Milan had not referred expressly to COGSA.
43. Nor am I impressed with Owners' submission that, had they been aware that Milan was relying on COGSA, they would have pressed for disclosure of documents relating to the time at which Milan took possession of the bills of lading, presumably in order to establish that the bills were in fact spent by that time. However, it is clear from the Award^[36] that Owners had indeed raised this issue before the Tribunal and the Tribunal was satisfied that Milan had taken possession of the bills of lading in good time. Owners' specific concern now appears to be with Milan's dealings with Guaranty Trust Bank. However, the Tribunal specifically considered all of the evidence presented to it in relation to this issue of timing and was satisfied that there was corroborating evidence that Milan had taken possession of the bills of lading at or around the time discharge operations commenced at the first discharge port. Accordingly, it is very unlikely that the Tribunal would have come to a different conclusion had Owners made the suggested disclosure application.
44. Accordingly, in my judgment, Owners have failed to establish that there was any serious irregularity arising out of the Tribunal's conduct, or that even if there was any such irregularity, that has any caused substantial injustice to Owners.
45. Accordingly I dismiss Owners' challenge under s68 in respect of the title to sue issue.

The currency issue

46. Before the Tribunal, Owners argued that any award should be made in Nigerian naira on the basis, they contended, that this was the currency in which Milan suffered its loss. The Tribunal, however, concluded that Milan had suffered their loss in US dollars and made its award in that currency. The Tribunal dealt with this issue very briefly in the Award. At paragraph 75, it noted that Owners had argued that the award should be in naira but held that Milan had established, on the evidence "that their loss was in [US dollars] and that they should recover quantum on that basis".
47. In their s.57 application, Owners invited the Tribunal to reconsider its conclusion on the basis that it had made an "accidental mistake" in failing to appreciate that Milan had advanced their claim in naira rather than dollars. The Tribunal refused Owners' application. It expressly rejected Owners' suggestion that Milan had made its claim in naira and it reinforced its earlier conclusion that Milan had suffered its loss in US dollars. It stated:

"The claim related to an International trade where the primary currency was US dollars, which included the cost of the goods and the ocean freight. This was effectively recognised by Owners when they made three sealed offers all of which were in US dollars. We had no hesitation in finding that the appropriate currency for damages was in US dollars in accordance with the Claimant's claim, regardless that the cargo was sold in local currency, which invariably happens with such trades."

Owners' s.68 challenge

48. Owners' s.68 challenge in respect of the currency of the Award can be summarised as follows. Owners complain that the Tribunal erred in treating Milan as having claimed to have suffered its losses in US dollars rather than Nigerian naira. Owners assert that, even though Milan first quantified its losses in naira and all its evidence showed that they had suffered those losses in naira based on the reduction in the value of the damaged cargo in the Nigerian resale market, the Tribunal instead awarded Milan damages in US dollars. Owners complain that this was despite the fact that, in paragraphs 4 and 36 – 37 of the Award, the Tribunal itself allegedly recognised that Milan had suffered and claimed its losses in naira.
49. In support of this contention, Mr Karia submitted that:

i) The Tribunal's award of damages to Milan in US dollars was inconsistent with the way Milan had put its case, and as Owners (and indeed the Tribunal – see the Award paragraphs 4 and 36 – 37) had understood the case that Owners had to meet. That was a serious irregularity within the meaning of section 68(2)(a) and a breach of section 33 of the Act.

ii) In the circumstances, Owners were not given "a reasonable opportunity of putting [their] case and dealing with that of [Milan]" as Owners understood that case to have been squarely put as a claim for losses suffered in naira.

iii) Again, there was a moving of goalposts or, at the very least, an unexpected change of focus: see, Apis AS (supra).

iv) In its response to Owners' section 57 application, the Tribunal sought to justify denominating its Award in US dollars by stating that Owners "effectively recognised" that the primary currency in international trade was US dollars "when they made three sealed offers all of which were in US dollars". This, submitted Mr. Karia, was an impermissible and irrelevant consideration which could not support the Tribunal's decision to award damages in US dollars. The fact that Owners may have made an offer in dollars does not change the fact that Milan claimed losses suffered in naira. Furthermore, if the Tribunal looked at those offers before deciding to denominate its Award in US dollars, that would have been clearly impermissible, as those offers were "without prejudice save as to costs" offers.

v) Owners had suffered substantial injustice in that:

a) the Award requires them to pay approximately US$40,460.98 more than the correct award in naira would have been worth; and

b) more significantly, there was a much greater chance of one of Owners' three sealed offers (enumerated in paragraph 78 of the Award) being found to have been an "effective" offer so as to substantially affect the incidence of the costs of the reference below if the Award had been denominated in naira, as it should have been.

vi) Accordingly, the court should remit the Award, with directions to substitute an award for naira 16,800,000 in place of the US$150,000 presently awarded, pursuant to section 68 of the Act.

Determination of the s68 currency issue

50. In my judgment there is no basis for the contention that there was any serious irregularity within the meaning of s68 of the Act in the conduct of the Tribunal in relation to the currency issue. Thus I do not accept Owners' contention that Milan had always made or expressed its claim in Naira. It is clear from Milan's claim submissions and its subsequent submissions that its claim was always asserted in US dollars, although, perhaps understandably in the circumstances, it was a part of the claim that the quantum of loss fell to be determined by reference to local prices which had to be converted into US dollars.
51. As Mr. Olbourne submitted, the Tribunal had before it a claim expressed in US dollars. It afforded Owners ample opportunity to respond to that claim, and was thus entitled to make its Award in US dollars. In my view there was no breach of procedural fairness resulting in substantial injustice to Owners such as to engage s. 68(2)(a) or indeed any other provision of the section.
52. At the hearing before me, Mr. Karia rightly did not press the complaint made in the evidence as to the exchange rate. From its earliest submissions in the arbitration, Milan had put forward a claim in US dollars that incorporated a calculation based on a naira/dollar exchange rate of 112:1. It was open to Owners to dispute that exchange rate and to submit evidence in support of some other exchange rate, but they did not choose to do so. In those circumstances, the Tribunal was entitled to accept Milan's proposed exchange rate and did not fail to accord the parties procedural fairness in doing so.
53. Owners clearly had ample opportunity to make submissions on the point which, as the Award^[37] states, they availed themselves of. Further, in dismissing Owners' s.57 application, the Tribunal stated that it had "no hesitation" in finding that the appropriate currency for its Award was US dollars. I do not consider that the point about the reference to Owners' without prejudice US dollar offer takes Owners' argument any further. Even if it was not legitimate to rely on the fact that the offer was made in dollars (an issue which I do not decide and do not need to decide), there was no apparent other evidence or arguments available to Owners which could have been presented to the Tribunal to support their case, beyond that which they did deploy.
54. Accordingly I reject the s68 challenge in relation to the currency issue.

Owners' application for leave to appeal under s.69 of the Act

55. Further or alternatively Owners sought leave to appeal against the Tribunal's decision that its Award should be in US dollars rather than Nigerian naira on grounds that the Tribunal erred in law. Mr. Karia submitted that the court should not only grant the Owners leave to appeal, but also grant that appeal, because the Tribunal's ruling on the currency issue is a ruling of law which is obviously wrong within the meaning of section 69(c)(i) of the Act, alternatively, is one of general public importance and is at the very least open to serious doubt within the meaning of Section 69(c)(ii) of the Act. He also submitted that all the other requirements of section 69 were also satisfied.
56. The question of law said to arise was:

"Where a claimant claims losses resulting from cargo damage quantified in the currency of the country of discharge ("Currency A") and/or based on the diminution in the value of the cargo in that country and in Currency A, is it nevertheless entitled to recover damages in US dollars instead?"

57. Mr. Karia submitted that it was trite law that damages must be denominated in the currency in which the claimant (here, Milan) truly felt the loss. The Tribunal ruled that Milan were entitled to recover damages in US dollars because "they paid for the cargo in US dollars"^[38]. He submitted that that was "an obviously wrong ruling of law" because:

"It is trite law, established at the House of Lords level, that the relevant currency is not the currency in which replacement cargo must be purchased, but the currency in which the receiver/buyer felt the loss. The latter currency will usually be the currency prevailing at the port of discharge. "

In support of this submission he referred to The Texaco Melbourne^[39] where the claimant had been held to be entitled to recover damages for non-delivery of fuel oil at the port of Takoradi in Ghana. The House of Lords held that the claimant felt its loss in Ghanaian cedis and could only recover damages in that currency even though a replacement cargo would have to be purchased with US dollars. Mr. Karia referred to the passage where Lord Goff explained (at p. 480, col. 2):

"Now it is true that it is sometimes said that the goods owner is deemed to have gone out onto the relevant available market and to have there bought in replacement goods. Even so, it does not follow that the currency in which replacement fuel oil could have been bought on that market, here the U.S. dollar, constitutes the currency in which the goods owner felt his loss. Indeed, on the facts of the present case any such conclusion would be highly unrealistic.

Let it be supposed that, contrary to the facts of the present case, the cedi had appreciated significantly against the dollar over the relevant period; and that the shipowners had advanced the argument that, because the department is deemed to have purchased replacement fuel oil on the Italian market, therefore the department felt its loss in dollars and so must accept an award in dollars and as a result bear the consequences of the depreciation in the dollar between the date of breach and the date of judgment. To any such suggestion the department would have replied, with force, that in reality the case had nothing to do with the dollar at all, and that it never felt its loss in dollars. What it lost was the value of the cargo at Takoradi on the date when it ought to have been delivered there; and having regard to the way in which it conducted its business and to what in fact happened, however the amount of its loss was to be measured in law, it in fact felt its loss in cedis."

58. He submitted that those principles applied a fortiori to the simple claim for cargo damage in the present case; that although a number of bags of rice were destroyed by the authorities, there was no question or evidence in the present case of Milan going into the market to buy any replacement bags; but that rather Milan's own evidence was that it had lost sums calculated in naira. He submitted that, applying Lord Goff's test set out in the passage above, if

"contrary to the facts of the present case, the [naira] had appreciated significantly against the dollar over the relevant period; and that the shipowners had advanced the argument that … [Milan] must accept an award in dollars … [Milan] would have replied, with force, that in reality the case had nothing to do with the dollar at all, and that it never felt its loss in dollars".

Accordingly, he submitted, Milan felt its loss in naira.

59. Therefore, he submitted, based on the clear law authoritatively laid down by the House of Lords in The Texaco Melbourne, the Tribunal's ruling that the Award should be expressed in US dollars was obviously wrong. The Tribunal asked itself: in which currency did Milan pay for the cargo^[40]? That was the wrong question. The correct question was: in which currency did Milan feel the loss caused by the cargo damage? On the facts found by the Tribunal^[41], that was obviously naira.

Determination of the s.69 currency issue

60. I refuse Owners' application for leave to appeal under s69 in relation to the currency issue for the following reasons.
61. First, I do not consider that the issue raises a question of law. In reality what owners seek to challenge under this head is the Tribunal's finding of fact.
62. As Mr. Olbourne submitted, the legal principles to be applied to the issue of the currency in which an award is to be made are well-established and clearly identifiable: cf The Texaco Melbourne (supra); The "Mosconici"^[42]. Pursuant to section 48(4) of the Act, a tribunal may order the payment of a sum of money in any currency. However, this does not give a tribunal an unfettered discretion as regards the currency of an award. It must act in accordance with the principles identified by Lord Wilberforce in The Folias^[43] and restated by Lord Goff in The Texaco Melbourne at 477-478:

"First, it is necessary to ascertain whether there is an intention, to be derived from the terms of the contract, that damages for breach of contract should be awarded in any particular currency or currencies. In the absence of any such intention, 'the damage should be calculated in the currency in which the loss was felt by the plaintiff or' 'which most truly expresses his loss'."

63. The currency in which a claimant feels its loss is a question of fact to be determined by the tribunal having regard to all the circumstances of the case before it: see The Texaco Melbourne, (supra) at pages 478-480. The decision-maker's function is to identify "the currency which most justly expresses the loss that has been suffered by the claimants": The "Mosconici", at page 316. Thus, factors which are important in one case may or may not be important in another, and caution must be taken not to elevate factual observations made in one case into statements of principle to be applied generally in other cases. In the passage relied upon by Mr. Karia in The Texaco Melbourne, Lord Goff was discussing the particular facts of the case before him. He was not attempting to lay down a principle of law applicable to all factual situations. The facts in that case were particular and readily distinguishable from those in the present case. In The Texaco Melbourne the operation of very strict exchange controls meant that, although the claimant could enter into transactions to buy or sell goods in foreign currency, all payments of foreign currency were to be made to or by the Ghanian Central Bank who would then credit or debit the claimant's local currency accounts. The claimant itself never dealt with or handled foreign currency. In the circumstances, it was not surprising that the courts at all levels held that the currency in which the claimant suffered its loss was the local one.
64. Again, as Mr. Olbourne submitted, the fact that replacement goods may have been purchased in a particular currency (see The "Mosconici") or that the available market by reference to which the quantum of damages falls to be determined operates in a particular currency (see The Texaco Melbourne) are no more than factors to be taken into account and, even then, may well be of relatively limited importance. Matters that are likely to be more important are the claimant's currency of account and the nature of its business and also the nature of the particular transaction in question.
65. The Tribunal's approach was to regard its task as being to determine, on the basis of the evidence presented to it, the currency in which Milan suffered its loss. It found that Milan had established that it had suffered its loss in US dollars and made its Award in that currency. As a finding of fact, it is not amenable to an appeal under s69.
66. But even if I were wrong in this conclusion, and Owners' proposed question can indeed be characterised as raising an issue of law, the Tribunal's decision is, on the basis of the findings of fact in the Award, neither obviously wrong nor open to serious doubt. Further Owners' proposed question does not identify any issue of general public importance so as to satisfy the requirement in s.69(3)(c)(ii). There is no basis for supposing that the test identified in, for example The Texaco Melbourne, has given or gives rise to any difficulties or requires any further clarification by this court.
67. Finally, Owners have not established to the Court's satisfaction, as required by s.69(3)(d) of the Act, that "it is just and proper in all the circumstances for the court to determine the question". Owners provided security for Milan's claim in US dollars and made three sealed offers to Milan all expressed in US dollars. In those circumstances, as Mr. Olbourne submitted, it is reasonable to conclude that the parties' shared expectations throughout the arbitral proceedings was that the Tribunal's Award would be made in dollars and not naira. I see no reason why the Court should not have regard to these without prejudice offers for the purpose of considering whether the requirements of s.69(3)(d) of the Act are satisfied.
68. For these reasons, I refuse Owners' application for leave to appeal under s. 69 of the Act in relation to the currency issue.

Note 1    Milan applied for leave to appeal on a further point of law, however leave was refused on that issue by Hamblen J on 7 December 2010.    [Back]

Note 2    See the Award, paragraph 7.    [Back]

Note 3    Paragraph 43.    [Back]

Note 4    Paragraph 44.    [Back]

Note 5    Paragraphs 45-46.    [Back]

Note 6    Paragraph 59.    [Back]

Note 7    Paragraph 50.    [Back]

Note 8    Paragraphs 50-51.    [Back]

Note 9    Paragraph 72.    [Back]

Note 10    Paragraph 55.    [Back]

Note 11    Paragraphs 58-60    [Back]

Note 12    Paragraph 58-60.    [Back]

Note 13    Paragraphs 60-62, 71.    [Back]

Note 14    Paragraph 64.    [Back]

Note 15    Paragraph 71.    [Back]

Note 16    Paragraphs 65-67, 71.    [Back]

Note 17    Paragraph 68.    [Back]

Note 18    Paragraph 71.    [Back]

Note 19    Paragraph 71    [Back]

Note 20    Paragraph 71.    [Back]

Note 21    Gosse Millerd v Canadian Government Merchant Marine [1929] AC 223, 234.    [Back]

Note 22    [1982] 1 Lloyd’s Rep. 617, 625, col. 1.    [Back]

Note 23    See e.g. paragraphs 2.1 to 2.4 of the defence submissions.    [Back]

Note 24    See paragraphs 1-3 of the reply/ amended claim submissions.    [Back]

Note 25    See paragraph 1-4(a).    [Back]

Note 26   See paragraph 7.1.    [Back]

Note 27    This is accepted by Owners: see paragraph 8 of Andrew Patrinos’ Statement dated 3 September 2010.    [Back]

Note 28    Paragraph 20.    [Back]

Note 29    Paragraph 22.    [Back]

Note 30    Paragraphs 12 and 14.    [Back]

Note 31    [2010] 1 Lloyd’s Rep. 436, 446, paragraphs 58 & 61 per Beatson J.    [Back]

Note 32    (23rd January 2001), 2001 WL 239706.    [Back]

Note 33    Award, paragraph 21.    [Back]

Note 34    [2003] 1 Lloyd’s Rep 92, 118, column 2, Colman J.    [Back]

Note 35    See Mr Patrinos’ witness statement dated 1 November 2010.    [Back]

Note 36    See paragraphs 15-18, 20-22.    [Back]

Note 37    Paragraph 77.    [Back]

Note 38    Award, paragraph 75.    [Back]

Note 39    [1994] 1 Lloyd’s Rep. 473 (HL).    [Back]

Note 40    Award, paragraph 75.    [Back]

Note 41    Award, paragraphs 4 & 36 – 37.    [Back]

Note 42    [2001] 2 Lloyd’s Rep. 313, 315LHC, David Steel J.    [Back]

Note 43    [1979] AC 685.    [Back]