DUCAT MARITIME LIMITED v LAVENDER SHIPMANAGEMENT INCORPORATED

A challenge under Arbitration Act 1996, section 68, concerns due process rather than the correctness of an arbitral decision. A tribunal must give the parties an opportunity to address any material basis for its decision which falls outside the cases advanced or the common ground between them.

A gross and obvious accounting or arithmetical error may constitute a serious irregularity where making the error departs from the parties’ cases or common understanding without that opportunity. Mere illogicality or an incorrect decision is insufficient. Substantial injustice is established where the irregularity may have materially affected the award and exceeds what could reasonably be expected as an ordinary incident of the arbitration.

The claimant challenged part of an award under section 68 of the Arbitration Act 1996. The arbitration concerned unpaid hire under a charterparty. The arbitrator rejected the charterers’ underperformance counterclaim but mistakenly added its amount to the owners’ claim, producing an award exceeding the amount claimed and including interest on the failed counterclaim.

The arbitrator refused two correction applications under section 57(3). The central questions were whether the arbitrator had failed to comply with the duty of fairness under section 33, whether the accounting error constituted a serious irregularity, and whether the charterers had suffered substantial injustice.

1. Challenge allowed in part. The arbitrator had committed a serious irregularity under section 68(2)(a) of the Arbitration Act 1996.
2. The parties had proceeded on the common ground that the underperformance claim was the charterers’ counterclaim and did not form part of the owners’ claim. The arbitrator decided the amount due on a basis advanced by neither party, without giving them an opportunity to comment. That was a failure to comply with the section 33 duty to act fairly.
3. The arbitrator also recognised that the figures treated as due exceeded the amount claimed, but resolved the unexplained discrepancy without seeking clarification. Had he invited submissions, the mistake would have been exposed.
4. Section 68 is concerned with due process, not whether the tribunal reached the correct result. Illogicality or irrationality alone is not a serious irregularity. However, a gross and obvious accounting error may fall within section 68(2)(a) where it represents a departure from the parties’ cases or common ground without a fair opportunity to address the departure. The accounting-error ground added little to the primary fairness ground in this case.
5. There was substantial injustice. The error inflated the principal award by approximately one third and resulted in interest being awarded on the unsuccessful counterclaim. The injustice went beyond what could reasonably be expected as an ordinary incident of the arbitration.
6. It was inappropriate to remit the award after two unsuccessful correction applications and because remission would cause unnecessary cost. The award was set aside to the extent of US$9,553.92.

The judgment concerns a first-instance challenge to an arbitral award under section 68 of the Arbitration Act 1996. The award was dated 3 September 2021. The arbitrator refused correction applications made under section 57(3), after which the claimant issued the arbitration claim.