Torch Offshore Llc & Anor v Cable Shipping Inc. [2004] EWHC 787 (Comm)

[2004] EWHC 787 (Comm)Case No 2003/1081
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 07/04/2004
Before
THE HONOURABLE MR JUSTICE COOKE
Between
TORCH OFFSHORE LLC & ANR.ClaimantCABLE SHIPPING INC.Defendant
Mr J McCaughran, QC and Mr J Russell (instructed by Clyde & Co, Solicitors) for ClaimantMr N Meeson, QC and Mr P Ferrer (instructed by Marine Legal Services, Solicitors) for DefendantHearing Hearing dates: 5 th and 6 th April 2004
Judgment

Introduction

[1]This is the hearing of an application by the Claimants (Torch) under sections 68(2)(d) and 68(3) of the 1996 Arbitration Act, by which Torch seek to have the award of Mr Mark Hamsher dated 5th November 2003 set aside or varied. It is said that he failed to address one of the central issues in the arbitration and that there was a serious irregularity affecting the proceedings and the award in consequence. In addition, by a direction given on 9th November 2003, Torch’s application under section 69 of that Act for permission to appeal from the award on three points of law was listed to be heard orally immediately following the section 68 application.[2]The claims in the arbitration arose out of the charter of a vessel, the “Midnight Hunter”, formerly the “G Murray” which Torch chartered from the defendants (the Owners) to use as a light construction and pipe-laying vessel in the oil industry in the Gulf of Mexico. The charter was on a Supplytime Form (as amended) for a period of three years. In the charter the vessel was described as having clear deck space of “over 1000 sqm @ 10t/sqm”, although, at the foot of the next page of the description the words appeared “DETAILS GIVEN IN GOOD FAITH BUT WITHOUT GUARANTEE”.[3]Torch claimed that in deciding to enter into the charterparty it relied on two representations:- i) A representation that the deck strength of the vessel throughout its clear deck area was 10mt/sqm (the first representation); and ii) A representation that the vessel’s deck could support, without the need for supporting pillars below deck, the concentrated loads imposed by Torch’s modular pipe-laying system (MLS), the details of which had been set out in a fax dated 28th September 2001 from Torch’s chief engineer, Mr Lecarme to the Owners (the second representation).[4]As found by the arbitrator, both of those representations were made and neither was true. He also concluded that the Owners had reasonable grounds for believing that they were true at the time they were made because of assurances given to them by the shipyard which had carried out conversion work on the vessel and supplied them with calculations of the vessel’s deck strength. The representations were therefore false but innocently made. Torch complains primarily about the Arbitrator’s treatment of the issue of reliance on those representations by Torch in entering the charter.[5]Torch maintains that there is a serious irregularity in the award inasmuch as the arbitrator failed to address the question whether the second misrepresentation did or did not induce Torch to enter the charter. In addition, Torch seeks leave pursuant to section 69(2)(b) of the 1996 Act to appeal on three questions of law:- i) Whether the Tribunal erred in law in failing to apply the correct legal test in deciding that the first misrepresentation did not induce Torch to enter the charter. ii) Whether the Tribunal erred in law in deciding that the second misrepresentation did not induce Torch to enter the charterparty if, contrary to its primary submission under section 68, the arbitrator did address the issue. iii) Whether the arbitrator erred in law in deciding that Torch was barred from rescinding the contract by reason of lapse of time.[6]Although Torch had originally terminated the charter on the ground of breach of charter by the Owners, by the time of the hearing it was accepted by Torch that it was not entitled to terminate the charter on the grounds of repudiatory breach or under clause 26. Instead Torch claimed it was entitled to and had rescinded the charter on the grounds of innocent misrepresentation. Torch also claimed damages under section 2(1) of the Misrepresentation Act 1967 and, if it had no right to rescind, it claimed damages for breach of the vessel’s description in the charterparty, namely its deck strength.[7]Torch failed in its claim for damages under the Misrepresentation Act but succeeded in the arbitration in its claim for damages for breach of contract. The arbitrator held that the vessel was misdescribed in the charter as having a deck strength of 10 mt/sqm, the quantum of such damages being left over for later assessment. The cost of reinforcement of the deck to the appropriate strength was $77,000 only and the work took some 11 days.[8]Although there was some argument as to the appropriate relief to be given by the Court, in the end it was accepted that, should the application succeed under section 68, it would be necessary to remit the award to the arbitrator for him to make a finding as to whether or not the second representation did induce Torch to enter the charter. Equally he would have to decide whether any right of rescission in respect of that representation was lost, should he find that there was inducement. Should permission to appeal be given, and such an appeal he heard and succeed, remission would again be the appropriate remedy so that the arbitrator could apply the correct test for inducement. Should Torch succeed on the issue of inducement, the question of loss of the right to rescind would be one of equity, where the facts fell to be taken into account, so that remission would again be appropriate so that the chosen finder of fact could determine the issue.

The Background Facts as found by the Arbitrator

[9]The vessel that was eventually renamed the “Midnight Hunter” was built in Singapore in 1978 for offshore construction work with a large crane but was subsequently converted into a diamond-mining vessel. She was purchased by the Owners at the end of 2000 and in July 2001 they placed a contract with a Polish shipyard for the conversion of the vessel, including the insertion of a new section of 20 metres. Calculations in support of a deck strength of 10 mt/sqm were supplied by the yard to the Owners in August 2001.[10]It was in the autumn of 2001 that Torch contacted the Owners with a view to chartering the vessel for use as a light construction vessel in the Gulf of Mexico. On 28th September 2001, Torch asked the Owners whether equipment weighing about 280 mt spread over an area of about 50 square metres could be carried on deck and whether under deck pillars would be required to carry the load. By an e-mail of 1st October, the Owners responded that the deck loading from frame 31 was ten tonnes per squaremetre and that no pillars would be required to carry the weight of equipment specified by the charterers in their enquiry. By the end of the hearing, having initially contended that it was true, the Owners admitted that the second limb of that reply was a false unambiguous statement of fact, although at the time they did not appreciate that it was inaccurate. By the end of the hearing, having initially contended that it was made “without guarantee”, Owners also accepted that the representation in the email of 10 mt/sqm was also untrue, as were other representations to the same effect made on other occasions, whilst confining themselves to arguing that the representations did not induce Torch to conclude the charter and that the right to rescind had been lost.[11]Although negotiations had originally proceeded for a bareboat charter with a purchase option, these did not result in such a charter. Instead on 31st May 2002 the parties concluded a time charter on a Supplytime Form for three years. In that charterparty the vessel was described as having a clear deck space of “over 1000 m² at 10mt/sqm.”[12]The vessel was delivered on 19th August 2002 and was initially used by Torch for a variety of tasks in the Gulf of Mexico. Torch’s plan was to install an MLS on the vessel originally with three, but subsequently with four, coils. The weight of that was 280 tonnes which was the reason for the request on 28th September 2001 which led to the e-mail of 1st October from the Owners to which I have already referred.[13]The arbitrator found that by 25th September 2002, Torch appreciated that the deck strength of the vessel was not 10 mt/sqm. The calculation carried out by one of their employees at that time indicated (wrongly) that the existing deck strength was approximately one-tenth of that figure. The Arbitrator went on to find that Torch had knowledge, both of the facts and the right to rescind, within, at the most, six weeks from the end of September 2002. He found also that Torch traded the vessel between October and December 2002 and made the last payment of hire on 3rd January 2003. During that period however Torch was constantly pressing the Owners to confirm the actual strength of the deck and was considering both internally and with Owners how the matter could be remedied by appropriate deck strengthening. The arbitrator found that Torch was not affirming the contract by so doing, nor was there was any unequivocal representation by Torch that it did not intend to exercise any right to rescind.[14]The Owners, during this period ascertained that the yard’s calculations of deck strength were flawed. They procured a Finite Element Analysis to establish the true deck strength, the results of which were produced on 18th December and on the following day they advised Torch that the maximum strength of the inserted section was about 4 tonnes per square metre and the aft part was about six tonnes per square metre. They advised that they were “analysing the steel job to improve deck loads to ten tonnes per square metre”.[15]In early 2003 Torch raised the possibility of the parties agreeing an adjustment to the charterparty rate because that might be more financially attractive to the Owners, rather than strengthening the whole deck. Discussions followed but the parties were unable to reach agreement about any such reduction. In consequence, on 24th January, Torch wrote to the Owners exercising its rights under clause 26 of Part 2 of the charter to terminate the charter on a ground set out in that clause. The letter referred to the provision in the charter that the deck load would be 10 mt/sqm and asserted that, because that requirement had not been met, Torch’s ability to trade the vessel was affected.[16]The Owners protested and commenced strengthening work on the deck on 27th January which was completed by 8th February at a total cost of US$ 77,000. In the meantime, the vessel was arrested by Torch. On 7th April Owners accepted Torch’s conduct as bringing the charter to an end but the vessel remained under arrest until an agreed arrangement on 24th July 2003.[17]By the time of the hearing before the arbitrator in October 2003, the vessel had not been reemployed.[18]At paragraphs 20 – 28 of the Reasons forming part of the Award, the arbitrator set out information about Torch and its business requirements. He found that Torch had previously worked in the shallow water market but had recently tried to position itself to work in the deep-water section. Torch wanted the vessel to be capable of taking its MLS system so it could establish its reputation in deep water pipe-laying before the completion of the conversion of a large vessel which it had also acquired. It was also Torch’s evidence that it wanted the vessel to be flexible enough to be used for other projects when she was not pipe-laying.[19]Although not contained in the Award, shortly before the hearing, the experts for both sides had agreed that the distributed deck load capability of the vessel was: i) About 3.8 mt/sqm in way of the 20 metre insert between existing frames 34 and 35. ii) About 6 mt/sqm from frame 35 to frame 43. iii) 10 mt/sqm from frame 43 aft to the transom.

The Test under section 68 of the Arbitration Act 1996

[20]The section provides:
“68(1) A party to arbitral proceedings may ……. apply to the Court challenging an award in the proceedings on the ground of serious irregularity affecting the Tribunal, the proceedings or the award. A party may lose the right to object (see section 73) and the right to apply subject to the restrictions in sections 70(2) and (3). (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. …………………. (d) Failure by the Tribunal to deal with all the issues that were put to it.”
[21]Paragraph 58 of the Report of the Departmental Advisory Committee includes the following:- “The Court does not have a general supervisory jurisdiction over arbitrations. We have listed the specific cases where a challenge can be made under this clause. The test of “substantial injustice” is intended to be applied by way of support for arbitral process, not by way of interference with that process. Thus it is only in those cases where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process that we would expect the Court to take action. The test is not what would have happened had the matter been litigated. To apply such a test would be to ignore the fact that the parties have agreed to arbitrate, not litigate. Having chosen arbitration, the parties cannot validly complain of substantial injustice unless what has happened cannot on any view be defended as an acceptable consequence of that choice.” The sub-section has been considered in a number of authorities and I was referred to The Petro Ranger [2001] 2 LLR 348 where Cresswell J set out the effect of that report on the approach of the Court to section 68 of the 1996 Act. I was also referred to Hussman v Al Ameen [2000] 2 LLR 277 where Thomas J (as he then was) said that section 68(2)(d) did not require a Tribunal to set out each step by which it reached its conclusion or deal with each point made by a party in an arbitration. A failure in that respect was not a failure to deal with an issue that was put to it, although it might amount to a criticism of the reasoning. By contrast I was referred to the decision of Toulson J in Ascot Commodities v Olam [2002] CLC 277 where he held that a central point raised by a party which had not been dealt with by a Tribunal did amount to a serious irregularity and, because the issue was central, it was likely to give rise to serious injustice.[22]In the present case, if the arbitrator did not decide one way or another, whether the second representation did induce Torch to enter into the charter, that would, unless the conclusion on that issue was obvious from other findings, amount to a serious irregularity which is capable of giving rise to serious injustice, since it would affect the right to rescind and the final result of the arbitration. This is something which is outside the ambit of what could reasonably be expected in the arbitral process and does not amount to an acceptable consequence of the parties’ choice of arbitration, as opposed to litigation. Justice would require such a deficiency to be corrected.

Sections 57 and 70 of the Arbitration Act 1996

[23]Section 70 provides as follows:
“(1) The following provisions apply to an application for appeal under section 67, 68 or 69. (2) An application or appeal may not be brought if the applicant or appellant has not first exhausted - ………… (b) Any available recourse under section 57 (correction of award or additional award).”
[24]Section 57 is headed “Correction of award or additional award”. It provides that the parties are free to agree on the powers of the Tribunal to correct an award or make an additional award but that if there is no such agreement the provisions of sub-section 3 onwards are to apply. Sub-section 3 provides:- “The Tribunal may on its own initiative or on the application of a party –(a) correct an award so as to remove any clerical mistake or error arising from an accidental slip or omission or clarify or remove any ambiguity in the award, or(b) make an additional award in respect of any claim (including a claim for interest or costs) which was presented to the Tribunal but which was not dealt with in the award……..”.[25]If Torch is correct in its submission that the arbitrator simply failed to deal with the issue to which I have adverted, then there is no question of any clerical mistake or error arising from an accidental slip or omission. There is a wholesale failure to deal with an important issue.[26]In Groundshire v VHE Construction [2001] 1 LLR 395 and Al Hadha Trading v Tradigrain [2002] 2 LLR 512, the courts had cause to consider the ambit of section 57 in the light of the report of the Departmental Advisory Committee. I agree with the approach adopted by HHJ Havelock –Allan QC in the latter decision from paragraph 65 onwards, and the distinction drawn between referring a matter to the arbitrator to seek to effect a change in his decision and referring a matter to an arbitrator for clarification of what he has decided.[27]In my judgment section 57(3)(b), which uses the word “claim”, only applies to a claim which has been presented to a Tribunal but has not been dealt with, as opposed to an issue which remains undetermined, as part of a claim. It is noteworthy that the terms of section 57(3)(b) differ from the terms of section 68(2)(d) in the language used. I consider that the terms of section 57(3)(b) are apt to refer to a head of claim for damages or some other remedy (including specifically claims for interest or costs) but not to an issue which is part of the process by which a decision is arrived at on one of those claims. As Counsel for Torch pointed out, Torch had claimed rescission and that claim had been rejected by the arbitrator. He could not change his award on that point and there was no room for an application to him to decide that claim, even if he had failed to decide whether there was inducement by the second representation which would have entitled Torch to rescind.[28]If however Torch had reverted to him, applying for clarification as to whether he had decided against it on inducement by the second representation, it would have been clear in this court whether or not he had determined the issue. It seems to me that section 57(3)(a) can be used to request further reasons from the arbitrator or reasons where none exist. The policy which underlies the Act is one of enabling the arbitral process to correct itself where possible, without the intervention of the Court. Torch contended that it was clear that the arbitrator had not decided the issue and that therefore there was no ambiguity in the award which required clarification, but the very existence of a genuine dispute on this question militates against that argument. If there was unarguably a clear failure to deal with an issue, it could be said that there was no ambiguity in the award, but as set out in Al Hadha at paragraph 70, an award which contains inadequate rationale or incomplete reasons for a decision is likely to be ambiguous or need clarification. There was therefore room for an application by Torch under section 57, as an exchange of letters with the Owners in relation to this part of the Award would have revealed, so that the time limit of 28 days (for which section 57(4) provides) applied. In these circumstances Torch had available recourse under section 57, which had not been exhausted and section 70(2) therefore presents an insurmountable bar to Torch’s section 68 application. I nonetheless go on to determine the section 68 application, should I be wrong on the ambit of section 57.

Section 68 – the Reasoning of the Arbitrator

[29]At paragraph 31 of the reasons, the arbitrator recorded the fact that the Owners accepted that the second representation was false but referred to “a debate between the parties as to whether there had been representations that the deck strength was ten mt/sqm.” He found that there had been such a misrepresentation. He is criticised by Torch for not recording that Owners had conceded in their closing submissions that both the first and second representations were false. What the arbitrator did, in that paragraph, was to determine whether the qualification of “without guarantee” could be imported into the email of 1st October as the Owners had previously argued (and continued to argue in relation to the contractual warranty) and whether this could apply in any way to the other 3 occasions when the first representation had been made. He found that it could not. I do not see how this impacts on the question at issue here, as to whether or not he did or did not decide that Torch was induced to conclude the charter on the basis of the second representation.[30]In paragraphs 32-49 of the reasons, the arbitrator explored the question of inducement under the heading “Were the charterers induced by the misrepresentation to enter the charterparty”. Torch points out that the title of this section refers to a misrepresentation in the singular and argues that the whole of the succeeding section relates only to the impact of the first representation upon Torch and not the second. It points out that a finding that Torch was not induced to enter into the charter by a representation of deck strength of ten mt/sqm does not rule out Torch being induced to enter into the charter in reliance upon a representation that the vessel’s deck could support, without the need for pillars below deck, the loads imposed by the MLS which, as set out in the material made available to Owners, amounted to a requirement of 5.6 tonnes per square metre. It is said that, although the arbitrator had in mind the two representations, he assumed that a finding that the first representation did not induce the charter concluded the issue as to whether or not the second representation did so and therefore made no finding on the latter. In this, he was misled, it is said, by the submissions of the Owners to that effect.[31]In order to determine this matter it is necessary to examine the structure of paragraphs 32 – 49 and those which preceded it. At paragraph 3 of the reasons the arbitrator referred to the faxed request of 28th September 2001 and the e-mail answer of 1st October: i) The fax of September 28th 2001 included the following question:- “2 Deck loading: the mentioned equipment heaviest concentrated load is the combination of a reel + product + under roller that is to say about 280 Te spread over an area of about 50 sqm. Does the ship requires under deck pillars to accept this load (maximum 3 reels).” ii) To this the answer was given in the e-mail of lst October:
“Regarding your point 2, the deck loading from the frame 31 to the aft is 10 ton/sqm. No pillars are required to keep this load.”
[32]It is clear that attention focussed on this email as containing both representations, although the first representation was also made elsewhere. Under the heading “Did the Owners misrepresent the deck’s strength?” at paragraph 31, the arbitrator referred to the Owners’ acceptance that the second limb of the information given to Torch in the 1st October email was untrue, namely the reference to the absence of any need for pillars. Paragraph 31 went on, after referring to that admission, to determine the effectiveness of the first misrepresentation, reiterated on three occasions apart from the email of October 1st. The arbitrator concluded this paragraph with the words “I therefore accepted the charterers’ argument that in addition to the misrepresentation of lst October 2001 conceded by the Owners (the second representation), the Owners had also made the further misrepresentations set out above” (referring to the repeated first representation). The arbitrator was, therefore, in this paragraph dealing with both representations, so that it is clear that the arbitrator was using the expression “deck’s strength” in the heading as shorthand for both the first and second representation.[33]Having referred to both representations in paragraph 31 as being untrue, it is hard to imagine that the arbitrator would, in the following paragraphs dealing with inducement, ignore one of those two representations. Little can in my judgment be inferred from the use of the word “misrepresentation” in the singular in the heading to paragraph 22 and attention must be paid to the terms of the succeeding paragraphs in order to see what the arbitrator did decide. It was suggested that the use of the singular could be a typographical error, but it is likely that it was a shorthand reference to the email of 1st October, since the arbitrator had previously referred to the two limbs of information set out in it, rather than referring to these as two representations. Indeed there is good ground for thinking that the arbitrator, throughout the paragraphs which follow, had the email in mind, since it contained both the representations in issue. When he referred to the representation, he meant the representation in the email in both its limbs, which were linked in the minds of the parties, as they were in the email.[34]In paragraph 32 of the reasons, the arbitrator set out the test to be adopted in relation to issues of inducement by reference to the decision of the Court of Appeal in J.E.B. Fasteners v Marks Bloom & Co [1983] 1AER 583 and the decision of Rix J (as he then was) in Avon Insurance v Swire (Unreported 20th January 2000). Both parties accept that the test was correctly set out as being whether or not a misrepresentation plays a “real and substantial part, though not by itself a decisive part” in inducing the party in question to enter into a contract, a distinction being drawn between a minor factor which supports or encourages a decision and a factor which is sufficiently important to be called “a real and substantial part” of that which induces a person to conclude a transaction.[35]At paragraph 33 of the reasons, the arbitrator set out Torch’s case (transposing the word “charterers” for “Owners”). He set out Mr Lecarme’s evidence in the following way:
“In Monsieur Lecarme’s statement he said that it was crucial that there was a large deck area of over 1,000 square metres and that it had a deck strength of ten tonnes per square metre because he considered that deck strengths of this order ‘was a minimum requirement for the type of sub-sea construction vessels sought by the charterers to enter the deep water market.’ He also explained that he considered it important to establish where the pillars would need to be installed because if so, that would add to the costs which would be for the charterers’ account, cause delays and also reduce the space available below deck for carrying equipment. In his statement he also said that if he had known of the true deck strength of the vessel and that additional pillars would have to be installed to support the MLS, then “I have no doubt that I would have advised ………. that the ship was not suitable” and that the charterers would not have entered into the charterparty.”
[36]It is clear from this recital of Mr Lecarme’s evidence that the arbitrator had in mind both the first and second representations to which that evidence related. The part of Mr Lecarme’s statement, which he cited, dealt specifically with the issue of the pillars and the effect that future installation of such pillars might have, should they turn out to be necessary.[37]At paragraph 34 of the reasons he then explored Mr Lecarme’s evidence as to the crucial nature of the deck strength to Torch in the light of the totality of the other evidence. He asked himself the question “did the totality of the evidence support Mr Lecarme’s statement that the deck strength was something that was crucial and if he had known the true deck strength, he would have advised the Stockstills not to conclude the charterparty and they would not have done so?” In using the word “crucial” it can be seen that the arbitrator was referring to Mr Lecarme’s evidence in relation to the first representation, but when he went on to refer to knowledge of “the true deck strength” and the advice which would follow from that, he must be taken to refer to both representations, since Mr Lecarme’s evidence was related to what he would have advised on the basis of the true deck strength in the context of the requirement for additional pillars.[38]From paragraph 35 onwards the arbitrator explored the contemporaneous documents which he found revealing. In those documents he found little significance being attached by Torch to the requirement of a deck strength of 10 tonnes per square metre and at the end of paragraph 37 he said that he agreed with the Owners that Mr Lecarme’s explanation as to why there was no reference to a deck strength of 10 mt/sqm in any enquiries for alternative vessels was not convincing.[39]He then referred at paragraph 38 to the suggested compromise on the deck strength/charter party rates which had been suggested by one of Torch’s representatives. He set out an e-mail from Owners which referred to the distribution weight of the MLS equipment as about 6 mt/sqm and the deck strength of the aft part of the deck of that capacity. Reference was also made in that e-mail to the strength of the inserted section which, with pillars, would be 6 mt/sqm, whilst work was continuing to remodel the vessel to achieve 10 mt/sqm throughout. It was the response to this e-mail from Mr Bullock, one of Torch’s engineers, which suggested a compromise on final deck load strength and modifications in exchange for a reduced charter rate.[40]The arbitrator referred to the expert evidence that had been produced and found that a deck strength rating of ten mt/sqm was not considered necessary for vessels in this market (having found earlier at paragraph 34 that vessels of this type and size usually have a deck strength of 5 mt/sqm) and that deck area was more important than deck strength. He referred to one expert’s view that “up-rating” of a vessel’s construction to a deck strength rating of ten mt/sqm was an unnecessary additional cost as it was always likely that additional local strengthening would be required for equipment put on deck.[41]At paragraph 43 the arbitrator referred to Mr Lacarme’s evidence when asked whether the deck area was the most important thing. His response was that what was most important was the length of the free deck to install their equipment, and that Torch wanted to put the MLS with four reels on it, needing at least 240 feet of free deck space.[42]At paragraph 45, the arbitrator said that he was not persuaded that a deck strength of five mt/sqm as opposed to ten mt/sqm would have restricted the trading possibilities as severely as Torch had suggested when seeking to support its position that it would not have chartered the vessel if it had known her true deck strength. He accepted that the Owners were right in arguing that the loading of material or equipment that actually required a deck strength of ten mt/sqm would generally either create stability problems for the vessel or create practical problems in maintaining and handling the load. He found that “even if the deck strength had been ten metric tonnes per square metre, the installation of the MLS would in any event have required localised reinforcement by way of plate and small brackets on the deck. Although the work required would have been less significant than the installation of the pillars that was required, given the actual strength of the deck, the installation of the MLS would have in any event required some work with either the warranted or actual deck strength: the only difference was the extent of the work”. He had already pointed out that the cost of bringing the deck strength up to ten mt/sqm was only US$ 77,000.[43]There is no doubt when reading these paragraphs that the focus of the arbitrator’s attention is on the 10mt/sqm figure, to which reference is made in each of paragraphs 35-39 and 41-45 of the Reasons, but paragraphs 38,43 and 45 show that the arbitrator had the second representation well in mind because, in those paragraphs, reference is clearly made to the installation of the pillars in the context of deck strength. It is plain therefore from a reading of these paragraphs that the arbitrator considered both the first and second representation in the context of inducement because there is reference not only to ten mt/sqm but also to deck area upon which the MLS is to be put and the strength of those parts of the deck where it would be placed. He treated the representations as linked because that is how the parties had treated them.[44]It is not surprising that the arbitrator focused upon the 10 mt representation, because this was the focus of the evidence and the submissions to him. Nothing was really made of the question of the pillars to support a deck strength of 5.6 mt/sqm since the work involved for that would self evidently be minimal. At paragraph 44 the arbitrator records that the cost of bringing the deck strength up to 10 mt/sqm, with pillars, was only US$ 77,000 which the Owners characterised as “de minimis”. Since the aft part of the vessel had a deck strength of 6 mt/sq.m. the only work required to be done to bring the vessel up to a deck strength of 5.6 mt/sqm was reinforcement of the 20 metre insert between existing frames 34 and 35 where the deck strength was about 3.8 mt/sqm. That work would truly have been de minimis in the context and the parties’ arguments did not therefore focus upon it. When regard is had to the parties’ closing submissions, both written and oral, the issue of the pillars was always put in the context of the representation about deck strength of 10 mt/sqm as, indeed it appeared in the e-mail of 1st October. No real attention appears to have been paid to the second limb of e-mail of 1st October, nor to the second representation in isolation from the first representation.[45]What the arbitrator rightly focussed on was the evidence of M Lecarme and his insistence that the 10mt/sqm deck strength was crucial to his advice to Torch to enter into the charter. The issue of pillars was subsidiary to the issue of deck strength in the mind of Mr Lecarme, on his own evidence, as appears from paragraph 33 of the reasons, to which I have already referred. The emphasis in submission was always on the overall deck strength of 10mt/sqm, whilst the question of pillars affected only issues of cost, delay and available space. These elements were plainly insignificant, amounting to 11 days work, during which the vessel would have been off-hire, a cost of $77,000 and minimal interference with space utilisation, in the absence of any hatch opening for this underdeck area. If attention was to be directed to pillars in the context of upgrading the deck to 5.6mt/sqm, this would have involved strengthening a 20 metre section only, taking a fraction of the time taken to strengthen the deck to 10mt/sqm, a fraction of the cost of $77,000 and a trivial effect on space utility by the insertion of a few pillars. Any argument based on that alone, would have been hard to sustain and for that reason it does not appear to have been made in those terms. Although it is now said that the cost and time taken would not have been known at the time when the representation was made, the reality of the matter is that, as the arbitrator pointed out at paragraph 45 of the Reasons, some strengthening work was inevitable for the MLS, whatever the deck strength, whilst the work necessary here, in the shape of a few pillars was not, on the arbitrator’s findings, very different from that.[46]In my judgment it is plain that, although references to “warranted deck strength” in the reasons did refer to 10 mt/sqm, this was because of the way in which the evidence of Mr Lecarme on reliance had been put. Whilst therefore it is true to say that a finding that the first representation did not induce the charter would not of itself, as matter of logic alone, conclude the issue on the second representation, in practice, on the way the case was run and the evidence adduced, it did do so, the latter never truly being run in isolation from the former. The arbitrator’s findings therefore encompassed the case as argued.[47]At paragraph 46 the arbitrator found that Torch was not so concerned by the actual strength of the deck as by what it perceived to be a lack of clear and straightforward information emanating from the Owners as to its strength and as to how and when it would be strengthened to bring it up to requirements. At paragraph 47, he then pointed to the various matters which showed that the warranted deck strength was in itself not of the crucial importance in chartering the vessel for which Torch contended. Furthermore, at paragraph 48 he then went on to say that Torch would have had many considerations in mind in deciding to charter her and that he was not persuaded that the warranted deck strength could properly be categorised as a real and substantial part of what induced Torch to enter into the charter.[48]Although Torch placed much weight upon the arbitrator’s reference to “warranted deck strength” it is clear in the context, that the arbitrator was not referring, when dealing with inducement by representation, merely to the 10mt/sqm deck strength set out in the contract and constituting the first representation, but also to the linked representation in the email relating to pillars. He was dealing with both representations together in assessing whether or not there had been inducement and found, as a fact, that there was none.[49]When seen therefore in the context of the arguments put to the arbitrator and the evidence before him, his conclusion on lack of inducement encompasses both the first and second representations, insofar as they were the subject of argument at the hearing. There is therefore no failure to address a central issue in the arbitration. When referring to the “deck strength” the arbitrator deals with the case as put by Torch, namely the representation of 10 mt/sqm with no pillars. In paragraph 45, the arbitrator deals with the difference between a deck strength of 5 and 10 mt/sqm and says that he is unpersuaded that a deck strength of 5 mt/sqm would have had the effect for which Torch contended. Equally in that paragraph he deals with the issue of the pillars and the work required by way of local reinforcement in order to accommodate the MLS, by way of comparison. The comparison with the pillars required to bring the deck strength up to 5.6 mt/sqm was not expressly made but would have been even more pointed. It was not made because the parties did not address the point in those terms to the arbitrator. Pillars were always seen in the context of the 10 mt/sqm representation.[50]When regard is had to paragraph 46 of the reasons, which is a key paragraph to the arbitrator’s conclusions, it is clear that he finds that the Owners were not truly concerned by the actual strength of the deck at all, whether the reference to the actual strength of the deck encompasses deck strength without pillars or not. That point is reinforced in paragraph 47 before the arbitrator goes on to refer to the warranted deck strengths in that paragraph and in paragraph 48. Even if therefore I am wrong in concluding that the arbitrator specifically encompassed both representations in his conclusion as to lack of inducement to enter the charter, insofar as relied on at the hearing, it is abundantly clear that his finding that Torch had no concern about the actual deck strength applies with equal force to a representation of 10 mt/sqm or 5.6 mt/sqm. Since only 20 metres of deck fell short of 5.6 mt/sqm, namely the insert section, for which the remedial work would be minimal, it is self-evident what the arbitrator’s conclusions would be if he has not, as I have found, actually decided the issue of inducement on the second representation.[51]Whichever view is right, in these circumstances there can be no serious irregularity within the meaning of section 68(2) of the 1996 Act since no substantial injustice is caused to Torch by the Award and Reasons. Either way, it cannot be said something has gone so seriously wrong with the proceedings that justice requires the Court to intervene.

The Section 69 Application for Permission to appeal

[52]Section 69 of the Arbitration Act 1996 provides for an appeal by a party to arbitral proceedings on a question of law arising from an award. By sub-section 2, such an appeal is not to be brought without the agreement of the other parties to the proceedings or alternatively without the permission of the Court. The right to appeal is also subject to the restrictions in section 70(2), to which I have already referred.[53]Section 69(3) provides as follows:- “………… (3) Leave to appeal shall be given only if the Court is satisfied:(a) that the determination of the question will substantially affect the rights of one or more of the parties,(b) that the question is one which the tribunal was asked to determine(c) that, on the basis of the findings of fact in the award – (i) the decision of the tribunal on the question is obviously wrong, or (ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.” (a) that the determination of the question will substantially affect the rights of one or more of the parties, (b) that the question is one which the tribunal was asked to determine (c) that, on the basis of the findings of fact in the award – (i) the decision of the tribunal on the question is obviously wrong, or (ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and (d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.”[54]The three questions of law upon which permission was sought, are set out in paragraph 5 of this Judgment. The first two questions can be dealt with together, in the light of my finding that the arbitrator did decide that neither the first nor the second representations induced Torch to enter the charter, since Torch maintains that, in deciding both issues, the arbitrator applied the wrong test for inducement.[55]It is accepted by Torch that the arbitrator correctly set out the appropriate test in paragraph 32 of the award before setting out the evidence adduced by Torch. The concluding paragraph of this section of the award reads as follows:- “The Midnight Hunter was a large and, after her conversion, expensive and very sophisticated vessel. The charterers would have had many considerations in mind in deciding to charter her. No doubt the deck strength was in the words of Mr Justice Rix “a factor which is observed or considered by a plaintiff, or even supports or encourages a decision”. However for all the above reasons, I was not persuaded that the warranted deck strength could properly be categorised as “a real and substantial part” of what induced them to enter into the charterparty. There was therefore no effective misrepresentation that would allow rescission.”[56]Once it is found that this paragraph relates not only to the first but the second representation, it is hard to see how Torch’s application could succeed. The arbitrator has, in this paragraph, made a finding of fact in accordance with the correct test, so that no issue of law would appear to arise. It is accepted that the arbitrator need not set out in his award every step in his process of reasoning and that findings of fact cannot be challenged. Nonetheless, Torch submits that the intervening paragraphs between paragraphs 32 and 48 reveal that the arbitrator in fact applied a different test, namely whether the misrepresentations played a decisive part in inducing Torch to enter the contract.[57]Once again, this point arises because of the way in which the evidence emerged as recited by the arbitrator in the award. It was Mr Lecarme’s evidence that it was crucial to him that there was a large deck area of over 1000 sqm with a deck strength of 10 mt/sqm and that he considered it important to establish whether pillars were required. When reviewing the evidence, the arbitrator therefore asked himself the question whether the totality of the evidence supported Mr Lecarme’s statement and concluded that it did not. He rejected Mr Lecarme’s evidence that if he had known of the true deck strength of the vessel and that additional pillars would have to be installed to support the MLS, he would have advised Torch that the ship was not suitable and Torch would not have entered into the charter. Because that was the form of Torch’s evidence, that was the material with which the arbitrator had to grapple.[58]Having rejected Mr Lecarme’s evidence by reference to the contemporary documents, the suggested compromise on deck strength/charterparty rates, the expert evidence, the small cost of upgrading the deck strength to 10 mt/sqm ($77,000), the trading possibilities of the vessel with a lower deck strength and the requirement for work to be done to install the MLS even with a deck strength of 10 mt/sqm, the arbitrator went on to make his findings.[59]In paragraph 46 he found that the charterers were not really troubled by the actual strength of the deck at any stage in the history. Torch’s lack of concern at this at the end of the story shed light on what it considered important at the beginning of the relationship. He concluded that “all that pointed to the fact that the warranted deck strength was in itself not of the crucial importance in the chartering of the vessel for which the charterers argued.” He thus found against Torch on the case which Torch had chosen to put.[60]With the first and last paragraphs of the relevant section setting out the correct test and applying it, it cannot be said that the intervening paragraphs, which contain a rejection of Torch’s evidence and of the particular way in which Torch had put its case, show the application of a different test. It cannot be said that there is any error of law in the test applied nor in the approach of the arbitrator.[61]It was suggested that the arbitrator erred in failing to apply or even consider the presumption of reliance which arises when a misrepresentation is material. There was however no reason to mention the presumption in circumstances where the arbitrator examined the evidence and found against Torch.[62]A further point was raised by Torch inasmuch as it was suggested that the arbitrator asked himself the wrong question. Instead of asking “was each representation a real and substantial part of the inducement to Torch to charter the vessel?”, it is said that he should have asked “was each misrepresentation a real and substantial part of the inducement to Torch to enter into this charterparty?” i.e. to charter the vessel on these particular terms. Reliance was placed upon that part of the Award which recited Torch’s willingness to compromise by accepting a lower deck strength in return for a reduced charterparty rate.[63]This contention cannot succeed because it is clear from the award that Torch based its case on Mr Lecarme’s statement that, with due knowledge of the deck strength, he would not have advised Torch to enter the charter and Torch would not have done so. No case was ever made on the basis that a charter would have been concluded on different terms. Once again, the shape of the award has been determined by the way in which Torch put its own case.[64]In these circumstances, permission to appeal is refused in relation to the first two questions of law with the result that the third proposed question of law does not arise. The issue of the right to rescind being lost by lapse of time can only arise if the arbitrator was wrong in relation to inducement. The question of law on lapse of time therefore does not substantially affect the rights of the parties in the light of my earlier decision. Nor would it be just and proper for the Court to determine the question, whether or not the arbitrator was obviously wrong or the question is one of general public importance where the decision of the arbitrator is at least open to serious doubt. It matters not since the arbitrator was not obviously wrong on the question of inducement and that question is not one of general public importance.[65]In reality, the only question of law which could arise out of the award is the question of the loss of the right to rescind for lapse of time since the decision of the arbitrator on inducement was a decision of fact based upon the appropriate test which he recited and then employed in reaching his decision, but on the findings made by the arbitrator and my decision on the other issues, that question does not arise. I do not therefore need to determine whether or not the arbitrator arguably erred in law in deciding that Torch was barred from rescinding the contract by reason only of lapse of time and I decline to do so.

Conclusion

[66]Torch’s applications under both section 68 and 69 of the 1996 Act therefore fail and must be dismissed. Unless there are matters of which I am unaware, costs must follow the event, but I await submissions before making an order.

Cited in 11 later judgments

and 2 more of the most senior