Award dismissing a claim for inordinate and inexcusable delay survives challenge in the English court

In Grindrod Shipping Pte Ltd v Hyundai Merchant Marine Co. Ltd, the English High Court (“the Court“) rejected an application under s68 of the Arbitration Act 1996 (“the Act“) to challenge an Award (the “Award“). Six years after the proceedings had commenced, the tribunal (“Tribunal“) issued a final award dismissing the claim under s41(3) of the Act on the ground of inordinate and inexcusable delay. Grindod Shipping challenged the award under s68 of the Act,  arguing that the Tribunal’s decision was based on grounds not advanced by the respondent. The Court concluded that the issues had been sufficiently “in play” for all sides to have had a fair opportunity to respond. There was no breach of the tribunal’s duty to act fairly and impartially and therefore no procedural irregularity.

Background

In July 2011, Grindod Shipping commenced arbitral proceedings against Hyundai. By August 2016, the proceedings had only reached the stage of documentary disclosure, with each side blaming the other for the delay. Shortly thereafter, when the six year limitation period had just expired, Hyundai applied to the Tribunal under s41(3) of the Act to have the claim dismissed.  After submissions by both parties, the application was determined “on the papers”, with no hearing being thought necessary by either party or the Tribunal.

The Tribunal’s Award

Under s41(3) of the Act, a tribunal may dismiss a claim if it is satisfied that there has been an inordinate and excusable delay which (i) gives rise, or is likely to give rise, to a substantial risk that it is not possible to have a fair resolution of the issues in that claim (s41(3)(a)); or (ii) has caused, or is likely to cause, serious prejudice to the respondent (s41(3)(b)).

The Tribunal found that there had been inexcusable and inordinate delay. Hyundai argued that the deterioration in the quality and availability of evidence gave rise to a substantial risk of unfairness under s41(3)(a). The Tribunal rejected this contention, finding that the merits of the case were unlikely to turn on the evidence of factual witnesses and would rest instead on contemporaneous documentation and expert evidence. However, the Tribunal considered that the delay caused “serious prejudice” to Hyundai under s41(3)(b). An application for security for the claim had been made in 2011 and was renewed and ordered against Hyundai in 2016, prompted by Hyundai’s well-publicised financial difficulties. The Tribunal considered that the order to provide security, which led to the threatened arrest of one of its ships, caused substantial prejudice to Hyundai. Further prejudice was caused because the order and the mere threat of arrest indirectly jeopardised Hyundai’s restructuring programme. Had the matter come before the Tribunal in 2014 (which it would have done but for the inordinate and inexcusable delay), Hyundai would not have faced such issues. The Tribunal dismissed the claim, awarding Hyundai its costs in full.

Grindod’s challenges to the Award

Grindod challenged the award on the grounds of serious irregularity under s68 of the Act and appealed on a point of law under s69 of the Act. The Court rejected the s69 application on the papers, on the basis that the Tribunal’s decision under s41(3) of the Act was one of fact, or at best mixed law and fact, and that there was no legal test on which the Tribunal was said to have erred.

Under s68(2)(a), Grindod argued that the Tribunal had acted in breach of its general duty under s33 in determining the s41(3) by formulating its own grounds for finding that the delay was causing “serious prejudice” under s41(3) and resting its conclusion on the financial burden on Hyundai of providing the security.

The High Court’s judgment

The Court identified a number of well-established principles relating to the tribunal’s general duty under s33 of the Act: that were relevant to the dispute: (i) a tribunal must allow the parties an opportunity to deal with any issues that might form the basis of their findings; (ii) if the tribunal is minded to base its decision on issues not raised by the parties, it must give the parties an opportunity to address these issues; and (iii) additional care must be taken when a decision will be made on the papers or where the chance for oral submissions is limited.

Following ABB AG v. Hochtief Airport GmbH [2006] 2 Lloyd’s Rep 1 and Reliance Industries Ltd v Union of India [2018] EWHC 822, the Court held that a party has an opportunity to address a point if the point is “in play” or “in the arena” in the proceedings. It is not necessary that the issue has been raised by a party in the specific formulation adopted by the Tribunal, provided the parties have been able to address the “essential issues” on which the Tribunal’s decision is based. Hyundai’s financial hardship was not raised by Hyundai in the context of “serious prejudice”, but it was identified by Hyundai as a factor relevant to the exercise of the Tribunal’s discretion under s41(3), and Grindod was given a fair opportunity to offer submissions in response. There had therefore been no serious irregularity.

Even if it had found for Grindod on the serious irregularity point, the Court said it would not have found that Grindod had faced substantial injustice so as to satisfy s68 of the Act. The arguments which could have been made would have been unlikely to affect the Tribunal’s decision.

Comment

This judgment serves as a reminder of the considerable discretion afforded to a tribunal to dismiss a claim when the requirements of s41(3) are satisfied.  It is also a salutary prompt that parties should ensure they respond to all issues that may be adverse to their case, regardless of the context in which those issues are raised.

 

For further information, please contact Nicholas Peacock, Partner, Hannah Ambrose, Professional Support Consultant, or your usual Herbert Smith Freehills contact.

 

Nicholas Peacock
Nicholas Peacock
Partner
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+44 20 7466 2803
Hannah Ambrose
Hannah Ambrose
Professional Support Consultant
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+44 20 7466 7585

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Filed under Arbitration Act 1996, Arbitration proceedings, Arbitrators, Challenges to awards, Costs, Europe

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