Coral Seas Ltd v Gilmore [1981] SBFJCA 1; [1980-1981] SILR 119 (17 March 1981)

[1980-1981] SILR 119

IN THE FIJI COURT OF APPEAL FOR SOLOMON ISLANDS

Civil Appeal Case No. 17 of 1980

CORAL SEAS LIMITED

v

GILMORE

Fiji Court of Appeal
(Gould V.F. Henry and Spring JJA)
Sitting as Court of Appeal for Solomon
Civil Appeal No. 17 of 1980

16th and 17th March, 1981

Arbitration - remission of award - discretion of court meeting of arbitrators in absence of party - participation by umpire in proceedings - confusing award - effect of fraudulent misrepresentation on charter party - award set aside

Facts:

A number of disputes arising from the charter to the Appellant of a ship owned by the Respondent were referred to arbitration under the terms of the charter party. There were a number of changes of arbitrators and umpire. The umpire sat with the arbitrators at hearings and in conference. At one meeting of the arbitrators when evidence was tendered by the Respondent the Appellant did not appear. The award gave the option to the Appellant either to pay actual cost of repairs or a specified sum and required it to pay a sum continuing loss of profits until repairs were completed or the specified sum paid. On motion by the Appellant in the High Court (Cooke Acting C.J.) remitted the award to the arbitrators to hear further evidence. The Appellant appealed seeking an order setting aside the award.

Held:

1. The power of the High Court to remit an award is discretionary and if that court does not purport to decide on a basis of discretion the Court of Appeal may substitute the order which justice requires.

2. The findings of the High Court that the umpire did not make any decision enabled the court to say that the mere fact that advice was given by the umpire did not prejudice either party. However the procedure whereby the umpire and arbitrators sat together to draw up the award was not well advised although there was no breach of natural justice.

3. Even though notice was given of a meeting and the Appellant may have been unbusinesslike in not attending, the Appellant had a right to be present and had not waived that right. The holding of the meeting in the absence of the Appellant at which hearsay evidence was given was technical misconduct.

4. Once the Appellant was aware of alleged fraud in the charter party it should have elected either to take advantage of the fraud by bringing an action for relief to vitiate the whole agreement. This would involve a stay of the arbitration. By its conduct in continuing the arbitration the Appellant had approbated and reprobated and could no longer rely on alleged fraud.

5. An award must be in a form capable of being enforced as a judgment. A discretion vested in the Appellant unlimited by time could give rise to substantial delay and even further litigation. The award did not embody sufficient clarity and certainty.

6. In all the circumstances the proper order was that the award of the arbitrators be set aside and the proceedings started again de novo

Cases referred to:

Re Baxters and Midland Railway (1900) 95 LT 20
Odlum -v- Vancouver City (1915) 85 L.J.P.O. 95
Potter -v- Newman (1835) 4 Dowling 504
London Export Corporation Ltd -v- Jubilee Coffee Roasting Co. Ltd (1958) 1 All ER 494
Margulies Brothers Ltd -v- Dafnis Thamaides and Co. (UK) Ltd. (1958) 1 All ER 777
Myron (Owners) -v- Tradex Export SA Panama City RP (1969) 2 All ER 1263
Eastcheap Dried Fruit Co. -v- NV Gebroeders Catz Handesvereeniging (1962) 1 Lloyd’s Rep. 283

For Appellant: King and Knight
For Respondent: Sweetman

Gould VP: On the 10th April, 1979, an award was handed down by two Arbitrators, Paul Herbert Brown and Brian Edward Allen in proceedings by way of arbitration arising out of a dispute concerning a ship called the "Solsea". The present Appellant company moved the High Court of the Solomon Islands to set aside or remit the award on a number of grounds, and after evidence by affidavit and viva voce had been given the learned Chief Justice gave judgment on the 20th November, 1979, remitting the award in the following terms:-

"The award will, therefore, be remitted to Mr. Brown and Mr. Allen to enable them to give further consideration to the dispute in the light of any further evidence or arguments which either party may wish to submit. If eventually they are agreed, they will make a fresh award. If they are not agreed they will appoint an umpire"

The Appellant Company (hereinafter referred to as "Coral Seas") brought the present appeal from the High Court, asking to have the award set aside.

It has been common ground throughout the proceedings that the matter in issue is governed by English law.

As concisely as possible, the basic facts are these. In June 1978, the Respondent chartered the "Solsea" to Coral Seas for four months (with an option to renew) under what is commonly known as a Barecon charter. The "Solsea" was issued at Tulagi on the 7th April, 1978 with a safety certificate current for twelve months. The "Solsea" was used by Coral Seas for two months and five days, on various journeys, but on the 10th August, 1978, leaks were reported and the safety certificate was revoked on the 14th August, 1978. On the 21st September, 1978, notice of re-delivery under Clause 13 of the charter was given and on the 4th October, Coral Seas paid the Respondent $4,290 for the hire of the "Solsea" from 1st September, 1978, to the 6th October, 1978.

We have not been referred to any document setting out the details of the disputes actually referred to the Arbitrators for their decision. There are submissions in the nature of arguments and claims, but no definition of specific questions referred under Clause 25, which provides for reference to arbitration of "any dispute arising out of this charter". The award itself perhaps provides the best guide when it summarized the claims as follows:-

"The owner claimed (in summary)

(a) that the vessel had been damaged while on charter and for the cost of the consequent repairs;

(b) that the vessel had not been duly redelivered in accordance with the charter and that he was entitled to be paid either -

(1) the hire charge under the charter from the 7th October 1978 until the vessel is repaired and duly redelivered together with reimbursement of manning costs for the same period; or in the alternative;

(2) damages in respect of loss of profits from the 7th October 1978 until the vessel is repaired;

(c) costs incurred in respect of the arbitration.

The charter claimed (in Summary)

(a) that the revocation of the vessel’s safety certificate with effect from the 31st August 1978 entitled the charterer to cease payments under the charter until the safety certificate was re-issued;

(b) the repayment of $4, 290 paid to the owner without prejudice on the 6th October being one month’s hire charge together with interest thereon;

(c) that the charterer had no further liabilities under the charter after the 6th October 1978 having redelivered the vessel to the owner on that date, the repairs now found to be necessary having arisen as a result of damage incurred before the start of the charter period and of latent defects and from fair wear and tear;

(d) that the charterer was entitled to rescind the charter in view of an undisclosed mortgage affecting the vessel;

(e) costs incurred in respect of the arbitration."

The award held that damages under four subheads resulted from groundings during the period of the charter and not from latent defects or fair wear and tear. As to this, the award said:-

"We award and direct that the charterer shall at its own discretion either:-

(a) effect the repairs necessary to put right such damage to the satisfaction of a surveyor appointed jointly by the owner and the charterer at the expense of the charterer; or

(b) pay to the owner the sum of $27, 400.00 (twenty seven thousand four hundred dollars) in respect of the costs of repairs."

The next important paragraph is No.3:

"We find that the vessel was not redelivered to the owner in accordance with the terms of the charter but that for all practical purposes the charter ceased on the 6th October 1978. Accordingly the owner is not entitled to the hire charge from that date. We find that the vessel was returned to the owner in an unusable condition, that the repairs which were at that date the owner’s responsibility were not such as to make the vessel immediately unusable and vie award to the owner the following which we direct be paid by the charterer:-

(a) in respect of the loss of profits the sum of $27.66 a day for the period commencing on the 7th October 1978 and ending on the 30th day after either satisfactory completion of the repairs in accordance with paragraph 1 of the Award or payment of the owner of the sum specified in that paragraph;

(b) in respect of manning costs the sum of $6.13 a day for the period specified in sub-paragraph (a) above;

(c) in respect of the re-issue of a safety certificate, the costs actually charged by the Marine Department of the Ministry of Transport and Communications for inspecting the vessel on one occasion after the date of this award."

The award went on to say that the revocation of the safety certificate did not entitle the charterer to cease making the hire payments, that the payment of $4,290 was in accordance with the charter. As to the mortgage, paragraph 7 said:-

"The charterer did not discover the existence of the mortgage over the vessel until after the 6th October 1978, though the charterer was verbally informed by the owner before the start of the charter that the owner owed money on the vessel. The charterer has not suffered any loss by reason of the existence of the mortgage."