Midnight Marine Ltd & Anor v Thomas Miller Speciality Underwriting Agency Ltd Re: LABHAULER

A challenge to an arbitration award for serious irregularity under section 68 of the Arbitration Act 1996 requires both an irregularity within the statutory list and substantial injustice. A tribunal may dismiss a claim under section 41(3) where the statutory conditions are met, and “claim” and “claimant” may include a counterclaim and counterclaimant. A party cannot avoid the consequences of delay by characterising its claim as merely a defence. Where success on a section 69 appeal could not affect the parties’ rights because the claim would in any event be dismissed for delay, permission to appeal cannot be granted.

The claimants sought an indemnity under a P&I policy after cargo carried on the barge Labhauler was lost. The defendant commenced London arbitration seeking a declaration of non-liability. The arbitrators held that the indemnity claim was time-barred and, alternatively, dismissed it under section 41(3) for inordinate and inexcusable delay.

Butcher J refused permission to appeal under section 69 and dismissed the section 68 challenge without a hearing. The claimants applied to set aside that dismissal and sought leave to appeal against the refusal of permission. The issues concerned the tribunal’s power under section 41(3), substantial injustice under section 68, and whether a section 69 appeal could affect the parties’ rights.

1. Applications dismissed. The application to set aside the paper dismissal of the section 68 challenge and the application for leave to appeal against the refusal of permission under section 69 were both dismissed. The claimants were ordered to pay £30,000 in costs.
2. Section 68 requires proof of an irregularity within the closed list in section 68(2), together with substantial injustice. The alleged treatment of the claim under section 41(3) could not satisfy that requirement because substantial injustice could not be shown.
3. Under section 41(3), a tribunal may dismiss a claim where there has been inordinate and inexcusable delay and the delay creates a substantial risk that a fair resolution is impossible or causes serious prejudice. By section 82(1), “claim” and “claimant” include a counterclaim and counterclaimant unless the context requires otherwise.
4. The claimants faced an insuperable dilemma. If their indemnity claim had not been referred to arbitration, it was time-barred. If it had been referred, the arbitrators had power to dismiss it for prolonged and prejudicial delay. There was no intermediate position in which the claim was referred but the claimants were not counterclaimants.
5. Permission under section 69 could be granted only if determination of the question of law would substantially affect the parties’ rights. That condition was not met because the claim would still be dismissed under section 41(3).
6. The court also gave procedural guidance. A paragraph O8.5 dismissal without a hearing is intended to identify hopeless section 68 applications promptly and economically. A hearing to set aside such an order should ordinarily address only whether there is a real prospect of success.

Butcher J refused permission to appeal under section 69 and dismissed the section 68 challenge without a hearing. The present court dismissed the application to set aside that dismissal and refused leave to appeal to the Court of Appeal.