England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
In the matter of the Arbitration Act 1996

		28 September 2017

INTRODUCTION

1. This is the application made by the claimant in this arbitration claim, Union Marine Classification Services LLC ("Union Marine"), for (1) an order made under s 68 of the Arbitration Act 1996 ("the Act") to set aside for serious irregularity, the Second Partial Award of Mr Bruce Harris dated 10 November 2016 ("the Second Award") and (2) an order that Mr Harris now be removed as sole arbitrator pursuant to s 24 of the Act.

BACKGROUND AND PROCEDURAL HISTORY

2. By a written agreement dated 15 February 2007, Union Marine agreed to provide to the Respondent to this application and the arbitration, the Government of the Union of Comoros ("Comoros") the services of registering sea-going vessels under the Comoros flag for a period of 25 years. In exchange, Union Marine was entitled to retain 50% of the revenue it obtained from such services, subject to a minimum monthly payment of US$11,000 ("the Contract").
3. By a notice of termination dated 17 April 2012, Comoros purported to terminate the Contract. Union Marine's core allegation in this respect was that (1) Comoros had no legal basis for so doing and was therefore in repudiatory breach and (2) the real reason for the termination was an agreement made at the time between Comoros and a Mr Fahim that he should take over "in-house" the role previously occupied by Union Marine, although subsequently, it seems that Mr Fahim fell out with Comoros which then dismissed him.
4. There is a somewhat complex procedural history to this matter. I set out the headline points below.
5. Union Marine sought to refer to arbitration its dispute with Comoros from 2011 onwards; in the event, because Comoros argued that there was no operative London arbitration clause, Mr Harris was not appointed until 11 October 2013, when Leggatt J so ordered.
6. On any view, the main issue between the parties in the arbitration leading to the First Partial Award dated 22 July 2014 ("the First Arbitration" and "the First Award" respectively) was whether Comoros had repudiated the Contract by its notice of termination or whether the latter was valid because of an alleged prior repudiatory breach committed by Union Marine. By the First Award, the arbitrator found that Comoros was indeed guilty of repudiatory breach because there was no legal justification for its termination of the Contract at that point. The last part of paragraph 94 of his First Award reads thus:

"in the result… my conclusion is clearly that the Government was not entitled to terminate the Agreement, and accordingly that it was in fact the Government which was in repudiatory breach itself. (So far as I know, however, Union Marine have not accepted that as such.)"

7. In paragraphs 95-99 of the First Award, however, the arbitrator dismissed Union Marine's claim for damages, whether in respect of the period leading up to the service of the termination notice or thereafter, and therefore its damages claim failed entirely. By paragraph 100 of the First Award, he reserved for later determination the question of costs.
8. By a Correction and Addition to the First Award dated 31 August 2014 supported by a Statement of Reasons of the same date, ("the Correction") the arbitrator dealt in particular with and corrected paragraph 72 of the First Award. This had read:

"… I am unable to find that, on the balance of probabilities, Union Marine did not meet their payment obligations under the Agreement. This does not mean that my conclusion is that they did fulfil those obligations: as the parties' lawyers at least will appreciate, I would have had to be persuaded that it was more likely than not that Union Marine were in breach… And the evidence is not sufficiently weighty to enable me to come to that conclusion. Moreover, I am far from persuaded that there was here any case of bribery."

9. By paragraphs 6 and 7 of the Correction he stated that by means of a correction to paragraph 72 of the First Award,

"Union Marine ceased making the minimum US$11,000 monthly payments under… the contract after August 2011, that this was a breach of that Article and that Union Marine continued to be in breach in this respect until 17 April 2012. I do not, however, consider that this entitled the Government to terminate the contract as it did on that date, but it is entitled to damages for this breach to be assessed."

He went on to further hold that Comoros was entitled to an account and damages as claimed in paragraph 77 of its counterclaim.

10. The finding that although there had been a failure to pay the instalments on the part of Union Marine, nonetheless it could not justify Comoros's termination is not the subject of challenge before me nor could it be.
11. Comoros subsequently sought, unsuccessfully, to challenge the First Award while Union Marine sought unsuccessfully to challenge the Correction on the basis that the findings and order therein went beyond the arbitrator's corrective powers under s 57 (3) of the Act. That challenge had originally been made before Eder J pursuant to s67 of the Act. He held that s67 did not permit such a challenge and so the application failed in limine. He also refused Union Marine's application to make, out of time, a s68 application as an alternative to the s67 claim. Importantly, however, he also held that even if Union Marine had been entitled belatedly to make a s68 claim in respect of the Correction, it would have failed.
12. On 12 February 2016, the Court of Appeal (Moore-Bick and Tomlinson LJJ – [2016] EWCA Civ 239) upheld the decision of Eder J when it refused Union Marine permission to appeal. In paragraph 19 of the judgment of Moore-Bick LJ he said that what had happened here was that in the First Award, the arbitrator had "dealt with the big issue and simply overlooked what was on any view a minor claim that might properly have been regarded as essentially a matter of quantum". And in paragraph 23 of his judgment Tomlinson LJ said that it was plain that when the arbitrator had come to write the original paragraph 72 he had lost sight of the circumstance that there was also before him an accounting claim made by Comoros to the effect that Union Marine had failed to pay all the relevant fees irrespective of whether the way in which they did so gave rise to an entitlement to Comoros to terminate the agreement. This was an obvious oversight and was one towards which the corrective powers under s 57 (3) (b) of the Act were directed.
13. On the face of it, therefore, what was then left for the arbitrator to decide was Comoros' outstanding claim for an account and/or damages in respect of non-payment by Union Marine which had been ordered in the Correction.
14. In fact, and in response to the arbitrator's request to the parties by email dated 14 June 2016 as to what further steps they now wished him to take, the position became somewhat more nuanced. By a responsive email dated 20 June 2016, Union Marine's solicitors, Zaiwalla & Co. ("Zaiwalla") argued that there was a note in [paragraph 94 of] the First Award that Union Marine had not accepted Comoros' repudiatory breach of the Contract, and that Comoros had now itself started to run Union Marine's business. In the circumstances they asked that the arbitrator should make a further award for a declaration that Comoros was not entitled to cancel the Contract and therefore the Contract continued, and secondly to assess the loss suffered by Union Marine since the date of repudiation which would include the original costs of setting up the business by Union Marine.
15. For its part, Comoros, by an email sent by its solicitors Clyde & Co. LLP ("Clydes"), asked the arbitrator now to issue an award that (i) that the termination of 17 April 2012 was effective, (ii) in the alternative that Union Marine had accepted Comoros repudiatory breach for the reasons given in the letter from Clydes dated 20 August 2014 which had already been accepted in the Correction, or (iii) in the further alternative that the Contract had been terminated by Clydes' letter dated 10 November 2014.
16. The response to that by Zaiwalla on behalf of Union Marine dated 22 June 2016 is important and it reads thus:

"We refer to Clyde & Co.'s email below dated 22 June. In this email Clyde & Co. have asked for the Arbitration reference to proceed further and have asked for the tribunal to make three declarations in their further award. The Claimant by our email of 20 June have also sought two declarations. This being so, there is no question of your jurisdiction being in issue. We would be grateful if you would give appropriate directions for the purpose of proceedings with the declarations sought by both sides. No doubt you will keep in mind that you had heard extensive oral evidence from both sides over the period of two days in respect of the accounting issues.

17. In response to that and by his email dated 23 June 2016, the arbitrator said that the declarations sought by both parties ( leaving to one side the assessment of loss which Union Marine wanted him to perform but which would be dependent on the outcome of the declaration applications), should be capable of being dealt with following exchange of short written submissions and without a hearing. He proposed that each party provided submissions within two weeks and then each had one week in which to respond to the other submissions following which he would rule. The parties agreed to this.
18. Following the filing of submissions by the parties on 5 October and then 19 October 2016, the arbitrator made his Second Award on 10 November 2016 which is the one now being impugned.
19. By the Second Award, the arbitrator held that the Contract had indeed been terminated following Comoros' repudiatory breach thereof constituted by its invalid termination notice. He did so by upholding all three of Comoros' arguments. These are referred to briefly in paragraph 15 above, but in more detail, it was argued first that Union Marine's failure to pay sums due under the Contract after 17 April 2012 itself amounted to an acceptance of Comoros' repudiation which had taken place by no later than June 2012. Second, Union Marine's claim made on 6 February 2014 and in relation to the First Arbitration, that Comoros was liable to pay damages for the loss of the whole 25 year Contract, was itself also an acceptance of repudiation since it was inconsistent with any notion that the Contract remained alive. And third, and in any event, the further termination notice served by Comoros on 10 November 2014 ("the Further Notice") was plainly justified (if the Contract was still somehow alive) because by then, there had been a substantial and prolonged failure by Union Marine to make any payments which now was sufficiently serious to constitute a repudiatory breach on its own.
20. The Further Notice stated that even if, which was denied, the Contract had remained alive after April 2012, Union Marine had been in persistent breach thereof by reason of its failure to pay the sums due under the Contract and also because Union Marine and/or its director Mr Shaikh had been found guilty by the Comoros National Commission for the Prevention and Fight Against Corruption of bribery and corruption of a Government Minister in October 2012. It went on to say that:

"These repudiatory breaches of contract by your client have been accepted by the government's unequivocal acts and statements since October 2012 and throughout the arbitration proceedings by which the Government has made clear that it considers the contract to have been terminated."

21. The Further Notice went on to say that the grounds for termination included without limitation, failure to pay from 17 April 2012 onwards, bribery, failure by Union Marine to provide evidence of earnings and the repeated refusal on its part to accept the lawful authority of the Comoros National Transportation Authority.

THE PRESENT ISSUES: INTRODUCTION

22. In addition to the present section 68 challenge, Union Marine had also sought to impugn the Second Award by appealing against it on a point of law pursuant to s69 of the Act. However, by the order of Teare J on 6 April 2017, permission for such an appeal was refused.
23. By s68 (2):

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

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

(b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67…."

24. Union Marine challenges each of the three bases on which the arbitrator held that the Contract was at an end for the following reasons:

(1) as a general point affecting all three bases, the arbitrator had no power to decide the question of termination or not, at all. It was not part of Union Marine's original claim, was not up for decision on the First Award, nor did it flow from the decision of the Court of Appeal. If that point was correct, then there would have been unfairness and/or excess of powers amounting to a serious irregularity within s68 (2) (a) and/or (b); ("Issue 1");

(2) as an alternative, there was no basis for the arbitrator to find that there had been non-payment by Union Marine under the Contract and if this point was correct, then the first and third particular bases for his decision were vitiated. This was much more than a mere challenge to an arbitrator's finding of fact because, according to Union Marine, the arbitrator simply ignored plain evidence to the contrary and reversed the burden of proof in a way which was unfair and contrary to s68(2) (a) and/or (b); ("Issue 2");

(3) further, there was no basis for finding that the claim made by Union Marine for damages for the loss of the entire Contract over 25 years could amount to an acceptance and the decision here was a serious irregularity within the meaning of s68 (2) (a) and/or (b); ("Issue 3")

(4) further, Union Marine had suffered "substantial injustice" within the meaning of s68 (2); ("Issue 4");

(5) further, if there had been any power to decide the question of termination at all, that question must now be remitted and in the circumstances, to a new arbitrator in place of Mr Harris, pursuant to section 24 of the Act; ("Issue 5").

25. Comoros denies all of those contentions. I now consider them in turn.

ISSUE 1: POWER TO DECIDE THE QUESTION OF TERMINATION

Ad hoc agreement

26. It is common ground between the parties that the issue of termination after 17 April 2012 was not raised in the First Arbitration. However, it is of course open to the parties to an existing arbitration to confer jurisdiction upon the arbitrator on an ad hoc basis.
27. In my judgment, that is precisely what happened in the exchange of emails referred to in paragraphs 14-16 above. This had its origin in the original application made by Union Marine for the arbitrator to declare not only that Comoros was not entitled to terminate when it did (which the arbitrator had already found) but also that the Contract remained alive, and finally that Union Marine's losses as a result should now be assessed. The email in reply from Clydes set out its own counter-declarations, making it clear that it did not accept that the Contract was still alive, and then the reply to that from Zaiwalla made it plain on an objective and fair reading that both applications for declaratory relief should now be put before the arbitrator.
28. The arbitrator dealt with his jurisdiction to decide these points in paragraphs 15-17 of the Second Award. In paragraph 15 he expressly held that the emails in June had conferred an ad hoc jurisdiction upon him and although in their reply submissions, Zaiwalla had then said that he had not been given such jurisdiction, that argument was not particularised and the arbitrator could not see what could be said in support of it. The applications made by the parties for declaratory relief seemed to him to give rise to an agreement that he could now determine whether the Contract continued, describing this as "an agreement that is almost as clear as if it had been set out in a single formal document." In my judgment that conclusion is plainly right and cannot now be the subject of challenge. So the arbitrator plainly had substantive jurisdiction to consider the termination point.

Issue Estoppel

29. It is true that in the First Award the arbitrator had made the observation in paragraph 94 that as far as he knew, Union Marine had not accepted the repudiatory breach "as such". But he dealt with that point, too, at paragraph 7 of the Second Award. He said that in making this observation, he had made no finding as to whether or not Union Marine had accepted that breach and that the words in question in paragraph 94 "cannot amount to a conclusion." Again, on an objective analysis, it is impossible to interfere with that view and I agree with it. That is not simply because of the language used but because the question of acceptance was not in fact up for determination in the First Award at all as is common ground.
30. This removes the basis for Union Marine's contention that the so-called "finding" of acceptance made in paragraph 94 of the First Award in fact amounted to an issue estoppel between the parties so that the arbitrator now had no power to decide otherwise and indeed Comoros had no entitlement to allege otherwise. The reality is that the relevant words in paragraph 94 could not objectively be seen as intended to form a binding conclusion but rather as an aside. I reject the contention made by Union Marine that the words "so far as I know" should be read as "on the basis of the evidence before me". Rather, it means what it says - ie the arbitrator is saying that "as far as he is aware..". That conditionality is reflected in the fact that he had not even been asked by the parties to decide the question of acceptance, as noted above. The use of parentheses supports that view.
31. Indeed, while in their later submissions for the Second Award, Union Marine did rely on the words in paragraph 94 it is noteworthy that they did not originally object in limine by their 22 June email to Comoros' suggested declarations; this would have been the obvious thing to do at the outset if in truth the whole question of acceptance was issue estopped.
32. Indeed, the arbitrator himself considered the words in paragraph 7 of the Second Award as noted above. Significant weight should be attached to his view because the alternative is that he was being wholly disingenuous which is not even alleged, nor could it be.
33. In oral argument, Mr Robb on behalf of Comoros made a further submission which was that the arbitrator may simply have meant by the words "accepted that as such", an express written acceptance of the repudiatory breach. That is not an unrealistic submission since it is common ground that Union Marine did indeed communicate no such written acceptance. On that footing, the observation did not extend to other forms of acceptance. I think there is much force in this point albeit that the arbitrator himself did not put it like that in paragraph 7 of the Second Award. That said, this further point is not necessary for my conclusion which is that objectively the words in question, taken in their proper context, did not amount to any binding finding in relation to acceptance.
34. I accept of course that the arbitrator has no power (absent agreement of the parties) to reconsider or review the subject-matter of his own prior award; see paragraphs 23 and 26 of the judgment of Popplewell J in Emirates Trading v SFI [2015] 1 CLC 963. But that is not this case. The First Award did not contain a relevant finding and the observations made in paragraph 94 were not the subject-matter of the First Award anyway. See above.
35. For all those reasons, the foundations for any irregularity argument based on issue estoppel are absent.
36. Moreover, this particular point could not affect the November 2014 termination since (by definition) it does not depend on a prior acceptance by Union Marine of a repudiatory breach on the part of Comoros after April 2012.

Improper Approach to determination of the non-payment issue

37. However, there was a separate point advanced in relation to Issue 1 by Union Marine which was that even if the arbitrator had substantive jurisdiction to deal with the acceptance point and there was no issue estoppel, he nonetheless exceeded his powers and/or acted unfairly because he in some way decided the point (at least in relation to Comoros' first and third grounds dealing with non-payment) in particular by admitting new or further evidence which had not been provided for and/or by acting on no evidence. It is more convenient for me to consider that submission in the context of Issue 2 which deals with non-payment generally.

ISSUE 2: NON-PAYMENT BY UNION MARINE

The Law

38. It is accepted by Union Marine that an allegation that an arbitrator erroneously decided a question of fact cannot without more amount to a serious irregularity. As far as evidential questions are concerned, there would have to be something exceptional before s 68 (2) (a) could be engaged at all.
39. Thus, in Arduina v Celtic Resources [2006] EWHC 3155 (Comm), Toulson J (as he then was) said that in an exceptional case a failure by the arbitrator to take any or properly consider the evidence could give rise to a fairness challenge under s68, for example if he genuinely overlooked evidence that really mattered or got the wrong end of the stick in misunderstanding it. But there was all the difference in the world between such cases and where an arbitrator evaluating evidence reached a factual conclusion that one party did not like. Then, in Sonatrach v Statoil [2014] EWHC 875 (Comm) Flaux J (as he then was) made some observations on the subject in paragraphs 17 and 18 of his judgment. He thought that the passage in the judgment of Toulson J in Arduina was clearly obiter and that he had not specified what sort of exceptional case he had in mind. Flaux J could see that if an agreed or admitted piece of evidence was ignored or overlooked it might be possible to say that s68 (2) (a) was engaged. But beyond that, to argue that the tribunal had overlooked or misunderstood a particular piece of evidence necessarily involved an impermissible interference with the evaluation of the evidence by an arbitral tribunal. Finally, in A v B [2017] EWHC 596 (Comm), Christopher Butcher QC sitting as a Deputy High Court Judge cited the observations of Flaux J with approval and then referred to the decision of Cooke J in New Age v Range Energy [2014] EWHC 4358 (Comm) who, in paragraph 14 of his judgment, took much the same view as Flaux J.
40. It is therefore clear that the Court, in considering a s68 challenge, must be astute to preserve the integrity of the arbitral process in (among other things) the area of fact-finding so as to avoid an impermissible interference by the Court with the function of the arbitrator under the guise of a s68 challenge. Cases where such interference might be justified under s68 will be extremely rare, in my view.

The Evidential Point

41. Here, it is submitted on behalf of Union Marine that in truth there was "no evidence" at all of any failure on the part of Union Marine to pay instalments due after 17 April 2012. If that is right, then there might have been a serious irregularity. One might have the beginnings of such an argument if, for example, all the evidence pointed towards payments having been made with no party suggesting otherwise, so that in finding the opposite the arbitrator had in effect gone on a perverse "frolic of his own".
42. But that is not this case. First, and as summarised by Ms Aodha, Comoros' solicitor, in paragraphs 20-23 of her first witness statement dated 1 March 2017, there was evidence on the point about non-payment in the First Arbitration hearing. Comoros' analysis of Union Marine's TT payments (not itself disputed) showed that there had been payments of no more than US$73,597 in 2012 which was considerably less than what was due in that year. See the payment summary itself at 1/14/250. For that year, there should have been at least US$132,000 (12 x US$11,000 per month). In fact, the information as to the US$73,597 originally came from Comoros and not even Union Marine.
43. In its submissions for the Second Arbitration, exchanged on 5 October 2016:

(1) Comoros stated the fact of non-payment in the table set out in paragraph 12 for the period after August 2011;

(2) it repeated the fact of non-payment in paragraph 13 (iii) which contained footnote 5;

(3) that footnote referred to the fact that there had been evidence at the First Arbitration hearing of the payment of US$73,597 which Union Marine had said was in fact in compliance with its obligation to pay a guaranteed minimum of US$11,000 per month up to 17 April 2012; that was disputed by Comoros and of course the arbitrator found that there had been non-payment up to that date;

(4) at paragraph 22, Comoros stated as follows:

"… It is submitted that UM's second Notice of Termination served on 10 November 2014 was unquestionably justified. Since the Tribunal does not have the benefit of full evidence and submissions relating to the period after 17 April 2012 it is sufficient for present purposes to note that UM has not made any payments to Comoros under Articles 4-5 of the Contracts in 17 April 2012. This is despite it being under an obligation… to pay…US$11,000 per month. Its unexplained refusal to do so between April 2012 and November 2014… is in itself a sufficiently serious breach to justify Comoros' termination of the Contract on that date".

(5) footnote 10 makes it clear that the reference to the period "after 17 April 2012" was in particular concerned with the allegation of bribery itself relied upon in the 10 November Further Notice as well as non-payment. And so, the sense of the second sentence of paragraph 22 was not so much that there was insufficient evidence on the question of non-payment, but rather that there was incomplete evidence on the bribery point, but this did not matter because there was the non-payment. Footnote 11 effectively repeated the earlier footnote 5.

44. It is (now) common ground that following those submissions, Union Marine never contended that it had in fact made payments after 17 April 2012 (putting to one side the US$73,597 which it had said was in discharge of earlier payment obligations). Its reply submissions dated 19 October 2016 bear careful reading. On the question of jurisdiction (and not on Comoros' application for a declaration as to termination), it said this:

".. Tribunal could not have considered that the contract was lost as a result of the Claimant accepting repudiatory breach on 17 April 2012 because the tribunal had made a clear finding in its award [i.e. in paragraph 94]… Similarly the Tribunal did not anywhere in the award say that the alleged failures (which are strenuously denied by the Claimant) to pay US$11,000 per month was a good reason because of which the Government could terminate the Claimants contract."

45. Originally Union Marine relied upon this "strenuous" denial by it in the context of Comoros' allegation that there had been non-payment after 17 April 2012 which the arbitrator said was "not denied". But, as Mr Brindle QC had to accept in argument, the denial in these submissions was all about the alleged failure to pay prior to 17 April 2012 and so it does not bear on the position thereafter. Moreover, the "strenuous" denial for the former period was rendered irrelevant by the finding in the Correction that there had been non-payment prior to 17 April 2012 anyway.
46. Union Marine's submissions then turned to the points on termination itself. But they contained no denial by it of Comoros' contention as to non-payment after 17 April 2012. All the submissions do is take various jurisdictional points. Nor did it say (as it now says) that all of Comoros' submissions on the question of non-payment were simply assertion.
47. The obvious truth is that if Union Marine had wanted to say, and could have said, that payment had in fact been made post-17 April 2012 it would have done so. Indeed, even as at the date of this hearing, there was no evidence or submission made by Union Marine that it had made any further payments. All it has done is to make an entirely new point, in paragraph 17 of Mr Zaiwalla's third witness statement dated 9 March 2017 where he stated that "at least after 17 April 2012 the Comoros Government was not entitled to receive the minimum USD11,000 per month under the contract. The reason for this is that the contract contained an implied term that the Comoros Government would co-operate with Union Marine in the performance of the agreement and they had stopped doing so since January 2011." That is about as close as one can get to an admission as a matter of fact that no further sums were paid. See also paragraph 20 of that statement and paragraph 33 of Mr Zaiwalla's first witness statement of 8 December 2016.
48. Therefore, there can be nothing objectionable from the point of view of s68, in the arbitrator having taken note of the fact that Union Marine did not deny the allegation of non-payment. That is fortified by paragraph 6 of Schedule 2 to the of the LMAA terms which governed his appointment. This stated that:

"Bare denials in defence and subsequent submissions in response to an allegation will not be acceptable. If an allegation is denied, reasons must be given and if appropriate a positive contrary case put forward."

Union Marine did not do so here.

49. Accordingly, Union Marine's submissions really amount to saying that although it did not in fact pay after 17 April 2012 (or at worst there was no evidence or submission at all that it had paid), the arbitrator was not entitled to conclude thus because the un-contradicted statements as to non-payment made by Comoros in its submissions and correspondence were not "evidence". Further, it contends that the arbitrator was guilty of serious irregularity in effectively reversing the burden of proof in the way that he put the point in the second half of paragraph 24 of the Second Award. What he said (and all that he said) on the question of non-payment was this:

"19. … The Government contended that Union Marine effectively accepted the Government's repudiatory breach on or shortly after 17 April 2012 by virtue of Union Marine's failure to pay any sums under Article 4 of the contract. That, the Government said, amounted to an unambiguous election by Union Marine to treat itself as discharged from its obligations. This was not an argument that Union Marine endeavoured to meet in their reply submissions and having considered the authority… I am of the view that the Government is right on this point, although it seems to me that a couple of months must be allowed following 17 April 2012 before, looking at the position objectively, it could be said that Union Marine had elected to treat themselves as discharged.…

24. The Government had a further alternative, namely that Clyde & Co.'s notice of termination of 10 November 2014 was plainly justified and brought an end to the contract. That too seems to me correct… And Zaiwalla & Co. for Union Marine could only say in response to this point that it was accepted that I did not have the benefit of full evidence and submissions for the period after 17 April 2012 and could not invite any such further evidence. But it is clear (and it was not denied) that Union Marina had not paid the $11,000 per month since April 2012. That in my view was a sufficiently serious breach to justify the Government terminating in November 2014 if the contract had not, contrary to my view, already come to an end.

50. The submission made by Union Marine here is, in my judgment, wholly divorced from reality. On the materials which the arbitrator did have and in the absence of any contradiction from the alleged paying party where all that Comoros could do was to say that there had been no payment (i.e. to prove a negative) not only was the arbitrator well entitled to conclude as he did but:

(1) any complaint about his reasoning here is far removed from the sort of very rare residual case concerning evidence that might fall within s68 (2) (a), and indeed

(2) it is difficult if not impossible to see how the arbitrator could seriously have found otherwise.

51. On that basis the foundation for the challenges to his findings at paragraphs 19 and 24 of the Second Award fall away.

Excess of powers or unfairness in respect of the non-payment findings

52. As foreshadowed in paragraph 37 above, Union Marine makes the separate point that the arbitrator made the finding about non-payment by having recourse to further or new evidence which was not permissible.
53. In my judgment, there is nothing in this contention for the reasons set out below.
54. First, while it is true that both sides agreed that the Second Arbitration should be conducted on paper without a hearing, and on the basis of written submissions, that did not mean either expressly or impliedly that they could not supplement their actual submissions with documentary (as opposed to live) evidence. Indeed that is precisely what both parties did. Each supplied a bundle of documents to accompany their written submissions which in both cases contained material post-dating the first Arbitration; see paragraphs 48 and 49 of Ms Aodha's first witness statement.
55. Second, the question (at the very least) of non-payment by Union Marine which underlay the first and third declarations sought by Comoros was (1) a question of fact and (2) one which would have to be decided at least in part by reference to post-First Arbitration matters because of the allegations made in the November 2014 Termination Notice. Plainly the materials previously submitted for the First Arbitration would not be enough.
56. Third, given that the nature of those allegations was in negative form i.e. the fact of non-payment by Union Marine (save for the amount of US$73,597 discussed above) the volume of material which Comoros (as opposed to Union Marine) could adduce was in truth, limited. The "further" evidence consisted mainly of the 20 August and 10 November 2014 letters which demanded payment and the fact of non-payment in response thereto. The party which could have put in positive evidence on the issue was Union Marine but it declined to do so. Its reply submissions dated 19 October 2016 concentrated instead on whether the arbitrator had jurisdiction to consider those questions at all, which was particularly odd given the ad hoc agreement made previously by both sides in June 2016.
57. Fourth, insofar as it was submitted that all that the arbitrator could do was to decide the issue by reference only to his findings in the First Arbitration that is a non-sequitur. The issue over termination was plainly a further issue which (among other things) the parties agreed to put before the arbitrator. By definition, it could not be resolved solely by reference to his findings or conclusions in the First Arbitration since at that stage, he was not being asked to decide it. It was likely, therefore, that he would have to go beyond the findings of the First Arbitration in order to determine that issue. In this regard, he could reasonably be expected to consider the material used for the First Arbitration if it assisted on that question, along with any further materials submitted for the Second Arbitration. Indeed, on the question of accounting, which was the subject of the declarations now sought by Union Marine in the Second Arbitration, it specifically asked the arbitrator to have in mind the oral evidence on the accounting issue given at the First Arbitration - see Mr Zaiwalla's email of 22 June 2016.
58. Fifthly, the arbitrator had the express power to decide the case in a way which might include further evidence:

(1) paragraph 1 (c) of Schedule 2 to the LMAA Terms states that written submissions must be accompanied by paginated supporting documentation relevant to the issues between the parties, other than documents which accompanied previous submissions;

(2) in addition the arbitrator had the well-known extensive powers in respect of the admission of evidence in various forms in any event, pursuant to section 34 (1) AA (2) (f) of the Act. In particular it was for him to decide whether to apply the strict rules of evidence (or not) as to the admissibility, relevance or weight of any material sought to be tendered.

59. Mr Brindle QC says that these powers do not assist here because this was not the commencement of an arbitration but rather a "tidying-up process" following publication of an award. I reject that. Again, by the ad hoc agreement, both parties had agreed to remit further issues to the arbitrator. Of course they were connected with the issues determined by the First Award but they were nonetheless substantive and distinct. The fact that the parties agreed to be limited to written submissions as opposed to having an oral hearing does not alter the fact that there was a Second Arbitration producing a Second Award.
60. At best, therefore, Union Marine's complaint is really that it disagrees with the arbitrator's particular findings on non-payment as it affected the termination issue. That is not justiciable under s68. Even if the arbitrator somehow took into account evidence he should not have done (which is not so here) that would not be an excess of powers under s68 (2) (b) but rather (at worst) an erroneous exercise of his fact-finding powers which he undoubtedly had - see paragraph 32 of the well-known judgment of Lord Steyn in Lesotho v Impreglio [2006] 1 AC 221. Nor can there be said to have been any breach of the duty of fairness so as to bring the case within s68 (2) (a).

ISSUE 3: THE EFFECT OF THE DAMAGES CLAIM MADE BY UNION MARINE

61. A first point to note is that in the Correction, the arbitrator rejected Union Marine's application for further declaratory relief. He did so on the basis of the reasons given in the letter from Clydes on behalf of Comoros dated 20 August 2014, and he referred to this when dealing with the point in the Second Award at paragraphs 20-23 thereof. There he noted that what he had said in paragraph 3 of the Correction was that making a claim for damages for the unexpired duration of a fixed year contract on the basis that the Contract had been lost was one of the clearest ways of accepting a repudiatory breach. He noted that this observation had not been challenged by Union Marine following the Correction. In paragraph 22 he then noted the counter-arguments made by Union Marine to the effect that the claim for damages on the "whole Contract" basis was in effect conditional; this was said to be because Union Marine had originally said that further damages for the period after 17 July 2014 would need to be assessed but it would seek liberty to apply for directions in respect of such an assessment in the light of whether or not Comoros chose to abide by the contract if the termination notice was ruled invalid. So Union Marine simply reserved its right to claim damages for losses over the remaining 25 year period.
62. In paragraph 23, the arbitrator dealt as follows with that argument:

"that does not seem to me to answer the point. The Government did not and never has "reinstated" the contract: on the contrary. Accordingly, even if I am wrong that Union Marine's failure to pay the monthly $11,500 [it should be $11,000] amounted to an acceptance of the Government's repudiation, I conclude that the claim advanced by Union Marine had that effect."

63. That finding had itself been drawn from the first part of paragraph 21 of Comoros' written submissions which the arbitrator therefore accepted.
64. The finding made in paragraph 23 of the Second Award was perfectly open to the arbitrator, taking the common sense view that since, following the First Award (it now being 2016), Comoros had continued to play no part in the Contract, the damages claim for the loss of the whole Contract would now be unconditional. Union Marine's position in the First Arbitration had on any view been that if Comoros did not play ball (so as to allow Union Marine to perform the Contract) then the latter would indeed claim damages, there being no alternative. Union Marine seems now to have changed its position with regard to remedy but that is irrelevant. In fact, of course, conditional or not, the arbitrator decided and dismissed the larger damages claim (conditional, according to Union Marine) anyway, in the First Award.
65. While Union Marine may disagree with the arbitrator's analysis and conclusion in paragraph 23, that cannot possibly form the basis for any challenge under s68.
66. On that footing, it matters not whether, on a detailed analysis of the way the damages claim was put in the original Particulars of Claim, or by reference to the transcript of the hearing of the First Arbitration, Union Marine was making the larger damages claim conditional. The arbitrator's conclusion in paragraph 23 does not depend on a finding that it was unconditional.
67. Therefore, this head of challenge fails also.

ISSUE 4: SUBSTANTIAL INJUSTICE

68. Strictly, since none of the heads of challenge succeeds thus far, it is not necessary for me to deal with the next hurdle which Union Marine must surmount namely whether it had suffered any substantial injustice as a result of the alleged irregularity.
69. However, since the point was argued, I deal with it briefly. My conclusion is that the suggestion of substantial injustice is hopeless here, even if I were wrong on the prior points, for the reasons set out below.
70. First, since Union Marine accepts (as it must) that it cannot revisit its damages claims which were all determined against it by the arbitrator in the First Award, all it could hope for if (a) the matters now complained of had succeeded under s68 and were remitted for further reconsideration and (b) it succeeded on them subsequently, would be a declaration that the Contract was still alive. But notwithstanding Union Marine's suggestion to the contrary, that would be an entirely useless declaration for it now to have:

(1) Union Marine could not do anything with it. Unlike the successful Plaintiff in the well-known case of White and Carter v McGregor [1962] AC 413, Union Marine could not perform the Contract without the active assistance and co-operation of Comoros which all the evidence shows has not been and will not be forthcoming;

(2) as an alternative, Mr Brindle QC suggested that there was value even in the declaration itself since it would help Union Marine's reputation in some way. But I cannot see how, if Union Marine could not go on to perform the Contract alone. Indeed, to publicise that there was a binding contract still in place and then not to be able to deliver under it would surely be much worse from Union Marine's point of view than not mentioning it now at all;

(3) given the history of non-payment now extending over some 6 years, Comoros would be entitled in any event to serve a yet further notice of termination which would be incontrovertibly valid.

71. Accordingly, the required substantial injustice cannot be made out by Union Marine.

ISSUE 5: REMOVAL OF THE ARBITRATOR

72. Since the substantive application under s68 must fail, it is unnecessary for me to deal with the contingent application to remove under s24 of the Act. Moreover it is not straightforward to say how that might have fared had the s68 challenge succeeded, since it may depend on the way in which that challenge putatively succeeded. All of that said, I am virtually certain that a removal of the arbitrator would not be justified here. If ordered to reconsider matters according to any particular parameters, there is nothing to indicate that Mr Harris could and would not undertake that exercise properly. Apart from being extremely experienced, he also frankly conceded where he had overlooked some matters previously and there is nothing in the procedural history to give rise to any significant doubt as to his competence or independence for the future. As it happens, however, the point does not arise.

CONCLUSION

73. Accordingly, Union Marine's challenge under s68 must fail in its entirety.