BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| GRINDROD SHIPPING PTE LTD
(Claimant in the arbitration)
|- and -
|HYUNDAI MERCHANT MARINE CO. LTD
(Respondent in the arbitration)
Ms Karen Maxwell (instructed by Holman Fenwick Willan, Hong Kong) for the Defendant
Hearing dates: 10 May 2018
Crown Copyright ©
Sir William Blair :
The statutory powers
"If the tribunal is satisfied that there has been inordinate and inexcusable delay on the part of the claimant in pursuing his claim and that the delay—
(a) gives rise, or is likely to give rise, to a substantial risk that it is not possible to have a fair resolution of the issues in that claim, or
(b) has caused, or is likely to cause, serious prejudice to the respondent,
the tribunal may make an award dismissing the claim."
"Serious prejudice is, however, a different matter. We are satisfied that the delay has already resulted in a significant increase in costs in defending the claim. Hyundai have also been obliged to put up substantial security for Island View's claim in terms of a cash deposit. We consider that this case ought properly to have come before us for a decision in 2013, or perhaps 2014 at the latest. As we suspect that Hyundai would not have been threatened with an arrest of one of their ships prior to their financial difficulties of 2016, we are therefore satisfied that there is a clear causal link between the delay and the substantial financial prejudice Hyundai have incurred in providing Island View with security for their claim. Island View's demand also came at a most inconvenient time for Hyundai, when they were restructuring their fleet and reorganising their financial affairs. The mere threat of the arrest of one of their ships exposed Hyundai to further prejudice as it might have had a disastrous effect on their restructuring programme. As we are satisfied that the inordinate and inexcusable delay has already caused serious prejudice to Hyundai, we have decided to exercise the power given to us by Section 41(3) of the Act and dismiss Island View's claim. We further award Hyundai their costs associated with this application and the costs of the arbitration."
The applicable legal principles
"To comply with its duty to act fairly under s. 33(1) of the Arbitration Act 1996, the tribunal should give the parties an opportunity to deal with any issue which will be relied on by it as the basis for its findings. The parties are entitled to assume that the tribunal will base its decision solely on the evidence and argument presented by them prior to the making of the award. If the tribunal is minded to decide the dispute on some other basis, the tribunal must give notice of it to the parties to enable them to address the point. Particular care is needed where the arbitration is proceeding on a documents-only basis or where the opportunity for oral submissions is limited. That said, a tribunal does not have to refer back to the parties its analysis or findings based on the evidence or argument before it, so long as the parties have had an opportunity to address all the 'essential building blocks' in the tribunal's conclusion. Indeed, the tribunal is entitled to derive an alternative case from the parties' submissions as the basis for its award, so long as an opportunity is given to address the essential issues which led the tribunal to those conclusions…"
"If an arbitrator is impressed by a point that has never been raised by either side, then it is his duty to put it to them so that they have an opportunity to comment. If he feels that the proper approach is one that has not been explored or advanced in evidence or submission, then again it is his duty to give the parties a chance to comment…It is not right that his decision should be based on specific matters which the parties have never had the chance to deal with. Nor is it right that a party should first learn of adverse points in a decision against him. That is contrary both to the substance of justice and to its appearance."
That was a decision under the previous arbitration legislation but it remains good law for the purposes of sections 33 and 68(2)(a) of the 1996 Act.
"(1) In order to make out a case for the Court's intervention under section 68(2)(a), the applicant must show:
(a) a breach of s. 33 of the Act; i.e. that the tribunal has failed to act fairly and impartially between the parties, giving each a reasonable opportunity of putting his case and dealing with that of his opponent, adopting procedures so as to provide a fair means for the resolution of the matters falling to be determined;
(b) amounting to a serious irregularity;
(c) giving rise to substantial injustice.
(2) The test of a serious irregularity giving rise to substantial injustice involves a high threshold. The threshold is deliberately high because a major purpose of the 1996 Act was to reduce drastically the extent of intervention by the courts in the arbitral process.
(3) A balance has to be drawn between the need for finality of the award and the need to protect parties against the unfair conduct of the arbitration. In striking this balance, only an extreme case will justify the Court's intervention. Relief under section 68 will only be appropriate where the tribunal has gone so wrong in its conduct of the arbitration, and where its conduct is so far removed from what could be reasonably be expected from the arbitral process, that justice calls out for it to be corrected.
(4) There will generally be a breach of section 33 where a tribunal decides the case on the basis of a point which one party has not had a fair opportunity to deal with. If the tribunal thinks that the parties have missed the real point, which has not been raised as an issue, it must warn the parties and give them an opportunity to address the point.
(5) There is, however, an important distinction between, on the one hand, a party having no opportunity to address a point, or his opponent's case, and, on the other hand, a party failing to recognise or take the opportunity which exists. The latter will not involve a breach of section 33 or a serious irregularity.
(6) The requirement of substantial injustice is additional to that of a serious irregularity, and the applicant must establish both.
(7) In determining whether there has been substantial injustice, the court is not required to decide for itself what would have happened in the arbitration had there been no irregularity. The applicant does not need to show that the result would necessarily or even probably have been different. What the applicant is required to show is that had he had an opportunity to address the point, the tribunal might well have reached a different view and produced a significantly different outcome."
Discussion and conclusion
(i) The Award
(ii) The parties' submissions to the tribunal
"Further, whatever prejudice would be suffered by Charterers [i.e. in having the claim dismissed] is overwhelmed by the prejudice which would be suffered by [Hyundai], in:
(a) Having to defend this very stale claim, notwithstanding the likely diminution in value of the evidence (see above); and
(b) The need to maintain a bond in the amount of US1,600,000 issued by Aspen Insurance UK Limited as security for the Charterers' claim (pages 43-44), the necessary continuation of which is wasteful of [Hyundai's] resources as [Hyundai] have had to deposit US$580,000 in cash with Aspen Insurance UK Limited and have to pay a bond fee of US$23,000 per year to maintain the security."
(iv) The authorities
"It is always important to keep in mind the distinction between a lack of opportunity to deal with a case and a failure to recognise or take such opportunity. It is commonplace in judicial decisions on points of construction that a judge may fashion his or her reasoning and analysis from the material upon which argument has been addressed without it necessarily being in terms which reflect those fully expressed by the winning party. There is not perceived to be, and is not, anything which is unfair in taking such a course. It is enough if the point is "in play" or "in the arena" in the proceedings, even if it is not precisely articulated. To use the language of Tomlinson J, as he then was, in ABB AG v Hochtief Airport  2 Lloyd's Rep 1 at , a party will usually have had a sufficient opportunity if the "essential building blocks" of the tribunal's analysis and reasoning were in play in relation to an issue, even where the argument was not articulated in the way adopted by the tribunal. Ultimately the question which arises under s. 33(a), whether there has been a reasonable opportunity to present or meet a case, is one of fairness and will always be one of fact and degree which is sensitive to the specific circumstances of each individual case. That applies to points of construction as much as to other points in dispute."
(iv) IVS's submission
(v) Conclusion on serious irregularity
(vi) Substantial injustice