Ispat Indurstries Ltd v Western Bulk PTE.Ltd [2011] EWHC 93 (Comm)

Case No 2010 FOLIO 405

[2011] EWHC 93 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

IN THE MATTER OF THE ARBITRATION ACT 1996

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 31/01/2011

Before

MR. JUSTICE TEARE

Between

ISPAT INDURSTRIES LTD.Claimant

WESTERN BULK PTE.LTD.Defendant

ISPAT INDURSTRIES LTD.Claimant (Respondent Charterer in Arbitration) and WESTERN BULK PTE.LTD.Defendant (Claimant Owner in Arbitration)

Nigel Cooper QC and Ravi Aswani (instructed by Swinnerton Moore) for Claimant

Julian Kenny (instructed by Ince & Co.) for Defendant

Hearing Hearing dates: 20 January 2011

Judgment

Mr. Justice Teare:

[1]This is an application by the Claimant, who was the Charterer of the vessel SABRINA 1, challenging the award of arbitrators on the ground of serious irregularity pursuant to section 68 of the Arbitration Act 1996 and appealing against the same award pursuant to section 69 of the Arbitration Act 1996, leave to appeal having previously been granted.

The claim and counterclaim before the arbitrators

[2]SABRINA 1 was chartered by her Owner to the Charterer pursuant to the terms of a fixture recap dated 21 December 2007 which provided as follows:

“……… 2. Delivery DOP [Dropping outward pilot] Chennai …… 3. Laycan: 0001 31/12/2007 – 5/1/2008 4. For one time charter trip via SPS [Safe ports], SBS [Safe berths], SAS [Safe anchorages] ALW W/I IWL [Always within Institute Warranty Limits] and always in lawful trade of duration about 12/15 days WOG [Without guarantee] 5. Cargo Intention: Calibrated/lumpy iron ore/iron ore pellets/Iron ore fines/Quartzite ore minerals in bulk. 6. Redelivery DOP Mumbai …… 25. OWISE PER WBC/ISPAT last performed CP based on Owners BTB [back to back] with logical amendments and mainterms as fixed. ………”

[3]The parties’ last performed charterparty was on the New York Produce Exchange Form for a time charter trip. The standard terms (as amended) provided that the vessel was to be employed in carrying lawful merchandise (line 36) with certain exclusions and that the master would be under the orders and directions of the Charterers as regards employment and agency (clause 8). Clause 16 provided that “the act of ……enemies always mutually excepted”. The rider clauses included clause 36 which provided that “the vessel shall be employed for one time charter trip from Vizag to Mumbai lawfully trading between safe port(s), safe berth(s) and safe anchorages ……….”

[4]On 24 December 2007 the Charterer sent voyage instructions to the Master which read in part as follows:

“LAYCAN: 31st December ’07 to 5th January 2008 Delivery: DOP Chennai ……. Redelivery: DLOSP Mumbai ….. Load Port: Visakhapatnam (Vizag) Disport: Mumbai…. Intended cargo: Iron Ore…”

Load Port: Visakhapatnam (Vizag) Intended cargo: Iron Ore…”

Load Port: Visakhapatnam (Vizag)

[5]On 26 December 2007 the Charterer informed the Owner that:

“……due to Maoist and Naxai Insurgency in Orissa and Andhra Pradesh our cargo movement to the port of Vizag has been seriously affected. Consequently there will be no more cargo available by the time MV Sabrina 1 arrive at Vizag. View above due to circumstances beyond our control we regretfully have to cancel the above noted fixture.”

[6]On 27 December 2007 the Owner replied:

“We have read Chrtrs msg cancelling our fixture and accept their repudiatory breach of our fixture. We are now looking for alternative employment for vsl upon completion present business. We have looked at current market and only gainful employment we can see is in South America. So in order to mitigate our claim for damages for whole Ispat TC earnings we have to ballast to South America and hopefully find a profitable fixture there. Obviously chrts obliged to cover our ballasting costs but we expect to find ok fixture there so such a trip is best way to mitigate. We shall let you know as soon as vsl fixed for next business.”

[7]The vessel was not refixed until 15 January 2008. The Owner therefore claimed damages of US$802,725 being the hire which would have been earned on the 12 day time charter trip agreed with the Charterer.

[8]On 12 November 2008 the Owner obtained a Rule B attachment in New York as a result of which sums totalling US$945,282 were attached. The attachment was vacated on the application of the Charterer and the funds were released. But on 29 December 2008 the funds were again attached and on a further application by the Charterer the second order was vacated. The judge granting the second vacation declared herself “awestruck” by the Owner’s conduct. In the arbitration the Charterer counterclaimed a sum in excess of US$1m. representing the attached sums.

The arbitrators’ decision

[9]After written submissions had been exchanged a hearing took place on 20 and 21 January 2010 at which the Owner and Charterer were represented by solicitors and counsel. The arbitrators published their award on 5 March 2010. A majority of the arbitrators (Mr. Simon Gault and Mr. Timothy Marshall) held that the Owner’s claim succeeded in the sum of US$802,725 and dismissed the Charterer’s counterclaim. The reasoning of the tribunal was that the charterparty was a time charter and so, although the intended cargo was not available at Vizag because of “enemy activity” within clause 16 of the NYPE form, the Charterer was obliged to find an alternative lawful cargo. The Charterer had made no attempt to do so but had simply cancelled the charterparty. In any event a cargo of iron ore was available at Vizag after 7 January 2008. The majority further held that there had been no unreasonable failure to mitigate the Owner’s loss and so awarded damages equal to the hire which would have been paid for the estimated duration of the charterparty. The tribunal dismissed the counterclaim on the grounds that neither the first nor second attachment proceedings in New York were a breach of the arbitration clause in the charterparty. The dissenting arbitrator (Mr. Abid Bilgrami) would have dismissed the Owner’s claim on the ground that the Owner had failed to mitigate its losses.

[10]The disagreement between the arbitrators concerned the evidence of a Mr. Heward, who had been called by the Owner as a witness on the question of mitigation and had been cross-examined. The dissenting arbitrator considered that Mr. Heward’s evidence was in some respects untrue and unreliable. By contrast, as accepted by Mr. Nigel Cooper QC, counsel for the Charterer, the majority accepted Mr. Heward’s evidence. The majority recounted his evidence in detail between paragraphs 56 and 70 of their Reasons and summarised the Charterer’s challenge to this evidence between paragraphs 84 and 91. The majority considered the disputed question of mitigation between paragraphs 108 and 125 and concluded that the Owner had not acted unreasonably in mitigating its loss.

The Charterer’s challenge pursuant to section 68

[11]Having lost the arbitration the Charterer has sought to challenge the award on the grounds of several “serious irregularities”. No less than 8 such irregularities were alleged in the Arbitration Claim Form and developed in counsel’s skeleton argument. Whilst Mr. Cooper formally maintained all of these allegations he recognised that some could not be maintained (for example, those which suggested that the tribunal had failed to give appropriate weight to certain evidence) but invited the court to bear all the allegations in mind when considering those complaints which were seriously maintained.

Mitigation

[12]The Charterer said that the tribunal’s approach to the question of mitigation was flawed. In his oral submissions Mr. Cooper identified the serious irregularity relied upon as being a failure to address the concerns raised by the dissenting arbitrator as to the reliability of Mr. Heward’s evidence.

[13]This alleged serious irregularity was said to be within section 68(2)(a), namely, a failure by the tribunal to comply with its duty under section 33 to act fairly, and within section 68(2)(d), namely, a failure by the tribunal to deal with all the issues that were put to it.

[14]Mr. Kenny, counsel for the Owner, referred me to Fidelity Management SA v Myriad International Holdings BV

[2005] 2 Lloyd’s Reports 508

in which Morison J. agreed with Colman J. in World Trade Corp. v Czarnikow Sugar

[2005] 1 Lloyd’s Reports 422

that arbitrators did not have to deal with every argument on every point raised but only with essential issues and that section 68(2)(d) was confined in its application to essential issues as distinct from the reasons for determining them. Morison J. added however that the duty of the court was to apply the clear wording of section 68 without any judicial gloss, in the light of the scheme of the Act and its legislative purpose. I respectfully agree with the statement by Morison J. as to the court’s duty but also regard Colman J.’s comments as helpful guidance as to the ambit of section 68(2)(d). To the same effect is the guidance of Christopher Clarke J. in Van der Giessen-de-Noord v Imtech Marine

[2009] 1 Lloyd’s Reports 273

at paragraph and 14:

“It is likely to be a serious irregularity under section 68 for the tribunal to fail to deal with all essential issues. But it may do so concisely. A failure to deal with an issue is not the same as a failure to set out the reasoning for rejecting a particular argument. Such a failure is remediable under section 70(4).”

[15]The reference by Christopher Clarke J. to section 70(4) explains why, in applying section 68(2)(d), the court has distinguished between dealing with an issue and setting out the reasons for the tribunal’s decision. Under section 70(4) a party who has made an application under sections 67, 68 or 69 may, where the award does not contain the tribunal’s reasons or not in sufficient detail to enable the court to consider the application, apply to the court for an order that the tribunal state its reasons in sufficient detail for that purpose. No such application was made in this case.

[16]With that guidance in mind I have concluded that the failure by the majority to address the concerns raised by the dissenting arbitrator does not amount to an irregularity within section 68(2)(a) or (d). There was put before the tribunal a clear issue as to whether the Owner had acted reasonably to mitigate its loss. That was an essential issue. It was the duty of the tribunal to deal with and decide that issue. The majority did so. The issue is addressed at paragraphs 108-125 of their Award. They concluded that the Owner had taken reasonable steps to mitigate its loss and gave clear reasons for their decision. It is true that they did not refer to the concerns of the dissenting arbitrator as to the evidence of Mr. Heward or explain why they found his evidence reliable. However, they were under no obligation to do so, although in circumstances where an attack had been made on Mr. Heward’s credibility it might have assuaged the Charterer’s concerns as to his credibility had they done so. The majority’s duty was to decide the important issue of mitigation which had been put to the tribunal and the majority did so. I do not therefore consider that there is an irregularity within section 68(2)(d). Nor do I consider that there was an irregularity within section 68(2)(a). The majority did not fail to comply with its duty to act fairly by not referring to the concerns of the dissenting arbitrator.

[17]Even if, contrary to my view, the majority’s failure to address the concerns of the dissenting arbitrator were an irregularity it would not be a serious irregularity which has caused or will cause substantial injustice to the Charterer; see the terms of section 68(2). The majority reached a clear view on the factual issue which they had to resolve, namely, whether the Owner took reasonable steps to mitigate its loss. There is no reason to suppose that had the majority specifically addressed the concerns of the dissenting arbitrator in their reasons they would have reached a different view. The failure to address the concerns of the dissenting arbitrator cannot therefore be shown to have caused a substantial injustice to the Charterer. It is because of the need for a substantial injustice to be shown that, as explained in the DAC Report, quoted by Cresswell J. in The Petro Ranger

[2001] 2 Lloyd’s Reports 348

at p.351:

“Section 68 is designed as a longstop, only available in extreme cases, where the tribunal has gone so wrong in its conduct of the arbitration in one of the respects listed in s.68, that justice calls out for it to be corrected. ”

The application for specific disclosure

[18]Prior to the hearing of the arbitration the Charterer had made an application for specific disclosure of several categories of documents which were said to be relevant to the mitigation issue. It was discussed in correspondence. Some further disclosure was given and some was refused on the grounds that it was not relevant. On 13 January 2010, one week before the hearing, the tribunal said this concerning the application:

“As to the [Charterer’s] application for further disclosure, we adjourn this application to be dealt with at the hearing. We note that the application is for documents relating to the Claimants’ case on damages. As we understand the submissions advanced by Messrs. Ince & Co. the Claimants contend that they have complied with their obligation to disclose all relevant documents in their possession custody or control. As we understand it, Mr. Heward will be attending the hearing and will be available for cross-examination. If the Respondents wish to test that contention by cross-examining him on the basis that the Claimants have failed to disclose relevant documents they may do so. If we find that there has been such a failure, we will have to consider how to proceed in the light of the parties’ submissions. One possibility is that we will proceed to make an award on liability and adjourn the issue of damages to a subsequent award. In this event, we may order the Claimants to pay the costs caused by any failure to give proper disclosure.”

[19]Mr. Swinnerton, the solicitor acting for the Charterer, has stated that at the commencement of the hearing the Charterer made clear that its application for specific disclosure was maintained. On the second day of the hearing Mr. Heward was cross-examined. There is a dispute between Mr. Swinnerton and Mr. Stockwood, the solicitor acting for the Owner, as to what was said concerning the application on that day. Mr. Swinnerton recollects that the Charterer clarified that whilst the application was maintained the Charterer would, in the event that the tribunal ruled against the Charterer’s application, invite the tribunal to draw the appropriate inferences. Mr.Stockwood recollects that on the second day the Charterer was asked whether the application was pursued and counsel replied that the Charterer was not asking the tribunal to make a further order but would invite the tribunal to draw inferences where appropriate from the Owner’s failure to produce documents. By the end of the hearing there was no ruling. Mr. Swinnerton states that no objection to that failure was raised because the Charterer was under the impression from the tribunal’s response of 13 January that if, after deliberating on the oral evidence the tribunal remained concerned about the application, the tribunal would grant it or at least invite further submissions from the parties as to how to proceed.

[20]In their award the majority do not refer to the application but note, at paragraph 109, that “there were also valid criticisms about the lack of proper and timely disclosure of relevant documents from the [Owner]. These factors all support the [Charterer’s] criticism of the Owner’s behaviour, but do not establish by themselves, that the Owners had failed to take proper steps to mitigate their losses.”

[21]The dissenting arbitrator noted in paragraph 29 of his dissent that there were “several grey areas” in Mr. Heward’s evidence, that he had suggested to his colleagues that the tribunal might exercise its power under section 34(2)(g) to take the initiative in ascertaining the facts “and that we should exercise this power to seek clarification of facts as also order disclosure of further relevant documents from [the Owner] in order to be able to make a more authoritative Award.”

[22]He then set out those documents he would call for, which were more extensive than those sought by the Charterer. He noted that his colleagues declined to exercise their powers under section 34 because the reference had proceeded to a hearing on the adversarial basis with both parties represented by experienced solicitors and counsel.

[23]The Charterer alleges that it was a serious irregularity within sections 68(2)(a) and (d) for the tribunal to fail to deal with the application for specific disclosure.

[24]It is necessary to decide whether the application for specific disclosure was maintained at the end of the oral hearing. On this there is a difference of recollection. I consider that it is more likely than not that the recollection of Mr. Stockwood is correct, namely, that the Charterer chose not to invite the Tribunal to make an order but to draw inferences against the Owner where that was appropriate. My reasons for so concluding are: i) The detailed award makes no reference to the application. Had it been maintained it is likely that reference to it would have been made. This is particularly so in circumstances where the award notes that there were valid criticisms about the Owner’s disclosure. ii) The dissenting arbitrator also made no reference to the Charterer’s application. On the contrary he suggested that the tribunal exercise its powers under section 34(2)(g). Had there been an extant application for specific disclosure it is likely that he would have referred to it. He contemplated an order for disclosure but one made pursuant to section 34(2)(g). The categories of documents referred to were wider than those sought by the Charterer. Had he been referring to the Charterer’s application it is likely that he would have referred to the categories sought by the Charterer. The majority declined to make an order under section 34(2)(g) on the grounds that such an order was not appropriate in an adversarial arbitration in which the parties had been represented by solicitors and counsel. This would not have made sense had the dissenting arbitrator been considering the Charterer’s application for specific disclosure.

[25]In those circumstances the allegation of an irregularity must fail. By the end of the hearing the tribunal was not required to rule on the application for specific disclosure but to draw adverse inferences where appropriate. The tribunal had expressly in mind “valid criticisms about the lack of proper and timely disclosure of relevant documents” by the Owner but nevertheless held that the Owner did not act unreasonably in its attempts to mitigate its losses. I am therefore satisfied that there was no serious irregularity within section 68(2)(a) or (d).

The admission of Mr. Heward’s second statement

[26]This statement, produced on the eve of the hearing, was admitted by the tribunal despite protests by the Charterer. The tribunal said that the witness could be cross-examined on the second day of the hearing. The Charterer complains that there was insufficient time to prepare for such a cross-examination and that, in circumstances where the Owner had failed to disclose relevant documents, an effective cross-examination could not be prepared. It was therefore said that the tribunal had breached its duty under section 33 to act fairly and to give the Charterer a reasonable opportunity of dealing with the Owner’s case.

[27]The decision by the tribunal was a case management decision. There is no complaint that the tribunal failed to consider the matters which were relevant to such a decision. It is most unlikely that the tribunal failed to consider whether counsel would have a reasonable opportunity to read and consider Mr. Heward’s second statement before cross-examining him on the second day. As to the absence of the disclosure sought by the Charterer the cross-examination was always going to be conducted in the absence of such documents; see the tribunal’s letter dated 13 January 2010. Indeed that is always and necessarily the case where a party at trial cross-examines a witness about an alleged failure to disclose relevant documents.

[28]I am therefore satisfied that the tribunal’s decision to admit the second statement of Mr. Heward was not a serious irregularity within section 68(2)(a).

[29]I have now dealt with those allegations of serious irregularities which were the subject of Mr. Cooper’s oral submissions. The application notice went further but in so far as it complained about the tribunal’s approach to the evidence such matters cannot amount to an irregularity, as Mr. Cooper realistically accepted. In so far as it criticised the tribunal’s failure to deal with an argument based on The Achilleas

[2008] 2 Lloyd’s Reports 275

and to decide whether the Owners’ conduct in seeking a Rule B attachment in New York for a second time was unreasonable he further accepted that these matters could more sensibly be determined under the section 69 application. I have considered Mr. Cooper’s submission that these matters should be borne in mind when determining the merits of the Charterer’s other complaints of serious irregularities. However, in my judgment they do not advance or improve those other complaints.

[30]For these reasons the challenge to the award under section 68 of the Arbitration Act 1996 must be dismissed.

The Charterer’s appeal pursuant to section 69

[31]Leave to appeal was given on three questions of law.

Construction of the charterparty

[32]The first question of law was expressed in these terms:

“In relation to a charterparty contained in a fixture recap incorporating by reference an NYPE time charter form, is the form chosen by the parties determinative of the true nature of the charterparty and, in particular, to what extent can the background matrix, fixture recap and voyage instructions inform the construction of the charterparty.”

[33]This formulation of the question does not identify with clarity the precise question of law which the Charterer wishes the court to determine. The question was intended to enable the Charterer to challenge the decision of the Tribunal (in paragraphs 100-107 of the Award) that performance by the Charterer of its obligations under the charterparty had not been made impossible by insurgent activity. The Tribunal’s reasoning was that a time charter trip is a time charter and that therefore, where the Charterer could not load its intended cargo at the intended load port of Vizag because of insurgent activity, the Charterer was obliged to find an alternative lawful cargo. The Charterer submits that, properly construed, the charterparty was “a voyage charter or at least a charter limited to a very specific trip only” with the consequence that if the voyage or specific trip was not possible then performance of the charter was not possible. There is no dispute between counsel that the correctness of the tribunal’s decision can be reviewed by the court pursuant to the leave which has been granted.

[34]I am reluctant to analyse and discuss the tribunal’s decision at length because, on the facts found by the tribunal, even if the Charterer were right in saying that the only laden voyage permitted was a voyage from Vizag to Mumbai carrying iron ore the tribunal would still have found in favour of the Owner because it held (in paragraph 106) that such a voyage was possible in early January 2008, after the disruption caused by insurgents had ended on 7 January. There is no appeal against that finding and in any event it does not appear to me to be wrong in law. The delay involved in waiting for disruption to end on 7 January 2008 could not have been a frustrating delay. Mr. Cooper suggested that in some way the estimate in the fixture note of the duration of the time charter trip, that is, about 12/15 days without guarantee, would have prevented the Charterer from making use of cargo which became available after 7 January. But there was no validity in any such argument. The estimate had to be given in good faith but was not of any other contractual significance.

[35]In those circumstances I shall deal shortly with the question of law on which leave was given. It is well established that where a voyage charter provides for a voyage from a port to be nominated by the charterer and the charterer nominates a particular loadport then he has neither the right nor the obligation to make any different nomination. It is equally well established that that doctrine of election does not apply to a time charter which entitles the charterer upon paying the hire to require the vessel to visit any port within the stated trading limits, subject to any express agreement to the contrary; see The Aragon

[1975] 1 Lloyd’s Reports 628

and The Jasmine B

[1992] 1 Lloyd’s Reports 39

[36]The tribunal considered the terms of the fixture note in question and held as follows:

“103. On the point of construction, we do not agree with the [Charterer] that to describe a cargo as an intended cargo in a time charter recap is the same as exercising an option so that the cargo cannot be changed without the consent of the [Owner]. This position is not changed by the giving of voyage instructions which repeat the recap term concerning the intended cargo. Similarly, the issue of voyage instructions naming the loadport does not mean that that port is written into the contract and cannot be changed…………” “105. A charter for time charter trip is, in some ways, a hybrid but it is still a time charter, on a time charter form, and not a voyage charter. If the intended cargo could not be lifted at the intended port, due to its unavailability there because of enemy activity within the meaning of clause 16, then the [Charterer] had the contractual obligation to try to find an alternative lawful cargo. ……”

[37]It was submitted that, construing the charterparty in accordance with the principles described by Lord Hoffman in ICS v West Bromwich Building Society

[1998] 1 WLR 896

, the parties had at all times contracted with a specific trip in mind (Vizag to Mumbai) and also with a specific cargo in mind (ore). Reliance was placed on the background fact that the Charterer habitually took ore from Vizag to Mumbai and that clause 36 of the previous charter, incorporated by reference into the fixture recap, expressly provided for a trip from Vizag to Mumbai. It was submitted that once the relevant final details had been nominated, as they were on 24 December, the Charterer had neither the right nor the obligation to make any other nomination.

[38]The fixture recap provided for a time charter trip via safe ports and incorporated the terms of the previous charterparty, clause 36 of which expressly provided for one time charter trip from Vizag to Mumbai lawfully trading between safe port(s). Thus the trip referred to in the fixture recap was a trip from Vizag to Mumbai via safe ports. Mr. Kenny submitted that meant that the Charterer’s power to give instructions as to the employment of the vessel pursuant to clause 8 of the New York Produce Exchange Form was limited to ports on the route from Vizag to Mumbai carrying any lawful cargo (subject to certain stated exceptions in the previous charterparty). Mr. Cooper submitted that the Charterer’s powers were limited even further. The Charterer could only employ the vessel on a voyage from Vizag to Mumbai carrying iron ore. He relied on the reference to clause 5 in the fixture recap to “cargo intention….iron ore” and the reference in clause 10 of the fixture recap to “Chrtrs intended voyage” which must, given the background, have been reasonably understood to mean Vizag to Mumbai, those being the Charterer’s habitual instructions.

[39]I agree with the conclusion reached by the arbitrators. Although the fixture note refers to the “intended voyage” and to the “cargo intention” of iron ore those references are to the voyage and cargo intended by the Charterer. I do not regard those references as being apt to define the time charter trip as being only a voyage from Vizag to Mumbai carrying iron ore. They merely identify what the Charterer’s intention was at the date of the fixture recap. Clause 36 of the previous charter did not provide for a voyage from Vizag to Mumbai with Vizag as the only port at which cargo could be loaded but for a time charter trip from Vizag to Mumbai “trading between safe port(s)”. Clause 36 therefore identifies the route to which the Charterer is restricted but permits the Charterer to direct the vessel to other safe ports on that route. Similarly, although the Charterer intended to employ the vessel in carrying iron ore, the terms of the previous charterparty, which were incorporated into the fixture note, entitled the Charterer to employ the vessel in carrying any lawful cargo subject to certain stated exceptions. The voyage instructions issued on 24 December were consistent with cargo which had been stated to be the Charterer’s intended cargo but cannot affect the construction of the fixture note agreed three days earlier. Since the charter was a time charter rather than a voyage charter I do not consider it appropriate to regard the giving of employment directions pursuant to clause 8 of the NYPE as the making of an irrevocable election; see The Aragon.

[40]In any event, if I and the arbitrators are wrong, the result of the arbitration would not have been any different for the reason I have already explained.

Rule B attachment and the London arbitration clause

[41]The second question of law on which leave to appeal was given related to the Charterer’s counterclaim and was in the following terms:

“If parties are allowed to bring security proceedings in foreign courts to secure sums in dispute in English arbitration, what is the permissible ambit of such foreign security proceedings, and in particular, in relation to any limiting criterion based on reasonableness, what does the reasonableness relate to.”

[42]The tribunal held that neither the first nor the second Rule B attachment in New York was a breach of the arbitration clause which was incorporated into the fixture note. That clause provided that “any dispute arising out of or in connection with this Contract shall be referred to arbitration in London…”

[43]The tribunal said:

“Claimants and Plaintiffs have for many years and still do, arrest vessels and bank accounts worldwide in order to obtain security for an arbitration claim in London. It has never been held that to do so, that is to say, to obtain ancillary relief, is a breach of an arbitration clause.”

[44]The Charterer alleged that the second Rule B attachment was unreasonably obtained, an assertion supported by the New York judge who set it aside describing the Owner’s conduct as “outrageous” and describing herself as “awestruck” by the Owner’s conduct. The Charterer further maintained that to obtain security unreasonably was a breach of the arbitration clause, relying upon a passage in the judgment of Jonathan Hirst QC sitting as deputy Judge of the High Court in The Kallang No.2

[2009] 1 Lloyd’s Reports 124

at para.78:

“These authorities establish that the English court will not restrain a party to an English arbitration clause from arresting a vessel in another jurisdiction where the sole purpose of the arrest is to obtain reasonable security for the claim to be arbitrated or litigated in England……Where however the claimants’ actions go beyond simply seeking reasonable security for the arbitration proceedings, there is a breach of the arbitration clause which the English court will restrain.”

[45]The Charterer said that to apply for security in an unreasonable manner is to go beyond simply seeking reasonable security. The tribunal disagreed and held that there had been no breach of the arbitration clause. Mr. Cooper submitted that this conclusion was wrong in law.

[46]In my judgment the tribunal was right to conclude that there had been no breach of the arbitration clause. It is well established that ancillary applications for security are not a breach of an arbitration clause so long as there is no attempt to have the merits of the dispute heard other than by the agreed arbitral tribunal; see The Rena K

[1978] 1 Lloyd’s Reports 545

, Petromin SA v Secnav Marine Ltd.

[1995] 1 Lloyd’s Reports 603

and In re Q’s Estate

[1999] 1 Lloyd’s Reports 931

. Consistently with these authorities Jonathan Hirst QC concluded in The Kallang No.2 that although the arrest in that case was a conservatory arrest and so not a breach of the London arbitration clause the arresting party insisted that the vessel would only be released from arrest against a bank guarantee answerable to Sengalese jurisdiction. That further conduct was a breach of the London arbitration clause because it went well beyond seeking security. It was an attempt to achieve Sengalese jurisdiction in place of London arbitration. It was in that context that Jonathan Hirst QC said that “Where however the claimants’ actions go beyond simply seeking reasonable security for the arbitration proceedings, there is a breach of the arbitration clause which the English court will restrain.”

[47]Relying upon that dictum the Charterer contended that where a person seeks security for a claim in London arbitration in an unreasonable manner he acts in breach of the arbitration clause. That contention ignores the long established authorities which show that ancillary claims for security are not a breach of an arbitration clause so long as there is no attempt to have the merits of the dispute determined other than in arbitration. Further, it seeks to construe the phrase “reasonable security” as used by Jonathan Hirst QC in The Kallang No.2 without reference to the context in which it was used. In the present case the conduct of the Owner in obtaining a Rule B attachment for a second time may well have been unreasonable as a matter of New York law but there is no evidence that the Owner was seeking to have the merits of its claim decided elsewhere than in London arbitration. There was therefore no breach of the London arbitration clause.

[48]The tribunal therefore did not err in law in concluding that there had been no breach of the arbitration clause.

Remoteness and The Achilleas

[49]The third question of law on which leave to appeal was given was described in these terms:

“In relation to the particular facts and conduct by the [Charterer] which gave rise to a particularly large potential liability, was the Owner precluded from recovering on the ground of remoteness based on assumption of responsibility set out by the House of Lords in The Achilleas [2008] 2 Lloyd’s Reports 275 ?”

[50]Mr. Kenny submitted that this matter was not addressed by the tribunal because, although it had been mentioned in the Defence Submissions prepared by the Indian lawyers acting on behalf of the Charterer, it was not referred to in the written opening prepared by counsel for the Charterer or in his closing submissions. The agreed list of authorities did not include The Achilleas and the tribunal did not refer to it. In those circumstances (which were not challenged by Mr. Cooper) Mr. Kenny submitted that the court had no jurisdiction to deal with this question because it was not a question of law arising out of the award as required by section 69(1). He might also have said that it was not a question which the tribunal was asked to determine as required by section 69(3)(b). In response Mr. Cooper submitted that since leave to appeal had been given on this question the court had jurisdiction to deal with it.

[51]I will assume that Mr. Cooper is correct on this procedural issue without deciding it.

[52]The effect of The Achilleas on the law of remoteness of damages in contract has been considered by Hamblen J. in The Sylvia

[2010] 2 Lloyd’s Reports 81

. No challenge was made to his analysis or conclusions. He referred to the orthodox approach based upon a consideration of whether a loss was a not unlikely result of the breach and to the broader approach based upon a consideration of whether a party would reasonably be regarded as assuming responsibility for a loss:

“40. In my judgment, the decision in The Achilleas results in an amalgam of the orthodox and the broader approach. The orthodox approach remains the general test of remoteness applicable in the great majority of cases. However, there may be "unusual" cases, such as The Achilleas itself, in which the context, surrounding circumstances or general understanding in the relevant market make it necessary specifically to consider whether there has been an assumption of responsibility. This is most likely to be in those relatively rare cases where the application of the general test leads or may lead to an unquantifiable, unpredictable, uncontrollable or disproportionate liability or where there is clear evidence that such a liability would be contrary to market understanding and expectations. 41. In the great majority of cases it will not be necessary specifically to address the issue of assumption of responsibility. Usually the fact that the type of loss arises in the ordinary course of things or out of special known circumstances will carry with it the necessary assumption of responsibility. ……… 48. The orthodox approach therefore remains the "standard rule" and it is only in relatively unusual cases, such as The Achilleas itself, where a consideration of assumption of responsibility may be required. 49. In my judgment, it is important that it be made clear that there is no new generally applicable legal test of remoteness in damages. It appears that in a number of cases this is being argued and that decisions are being challenged for failing to recognize or apply the assumption of responsibility test. This results in confusion and uncertainty. 50. In the vast majority of cases tribunals of fact can and should be able to apply the well established remoteness test with which they are familiar and which, in the vast majority of cases, works perfectly well.”

[53]In the present case the Owner claimed damages measured by the hire that would have been paid for the expected minimum duration of the time charter trip, namely, 12 days. In view of the majority’s decision on the question of mitigation there was nothing to be deducted from that hire. That measure of damages is consistent with the orthodox test of remoteness. It is the loss which parties would recognise as not unlikely to result from an early redelivery of the vessel by the Charterer and, to use Hamblen J’s language, “carries with it” an assumption of responsibility by the Charterer for such loss. There is in my judgment no basis upon which it could be said that such measure of damages was contrary to the market understanding or expectations. Mr. Cooper submitted that “no reasonable party would at the time of contracting consider that the Charterer had assumed liability in respect of the Owner ballasting to the other side of the world for 25 days, earning nothing, and fixing a substitute charter nearly three weeks after breach. This would result in an unpredictable and disproportionate liability.” However, there was no finding to this effect and in any event damages were not awarded for a 25 day ballast voyage but for the minimum 12 day duration of the time charter trip. It is true that during that period or for a great part of it the vessel was ballasting to South America but the Charterer failed to prove that the Owner had not taken reasonable steps to mitigate its loss. There is therefore no reason to suppose that this was one of those relatively unusual cases where the question of assumption of responsibility had to be specifically considered. Counsel for the Charterer at the arbitration was right to make no submissions as to The Achilleas.

[54]There was therefore no error of law by the majority in failing to hold that the Owner was precluded from recovering on the ground of remoteness based on assumption of responsibility as set out by the House of Lords in The Achilleas.

[55]For these reasons I have concluded that the applications under sections 68 and 69 must be dismissed.