Nestor Maritime SA v Sea Anchor Shipping Co Ltd [2012] EWHC 996 (Comm)

Case No 2012 FOLIO 144[2012] EWHC 996 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 20/04/2012
Before
MR JUSTICE EDER
Between
NESTOR MARITIME S.A.ClaimantSEA ANCHOR SHIPPING CO. LTDDefendant
Michael Bloch QC and Tom Roscoe (instructed by Ince & Co) for ClaimantTimothy Hill QC and Leigh Williams (instructed by Clyde & Co) for DefendantHearing Hearing date: 23 March 2012
JudgmentMr Justice Eder :Introduction
[1]This is an application by Nestor Maritime SA (the “Sellers”) for an extension of time under s.80(5) of the Arbitration Act 1996 (the “1996 Act”) and CPR Part 62.9 to bring a challenge under s.68(2)(g) of the 1996 Act against the award of the Tribunal dated 12 May 2011 in an arbitration between the Sellers and Sea Anchor Shipping Co Ltd (the “Buyers”). The latter section in effect gives a party to arbitral proceedings the right to challenge an award on the ground of serious irregularity which is, for present purposes, defined as follows:
“(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 – (g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy…”
As appears below, it is the Sellers’ submission that the award was here obtained by fraud and that although the present application is brought out of time the court should nevertheless extend such time.[2]The underlying dispute in the arbitration concerned the sale of an oil tanker in 2007 by the Sellers to the Buyers. In essence, it was the Buyers’ case that the Sellers misrepresented the condition of the vessel. The Sellers commenced arbitration proceedings against the Buyers for a declaration of no-liability but lost. In the event, the Tribunal upheld the Buyers’ counterclaim on the basis that the Sellers had fraudulently and negligently misrepresented the condition of the vessel. By the award, the Sellers were ordered on the Buyers’ counterclaim to pay the sums of US$4,838,631 and €20,565 to the Buyers.[3]Following the publication of the award, the Sellers sought (unsuccessfully) both to challenge and to appeal the award under s.68 and s.69 of the 1996 Act. In addition, I should mention that there are other proceedings (both civil and criminal) relating to the dispute between the parties and still pending before the Greek courts.[4]The present application is a new discrete challenge issued on 27 January 2012. Under s.70(3) of the 1996 Act, any such challenge is of right but must be brought within 28 days of the date of the award. In the present case, that period of time expired on or about 10 June 2011. Thus the present challenge was brought more than 6 months after the expiry of this time limit. However, it is common ground that the court has a power to extend such time limit under s.80(5) of the 1996 Act and pursuant to CPR 62.9. Hence the present application to extend time.[5]This application was supported by a witness statement also dated 27 January 2012 by Paul Herring of Ince & Co. (the Sellers’ solicitors) and four further witness statements all dated 26 January 2012 by Dimitrios Gkritzapis (“Gkritzapis 1”), Nikolaos Nakos, Evangelos A Bardakos and Georgios Pavlis. Shortly thereafter, a further statement dated 2 February 2012 by Capt Bardakos was served. Following directions made by the court, there was served in opposition to the application a witness statement dated 24 February 2012 by Leigh Williams of Clyde & Co (the Buyers’ solicitors). This prompted a further round of witness statements on behalf of the Sellers from Mr Gkritzapis (“Gkritzapis 2”) and Capt Bardakos (both dated 8 March 2012) and two new statements from Efthimios Angelopoulos and Andreas Pagalos (dated 8 and 14 March respectively).

Summary of the Sellers’ case under s.68(2)(g) of the 1996 Act

(g) of the 1996 Act

[6]Central to the Buyers’ case in the arbitration was the Report and the Supplement to it produced by a ship-surveying company called “ANCO”, following a survey of the vessel in Tuzla, Turkey, in July-September 2007 (shortly after the sale of the vessel). The Report dated 28 September 2007 and the Supplement produced in early January 2008 contained, or purported to contain, thickness measurements of key steel structural elements of the vessel. By comparing those measurements to others contained in a similar report commissioned by the Sellers in 2005, it was the Buyers’ case (upheld by the Tribunal), that the rates of corrosion the comparison revealed were too great to have occurred in reality; leading to the conclusion that the Sellers had fraudulently procured the 2005 report to over-state the true condition of the vessel.[7]In essence, the Sellers now seek to allege that the thickness measurements in the Supplement were fabricated to the knowledge of the Buyers; that they were then fraudulently presented to the Sellers and fraudulently relied upon in the arbitration by the Buyers when the Buyers knew that those figures were false; and that accordingly the award in favour of the Buyers was procured by the Buyers’ fraud. That is the essence of the Sellers’ allegation in support of the challenge they seek to make under s.68 of the 1996 Act.[8]In particular, the Sellers advanced the following submissions:(i) The fact that the Supplement had been produced after, and in addition to, the Report was common ground in the arbitration. The Supplement (comprising 35 pages of purported measurements of steel thicknesses) related to areas of steel on the vessel that were replaced as part of the works that were carried out by the Buyers in Tuzla. Significantly, these pages included measurements of the “underdeck longitudinals” (structural beams running under the deck of the ship from fore to aft), which were the main items of the vessel’s structure considered in the arbitration.(ii) The Buyers’ position during the arbitration was that ANCO (who produced both the 2007 Reports and similar reports in 2005 and 2003) had inserted numbers in the Report higher than those in fact recorded; and that the Supplement corrected this inaccuracy in that it provided the accurate, lower, measurements in fact taken by the ANCO operatives. While the Buyers sought to suggest that this fact was adverse to the Sellers, the explanation did not give rise to any suspicion of collusion between ANCO and the Buyers. To the contrary, the Buyers’ explanation suggested that they had caught ANCO’s error, or possible impropriety, and corrected it. The Sellers were provided an explanation by ANCO which did not give cause for concern: see Capt Bardakos’ first statement at §9 and Mr Angelopoulos’ statement at §§18-21.(iii) Gkritzapis 1 as corroborated in important respects by the witness statement of Mr Nakos sets out a quite different version of events surrounding the production of the Report and the Supplement than advanced by the Buyers in the arbitration. It is to be noted that, in many cases, allegations of fraud are made by way of inferences to be drawn from the evidence. The Sellers’ case is stronger than this; they now have two detailed statements from the individual who was integral in producing the fabricated documents which were fraudulently relied upon, explaining how the fabrication was carried out. The Sellers’ allegation is a direct allegation of fraud - not an allegation which relies on inferences to be drawn from the documents or other evidence.(iv) Mr Gkritzapis was the technician (employed by ANCO) who carried out the UTM measurements on the vessel between July and September 2007. As he explains in Gkritzapis 1: (a) His usual practice, which was known to the Buyers’ representatives and the DNV surveyors, was not to record thickness measurements for areas of steel on the vessel which he marked to be replaced (§§38-41). (b) His instructions while on board the vessel were to mark for replacement (as a general rule) those areas of steel which were up to 0.4mm thicker than the “substantial” limit – i.e. up to 7.7mm in respect of the underdeck longitudinals. (The “substantial” limit being the thickness below which sections of steel required expensive annual inspection (7.3mm), and some way thicker than the “minimum allowable” thickness at which replacement was compulsory (6.8mm).) (§33) (c) The “clean drafts” of his drawings provided to ANCO for the purposes of producing the Report therefore did not have thickness measurements for the sections of steel to be replaced - but “blanks” were not acceptable in the final report. Consequently, “dummy” figures were inserted for those areas of steel marked for replacement in a range just below the “minimum allowable” thickness (6.8mm for the underdeck longitudinals) to meet Class’ requirement for “a number in each box”. These figures did not reflect the actual measurements taken and were ordinarily lower than the actual condition of the metal: §58 and §§57-60 of his second statement. (d) At the same time, Mr Gkritzapis was asked to produce a second set of drawings for John Davaris, at the instruction of Iordanis Melis (both employees of Queensway, the Buyers’ ship-managing agents) containing fabricated, and low, numbers for the areas of steel that had been replaced (§§48-51) .(v) Some two or three months after the production of the Report, Queensway requested that ANCO amend that report to include the fabricated figures on the second set of drawings produced by Mr Gkritzapis. The “Supplement” was produced on the basis of the fabricated numbers recorded by Mr Gkritzapis on the second set of drawings. The Supplement was then signed off by the Class society – DNV. (§§59-62)(vi) Mr Gkritzapis’ evidence in relation to how the measurements were actually carried out also contradicts the evidence of Murat Erzaim (the DNV surveyor supervising the UTM survey) in the arbitration to the effect that the 2007 measurements were taken in representative areas. Mr Gkritzapis confirms that the measurements (in fact improperly) were targeted in areas of localised corrosion, as the Sellers’ expert, Dr Kirby, suspected. (See Paul Herring’s Witness Statement at §§27-28.)(vii) This evidence flatly contradicts the case put forward by the Buyers in the arbitration; that the Report overstated the condition of the vessel, and this was corrected by the Supplement. Instead, on Mr Gkritzapis’ evidence, the Report already understated the condition of the vessel (in the sense that sections that were over the “substantial” limit were recorded as being below the “minimum allowable" limit), and the Supplement further understated the condition on the basis of fabricated figures.

Applicable legal principles

[9]The starting position is that the court should be reluctant to interfere generally, and under S.68(2)(g) in particular: Profilati v Paine Webber [2001] 1 Lloyd’s Rep 715 at 719-780; Thyssen Canada Ltd v Mariana Maritime S.A & Another [2005] EWHC 219 (Comm) per Cooke J at 13. The importance of finality in arbitrations is well recognised as a matter of policy underlying the 1996 Act: Thyssen Canada para 55. One important aspect of that general policy is s.73 of the 1996 Act which provides in material part:
“73.(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Part, any objection … (d) that there has been any other irregularity affecting the tribunal or the proceedings, he may not raise that objection later, before the tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection …”
[10]It follows that where a party knows of a serious irregularity but takes a deliberate decision to continue to take part in the proceedings without objection and takes the point only after losing the arbitration, such party will generally be precluded from raising such irregularity at that later stage. As stated by Cooke J in Thyssen Canada:
“Moreover, the expression “continues to take part in the proceedings” in section 73 is broadly worded and is designed to ensure that a party who believes he has grounds for objecting on the basis of serious irregularity should raise that objection as soon as he is, or reasonably ought to be, aware of it. He is not permitted to allow the proceedings to continue without alerting the Tribunal and the other party to a serious irregularity, which, in his view, renders the whole arbitral process invalid. As Moore-Bick J points out, this is not only to avoid a waste of time and expense but is based upon a more fundamental point of fairness and justice. It cannot be right for a party to participate in proceedings, which he believes to be fundamentally irregular, with the intention of taking advantage of any decision in his favour, whilst keeping up his sleeve an objection to an irregularity, which he will only produce in the event of an unfavourable decision.”
Such conduct can properly be characterised as an abuse of process: see Thyssen Canada at para 57.[11]Moreover, the effect of s.73 is that an objection to a serious irregularity may not be raised by a party after participating in the proceedings without taking objection, unless that party can show that at the time of participation the grounds for the objection were not known to him and he could not with reasonable diligence have discovered them: Rusal Gill & Duffus [2000] 1 Lloyd’s Rep 14 at 20-21; Thyssen Canada at para 18. If the respondent can show that the applicant took part in or continued to take part in the arbitral proceedings without objection, after the grounds of objection arose (as happened in the present case since the alleged facts which are the basis for the objection occurred almost 3 years before the hearing of the arbitration), the burden passes to the applicant to show that he did not know and could not with reasonable diligence have discovered those grounds at the time: Thyssen Canada at para 18.

Alleged fraud must be that of the Defendant

[12]The scope of s.68(2)(g) was considered by Aikens J in Elektrim SA v Vivendi Universal [2007] 1 Lloyd’s Rep 693 at [79-81]:
“…I agree with Moore-Bick J (as he then was) who stated in Profilati Italia Srl v Paine Webber Inc [2001] 2 Lloyd’s Rep. 715 at para 17, that it would be unwise to attempt to define all the circumstances when an award is "obtained by fraud" or "procured contrary to public policy" within section 68(2)(g). However, I note that section 68(2)(g) does not refer to the fraud of a party to the arbitration. On the face of the wording it would seem that the "fraud" referred to in the paragraph can be committed by anyone who is connected with the arbitration process. If this were right, then (for example) if it were proved that a witness for one side or another has committed perjury when giving evidence before the tribunal, that would be a "fraud" within para (g). If so then, if it were also proved that the perjured evidence resulted in the award being in favour of that party then, logically, the award would have been "obtained by fraud". 80. But I have concluded that this is not the correct construction of the words "obtained by fraud". It is a party to an arbitration that obtains an award in its favour or has one made against it. The words "obtained by fraud" must refer to anaward being obtained by the fraud of a party to the arbitration or by the fraud ofanother to which a party to the arbitration was privy. This fits in with the generalethos of the Act, which is to give the courts as little chance to interfere witharbitrations as possible. If this wording referred to the fraud of anyone that was involved in the arbitral process, whether or not the fraud was committed with the knowledge of the relevant party to the arbitration, then that would give unsuccessful parties carte blanche to apply to the court to set aside or remit an award. The unsuccessful party need only assert (for example) that a witness of the successful party had committed perjury (even without the knowledge of the successful party) and the award had as a result been in the favour of that party. It could then be asserted that the award had been "obtained by fraud", resulting in "substantial injustice"; therefore the award must be set aside or remitted.” (Emphasis added)
[13]I respectfully agree with those observations. It follows that it is not sufficient for the applicant merely to show that a witness who gave evidence during the arbitration lied or that there had been perjury and conspiracy to fabricate evidence on the part of one or more witnesses. S.68(2)(g) only applies where the award has been obtained by the fraud of a party to the arbitration or by the fraud of another to which a party to the arbitration was privy.

Extension of time

[14]It is common ground that the court has power to extend the time to bring the challenge under s.68 by virtue of s.80(5) of the 1996 Act which provides: “Where any provision of this Part requires an application or appeal to be made to the court within a specified time, the rules of court relating to the reckoning of periods, the extending or abridging of periods, and the consequences of not taking a step within the period prescribed by the rules, apply in relation to that requirement.” 15. The relevant rule in relation to s.80(5) is CPR Part 62.9, which provides: "(1) the court may vary the period of 28 days fixed by section 70(3) of the 1996 Act for (a) challenging the award under s.67 or 68 of the Act ..."[15]In Kalmneft v Glencore [2002] 1 Lloyd’s Rep 128, Colman J made the following remarks before setting out the considerations which would be relevant to any s.80(5) application to extend time. “52. ... Further, the relatively short period of time for making an application for relief under ss. 67, 68, 69 also reflects the principle of finality. Once an award has been made the parties have to live with it unless they move with great expedition. Were it otherwise, the old mischief of over long unenforceability of awards due to the pendency of supervisory proceedings would be encouraged. 53. At this point it is necessary to have in mind the general principle set out in s.1 of the 1996 Act:
“(1) the provisions of this Part are founded on the following principles, and shall be construed accordingly – (a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense; ...” 54. The reference to unnecessary delay is pertinent to identifying the relevant discretionary criteria …”
[16]Colman J set out the factors relevant to a s.80(5) application at [59] viz “(i) the length of the delay; (ii) whether, in permitting the time limit to expire and the subsequent delay to occur, the party was acting reasonably in all the circumstances; (iii) whether the respondent to the application or the arbitrator caused or contributed to the delay; (iv) whether the respondent to the application would by reason of the delay suffer irremediable prejudice in addition to the mere loss of time if the application were permitted to proceed; (v) whether the arbitration has continued during the period of delay and, if so, what impact on the progress of the arbitration or the costs incurred in respect of the determination of the application by the court might now have; (vi) the strength of the application; (vii) whether in the broadest sense it would be unfair to the applicant for him to be denied the opportunity of having the application determined.” denied the opportunity of having the application determined.”[17]In Nagusina Naviera v Allied Maritime Inc [2002] EWCA Civ 1147, Mance LJ, in reviewing the first instance decision, stated that the primary factors among those considered by Colman J in the Kalmneft case were factors (i) to (iii): [39]. Mance LJ said in relation to factor (vii) at [42]:
“Finally, as to factor (vii), general considerations of fairness, the judge must have had well in mind considerations of overall justice and fairness. They must, however, always be viewed in the particular context that Parliament and the courts have repeatedly emphasised the importance of finality and time limits for any court intervention in the arbitration process.”
[18]This approach was reiterated and adopted by Akenhead J in L Brown & Sons Ltd v Crosby Homes (North West) Ltd [2008] EWHC 817 (TCC), a case concerning a 66 day delay. At [32], Akenhead J said this in relation to the strength of the section 68 application. “…(c) The weight to be given to factor (vi) (the strength of the section 68 application) is not a primary factor. However, an intrinsically weak case will count against the application for extension whilst a strong case would positively assist the application. An application which is neither strong nor weak will not add significant weight to the application for extension of time.” S.73 of the Arbitration Act 1996 The Buyers’ case in relation to

S.73 of the Arbitration Act 1996

[19]On behalf of the Buyers, Mr Hill QC submitted that the Sellers’ challenge under s.68(2)(g) is, in effect, inevitably doomed by virtue of s.73(1)(d) of the 1996 Act which I have already quoted in relevant part and considered above. In particular, Mr Hill QC submitted that even assuming for present purposes that the alleged fraud was committed, the Sellers cannot satisfy the burden on them to show that they could not with reasonable diligence have discovered what they now say was a fraud by the Buyers. In particular, Mr Hill QC relied upon the following points:a. The Sellers had a close relationship with ANCO. It had used ANCO to carry out the 2003 and 2005 UTM surveys.b. According to Capt. Bardakos’ own evidence:(i) He spoke with Mr Angelopoulos, the head of ANCO, before the arbitration from “time to time”; and they spoke “about the arbitration”. Presumably, this would include the allegations being made by the Buyers that ANCO had been party to the fraud committed by the Seller and ANCO had produced false UTM reports in 2003 and 2005.(ii) Capt. Bardakos spoke with Mr Angelopoulos and asked permission for Mr Vastardis (who with Mr Nakos produced the 2005 Report) to give evidence; and Mr Angelopoulos agreed.(iii) Capt. Bardakos spoke with Mr Angelopoulos “either just before or at the very early stages of the arbitration” about the 2007 Report and why there were two versions; this conversation included a discussion about Mr Gkritzapis.(iv) At the time of the arbitration Capt. Bardakos recognised that there was “a tension” (to use his words) between the 2005 Report and the 2007 Report.(v) Mr Vastardis, who carried out the 2005 UTM survey in China in 2005, was called by the Seller to give evidence on its behalf. Mr Vastardis was assisted in 2005 by Mr Nakos (a fact Mr Nakos conveniently forgets to mention in his present witness statement). Mr Nakos also assisted Mr Gkritzapis at Tuzla to produce the 2007 Report.c. It is quite wrong for the Sellers now in this application to suggest that it did not challenge the accuracy of the 2007 Report at the arbitration because it had no reason to doubt it was done properly.d. The Sellers inexplicably chose not to call evidence from Mr Nakos or Mr Gkritzapis at the arbitration in June 2010 notwithstanding the so-called “tension” between the two reports and the fact that the ANCO operatives’ role (and in particular Mr Gkritzapis' role) was put squarely in issue in the Buyers’ witness statements for the arbitration. The case it was running at the arbitration was that the 2007 Report was inaccurate because the UTM readings had been taken in way of localised corrosion.e. As stated by Mr Williams, the Sellers' case in the arbitration was that the 2005 UTM survey had been done perfectly properly. Its apparent incompatibility with the 2007 UTM survey was to be explained, they argued, on the grounds that it was the 2007 Survey that had not been done properly. In particular, the readings were taken only in areas that were subject to localised corrosion that was unrepresentative of the general condition of the vessel. Moreover, the Sellers’ expert, Dr Kirby, suggested in his report that one logical explanation for the incompatibility between the 2005 and 2007 UTM survey results was that the 2007 UTM survey results had been fabricated. The Buyers specifically addressed this contention with witness evidence from the senior DNV surveyor in Tuzla, Mr Murat Erzaim. Mr Erzaim was cross-examined in some detail about how the UTM measurements were taken and, indeed, how the record of the UTM measurements was created. Mr Erzaim gave evidence at the arbitration about that topic which goes to the very heart of the new s.68 challenge. Mr Davaris was also cross-examined at some length about how the UTM readings were recorded. That the 2007 UTM survey readings and the 2007 UTM survey supplemental report were topics that were under scrutiny by the Sellers is also confirmed by what the Sellers said in their closing submissions in the arbitration. For example, "The circumstances surrounding the revised set of measurements remain obscure and are discussed further below. Buyers have failed to proffer any real explanation" (para 110), "The events in Tuzla in 2007 thus remain somewhat murky to say the least." (para 115), "There are some curious features about the 2007 readings…." (para 125). These insinuations were without foundation, but were made nonetheless. They were made by the Sellers in order to persuade the Tribunal to reject the 2007 UTM survey measurements as unreliable. The Tribunal did not do so. However, the point is that the reliability of the 2007 UTM readings and how they were recorded was in issue and explored in the arbitration. Moreover, the documents that the Sellers are now saying are evidence of a fraud were disclosed by the Buyers and appeared in Bundle E22 in the arbitration. Mr Davaris was asked a number of questions about the documents in that bundle during cross examination. It is not the case that the documents that supposedly evidence this fraud have suddenly materialised or that somehow they did not receive any scrutiny at the time.f. It is inconceivable that Capt. Bardakos did not fully investigate the 2007 Report and Supplement including the circumstances in which they were produced prior to the arbitration in June 2010. If what Mr Gkritzapis (and Mr Nakos) now says is the truth, this most certainly could have been discovered by the Sellers prior to the arbitration. The facts giving rise to the present allegation could with reasonable diligence have been discovered at the time. The Sellers clearly had access to all the relevant ANCO witnesses, the documents that evidence this alleged fraud were in evidence (indeed in a single trial bundle) and they were able to cross-examine during the arbitration the perpetrators of this alleged fraud, namely Mr Davaris, Mr Melis and, now, Mr Erzaim. Put bluntly, at the very least it was negligent for the Sellers and its lawyers to have interviewed Mr Vastardis and adduced evidence from him but not interviewed and adduced evidence from Mr Gkritzapis and Mr Nakos given the “tension” between the 2005 Report and the 2007 Report and Supplement, the Buyers’ witness evidence about Mr Gkritzapis’ role in the 2007 Report and the central importance of the inconsistencies to the factual and expert cases.g. So how did Capt Bardakos learn of the alleged fraud? According to Capt Bardakos’ own evidence, “it was only in the middle of November 2011 that I considered that the Buyer’s story about the nature of the 2007 Supplement might not be true” ; and there was no event or anything in particular that triggered this thought in November 2011. Given that there was no event or trigger, what Capt. Bardakos did in November and December 2011 could and should have been done in the years or months leading up to the arbitration hearing.

The Sellers’ case in relation to s.73 of the Arbitration Act 1996

[20]In response, Mr Bloch QC made a number of detailed submissions. First, he referred to Sumakan Ltd v Commonwealth Secretariat [2007] EWCA Civ 1148 (where a challenge was brought under s.68 on the basis that the arbitrator had not been properly appointed) in particular the judgment of Walker LJ (at §§36-38) upholding the first instance judge’s view that “it would be wrong to construe section 73 so as to hold that [the challenging party] could with reasonable diligence have discovered facts which it neither knew nor believed nor had grounds to suspect.” On this basis, Mr Bloch QC submitted thata party will not fall foul of s.73(1) unless it knew, believed, or had grounds to suspect the facts which form the grounds for the objection. Second, as to the facts, Mr Bloch QC submitted that the Sellers did not know, believe or have grounds to suspect the alleged fraud. In that context, he relied upon a number of general points in particular(i) it does not lie well in the mouth of a party against whom fraud is alleged to say “be that as it may you should have discovered it sooner”;(ii) in light of Sumakan it is not enough that the Sellers might reasonably have pursued a “train of enquiry” that may have led to them stumbling across what the Sellers now allege to be the true facts; and(iii) the inherent improbability of fraud as referred to, for example, in the speech of Lord Nicholls in Re H [1996] AC 563 at p586.[21]Further, Mr Bloch QC relied upon a number of specific points viz.a. Although the Sellers had previously used ANCO to carry out surveys, it was wrong to suggest that the Sellers had a close relationship with them.b. The Buyers advanced a positive (and, at the time, plausible) explanation as to how the Supplement came into existence in the arbitration. On day 7 of the arbitration, the Chair of the Tribunal asked counsel for the Buyers whether there was an “innocent explanation” for the fact that the Supplement was produced. (It is clear in the context that the suggestion that there was any guilt was not being levelled at the Buyers, but rather at ANCO, or even the Sellers.) In response, Mr Hill QC is recorded in the transcript as saying: “There is an explanation which I can’t – there is no ANCO witness I can put it to, but the explanation is that in relation to those underdeck longitudinals that they had to replace in any event, i.e. they were marked with white, they were cropped and renewed, the ANCO operative took the view it wasn’t necessary to show what the real level of corrosion was because it would highlight the inconsistencies for 2003 and 2005, so he did his company a favour by putting in a higher figure, which didn’t matter because it was being cropped and renewed in any event.”c. The contemporaneous documents disclosed in the arbitration supported this version of events. See, for example, the letter from Queensway to ANCO dated 22 January 2008 (exhibit CB1), which states: “[W]e have asked ANKO [sic] to make all necessary corrections to the bundles dispatched to us, because the Column “gauged” does not reflect the actual measurements we all witnessed.”d. As Mr Pavlis confirms in his witness statement in support of the present challenge, the Buyers maintained a consistent position in both civil and criminal proceedings in Greece relating to the sale of the Vessel.e. Capt Bardakos confirms his, and the Sellers’, understanding of the Buyers’ account in his first witness statement in support of the present challenge and the reasons for that belief; and, in addition, the ANCO boss at the material time, Mr Angelopoulos, gave Captain Bardakos no reason to believe that the 2007 Supplement was a fabrication. Indeed, as Mr Angelopoulos himself confirms, he was entirely unaware of the production of the Supplement until after legal proceedings were afoot and DNV contacted his father. At that time however, he attached little significance to the Supplement as it related to areas of steel that had been replaced, and had no reason to doubt that the figures contained in the supplement were true. Mr Angelopoulos could not have alerted Captain Bardakos to the fraud, as he too was unaware of it.f. In short, the Buyers represented at all times in all proceedings relating to the Vessel that the figures claimed in the Supplement were accurate. Any outstanding queries which might have been entertained about the circumstances of the production of the Supplement would reasonably have been directed at the original Report, and not the Supplement. Certainly, these queries would have been a very long way away from ringing an alarm bell that the Supplement might be fabricated.[22]In addition, although Mr Bloch QC accepted that in the arbitration the Sellers did challenge the 2007 Reports, he submitted that this was primarily on the basis that the measurements contained therein were taken by way of measurements of localised corrosion which were not representative of the general condition of the Vessel. In that sense, they claimed that the 2007 survey “had not been done properly”; but Mr Bloch QC submitted that that is a quite different suggestion to one that the numbers had no basis in reality at all. In that context, Mr Bloch QC submitted that although the suggestion of “murkiness” surrounding the production of the Supplement was raised, the point that was being made in the Sellers’ written closing at §§109-117 was that the Sellers had little idea of what had taken place on the vessel in Tuzla, as they had not been notified of the apparent problems with the vessel or given an opportunity to respond. The inference that the Sellers sought to draw from the “murkiness” (at §125 of their written closing) was that the substitute readings were taken in areas of localised corrosion – not that they were entirely fabricated. Mr Bloch QC accepted that Dr Kirby (the Sellers’ expert) did suggest that one explanation of the incompatibility between the 2005 and 2007 readings was that the 2007 readings were incorrect or inaccurate (because, for example, they were taken in way of localised corrosion) – but not that they were fabricated. Moreover, contrary to the suggestion in Mr Williams’ statement, Mr Bloch QC submitted that the fact that the fraudulently produced documents were before the Tribunal does not mean that the documents that supposedly evidenced this fraud were before the Tribunal in any meaningful sense; and that although the documents were before the Tribunal, the fact that they were fraudulent documents was only revealed once Mr Gkritzapis came clean. I should also note that it was the Sellers’ case that the Buyers were, behind the scenes, taking steps to try to put the provenance and accuracy of the 2007 Report beyond doubt, by seeking to bribe Mr Gkritzapis (or at least giving him the impression that was what they were trying to do) to give evidence in the Arbitration: see Gkritzapis 1 §64, Mr Angelopoulos (§23).

Discussion in relation to s.73 of the Arbitration Act 1996

[23]As appears from the above summary, the respective arguments advanced by both parties under this head ranged far and wide. To my mind, four points stand out.[24]First, I recognise there is a potential inherent difficulty in the Buyers’ submission with regard to s.73 which is perhaps best exemplified by the statement of Lord Cranworth in Reynell v Spyre (1852) 1 de G.M. & G. 660 at p710:
“No man can complain that another had too implicitly relied on the truth of what he has himself stated.”
That is, in effect, the principle relied upon by Mr Bloch QC when he submitted that the alleged fraud, if accepted, was intended not to be discoverable; and that the Buyers should not therefore be able to take advantage of the sophistication of their own fraud in being permitted to say that the Sellers were too slow in identifying it. However, it seems to me that such a general principle formulated in such terms provides the Sellers with only limited assistance in the present context and in the particular circumstances of the present case. That is because of the terms of s.73(1)(d) of the 1996 Act which, in effect, imposes a statutory bar on any party raising any objection based on an “irregularity” affecting the proceedings subject of course to the exception stipulated in the last part of s.73(1). (For the avoidance of doubt, I did not understand Mr Bloch QC to suggest that s.73 did not apply to an irregularity founded on s.68(2)(g).) In my view, it follows that the Sellers cannot raise an objection based on such irregularity unless they bring themselves within the exception and, in relevant respect, they can only do that by showing (ie the burden is on them) that they could not with reasonable diligence have discovered the grounds for the objection. Thus, in my view, the principle relied upon by Mr Bloch QC is not a complete answer to s.73; but I accept that it may be relevant in considering what could be discovered by “reasonable diligence”.[25]Second, as Mr Bloch QC submitted, in considering the strength of the argument, the focus is not merely the alleged fraud in relation to the measurement exercise carried out by the Buyers in relation to the Report and the Supplement but what the Sellers say was the Buyers’ fraud in obtaining the award. Plainly, these two overlap but I accept that it is the latter which is the foundation of the Sellers’ application under s.68(2)(g).[26]Third, there is no doubt that the accuracy of the measurements taken in 2007 as appear in the Report and the Supplement were the main focus of the arbitration. Indeed, this was the central issue. In such circumstances, the distinction which underlies most of Mr Bloch QC’s arguments in this context (viz the distinction between measurements that are, on the one hand, incorrect or inaccurate and, on the other hand, measurements which are fabricated) is, to my mind, at best, somewhat artificial particularly in the light of the other issues in the arbitration. Given all the various allegations of fraud advanced both in the arbitration and the Greek proceedings, I do not consider that this is a case where a suggestion that the measurements might have been fabricated was inherently improbable. Nor in my view is this a case where it might be said that if there was a fraud it was, in effect, one which the Sellers might - but only with some luck - stumble upon in some way but in respect of which there were no “grounds to suspect” (adopting the words of Walker LJ in Samoukan).[27]Fourth, I find it quite extraordinary that the Sellers did not themselves obtain statements and adduce evidence in the arbitration from Mr Gkritzapis and the other witnesses whose evidence the Sellers now seek to rely upon.[28]In my view, Mr Hill QC is right for the reasons he gives that if there had been the fraud which is now alleged, it could have been discovered with reasonable diligence; that contrary to the Sellers’ submissions, there were here “grounds to suspect” that the measurements were fabricated; and that, at the very least, the Sellers have not satisfied the burden on them under s.73 to show that the alleged fraud could not with reasonable diligence have been discovered. On this basis, I agree with Mr Hill QC that the application under s.68 is inevitably doomed and for that reason alone I should decline to grant the extension of time now sought by the Sellers. However, if that is wrong, I go on to consider whether the court should grant the extension of time as a matter of discretion focussing, in particular, on the various factors identified by Colman J in Kalmneft as summarised above. (i). & (ii) Length of Delay/Whether, in permitting time to expire and the subsequent delay to occur, the party was acting reasonably in all the circumstances[29]As to the length of delay, Mr Hill QC submitted that the delay in this case (ie over 6 months) is excessive; that a 20-week (or 5 month) delay in Thyssen was, on the facts, objectionable; and that there would have to be an overwhelming case for such a lengthy extension, especially when other s.68 and s.69 challenges had been brought within time and have all now been dismissed as hopeless. In my view, the fact that the court has dismissed other applications is of little, if any relevance; and reference to the length of delays in other cases is at best over-simplistic. Of course, the court must bear in mind the terms of the 1996 Act and the general policy considerations in favour of finality but, in my judgment, each application for an extension of time must be considered on it own particular facts. Mr Hill QC also submitted that in truth the Sellers deliberately waited until effectively Monday 30 January 2012 to serve the present application barely three clear days before the last hearing; and that this was a cynical and improper attempt to delay the enforcement of the award in circumstances where the Sellers (rightly) expected that their then existing s.68 challenges would fail. That suspicion may or may not be well-founded. I do not know and cannot say. For present purposes, that suggestion can and should be ignored.[30]Here, as I have stated, the Sellers could have brought its challenge under s.68(2)(g) as of right within 28 days of 12 May 2011; and the present application was made on 27 January 2012. So the relevant period of delay in bringing the challenge is some 6 and a half months. As to this delay, Mr Bloch QC submitted that the duration of the arbitration proceedings and the subsequent period before making the application were “dwarfed” by the period of time spent in relation to the related Greek proceedings (both civil and criminal). Against that background and having regard to what he described in his skeleton argument as “commercial cases of this size and complexity and with an international element” Mr Bloch QC further submitted “that a period of 6 and a half months delay is not especially remarkable in and of itself.” I do not agree. The delays in relation to the other Greek proceedings are, in my view, totally irrelevant as is the period relating to the conduct of the arbitration proceedings prior to the making of the award. So too is the suggestion that commercial cases of a certain size and complexity and with an international element are generally entitled to expect greater laxity. In my judgment, there is no basis whatsoever for such suggestion. On the contrary, the observations of Colman J. in Kalmneft which I have already quoted above apply equally to all arbitration proceedings and bear repetition and emphasis:
“…..the relatively short period of time for making an application for relief under ss. 67, 68, 69 also reflects the principle of finality. Once an award has been made the parties have to live with it unless they move with great expedition. Were it otherwise, the old mischief of over long unenforceability of awards due to the pendency of supervisory proceedings would be encouraged.”
The reference to the need for “great expedition” once an award has been made is important. Parliament has laid down a period of 28 days to bring any challenge as of right. Although that period may, of course, be extended by the exercise of the court’s discretion in appropriate circumstances, the assertion by Mr Bloch QC that a period of 6 and a half months is “not especially remarkable” is, in my judgment, fundamentally misguided.[31]It is convenient to consider the period of delay in two parts. First, there is the period following the publication of the award on 12 May 2011 and, in particular, from the expiry of the time limit on or about 10 June 2011 until about mid-November when, according to Capt Bardakos’ evidence, he discovered the alleged fraud. Second there is the period from about mid-November 2011 until the date when the present application was made ie 27 January 2012.

The period from 12 May/10June 2011 until mid-November 2011

[32]Mr Bloch QC submitted that the Sellers were certainly “…notsitting on their hands…” during this period and were pursuing a number of lines of enquiry in an attempt to challenge what they perceived to be a surprising and very unfair award; and that although many of those lines of enquiry were not ultimately pursued formally or the pursuit of these was unsuccessful (e.g. the s.69 challenges), that is a very different thing from saying that the Sellers were acting unreasonably in diverting their efforts and resources to those exercises at the time. In that context, Mr Bloch QC relied upon the evidence of Capt Bardakos with regard to the various tasks and lines of enquiry undertaken by the Sellers during this period viz instructing new legal representatives; preparing for the s.69 challenges; examining the Buyers’ quantum case in more detail; enquiring with experts as to what the appropriate cost of steel repairs would have been in Tuzla at the material time; enquiring with other Greek ship owners regarding the situation in Tuzla at the material time; visiting Turkey and instructing Turkish lawyers to look into the arrangements at Tuzla in more detail; and attempting to make contact with relevant personnel of DNV.[33]Although I am prepared to accept that the Sellers were not sitting on their hands during this period and were pursuing the lines of enquiry referred to above, I am not persuaded that the Sellers acted with the necessary expedition or even reasonable diligence so far as the present applications are concerned. For present purposes, I assume in the Sellers’ favour that they have a good arguable case that the award was obtained by fraud. However, the conclusions which I reached in relation to s.73 apply equally, if not with greater force, in this context. As submitted by Mr Bloch QC, it was the Sellers’ own case that following the publication of the award they were pursuing lines of enquiry in an attempt to challenge what it perceived to be a surprising and very unfair award. If that is so, it seems to me that the obvious line of enquiry was to make further enquiries with ANCO including, of course, Mr Gkritzapis and Mr Angelopoulos. It seems to me that, as I have stated, there were, at the very least, “grounds to suspect” and that it was still an obvious line of enquiry to pursue particularly since, again as Mr Bloch QC accepted and indeed positively asserted, the Sellers did have some grounds to believe that the Buyers were capable of fraudulent conduct in the arbitration proceedings in the light of the Tribunal’s conclusions in paragraph 116 of the Award – although, for the avoidance of doubt, I should emphasise that Mr Hill QC disputed that such conclusions constituted any finding of fraud. If it had been pursued there is no reason to suppose that what is now alleged to be fraud on the part of the Buyers would not have come to light much earlier.[34]For these reasons, it is my view that the period of delay following the publication of the award until mid-November 2011 militates strongly against the grant of an extension of time.

The period from mid-November 2011 until 27 January 2012

[35]Mr Bloch QC submitted that, in the circumstances, the Sellers had acted entirely reasonably and with requisite haste between mid-November 2011 (when according to Capt Bardakos he discovered the alleged fraud) and 27 January 2012 when the application was made. In summary, he submitted as follows:a. It was eminently prudent and reasonable of Capt Bardakos to seek corroboration of what Mr Gkritzapis had told him from Mr Nakos before acting upon that information: §33 of Capt Bardakos’ first witness statement.b. The fraud itself is bold and simply stated; the Buyers fraudulently procured a report detailing the condition of the Vessel. However, an understanding of how the fraud was orchestrated, and its full implications, requires some careful consideration of somewhat technical and complex details. It is entirely reasonable to take some time to consider the mechanism and impact of what has been discovered: §34 of Capt Bardakos’ witness statement.c. Mr Gkritzapis and Mr Nakos are Greek speakers and, while Capt Bardakos can read and write in English, he is not fluent. The need to translate documents and statements between Greek and English adds inevitable delay to the process; as does the need to coordinate between English and Greek legal teams.d. The alleged fraud and the corroborative account were discovered not long before Christmas. Inevitably, access to professional advice and assistance is impacted upon during that period and that once this is taken into account the actual period of delay is no more than about 4 weeks until 27 January 2012 when the present application was issued. e.

(g) :

“It was reasonable to wait until the matter had been properly investigated, then to make an application to extend time on the same arbitration claim form as that for relief under section 68(2)(g), as provided for by CPR Pt 62.9(3). I am satisfied that there is sufficient in the merits of the application for it to be proper to extend time and so I order.”
[36]These submissions were advanced by Mr Bloch QC with considerable persuasiveness but I am unable to accept them. Taking the Sellers’ case at its highest, although the total delay between the time when the alleged fraud was discovered (ie mid-November 2011) and the date when the application was made (ie 27 January 2012) is about 9 weeks, I am prepared to assume in the Sellers’ favour that the relevant period is somewhat shorter – say 4 weeks or so. However, even taking account of the points raised by Mr Bloch QC to explain this delay and giving them due weight, it seems to me that such delay falls far short of the need in these circumstances for expedition or even reasonable diligence. That conclusion is, in my view, fortified when it is borne in mind that the award was published so many months earlier ie in May 2011.[37]In my judgment, this further period of delay constitutes a further factor militating strongly against the grant of an extension of time. (iii). Whether the respondent to the application or the arbitrator caused or contributed to the delay[38]Under this head, Mr Bloch QC relied upon matters raised earlier. In particular, he submitted that the alleged fraud, if accepted, was intended not to be discoverable; that the Buyers should not be able to take advantage of the sophistication of their own fraud in being permitted to say that the Sellers were too slow in identifying it; and that the Buyers’ counter that the alleged fraud was “squarely in play” in the arbitration is without foundation. I have already addressed these points above. On the basis, as I have concluded, that the alleged fraud, if it had existed, could and should have been discovered with reasonable diligence, it seems to me that such submissions bear little, if any weight. (iv). Would the Buyers by reason of the delay suffer irremediable prejudice in addition to the mere loss of time if the application were permitted to proceed ?[39]Mr Bloch QC submitted that there was no irremediable prejudice; that the Buyers are fully protected by an HSBC guarantee; that the interest payable on the award (4.5% interest compounded at three monthly rests) is, if anything, generous; that if the Sellers’ case is not ultimately successful, the Buyers will no doubt receive their costs – and it would be open to the court to grant any extension of time on terms that the Sellers provide security for costs; and that any prejudice that might exist must be compared to the risk of the Buyers “getting off the hook” for their fraud.[40]Mr Hill QC submitted that there was irremediable prejudice in particular because(i) the Buyers are being kept out of a very substantial amount of its money in tough economic times and(ii) any further hearing will involve very substantial costs (which may in part be irrecoverable even if the Buyers succeed) and the cost of management time (which will also be irrecoverable).[41]As to these submissions, it seems to me that there is some force in Mr Hill QC’s points. In particular, I am very conscious that there is at least some irremediable prejudice when a commercial party is being kept out of its money. However, I am prepared to assume in Mr Bloch QC’s favour that there is none. I proceed on that basis. (v). Has the arbitration continued during the period of delay and, if so, what impact on the progress of the arbitration or the costs incurred might the determination of the application by the court have ?[42]The arbitration has been finished for some time. There is no impact. (vi). The strength of the application A. Buyers’ case with regard to the strength of Sellers’ application[43]The Buyers’ case is that the original story set out in Gkritzapis 1 is not only inherently implausible but, as demonstrated by the lengthy and detailed exposition in Mr Williams’ witness statement (“Williams”), is completely untrue; and that Mr Gkritzapis has now had radically to change and to embellish his story in his most recent statement (ie Gkritzapis 2) in an attempt to keep his lies alive but this has simply had the effect of compounding his lies. In short, Mr Hill QC on behalf of the Buyers submitted that the Sellers’ application was founded upon a “story” which was “utterly hopeless” and a “pack of lies”. In support of that broad submission and relying principally on points identified in Williams, Mr Hill QC made 8 separate points with regard to Gkritzapis 1 and the first witness statements of Mr Nakos and Mr Bardakos which were, in summary, as follows:a. Dirty drafts with thickness measurements for replaced steel Mr Gkritzapis’ original story in Gkritzapis 1 was that whilst taking measurements in the vessel he recorded thickness readings on a “dirty draft”. However, he did not record on the dirty draft (or any document) the actual thickness measurements of steel that required replacement. He simply indicated on the "dirty draft" that steel needed replacing by a series of hash marks “////” [Gkritzapis 1 paras 38, 45, 48, 51]. Further, Mr Gkritzapis did not record on these “dirty drafts” (or any document) any thickness measurements below 7.7mm in respect of any longitudinal [Gkritzapis 1 paras 38]. He says that each evening he faithfully transferred the thickness readings recorded in his “dirty drafts” onto clean diagrams (the “clean drafts”) and he would then throw away the “dirty drafts” [Gkritzapis 1 para 47]. In early August, however, Mr Melis allegedly asked Mr Gkritzapis to produce another set of “clean drafts” with fabricated low numbers (as well as hash marks) for the steel that had been replaced [Gkritzapis 1 paras 49]. However, contrary to Mr Gkritzapis initial evidence, a set of dirty drafts does exist with thickness measurements for the steel that was to be replaced: Williams paras 44, and 47-51. Furthermore, if the DNV surveyor's (Mr Erzaim’s) evidence to the Tribunal is correct (and there is no reason to doubt it at all) Mr Gkritzapis' account is impossible. It is apparent that in concocting Mr Gkritzapis' story the first time round the Sellers failed to appreciate that a considerable number of these "dirty drafts" still existed, had been disclosed to them by the Buyers in the course of the arbitration and were to be found in Bundle E22 of the arbitration hearing bundle. This has prompted a wholesale 'revision' to Mr Gkritzapis' story as set in Gkritzapis 2 and which is discussed below.b. 175 thickness measurements in the First ANCO Report between 7.3mm and 7.7mm Mr Gkritzapis is clear in his first witness statement that at Mr Melis’ request, he used 7.7 mm as his replacement threshold. Coupled with his invariable practice of not recording the measurement of steel that required replacement (which would have a random number between 6.2mm and 6.7mm supplied instead by a secretary at ANCO’s head office), there should be no thickness measurements whatever of longitudinal stiffeners in the first ANCO Report between 7.3mm and 7.7mm. However, there are in fact 175 such readings: see Williams para 52. This is not disputed by the Sellers.c. DNV surveyors not a party to the fraud In his original story, Mr Gkritzapis did not in any sense seek to implicate the DNV surveyors at Tuzla, Mr Erzaim and Mr Erbil. On the contrary, the original story of both Mr Gkritzapis and Mr Nakos was that they were both almost always under the close supervision of the DNV surveyors, who were cautious and reading the figures of the gauging machine over their respective shoulders [Gkritzaptis 1 para 34; Nakos para 12]. This was also the evidence of Mr Erzaim at the arbitration. On that basis, it would have been almost impossible for Messrs Gkritzapis and Nakos to carry out such a fraud: see Williams para 57.d. “Fabricated” document in fact created first Mr Gkritzapis’ evidence is that he created the “genuine” clean drafts (without thickness measurements for steel to be replaced) first and then created the “fabricated” clean drafts second, by inserting false thickness measurements [Tab 4 / Gkritzapis 1 para 51; Nakos para 21]. As demonstrated by Mr Williams, the alleged “fabricated” clean draft was clearly produced before the alleged “genuine” clean draft: Williams paras 62 to 65.e. Allegedly fabricated “clean drafts” provided to DNV If Mr Melis and Mr Davaris asked Mr Gkritzapis to fabricate “clean drafts” to give up to their superiors at Queensway, it is inconceivable that they would have voluntarily drawn DNV’s attention to these fabricated documents for fear of being caught out. However, that is precisely what Mr Melis did: Williams para 66 to 74. It is inconceivable that Mr Melis would have acted in the way in which he did if he had asked Mr Gkritzapis to fabricate a set of clean drafts.f. Documents show that the motive assigned to Mr Melis is false Mr Gkritzapis’s story requires Messrs Melis/Davaris to have set about deliberately to increase the costs of repairs by having steel replaced that did not need to be replaced. (Mr Gkritzapis never properly explains why this might be so.) However, this is quite contrary to the contemporaneous documents which show that Mr Melis was seeking to save money for the Buyers: Williams paras 75 to to 80.g. Random generation of thickness measurements in first ANCO Report Mr Gkritzapis says that the Report contains “random” figures between 6.2mm and 6.7mm for steel that was replaced. This was to comply with a “technical rule” of DNV that even steel that was to be replaced needed to have a thickness measurement [Gkritzapis 1 para 57]. This is incredible: Williams paras 82 to 85.h. Mr Gkritzapis spoke only to a secretary in December 2007 In December 2007, when the errors in the Report were realised, the Buyers asked ANCO to amend their report. Mr Gkritzapis goes to some lengths to explain how it is that he never spoke to anyone senior at ANCO about the Buyers’ request for an amended report [Gkritzapis 1 w/s paras 59, 60 and 63]. This is incredible: Williams para 86. It is an invention designed to overcome the obvious problem that Mr Angelopoulos would inevitably have been involved in such a serious matter given the prior history of their work with this vessel and would have told Capt. Bardakos well before the arbitration, given their close cooperation.[44]In light of the above, Mr Hill QC submitted that recognising that Mr Gkritzapis’ original story as set out in Gkritzapis 1 had been shown to be fatally flawed in a large number of respects, the Sellers and Mr Gkritzapis made up a new, embellished story a week before the present court hearing; and that this new story put forward by Mr Gkritzapis in Gkritzapis 2 and supported, in particular, by the new evidence of Mr Angelopoulos, is even more unbelievable than the first version of the story. In support of that submission, Mr Hill QC relied upon a number of points which, in summary, were as follows:a. The very fact that a simple but already incredible story had changed so much in the space of a few weeks is of itself telling (to put it neutrally).b. Of particular significance is the introduction of a new, prior fraud. This was an alleged fraud by the DNV inspector, Mr Erzaim, on Mr Davaris whereby Mr Erzaim asked Mr Gkritzapis to concoct low thickness readings for underdeck longitudinal stiffeners in order to persuade Mr Davaris to purchase staging which he did not need or want. Despite its critical importance to what Mr Gkritzapis was doing and how it influenced his behaviour for the rest of the job it receives absolutely no mention whatever in Gkritzapis 1. To the contrary, Mr Gkritzapis makes absolutely no suggestion whatever in Gkritzapis 1 that Mr Erzaim (or Mr Erbil) behaved other than impeccably throughout (which is, of course, the case).c. Furthermore, having made no suggestion originally in Gkritzapis 1 that Mr Erzaim was complicit in any fraud, Mr Gkritzapis now says "so far as I can recall" apparently, Mr Erzaim knew that Mr Gkritzapis was recording fabricated low numbers but, bizarrely, Mr Gkritzapis does not know why Mr Erzaim thought he was doing it [Gkritzapis 2 para 25].d. The reason for this sudden change in story is that Mr Gkritzapis now needs to explain why it is there exist so many 'rough' or 'semi rough' drafts created by him with thickness measurements for steel that was replaced and which are consistent with one another. As explained in Williams paras 49-50, the measurements in a particular "rough draft" are to be found in subsequent 'semi-rough' drafts which measurements then find their way into the final allegedly fabricated clean draft. The obvious and natural explanation is that contrary to what he is now saying, Mr Gkritzapis was actually doing the job he was engaged to do and recording the measurements of all the steel that he was measuring, whether it required replacement or not. However, Mr Gkritzapis' explanation for this inconsistency is that he was doing the very opposite of what he was supposed to do. Essentially he was extending the original fraud he committed on Mr Davaris (at Mr Erzaim's request) into the alleged fraud Mr Davaris subsequently committed on his employer, the Buyers.e. Having now explained that Mr Erzaim was himself guilty of having committed his own fraud on Mr Davaris (which Mr Davaris knew about [Gkritzapis 2 para 14.9]) and that separately he, Mr Erzaim, was also aware that Mr Gkritzapis was recording fabricated low numbers at Mr Davaris' request, Mr Gkritzapis then says he was nevertheless "not keen" to provide Mr Erzaim with copies of the fabricated documents because it would have created too much confusion for Mr Gkritzapis [Gkritzapis 2 para 28]. On top of all this. Mr Gkritzapis makes the similarly bizarre observation that he thought Mr Erzaim respected his judgment when it came to taking accurate metal thickness measurements [Gkritzapis 2 para 20.6].f. The key measurements in this case were those of the underdeck longitudinals. This is what the Buyers spent most of their money on at Tuzla and this is what the case was all about. However, since it now transpires that the allegedly fabricated nature of thickness measurements for a number of those elements were fabricated because of an alleged fraud committed by a DNV surveyor on the Buyers' employee, Mr Davaris, this makes it even less of a case of an award having been procured by the alleged fraud of the party to the arbitration.g. Having been absolutely clear in Gkritzapis 1 that there should be no metal thickness measurements between 7.3mm and 7.7mm recorded by him on any document he created because of the instruction given to him by Mr Davaris to mark for replacement steel that below 7.7mm rather than 7.3mm and his practice of never recording the thickness of steel marked for replacement, Mr Gkritzapis now says that this is not the effect of what he said in his first statement but that, in fact, his practice was not consistent. The existence of readings between 7.3mm and 7.7mm is explained by him in Gkritzapis 2 as having come about by a combination of(i) trying to make the fraud seem less obvious. In his own words, "a few [measurements] are also fabricated in order to disguise the fabrication…" [para 20.2 and 20.3 and 21];(ii) trying to help the Buyers save money despite Mr Davaris' and Mr Melis' alleged instruction to him to get rid of steel below 7.7 mm [para 20.5];(iii) taking the seemingly unilateral decision to retain steel that was below 7.7 mm in thickness because "the condition was still sufficiently good" [para 20.6] and(iv) confusion about whose fraudulent instructions he was supposed to be following, Mr Erzaim's or Mr Davaris' [para 15.5].h. Having said in his first witness statement that he created a set of fabricated documents for presentation to Mr Davaris at the end of the job on 19 September 2007 he now says the fabricated documents went through a drafting stage and were shown to Mr Davaris "in an incomplete form" [para 38]. In other words, he took a series of dry-runs at the fabricated documents and shared these drafts with Mr Davaris along the way.i. Having said in Gkritzapis 1 that he created the genuine documents first and the fabricated documents second in his hotel bedroom he now says that "on the odd occasion" he may have created the fabricated document first "and then tippexed out the numbers to produce the "genuine draft"" and also he might have done this in the ship's office rather than his hotel room so he could make sure that that the fabricated documents that he ultimately presented to Mr Davaris at the end of the job were consistent with the fabricated documents that he had generated to facilitate Mr Erzaim's earlier fraud on Mr Davaris and which Mr Davaris had already seen and which were kept in a desk drawer there [para 14.10, 33 and 41].j. Having said in Gkritzapis 1 that the thickness measurements for the forepeak tank bulkhead plating that he provided to Mr Davaris were fabricated ("I was asked to diminish the actual measurements of the bulkhead plating..." [para 55]) and having explained this particular feature of the vessel and this particular exercise at some length [paras 44 and 55], Mr Gkritzapis now says in Gkritzapis 2 "I would like to clarify that the measurements [of the bulkhead plating]….were accurate." [para 49]. The repair to the forepeak tank was one of the single most expensive repair jobs undertaken on this vessel.k. Having said in Gkritzapis 1 that he thought Mr Davaris asked him to fabricate the thickness readings so that he could justify to his employer the amount of work he ordered from the yard [paras 50, 54], Mr Gkritzapis now says he made a mistaken assumption as to Mr Davaris' motive. He now says "I do not know what the Buyers' rationale was for the instructions they gave me. I did not know (and still do not really know) how this exercise fitted in with the Buyers' operations generally and I do not know why the Buyers instructed me as they did" [para 54]. Nevertheless he now ventures that the reason why he was instructed to mark for replacement steel that was 7.7mm thick rather than 7.3mm thick was so that the Buyers could justify the cost of the staging [para 56]. In other words this was a case of 'in for a penny, in for a pound' commercial madness whereby, since the Buyers had hired a great deal of very expensive staging, they thought that they might as well make the repairs extra expensive by replacing steel they did not need to replace. If viewed in terms of Mr Davaris' and Mr Melis' alleged conduct, Mr Gkritzapis’ story is that, on the one hand, they wished to save money on staging and so had to be tricked by Mr Erzaim into doing so (presumably to obtain a kick back from the yard), but on the other were desperate to spend money on unnecessary steel renewals (presumably to obtain a kick back from the yard). But in order to justify steel renewals UTM readings indicating a need for replacement would need to be fabricated. Those could only be fabricated if staging was in place – which Mr Davaris apparently did not want and tried to avoid. Mr Gkritzapis’ story is utterly incredible.l. Having said in Gkritzapis 1 that the insertion of dummy numbers in the first ANCO report was "automatic" and "random" and could afford to be because "DNV were not interested in the exact measurements" [para 57], he now says in Gkritzapis 2 that they were not actually supposed to look obviously automatic or random [para 60]. In other words, they are supposed to look genuine and authentic, which rather suggests that they were always supposed to be genuine and authentic.m. Having explained in Gkritzapis 1 that he dealt with only a secretary at ANCO, Peggy, in relation to the production of the Supplement rather than the most obvious person, his boss Mr Angelopoulos, he now explains that "Peggy had quite a lot of responsibility for running the activities of the ANCO office at the time" [para 60]. Mr Angelopoulos’ new evidence in this respect is clearly contrived and unbelievable: that he did not like to "micro- manage" and how "trusted" and "more than capable" the secretaries in his office were [para 6, 16].n. Mr Gkritzapis goes to some considerable length to demonstrate that stains that look like oil stains on one of his dirty drafts are in fact ink stains from a leaking pen in his pocket [para 16.1]. He even exhibits the document to his statement to make the point that the stains are blue not black. Leaving aside the fact that the blue hue of a colour photocopy is hardly conclusive, this point of detail is frankly irrelevant since Mr Gkritzapis does not suggest the document is not his, he confirms it was in his pocket and thus apparently it was created by him inside a cargo tank. The Buyers' point is that these documents have all the hallmarks of being genuine, working documents not something created in a hotel bedroom late at night. Whether the stains are oil or ink makes no difference to that.[45]As for the new evidence from Mr Pagalos of DNV, Mr Hill QC submitted that this takes the Sellers’ case nowhere. Thus, Mr Hill QC submitted in summary as follows:a. Mr Pagalos signed off the fraudulent CAP 1 certificate in 2003 and 2006 (following the 2005 UTM readings) and he is/was a manager of the DNV Piraeus office that oversaw this vessel between 2000 and 2007. To put it neutrally, he has a 'complicated' history with this vessel.b. Although the arbitrators made no findings against DNV in their award (as DNV were not a party to the arbitration and no DNV witnesses had given evidence), the Buyers did not, and do not, shrink from the allegation that DNV and its inspectors were complicit in the frauds in 2003 and 2005 and the Buyer made this clear at the arbitration. Indeed, the arbitrators found that "the involvement of Mr Pavlopoulos of DNV in the inspections of 2000, 2003 and 2005 was striking…" [Award para 88]. Mr Pavlopoulos was a DNV colleague of Mr Pagalos and a co- signatory of the fraudulent 2006 CAP 1 certificate.c. Mr Pagalos is a co-defendant with DNV and the Sellers’ senior management in the civil proceedings that the Buyers are pursuing in Greece. He has every reason to help the Sellers overturn the award.d. Significantly, Mr Pagalos says nothing in his witness statement that supports Mr Gkritzapis' story that Mr Davaris asked him to fabricate thickness measurements.e. Mr Pagalos' evidence is that he spent 3-4 hours on the vessel in Tuzla on 18 July, he observed corrosion and cracks in the underdeck longitudinals but "[t]o verify and evaluate the extent of this corrosion and if the thickness was within or below acceptable limits close up surveys and UTMs were necessary, especially in the cargo tanks in the middle of the vessel" [para 19]. He then seeks to say that, from his cursory view, “the overall condition of [the] hull structure in the cargo tanks was found to be generally good for a vessel of her age”. In other words, the Seller now seeks to adduce factual evidence of the condition of the vessel at Tuzla to show that the factual findings of the Tribunal at paragraph 65 of their award were wrong. The Sellers had every opportunity to adduce the evidence of Mr Pagalos at the arbitration and it is not entitled now to seek to undermine the Tribunal’s award by adducing such evidence on a Section 68 application.f. In any event, the best that the Sellers can say is that Mr Pagalos observed some problems at Tuzla in 2007 but was not in a position to tell what the extent of the problems was. The full and precise extent of those problems was identified in the 2 months following Mr Pagalos' visit when full staging was erected inside the cargo tanks and the UTM survey was carried out.[46]In summary, Mr Hill QC submitted that this is one of those cases where the case is so intrinsically weak that it counts against the application to extend time; that the Sellers’ new case on its own terms is not credible; that it was incredible in the first place; and that, in its now embellished form, it sets what he described as “new standards for invention”. In short, Mr Hill QC submitted that this new proposed s.68 challenge is another fraud; that Capt. Bardakos has concocted another completely false story; and that it is highly relevant that the tribunal has already found that Capt. Bardakos behaved fraudulently, where ANCO and ANCO employees were involved, entirely independently of any inferences to be drawn from the incompatibility between the 2007 and 2005 UTM figures. In other words, completely ignoring the 2007 UTM results (which are the subject of this present s.68 challenge), Mr Hill QC submitted that Capt. Bardakos has a proven track record of behaving fraudulently and fraudulently with ANCO; that at the hearing of the arbitration Capt. Bardakos sought to argue that the 2005 survey by the Sellers was an honest exercise; and that although he repeats that refrain in his new witness statement, the tribunal found as a fact(i) that Capt. Bardakos and his colleague Mr Demeroukis behaved dishonestly in relation to the 2005 UTM survey in China by dismissing a Chinese UTM company when it refused to falsify UTM readings and then flying ANCO down from Greece to do the job instead (award paras 86 and 87); and(ii) that the previous set of UTMs in 2003 were known to be false by Capt. Bardakos because if they were genuine the vessel had grown steel between 2000 and 2003 that was not physically possible and would have been obvious to him (see award para 84). ANCO were the UTM company used by the Sellers in 2003. Accordingly, the tribunal found a pattern of fraud in relation to the 2003 and 2005 UTM surveys irrespective of the 2007 UTM results and found that Mr Bardakos was privy to both those frauds. In view of this history, the overwhelming likelihood is that this new challenge is another Bardakos/ANCO fraudulent conspiracy.[47]Furthermore, Mr Hill QC submitted that in any event, even taking all the Sellers’ evidence at face value, it cannot be said that the award was obtained by fraud or the award or the way in which it was procured was contrary to public policy within S.68(2)(g) of the 1996 Act; and that as stated above, s.68(2)(g) only applies where the award has been obtained by the fraud of a party to the arbitration or by the fraud of another to which a party to the arbitration was privy. Here, submitted Mr Hill QC, there was not a shred of evidence that the senior management/directors of Queensway or the Buyers were involved in any fraud or knew about it. As a matter of law, the Buyers will not be taken to know of the fraud being perpetrated on it: see Re Hampshire Land [1896] 2 Ch 743. B. The Sellers’ response with regard to the strength of the application[48]On behalf of the Sellers, Mr Bloch QC submitted that it was, at the very least most surprising that the Buyers had elected not to put in any statement from someone with first-hand knowledge of the events in Tuzla denying the accounts put forward by Mr Gkritzapis. The reason offered by Mr Williams for not putting in evidence directly countering Mr Gkritzapis’ account from someone with first-hand knowledge is that this “would be of little assistance to the Court since there will be a straight conflict of evidence on a number of points which it will not be in a position to resolve without hearing oral evidence.” However, Mr Bloch QC submitted that this purported justification for such omission does not work: it might be right for the Buyers to say that they cannot defeat this application simply by offering a conflicting account to Mr Gkritzapis’ - but that does not justify the decision not to present a conflicting account at all (if, indeed, the Buyers say they have one). Even if the Buyers did not think it appropriate to offer a point-by-point response, Mr Bloch QC submitted that does not explain their failure to counter the general thrust of the Sellers’ allegations; that they have not put in any evidence to rebut the allegation that Mr Gkritzapis was instructed to produce documents containing fabricated and low thickness measurements and that these were used to present a misleading impression of the vessel’s condition to the Tribunal.[49]Further, Mr Bloch QC submitted that Mr Williams’ evidence is, in effect, of little value. Mr Williams is, submitted Mr Bloch QC, a solicitor with no direct first-hand knowledge of the relevant events nor of the documents in question. In any event, Mr Bloch QC submitted that Gkritzapis 2 comprehensively answers all the apparent issues Mr Williams raises regarding the documents. In that context, Mr Bloch QC addressed in considerable detail many of the points raised by Mr Williams both in written form as summarised in paragraphs 32-64 of his skeleton argument and in his oral submissions. In any event, it was his submission that the court could not on this present application resolve the issues which had been raised and that such determination could only be made with the benefit of oral evidence and cross-examination.[50]As to the question of attribution of knowledge, Mr Bloch QC accepted that the Sellers would ultimately need to demonstrate that the fraud was that of the Buyers, rather than some third party. In that context, Mr Bloch QC submitted that so far as the Sellers have been able to determine, the Buyers were a “paper company”; that in all material respects it had acted through Queensway, who managed the vessel, and whose representatives gave evidence in the arbitration on behalf of the Buyers; that it is therefore, Queensway’s knowledge of the fraud that is material for these purposes; that the Sellers’ evidence points clearly to Mr Melis, Queensway’s Technical Manager, having knowledge of the true nature of the Supplement; and that Mr Melis was the “directing mind” of Queensway in the sphere of matters technical and in particular the person responsible for all technical matters, including the condition of the vessel and the main witness on behalf of the Buyers dealing with technical matters, and the Supplement in particular. (I should mention that Mr Bloch QC originally submitted that Mr Melis was the most senior person in Queensway who gave evidence at the arbitration – but Mr Bloch QC recognised that this was incorrect and, in the course of oral argument, submitted that if necessary the case of fraud could and would be alleged against Mr Terzis, the chief executive of Queensway.) On this basis, Mr Bloch QC submitted that the true nature of the Supplement is to be attributed to Queensway and, therefore, the Buyers. In that context, he relied on Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 in particular in the speech of Lord Hoffmann at pp 506-507.[51]I should also mention that Mr Bloch QC addressed at some length in his written submissions a number of points viz that if the alleged fraud existed (a) it would have had a significant impact or influence on the outcome of the arbitration (paras 116-132); (ii) it would have assisted the Tribunal in evaluating the earlier survey reports in 2000, 2003 and 2005 (paras 133-140); and (c) it would have had a significant effect on quantum (paras 149-154). It does not seem necessary to consider these in any detail. I am content to proceed on the basis that Mr Bloch QC is correct in such submissions. C. Discussion with regard to the strength of the application[52]I agree with Mr Bloch QC that although there may be good reason for the Buyers not adducing a point-by-point response it does seem surprising (at least at first sight) that the Buyers put in no evidence at all from anyone with first-hand knowledge of the events in Tuzla denying the accounts put forward by Mr Gkritzapis. However, this is often a difficult tactical decision. Evidence from a witness which consists of little more than a bare denial is often (rightly) criticised because of its failure to descend to any detail; and, as stated by Mr Williams, there is here much force in the view that a more detailed point by point rebuttal would be of little assistance (at least to the Buyers) because there would be a straight conflict of evidence which the court could not resolve without hearing oral evidence. Be that as it may, what is clear is that the assertion by Mr Hill QC in a footnote in his skeleton argument that Messrs Melis, Devaris and Erzaim vehemently deny the allegations does not fill the gap identified by Mr Bloch QC, is of no evidential value, carries no weight and must be ignored; and that I must deal with the application on the evidence before me.[53]For present purposes, I am also prepared to assume in Mr Bloch QC’s favour that I should disregard the Tribunal’s conclusion that Capt. Bardakos had previously acted dishonestly in relation to the 2005 survey and that there was a pattern of fraud in relation to the 2003 and 2005 surveys irrespective of the 2007 results to which Capt. Bardakos was privy – although as submitted by Mr Hill QC there are perhaps strong reasons why such conduct should not be disregarded because it is arguably unaffected by the events in 2007[54]Nevertheless and despite Mr Bloch QC’s forceful submissions, I am bound to say that I regard the case now sought to be advanced on behalf of the Sellers as, at best, extremely weak. That is so for two independent reasons.[55]First, as stated above, s.68(2)(g) only applies where the award has been obtained by the fraud of a party to the arbitration or by the fraud of another to which a party to the arbitration was privy and, in my view, even taking the Sellers’ evidence at face value, such evidence falls far short of showing any fraud on the part of the Buyers or which could properly be attributed to them. As Mr Bloch QC fairly conceded, the assertion in para 46 of his skeleton argument that Mr Melis was the most senior person in Queensway who gave oral evidence at the arbitration was an error. It is also fair to say that such error was perhaps excusable because it was founded on an error in the award itself and Mr Bloch QC did not himself appear in the arbitration. Be that as it may, I was frankly astonished when Mr Bloch QC felt able to assert orally for the first time in the course of his reply that if necessary the case of fraud could and would be alleged against Mr Terzis, the chief executive of Queensway. In my judgment, there was no proper basis for such assertion.[56]Second, on the technical side, it seems to me that the manner and timing in which this new case has emerged are, of themselves, relevant to what, if any credence, can be given to it. In particular, I bear in mind that the Sellers had at the very least used ANCO to carry out the earlier surveys in 2003 and 2005; and that on Capt Bardakos’ own evidence, he spoke to Mr Angelopoulos from time to time about the arbitration and, in particular, both to him and to Mr Gkritzapis either just before or at the early stages of the arbitration. Given what Capt. Bardakos himself recognised was a “tension” between the reports in 2005 and 2007, it is, at the very least, somewhat surprising that the Sellers did not call Mr Nakos or Mr Gkritzapis at the arbitration; and that, again on his own evidence, it was not until mid-November 2011 that Capt Bardakos considered that the Buyers’ story about the nature of the Supplement might not be true. In any event, the flaws in the Sellers’ evidence, in particular the evidence of Mr Gkritzapis, identified by Mr Hill QC and summarised above are, in my view, overwhelming. As submitted by Mr Bloch QC, it is true that Gkritzapis 2 does, in a sense, provide answers to the numerous points raised by Mr Wiliams with regard to Gkritzapis 1.[57]However, in the light of the contemporaneous documents, the various accounts and explanations given by, in particular, Mr Gkritzapis are, in my judgment, simply not credible or inconsistent or both. In particular, the inconsistencies summarised above between Gkritzapis 1 and Gkritzapis 2 are so striking that it seems to me difficult, if not impossible, for the court to give any credence at all to the case now sought to be advanced by the Sellers on the basis of this and the other new evidence.[58]To my mind, the most blatant example of such inconsistency concerns Mr Gkritzapis’ evidence relating to thickness measurements taken in the forepeak tank. Thus, in Gkritzapis 1 para 55, Mr Gkritzapis states:
“…I think [Mr Davaris’] concern to cover his back was also the reason why he videotaped the forepeak, when I was asked to diminish the actual measurements of the bulkhead plating (steel sheets), which were very close to the “as built” thickness, by recording values near to the same values entered for the grooving on the stiffeners. I therefore thought I was doing him a favour, helping him.”
However, in Gkritzapis 2, Mr Gkritzapis states in para 49 “…..In case it from was not clear in my first witness statement, I would like to clarify that the measurements of the fore-peak collision bulkhead contained on these diagrams were accurate, unlike those of the under deck longitudinals. As I mentioned in my first witness statement, Mr Davaris filmed this measurement exercise, and so there was independent verification of these measurements. As he was filming it, I assumed he didn't want me to insert different numbers onto the diagrams. The measurements were still not indicative of the general condition of the metal, however, as they were taken in areas of localised corrosion and grooving.” These two statements are manifestly contradictory: they are simply impossible to reconcile. Mr Bloch QC frankly accepted that these two accounts were “quite different” and that the two cannot both be accurate. However, Mr Bloch QC submitted that this inconsistency could be explained by a false memory and that there was considerable scope for what he described as “muddle and confusion”, an experience which (he submitted) we all share. Otherwise, Mr Bloch QC was unable to provide any satisfactory explanation of this inconsistency; nor of the other inconsistencies referred to above. His only response was that whatever inconsistencies existed could not properly be resolved at this stage without oral evidence and cross-examination and that itself is a reason why the court should grant an extension of time to allow the challenge to proceed.[59]I am very conscious of the dangers of the court carrying out a mini-trial on the affidavits. However, this is not a case where the inconsistencies lie between the evidence advanced by each adverse party in the litigation. Here, the inconsistencies are on one side. Moreover, such inconsistencies are not remote or peripheral. Rather, the inconsistencies in the Sellers’ evidence are manifest and lie at the very heart of the case now sought to be advanced; and, as stated above, are so striking that, in my judgment, this is a case where exceptionally the court is entitled to conclude even at this stage that the case advanced is, at best, extremely weak. (vii). Would it in the broadest sense be unfair to the Sellers for them to be denied the opportunity of having the application determined.[60]In a sense, any refusal to extend time which has the result of denying a party the opportunity of having the substantive application determined is “unfair” to that party. But the question of overall justice and fairness must be considered in the context of the overall scheme of the 1996 Act and in particular the policy considerations (including the importance of finality in arbitrations) which I have already referred to above. Notwithstanding the gravity of the allegations, it is my view that any relevant unfairness is outweighed by the delays in bringing the application and the fact that, as I have concluded, the alleged fraud is, at best, extremely weak.

Conclusion

[61]In my judgment, the Sellers have failed to satisfy the burden on them under s.73 of the 1996 Act that if the alleged fraud existed it could not with reasonable diligence have been discovered given, in particular, that there were here “grounds to suspect”. For that reason, the substantive application under s.68(2)(g) is inevitably doomed and, on that ground alone, the application for an extension of time to bring the substantive application must fail. Even if that is wrong, the delays in bringing the application and the fact (as I have found) that the application is, at best, extremely weak persuade me that I should in the exercise of my discretion refuse the application for an extension of time. In my view, any unfairness to the Sellers is outweighed by such matters.[62]Counsel are requested to seek to agree a draft order (including costs) for my approval failing which I will deal with any outstanding issues.

Cited in 11 later judgments

and 2 more of the most senior