English Commercial High Court (QB): Addressing a wrong issue in an award is an error of law by the Tribunal appealable under Sec. 69 of the English Arbitration Act

Sally Roberts court case

 

In the case of Fehn Schiffahrts Gmbh & Co KG vs. Romani SPA [2018] EWHC 1606 (Comm), the English Commercial High Court heard an appeal against the arbitral award on the point of law on an interesting issue of “whether the assignee can claim substantial damages in circumstances where the assignor has suffered no loss” which the tribunal decided in affirmative. The Court upheld the appeal and remitted the matter back to the Tribunal finding that the Tribunal has passed the award based on the premise that the assignor has suffered a loss and therefore assumed that the Charterer (being the assignee) could recover their losses from the Owner of the Vessel rather than addressing the issue of title to sue. Detailed analysis given below:

Factual Matrix

The Owners of a Vessel chartered the Vessel by a charterparty to the Charterers. The charterparty was for a voyage for a cargo of organic sunflower seeds and organic wheat. The cargo was loaded under two straight bills of lading dated and the consignee named in the bills of lading was assignor. At some point after completion of the loading, and prior to discharge, the cargo was fumigated. As a consequence of the fumigation, the cargo could not be sold as organic and therefore it had to negotiate a discounted price with the buyers to whom it had on-sold the cargo. Due to dispute the matter went into arbitration.

Arbitration Proceedings

Due to the loss incurred by the Charterers, they sought to recover the amount of the negotiated discounts from the Owners. The Tribunal held that the Owners were liable for any damages found to have been caused by the unauthorised fumigation of the cargo whilst it was in the Owners’ care and custody. Thereafter, the Owners applied to the Tribunal under Section 57(3) of the English Arbitration Act (the Act) for clarification of the evidence relied upon by the Tribunal which led to the finding that the Charterers had title to sue. The Owners appealed under Section 69 of the Act against the award on the ground that the tribunal erred in law while granting the award.

Legal Principle Applicable

Section 69 of the Act

69 Appeal on point of law.

(1) Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings.

An agreement to dispense with reasons for the tribunal’s award shall be considered an agreement to exclude the court’s jurisdiction under this section.

(2)An appeal shall not be brought under this section except—

(a) with the agreement of all the other parties to the proceedings, or

(b )with the leave of the court.

The right to appeal is also subject to the restrictions in section 70(2) and (3).

(3) Leave to appeal shall be given only if the court is satisfied—

(a) that the determination of the question will substantially affect the rights of one or more of the parties,

(b) that the question is one which the tribunal was asked to determine,

(c) that, on the basis of the findings of fact in the award—

(i) the decision of the tribunal on the question is obviously wrong, or

(ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and

(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.

(4) An application for leave to appeal under this section shall identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted.

(5) The court shall determine an application for leave to appeal under this section without a hearing unless it appears to the court that a hearing is required.

(6) The leave of the court is required for any appeal from a decision of the court under this section to grant or refuse leave to appeal.

(7) On an appeal under this section the court may by order—

(a) confirm the award,

(b) vary the award,

(c) remit the award to the tribunal, in whole or in part, for reconsideration in the light of the court’s determination, or

(d) set aside the award in whole or in part.

The court shall not exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.

(8) The decision of the court on an appeal under this section shall be treated as a judgment of the court for the purposes of a further appeal.

But no such appeal lies without the leave of the court which shall not be given unless the court considers that the question is one of general importance or is one which for some other special reason should be considered by the Court of Appeal.

Parties’ Contentions

The principle contention of the Owner was that the Charterers did not have the title to sue by virtue of an assignment from assignors and that the Charterers suffered the loss but the assignors did not. It was based on the legal principle enumerated in Chitty on Contracts (32nd edition) reproduced below:

“… [t]he principle that an assignee could not recover more from the debtor than the assignor could have done had there been no assignment

Based on this principle, the Owner contended that a consignee under a straight bill of lading who suffers no loss cannot bring a claim in respect of damage to the cargo.

On the other hand the Charterer contented that the damages awarded by the Tribunal were the loss that assignor was entitled to recover as the consignee under the straight bills of lading which it assigned to the Charterers, and therefore the question of law does not arise at all. In alternate, the Charterers argued that even if assignor did not in fact suffer loss, then the loss was suffered by the Charterers and the Charterers had title to sue the Owners independent of the assignment i.e. under the Charterparty.

Analysis

Citing the Award, the Court observed that there is no express finding in the Award that assignor did not suffer loss. If assignor suffered loss, there was no error of law.

Further the Court noted that on the authorities of the case cited the assignor may have suffered a loss as the holder of the straight bills of lading but there was no implicit finding by the Tribunal to this effect and therefore, the court cannot infer on the facts impliedly or expressly found by the Tribunal, that the Tribunal found that there was substantial loss to assignor.

Since the instant case is an appeal under Section 69 of the Act, the Court noted that in this case the court cannot determine whether the Tribunal answered the question of law correctly on the face of the Award: it is to be inferred from the Award that the Tribunal’s decision was based on the finding that the Charterer had title to sue based on the assignment, rather than the charterparty, but having proceeded on this basis, this court cannot determine whether the Tribunal determined that assignor suffered a loss.

But important thing noted by the Court was that the Tribunal has not distinguished between the issue of title to sue and the issue of whether assignor suffered a loss. If in fact there was no substantial damage suffered by assignor, then the Tribunal has incorrectly applied the law and assumed that the Charterer could recover the losses, even though no loss had been suffered by assignor.

Conclusion

Therefore, the Court held that the Tribunal has erred in its award and therefore, the matter was remitted back to the Tribunal.

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