Tame Shipping Ltd v Easy Navigation Ltd

Parties may agree that an arbitrator’s separate reasons are confidential and cannot be used in proceedings concerning the award. That agreement does not prevent the court from admitting the reasons where they are necessary to determine an application under section 68 of the Arbitration Act 1996. The court should examine them where the alleged serious irregularity and substantial injustice cannot otherwise be assessed, unless the allegation is groundless or an exceptional reason justifies exclusion. Section 68 remains a long-stop jurisdiction reserved for serious irregularity causing substantial injustice. An attempt to challenge the arbitrator’s construction of the contract or assessment of evidence as an error of law is not, without more, a serious irregularity.

The Buyers purchased the vessel Easy Rider under a Norwegian Saleform agreement. Clause 19 established a procedure for dealing with underwater damage discovered during a pre-delivery inspection. A classification surveyor identified a rudder defect. The vessel was delivered, and the parties deposited US$50,000 in escrow pending arbitration.

The sole arbitrator awarded the Buyers US$6,094, calculated by reference to the Sellers’ quotation, and dismissed the Buyers’ counterclaim. He issued separate reasons marked as confidential. The Buyers applied under section 68 of the Arbitration Act 1996, alleging procedural unfairness and failure to consider their repair quotation. The central issues were whether the confidential reasons could be relied upon and whether either complaint constituted serious irregularity causing substantial injustice.

1. Confidential reasons. The parties had agreed, expressly or by implication from the L.M.A.A. Small Claims Procedure and its Commentary, that the arbitrator’s separate reasons would not be used in proceedings relating to the award. That agreement bound the parties but not the court.
2. Where a section 68 application alleges serious irregularity causing substantial injustice, and the relevant evidence is contained in confidential reasons, the court should examine them and permit submissions on their significance. The court may decline to do so where other evidence makes examination unnecessary, the allegation is groundless, or an exceptional reason justifies exclusion.
3. First complaint. The arbitrator’s principal conclusion was that clause 19 applied to all underwater defects affecting class. His further comments about how the clause might operate if circumstances changed were collateral and amounted to peripheral explanation. The complaint was therefore an impermissible challenge to a question of law, not a serious irregularity.
4. Second complaint. The arbitrator had not overlooked the Buyers’ quotation. He had concluded that it was not produced in accordance with clause 19 and therefore could not be used under that clause. Whether that conclusion was legally correct was irrelevant to section 68 and disclosed no irregularity.
5. The application was dismissed.