Torch Offshore Llc & Anor v Cable Shipping Inc.

A challenge under section 68 of the Arbitration Act 1996 requires more than criticism of an arbitrator’s reasoning. A failure to deal with a central issue may constitute serious irregularity where it causes, or may cause, substantial injustice. However, the award must be read as a whole and the court need not infer a failure from the absence of a separately expressed finding. Section 57 may require the applicant first to seek clarification or an additional award. For section 69 permission, the proposed question must substantially affect the parties’ rights, have been determined by the tribunal, satisfy the statutory test of obvious error or general public importance, and make it just and proper for the court to intervene. The materiality of a misrepresentation is assessed by whether it formed a real and substantial part of the inducement, though not necessarily a decisive part.

Torch chartered the vessel Midnight Hunter from Cable Shipping under a three-year Supplytime charter. The vessel was represented as having a deck strength of 10 tonnes per square metre and as requiring no under-deck pillars to support Torch’s modular pipe-laying system. Both representations were false but innocently made.

An arbitrator rejected Torch’s misrepresentation claims, finding no inducement, but awarded damages for breach of the contractual description. Torch applied under sections 68(2)(d) and 68(3) of the Arbitration Act 1996, alleging that the arbitrator had failed to decide whether the second representation induced the charter. It also sought permission under section 69 to appeal on questions concerning inducement and lapse of time.

1. Section 68 application dismissed. A failure to determine whether the second representation induced the charter could constitute serious irregularity under section 68(2)(d), since it might affect rescission and the result of the arbitration. But the award had to be read as a whole.
2. The arbitrator had considered the two representations together. His references to deck strength, the need for pillars, the evidence of Mr Lecarme, the proposed compromise, the expert evidence and the cost and duration of remedial work showed that he had addressed the case as it had been argued. His finding that the representations did not form a real and substantial part of Torch’s inducement therefore encompassed both representations.
3. In any event, the arbitrator found that Torch was not genuinely concerned by the actual deck strength. That finding applied equally to the 10-tonne representation and to the representation concerning pillars. No substantial injustice was therefore caused.
4. Torch had also failed to exhaust available recourse under section 57. Section 57(3)(b) concerned a claim presented but not dealt with, such as a head of claim for damages or rescission, rather than an issue left undetermined within a claim. Section 57(3)(a), however, could be used to seek clarification or further reasons where the award was ambiguous or its reasons were incomplete.
5. Section 69 permission refused. The arbitrator had stated and applied the correct inducement test: the misrepresentation had to play a real and substantial, though not necessarily decisive, part in inducing the contract. His conclusion was a finding of fact, not an error of law. The proposed question concerning lapse of time did not arise because inducement had failed.
6. The applications under sections 68 and 69 were dismissed. Costs were to follow the event, subject to submissions.

The judgment concerned an application challenging an arbitral award dated 5 November 2003 and an associated application for permission to appeal on questions of law. The court dismissed both applications.