Award - Appeal - Challenge to award on grounds of serious irregularity

Ed & F Man Sugar Ltd v Belmont Shipping Ltd: Queen's Bench Division, Commercial Court (Mr Justice Teare): 18 November 2011

Section 33 of the Arbitration Act 1996 (the act), so far as material, provides: '(1) The tribunal shall - (a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and (b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined...'

The claimant company chartered a vessel from the defendant company which was the disponent owner of the vessel. By a charterparty, the claimant chartered the vessel for a voyage from Santos, Brazil to, in the event, Paradip and Haldia, India. Clause 19 governed load port laytime; Clause 23 dealt with the calculation of demurrage and despatch. The vessel arrived at Santos, the load port, on 16 September 2009. A notice of readiness (NOR) was tendered immediately (and was re-tendered on 19 September).

The claimant denied that the NOR was valid because the vessel's holds were not fit for cargo. A surveyor inspected the vessel on the 18 September and noted certain defects. Those were corrected and the vessel was approved ready to load at 11.40am on 20 September. The claimant did not deliver a further NOR after the vessel had been approved. The vessel did not berth until 23.40pm on 5 October 2009. Following the completion of loading at 05.45am on 7 October 2009, the owners claimed demurrage. It was agreed that the load port laytime was five days three hours. There was a dispute as to when laytime began. The matter went to arbitration based only on the parties' written submissions.

The defendant sought demurrage in the sum of $13,263.89, taking the view that laytime had begun on 16 September. The claimant contended that laytime had begun on 21 September. The arbitrators made and published their award on 25 October 2010. They recorded that neither party had requested an oral hearing. They held that neither the NOR dated 16 September 2009 nor that dated 19 September 2009 was valid on the basis that on those dates, the vessel had not been ready to load.

They concluded that laytime had begun on 21 September, and that accordingly, at Santos the vessel had been on demurrage for one day seven hours 50 minutes at a cost of $13,263.89. They further stated that since the defendant had not relied upon the decision in Glencore Grain Ltd v Flacker Shipping Ltd, The Happy Day [2002] All ER (Comm) 896 (Happy Day), the potential consequences of that decision had not affected their conclusion. The claimant challenged the award pursuant to section 68 of the Arbitration Act 1996 on the ground of serious irregularity.

The claimant submitted that the arbitrators were obviously aware that there was an argument, following the decision in the Happy Day, to the effect that laytime had commenced when loading had commenced on 5 October (the Happy Day argument). On that basis, no demurrage would have been due at the loading port.

Indeed despatch money would have been due to the claimant. It was further submitted that the arbitrators had appreciated that F Ltd, acting on behalf of the claimant, had not been aware of that argument. In those circumstances it was submitted that the arbitrators' duty pursuant to section 33 of the act had been to enquire of F Ltd whether any reliance was being placed on the decision in the Happy Day. Their failure to do so, it was argued, was a serious irregularity which had caused the claimant substantial injustice.

The claimant further submitted that had there been an oral hearing the matter would obviously have been raised and so there would have been no serious irregularity. The application therefore raised, it was said, an important issue of principle as to the conduct of arbitrations on documents alone. The claimant found support for his argument in a comment made by Lord Justice Waller in Bandwidth Shipping Corp v Intaari [2008] 1 All ER (Comm) 1015 (The Magdalena Olendorff) that: 'If an arbitrator appreciates that a party has missed a point then fairness requires the arbitrator to raise it so that the party can deal with it' (the fairness comment). The appeal would be dismissed.

Section 33 of the act did not require that the arbitrators should alert the claimant to the Happy Day argument. The claimant had put forward its case by explaining why it had denied the defendant's case on the commencement of laytime and by conceding that laytime had commenced at 1400 on 21 September 2009. Had the arbitrators alerted the charterers to the Happy Day argument they would have been giving the claimant an opportunity to put a case different from that which they had chosen to put. That was not encompassed by the arbitrators' duty to give the claimant a reasonable opportunity to put its case.

Further, the fairness comment had been made in the context of a point which had been in issue and which had been required to be dealt with. The context of the instant case was different. What had been in issue in the instant case had been whether a valid NOR had been given on 16 September 2009. The claimant had had a reasonable opportunity to deal with that point and in so doing had expressly accepted that laytime had commenced on 20 September 2009. No case had been made by the claimant that laytime had not commenced running until 5 October 2009 and so such a case or point had not been in issue (see [15], [18] of the judgment).

There was no breach by the tribunal of its duty pursuant to section 33 of the act. It followed that there had been no serious irregularity (see [19] of the judgment). Bandwidth Shipping Corp v Intaari [2008] 1 All ER (Comm) 1015 distinguished; Glencore Grain Ltd v Flacker Shipping Ltd, The Happy Day [2002] 2 All ER (Comm) 896 considered.

Timothy Young QC (instructed by Jackson Parton) for the claimant; Edward Ho (instructed by Ince and Co) for the defendant.