This dispute arose in relation to two charterparties which ran consecutively between Buyuk Camlica Shipping, owners, and Progress Bulk Carriers, charterers. The chartered vessel was the "Hilal I", a bulk carrier flying the Turkish flag. The charters were on an amended NYPE (1946) form.
Owners refused to load cargoes of direct reduced iron (DRI) and hot moulded briquettes of direct reduced iron (HBI). The charters had a rider clause that specifically excluded cargoes of DRI and HBI. Charterers argued that there had been an oral variation of the charters to allow the carriage of DRI and HBI. The dispute was arbitrated and the tribunal agreed with charterers that the charters had been varied and that owners’ refusal to load the cargo was a breach of charter.
Owners had also argued that even if there had been an oral variation of the charters, charterers would not have been able to order the vessel to load at the nominated ports because the vessel’s moulded depth and air draught prevented loading. Charterers’ position was that the charterparties misdesribed the vessel’s moulded depth and therefore owners were not able to rely on their own breach of contract to avoid liability for that breach and/or the inability to load. The tribunal also agreed with charterers on this point; that owners’ misdescription rendered performance by owners physically impossible. The combination of these factors entitled the charterers to damages for owners’ failure to load.
Owners applied to the High Court for an extension of time to challenge the awards under s. 68 (serious irregularity) of the Arbitration Act 1996 (the Act).
The court refused owners’ application to extend time under s.68 being persuaded by charterers' argument that owners were not entitled to do so because they had not exhausted the recourse available to them under s.57. In this regard, charterers relied on s.70 of the Act which provides:
" …
(1) The following provisions apply to an application or appeal under section 67, 68 or 69.
(2) An application or appeal may not be brought if the applicant or appellant has not first exhausted(a) any available arbitral process of appeal or review, and
(b) any available recourse under section 57 (correction of award or additional award).
...”
In order to succeed, therefore, owners had to bring themselves within s.57 of the Act which states:
“ …
(1) The parties are free to agree on the powers of the tribunal to correct an award or make an additional award.
(2) If or to the extent there is no such agreement, the following provisions apply.
(3) The tribunal may on its own initiative or on the application of a party
(a) correct an award so as to remove any clerical mistake or error arising from an accidental slip or omission or clarify or remove any ambiguity in the award, or
(b) make an additional award in respect of any claim (including a claim for interest or costs) which was presented to the tribunal but was not dealt with in the award.
These powers shall not be exercised without first affording the other parties a reasonable opportunity to make representations to the tribunal.
(4) Any application for the exercise of those powers must be made within 28 days of the date of the award or such longer period as the parties may agree.
...”
The only issue on which there was a possibly of recourse for owners was in relation to the allegation of serious irregularity and, in particular, owners’ argument that the tribunal had failed to deal with their submission that charterers had waived any misdescription of the vessel’s moulded depth because they were in possession of information that confirmed the vessel’s actual depth.
The court decided s.57(3)(a) of the Act did not apply in this case. Gavin Kealy QC (sitting as a Deputy High Court Judge) held that although there had been a failure to deal with the issue of misdescription by the tribunal, crucially there had been no ambiguity in their reasoning. The fact that charterers may have been in possession of information that confirmed the vessel’s actual depth was far from sufficient to establish an unequivocable representation by charterers that they would neither rely on the charter description nor claim damages for misdescription.
Further the Court went on to reason that even if there had been an irregularity as a result of the tribunal’s failure to deal with the waiver issue, it was not a serious irregularity within the meaning of s.68(2) of the Act.
As regards owners’ request to allow their appeal out of time, it was held that they were too late in making an application for an extension of time under s.79 of the Act. According to s. 57(4), any such applications had to be made within 28 days and owners had made their application outside that period.
Clearly it was the court’s opinion that owners had not given satisfactory reasons as to why they should be granted an extension of time and although “the court has the power to vary the period of 28 days....the court will require cogent reasons for extending time”. The factors the court will consider when granting an application for an extension of time had been previously set out in the case of Aoot Kalmneft v Glencore International AG [2002] 1 Lloyd’s Rep. 128:
"...
(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
...”
Owners had made their application for an extension of time five weeks after the award. Owners had provided no satisfactory explanation for letting the time limit expire or for waiting a further 3 weeks after the award to produce a claim form, even though they were represented by experienced solicitors and counsel. Owners’ failure to deal with the appeal promptly or to provide good reason for an exercise of discretion to extend time meant that the court was not in a position to allow their appeal out of time.
The decision is a warning against the risks of not reducing to writing conversations regarding the provisions or performance of contracts, as well as the need to ensure compliance with all time limits for the steps required to correct any ambiguity in arbitral awards or appeal periods.
Buyuk Camlica Shpg v Progress Bulk Carriers (the “Hilal I”) 4 March 2010
Article by Tim Guyer
