Mare Nova Incorporated v Zhangjiagang Jiushun Ship Engineering Co., LTD

A tribunal must give each party a reasonable opportunity to address a point which may determine the outcome. Deciding a claim on an unargued issue may constitute a serious irregularity under Arbitration Act 1996, section 68, where it causes substantial injustice.

Contractual wording will not be construed as abandoning accrued contractual or tortious rights and remedies without clear words. A clause defining the contractor’s period of responsibility for a vessel does not ordinarily discharge liability for breaches committed during that period. A section 69 appeal cannot determine a question which the tribunal was not asked to decide, even where the tribunal’s answer to that question was obviously wrong.

The claimant shipowner challenged an arbitral award under sections 68 and 69 of the Arbitration Act 1996. The defendant shipyard did not participate in the arbitration or the court proceedings.

The tribunal found that the shipyard had breached contractual obligations by incorrectly aligning an intermediate shaft bearing. It nevertheless rejected the claimant’s larger damages claim, holding that the shipyard’s liability had ceased when the vessel left the yard under clauses 2.1 and 6.3 of the contractual General Conditions. It awarded a lesser sum under a six-month guarantee.

The central issues were whether the tribunal had committed a serious irregularity by deciding the discharge issue without giving the claimant an opportunity to address it, and whether the contractual provisions discharged accrued liability.

1. The section 68 challenge succeeded. The tribunal decided the damages claim on a discharge-of-liability issue which had not been raised by either party and on which it had not sought submissions. This breached the tribunal’s general duty under section 33 of the Arbitration Act 1996 to give each party a reasonable opportunity to put its case and deal with its opponent’s case.
2. The irregularity caused substantial injustice. The claimant had lost an opportunity with a realistic prospect of persuading the tribunal that its contractual liability had not been discharged and that the larger damages claim should succeed.
3. The tribunal’s construction of the contract was also clearly wrong. Contractual construction starts from the presumption that parties do not intend to abandon rights and remedies arising by operation of law unless clear words establish that intention. The court relied on the principle discussed in Triple Point Technology, Inc v PTT Public Company Ltd [2021] UKSC 29 and the authorities there identified.
4. Clause 2.1 imposed contractual obligations concerning workmanship, materials and alignment. It contained no words limiting those obligations or the owner’s remedies. The provision requiring work to be completed to the owner’s representative’s satisfaction conferred an additional protection; it did not discharge liability for latent defects or accrued breaches. Petrofina S.A. & Co. v Compagnia Italiana Trasporto Olii Minerali and Sacor Maritima S.A. v Repsol Petroleo S.A. supported that construction.
5. Clause 6.3 defined the period during which the contractor was responsible for the vessel as bailee. Read with clause 6.1, it did not extinguish liability for contractual or tortious breaches committed during that period. The tribunal’s contrary interpretation was tantamount to treating the clause as an abandonment of accrued rights and remedies, contrary to the clear-words principle.
6. The section 69 appeal was dismissed. The discharge question had not been a question which the tribunal was asked to determine, so the statutory condition in section 69(3)(b) was not met. The award was remitted to the tribunal for reconsideration on the basis of the law stated in the judgment.

First-instance arbitration claim in the High Court. The judgment does not state any prior court decision determining the merits of the dispute.