Title
Oxford Shipping v. Nippon Yusen Kaisha, [1984] 2 Lloyd's Rep. 373
Content
373

Oxford Shipping Co. Ltd. v. Nippon Yusen Kaisha, (The "EasternSaga")Queen's Bench Division (Commercial Court) QBD (Comm)June 26, 1984 Before Mr. Justice Leggatt

Arbitration -- Arbitrators -- Concurrent hearing -- Dispute between owners and charterers and betweencharterers and sub-charterers a mirror image -- Same arbitrators appointed in each of two disputes --Whether arbitrators had power to order concurrent hearing without consent of the parties.

By a charter-party dated June 23, 1975, the owners let their vessel Eastern Saga to the charterers. Clause17 of the charter provided inter alia that:

Should any dispute arise between Owners and the Charterers, the matter in dispute shall be referred tothree persons at London . . . Their decision or that of any two of them shall be final . . .

The charterers in due course let the vessel to sub-charterers (Sanco). A dispute arose between the ownersand the charterers of which a dispute between the charterers and Sanco was to be regarded as a mirrorimage.

The disputes were referred to arbitration and the same arbitrators were appointed in each of the disputes.An application was made to the arbitrators for an order for concurrent hearings in each of the references.The arbitrators held that they had such powers. The owners, however, argued that the arbitrators had nosuch power either because they did not enjoy it by Statute or at common law or, alternatively, becausethere was an implied term of the arbitration agreement between the owners and the charterers that thearbitration between them would be private.

Held, by Q.B. (Com. Ct.) ( LEGGATT, J.), that

(1)

the arbitrators here enjoyed no power to order concurrent hearings oranything of that nature without the consent of the parties; the concept ofprivate arbitration derived simply from the fact that the parties hadagreed to submit to arbitration disputes arising between them and onlybetween them ( see p. 379, col. 1);

(2)

it was therefore implicit in this that strangers would be excluded fromthe hearing and conduct of the arbitration and that neither the tribunalnor any of the parties could insist that the dispute should be heard ordetermined concurrently with or even in consonance with 374 another dispute howeverconvenient that course might be and however closely connected thedispute in question might be ( see p. 379, col. 1);

(3)

the only powers which an arbitrator enjoyed related to the reference inwhich he had been appointed and they could not be extended merelybecause a similar dispute existed which was capable of being and wasreferred separately to arbitration under a different agreement; thereforethe arbitrators' order that the hearing of the arbitration between theowners and charterers take place concurrently with that between thecharterers and Sanco would be set aside ( see p. 379, cols. 1 and 2).

The following cases were referred to in the judgment:

Abu Dhabi Gas Liquefaction Co. Ltd. v. Eastern Bechtel Corporation, (C.A.) [1982] 2 Lloyd's Rep. 425;

Bremer Vulkan Schiffbau und Maschinenfabrik v. South India Shipping Corporation Ltd., (H.L.) [1981]1 Lloyd's Rep. 253; [1981] A.C. 909;

Duke of Buccleuch and Queensberry v. Metropolitan Board of Works, (1872) L.R. 5.H.L. 418;

Interbulk Ltd. v. Aiden Shipping Co. Ltd. (C.A.) [1984] 2 Lloyd's Rep. 66;

Succula Ltd. v. Harland and Wolff Ltd., [1980] 2 Lloyd's Rep. 381;

World Pride Shipping Co. Ltd. v. Diachi Chuo K.K., [1984] 2 Lloyd's Rep.

This was an application by the plaintiff owners, Oxford Shipping Co. Ltd., that the order made by thearbitrators that the hearing of the arbitration between the owners and the defendant charterers, NipponYusen Kaisha take place concurrently with that between the charterers and the sub-charterers, SancoSteam-Ship Co. be set aside.

Representation

Mr. Angus Glennie (instructed by Messrs.Richards, Butler & Co.) for the owners; Mr. MichaelCollins (instructed by Messrs. Middleton Lewis Lawrence Graham) for the charterers.

The further facts are stated in the judgment of Mr. Justice Leggatt.

JUDGMENT

Mr. Justice LEGGATT:

These proceedings raise the question often discussed but apparently never decided by a Court whetherarbitrators have power or jurisdiction to order the concurrent hearing of two arbitrations without theconsent of the parties to those arbitrations. The dispute between the plaintiffs and the defendants, who arerespectively claimants and respondents in the relevant arbitration, arises out of a charter-party betweenthem, under which the claimants were owners and the respondents charterers. It is dated June 23, 1975,and made in the New York Produce Exchange form. The charter-party contained a provision for letting thevessel known as Eastern Saga and she was in due course chartered by the respondents to a companycalled Sanco Steamship Co. (to which I shall refer to as "Sanco"). In due course there arose a disputebetween the owners and the charterers of which a dispute between the charterers and sub-charterers is tobe regarded as a mirror image. These disputes having arisen between the respective parties, the samearbitrators were appointed in each of the two disputes. They were appointed pursuant to cl. 17 of thecharter-party which provided that; Should any dispute arise between Owners and the Charterers, thematter in dispute shall be referred to three persons at London, one to be appointed by each of the partieshereto and the third by the two so chosen. Their decision or that of any two of them shall be final and forthe purpose of enforcing any award this agreement may be made a rule of the Court. The Arbitrators shallbe commercial men.

I am told by the plaintiffs' solicitor upon affidavit that when application was made to the arbitrators for anorder for concurrent hearings in each of the references, they deliberated for some while before reaching theconclusion that an order should be made for concurrent hearings. The one of the three arbitrators whodelivered their decision said that there was time in hand for the parties to test the jurisdiction point in theCourts and, indeed, when Counsel for the plaintiffs said they might apply to the Courts, indicated that thetribunal would welcome "the view from The Strand". This therefore constitutes that view. The plaintiffssay that the arbitrators have no such power as they purported on this occasion to exercise, either becausethey do not enjoy it by statute or at common law or, alternatively, because there is an implied term of thearbitration agreement between the owners and the charterers that the arbitration between them will beprivate. It would appear to follow from that submission that an arbitration agreement is ordinarily to beconstrued as containing such an implied term, at any rate unless there are express conflicting provisions.

Consideration of this point falls, in effect, under three heads:

375

(1)

the concept of privacy as applying to commercial arbitrations;

(2)

the question whether there is to be implied such a term as the plaintiffscontend for; and

(3)

the question whether, irrespective of the implied agreement, arbitratorsenjoy a power, either by statute or at common law or a combination ofboth, to exercise the jurisdiction which they purported to exercise.

In relation to privacy, Mr. Glennie, for the plaintiffs, contends that it is to be viewed in this way: that adispute referred to arbitration should be heard only in the presence of the parties to the arbitrationagreement and their respective advisers, so that the evidence, the contentions and the result are not madepublic, and he argues also that it is a characteristic of that privacy that the case should be presented,challenged, tested and determined only between the parties to the dispute. It being admitted that there is nopower to order consolidation, Mr. Glennie contends that there is little, if any, practical difference betweenan order for concurrent hearings and an order for consolidation. Against that, Mr. Collins, for thedefendants, argues that the concept of privacy is less narrow than the plaintiffs contend for. He says that all that is meant by "privacy" is that the arbitration owes its origin to and the arbitrators derive theirauthority from a contract between the parties. From that the consequences flow that the hearing is not inopen session; the arbitral tribunal has been chosen by the parties; and their award is published not to theworld at large but only to the parties. Mr. Collins argues that there is no good reason for implying a termthat, however closely involved a third party may be with the dispute, he is to be excluded in all respectsfrom participating in the hearing, the more so since a certain amount of information has to go, as he putit, "up and down the line". There is, moreover, in the New York Produce Exchange form of charter-partythe liberty to sub-let which I have mentioned, and it therefore cannot be said to be outside thecontemplation of the parties to such a charter-party that there may be a dispute common not only to ownerand charterer but also to charterer and sub-charterer. It is Mr. Collins' submission that, althoughconsolidation is admittedly not available, even if devoutly to be wished, there is nonetheless no factualbasis for prohibiting concurrent hearings. He remarks that, as is apparent from cases such as the Duke ofBuccleuch and Queensberry v. Metropolitan Board of Works, (1872) L.R. 5 H.L. 418, an arbitrator may,in appropriate circumstances, himself be called to give evidence in open Court of matters which haveoccurred during the conduct of an arbitration before him. It is also apparent that matters which startwithin the privacy of the arbitration room may come into open Court upon such occasions as leave toappeal from arbitrators is given by the Court and upon such occasions as interlocutory matters arising outof an arbitration hearing come ultimately before the Court of Appeal.

Against this, it is said, however, that, whatever the convenience of concurrent hearings, to contend thatthey should be available evidences a confusion of thought between the functions of Courts on the one handand arbitrators on the other. The Court exercises statutory powers in relation to orders for consolidationor orders for concurrent or consecutive hearings and those powers constitute the exercise of a publicfunction which is to be directly contrasted with the function of arbitrations since they are essentiallyconsensual. In aid of his argument that in arbitration agreements such as these there should be implied aterm that the arbitration hearing will be conducted in privacy in the sense for which Mr. Glennie contends,he refers to several matters connected with the conduct of the arbitration which he says militate against theidea that the parties contemplated that disputes between them would be conducted in the presence of anyother person. He remarks that evidence adduced at the arbitration hearing may be of a sensitive orconfidential character, such as makes it unlikely that the parties would have wished, even if they hadforeseen it, that any third person should be present. He says that the parties cannot be taken to havecontemplated that evidence given would be tested by anyone other than the other party to the arbitrationagreement or, come to that, would be challenged by evidence adduced or arguments proffered by any thirdparty. Mr. Glennie says that it is implicit in the nature of an arbitration agreement that the length and theexpense of any hearing that may prove requisite will be no more than is necessary to dispose of thedisputes between those two parties; and, further, administrative matters such as a date or dates for thehearing of an arbitration will be fixed, so far as is in the contemplation of the parties, for the convenienceonly of the parties to the arbitration agreement. It would appear objectionable to the parties at the timewhen the charter-party was entered into between them in which the arbitration clause is contained if itwere suggested that either of them, in the event of a dispute, would have to take their chance of beingcross-examined by a person who turned out to be party to a similar but different dispute arising under adifferent agreement. Nor can the parties to an arbitration agreement such as the agreement between theplaintiffs and the376defendants be supposed to havecontemplated, or, if they had contemplated it, to have accepted, that they might have to bear the extraexpense occasioned by cross-examination, argument and evidence of a third person quite apart from suchinterference with the convenience of the original parties in relation to hearing dates and otheradministrative matters as the presence of a stranger might cause.

Mr. Collins, in seeking to answer these arguments, begins by pointing to the manifest convenience in sucha case as this of holding the separate arbitrations together. He submits that there is no more sensible,practical or just result than that disputes so clearly related should be held at the same time. According tothat submission, unless the Court is constrained to hold as a matter of law or the construction of theagreement that the argument should not prevail, there should not be withdrawn from arbitrators thediscretion to conduct and determine the arbitration in the way they think most fit. In support of theargument that the advantages of having the arbitrations heard together outweigh the objections to such acourse, Mr. Collins remarks that here the factual basis of the two disputes is the same, and to hold thearbitrations together would enable the evidence to be adduced which is wholly or mainly common to both.Indeed, it appears that the defendants might be in some difficulty, were the arbitrations suffered to proceedseparately, because evidence adduced against them might not prove available to them, insofar as theywished to use it, in their separate dispute with Sanco. Mr. Collins points to the difficulty both from thepoint of view of Counsel and also, as it may be, of arbitrators in doing what he calls "wearing two hats"if the arbitrations are separately conducted. It would also follow that were that to occur the parties wouldbe put to the actual or potential disadvantage of having to call witnesses twice; or, perhaps moreaccurately, witnesses common to both disputes would themselves be subjected to the inconvenience ofbeing required to give their evidence on two separate occasions. Finally, it is said that if arbitrations canbe conducted concurrently, the risk of inconsistent awards is, if not obviated, at all events reduced.

In answer to Mr. Glennie's points, Mr. Collins says that the power to order concurrent hearings cannotdepend on the constitution of the tribunal. Even if there are different arbitrators in respect of two differentdisputes or references, still the power must exist. It is merely that there may occur practical difficultieswhich make it inappropriate for the power to be exercised. As far as costs are concerned, it has to beacknowledged that if the plaintiffs here were unsuccessful they would have to pay their own and thedefendants' costs over a period which would have been somewhat protracted by reason of the fact that theother arbitration was being conducted concurrently with their own. Nonetheless he submits that it isproper for arbitrators, when invited to make an order for concurrent hearings, as here, to pay regard to theoverall costs which would be incurred. It is obvious that the cost of concurrent hearings would be likelyto be less than the cost of two separate hearings even if they were conducted consecutively. Mr. Collinspoints to an agreement that has been made here between the defendants and Sanco that the arbitrators,which would mean the arbitrators in the dispute between the plaintiffs and defendants, should have powerto relieve the plaintiffs of such extra costs as might have been caused to them by concurrent hearings. Mr.Collins asserts that arbitrators generally, and especially arbitrators so experienced as those concerned inthe present proceedings, are perfectly capable of ensuring that there is no unnecessary duplication eitherof cross-examination or of legal argument on account of arbitration hearings being conductedconcurrently. As for the availability of hearing dates, that, he is able to remark, has not proved a difficultyin the present case. All in all, he contends that the factors relied upon by Mr. Glennie in support of hisimplied term are outweighed by the convenience of having the arbitrations heard together.

Mr. Collins is obliged to seek support for the arbitrators' exercise of power to order concurrent hearingsin s. 12(1) of the Arbitration Act, 1950, supplemented by implied common law powers. That that is thecorrect approach, he says, is supported by dicta of Lord Diplock in Bremer Vulkan Schiffbau undMaschinenfabrik v. South India Shipping Corporation Ltd., [1981] 1 Lloyd's Rep. 253; [1981] A.C. 909,first at pp. 259 and 980 where he said, after reference to s. 12(1) of the Act of 1950:

This statutory incorporation into all English arbitration agreements of so many implied terms unless theyhave been expressly excluded, does not rule out the possibility that terms additional to these, are to be readinto the arbitration agreement by necessary implication, though it makes somewhat less likely the need todo so.

Then, and perhaps more pertinently, at pp. 262 and 985, Lord Diplock said:

I turn then to consider what the mutual obligation of the parties are in a private arbitration. By appointinga sole arbitrator pursuant to a private arbitration agreement 377which does not specify expressly or by reference any particular proceduralrules, the parties make the arbitrator the master of the procedure to be followed in the arbitration. Apartfrom a few statutory requirements under the Arbitration Act 1950, which are not relevant to the instantcase, he has a complete discretion to determine how the arbitration is to be conducted from the time of hisappointment to the time of his award, so long as the procedure he adopts does not offend the rules ofnatural justice. The contractual obligation which the parties assume to one another in relation to theprocedure to be followed in the arbtration unless a contrary intention is expressed in the arbitrationagreement, is that which is stated in section 12(1) of the Act, viz.: "parties to the reference, and all personsclaiming through them respectively shall, subject to any legal objection, submit to be examined by thearbitrator or umpire, on oath or affirmation, in relation to the matters in dispute, and shall, subject asaforesaid, produce before the arbitrator or umpire all documents within their possession or powerrespectively which may be required or called for, and do all other things which during theproceedings on the reference the arbitrator or umpire may require."

It is Mr. Collins' contention that the arbitrators enjoy two relevant powers: (1) they have power to dealwith matters of procedure in evidence in the reference in the manner prescribed by s. 12(1); (2) they havean implied power at common law to fix the date and venue for the hearing. It is submitted that, providedan arbitrator does not offend the rules of natural justice, he has a complete and unfettered discretion bothas regards the fixing of the date and venue and as to such directions as are appropriate for prescribing theprocedure to be followed in course of the arbitration. Neither power is restricted, it is said, except insofaras the arbitrators must exercise their powers judicially. Mr. Collins referred to a number of cases in whichthe extent of arbitrators' powers has been considered. None of them is directly relevant for presentpurposes and the effect of them can conveniently be found in the judgment of Lord Justice Roskill in theCourt of Appeal in the Bremer Vulkan case[1980] 1 Lloyd's Rep. 255; [1981] A.C. 909; where heconsidered the effect of the authorities relied upon by Mr. Collins at pp. 278 and 946. Referring to theconclusion of the Judge at first instance in that case, Lord Justice Roskill said:

I cannot but think that if the judge had been referred to this decision [-- i.e., the Unione case --] and inparticular to the passage I have just quoted from the judgment of Viscount Reading . . . he would not havereached the conclusion that he did, namely that parties by their agreement to arbitrate impliedly clothed thearbitration tribunal with jurisdiction to give effect to their rights and remedies to the same extent and in thesame manner as a court, subject only to certain well recognised exceptions.

Those comments underline the dangers of attributing to an arbitrator wider jurisdication than is to befound or to be regarded as necessarily contained in the powers accorded to him by statute except insofaras they have been recognized to exist in well-established cases.

Mr. Glennie remarks that notwithstanding the language of s. 12(1) of the 1950 Act, there are severalpowers which arbitrators, as has been held, do not enjoy, such as the power to order security for costs, thepower to strike out for want of prosecution, the power to commit for contempt, and so forth. He alsocontends that upon a proper view of s. 12(1) of 1950 Act, the scope of the power which the arbitratorsenjoy is limited to the making of orders in the reference. He refers me to a number of dicta in recent caseswhich militate against the existence of the power which the arbitrators in the present case purported toexercise. First, in Succula Ltd. v. Harland and Wolff Ltd., [1980] 2 Lloyd's Rep. 381, Mr. Justice Mustillwas concerned with applications to replace arbitrators. He said at p. 389:

One further possibility must be mentioned, namely, the hearing of both disputes concurrently before thesame tribunal. Since the purchasers of the two vessels are not the same, the arbitrators cannot compel theparties to have the two references combined in this way, and neither can the Court. Nevertheless, if it wereabsolutely plain that this was the only sensible way of handling the matter, and if the owners' refusal toconsent to it could be regarded as wholly unreasonable, the Court could legitimately attach great weightto the point, when deciding how to exercise its discretion

I interpose there to remark that the Court in the present present case is not put in the position which Mr.Justice Mustill found himself of being able to attach weight to the desirability of two causes being dealtwith together in the exercise of any discretion now available. Mr. Justice Mustill continued:

I have therefore taken the matter into account only to this extent, that if the same tribunal is retained,concurrent hearings will be an option which is still open to the 378parties, if they have second thoughts, and if the other owners can be induced toagree, whereas once the tribunal is replaced the possibility will have disappeared forever.

It is quite plain that the learned Judge contemplated that concurrent hearings could only be effected of thetwo arbitrations with which he was concerned in the event of all the parties to the arbitrations agreeing tothe adoption of that course.

In Mustill & Boyd on Commercial Arbitration at p. 112, the learned editors consider what they call"third party situations" and possible solutions to the difficulty that third party procedure, such as isavailable in a High Court action, is not available as such in an arbitration. They say:

Viewed in the abstract, the sensible solution is for the parties to agree upon a tripartite arbitration beforethe same arbitrator, facilitated if necessary by an agreement to waive any inconsistencies in the twoarbitration agreements. An orderly solution will not, however, necessarily appeal to all the parties. It is thedefendant who is in difficulties, and the other parties may have no wish to accommodate him. What canbe done if they elect to stand on their strict rights? There are three possibilities.

With only the first am I concerned. That relates to the same arbitrator trying both claims, in relation towhich the learned editors say:

First, if the same arbitrator has been appointed in respect of two disputes he can, in effect, order thematter to proceed in the same way as third-party proceedings in the High Court.

The footnote to that proposition reads:

It cannot be exactly the same procedure, as the arbitrator cannot force the parties in one arbitration toaccept as binding his conclusions in the other. As regards the facts, this is no problem, since he plainlywill not make inconsistent findings, but there may be difficulties if one party appeals.

The text then resumes:

On the face of it, such an order would substantially infringe the contractual rights of the claimant and thethird party. On the other hand, the solution is obviously sensible and we believe that the Court would findit possible to uphold an arbitrator who had made an order of this type, by holding that he had an impliedauthority to adopt a procedure analogous to the one available in the High Court.

The note to that proposition says:

See per Lord Salveson in Ramdutt Ramkissen Das v. E D Sassoon & Co (1929) 56 Ind. App 128 .. . applied by the CA in Chandris v. Isbrandtsen-Moller Co Inc (1950) 84 Ll.L. Rep. 347 . . . The formercase concerned a substantive defence (lapse of time) and the latter a discretionary remedy (interest). Theanalogy to a pure question of procedure is not exact, but we believe that it is close enough.

Unfortunately, the learned editors have not developed that thought and it is acknowledged by both Counselappearing before me today that the analogy between those cases, to which I was referred but which I neednot cite, is indeed by no means (and, I would add, is far from) exact. In the subsequent case of Abu DhabiGas Liquefaction Co. Ltd. v. Eastern Bechtel Corporation, [1982] 2 Lloyd's Rep. 425, Lord JusticeWatkins made some comments that bear on the point now before me. He said at p. 427:

But there can be no doubt, it seems to me, that, having regard to the submission which impugns theholding of two separate arbitrations and to the merits of there being only one, a wide discretion as to theconduct of the arbitrations should be granted to the single arbitrator by the parties or insisted upon byhimself. The ideal solution to the manner of resolving the issues involved here would have been aproceeding by way of arbitration which closely resembles our civil action in which plaintiff and defendantand third and other parties litigate all disputes between them in a single hearing. Unhappily the parties tothis vast dispute are unable to agree a procedure of that kind.

That comment clearly proceeds upon an assumption that in default of agreement between the parties, theimposition of the procedure would not be possible.

In Interbulk Ltd. v. Aiden Shipping Co. Ltd. [1984] 2 Lloyd's Rep. 66 in the Court of Appeal on Mar. 23,1984, Lord Justice Robert Goff concluded his judgment by making observations about the desirability ofthere being a power to order consolidation. He said:

It is, I believe, well known that related arbitrations can arise out of the same factual dispute. Indeed,disputes between owners and charterers on the one hand and charterers and sub-charterers on the otherwith regard to damage suffered by the ship at a loading or discharging port provide a classic instance ofsuch a situation, yet English arbitration law provides at present no power either to 379arbitrators or the court to ensure that both arbitrations will be considered by the same tribunal either at the same hearing or at immediately succeeding hearings toavoid the danger of inconsistent awards. There is, for example, no means of ordering consolidation of twosuch related arbitrations. A solution to this problem is, I believe, to be found in the arbitration law ofHong Kong, but not in the English Arbitration Acts. I have no doubt that those who are responsible forproposing and formulating amendments to our arbitration laws have this point well in mind, but thepresent case will, I trust, provide an additional impetus and urgency to the efforts now being made to fillthis gap in our law.

I am told that there is, or may be, a Bill now before Parliament which would make provision of the kindcontemplated by Lord Justice Robert Goff. That, however, is of no avail to the parties to the presentproceedings.

Finally, and even more recently, in the case of World Pride Shipping v. Diachi Chuo K.K., [1984] 2Lloyd's Rep. Mr. Justice Lloyd, said this:

The inconvenience of multiple arbitrations, though it exists, can be exaggerated. The problem is not a newone and London arbitrators have evolved ways of reducing the inconvenience and limiting the risk ofconflicting decisions by hearing arbitrations together or one immediately after the other. True, thispre-supposes co-operation between the parties.

It seems to me that, as is graven upon the heart of any commercial lawyer, arbitrators inthe position of these arbitrators enjoy no power to order concurrent hearings, or anything of that nature,without the consent of the parties. The concept of private arbitrations derives simply from the fact that theparties have agreed to submit to arbitration particular disputes arising between them and only betweenthem. It is implicit in this that strangers shall be excluded from the hearing and conduct of the arbitrationand that neither the tribunal nor any of the parties can insist that the dispute shall be heard or determinedconcurrently with or even in consonance with another dispute, however convenient that course may be to the party seeking it and however closely associated with each other the disputes in question may be. Theonly powers which an arbitrator enjoys relate to the reference in which he has been appointed. Theycannot be extended merely because a similar dispute exists which is capable of being and is referredseparately to arbitration under a difference agreement.

For these reasons, in my judgment the plaintiffs are right and I shall grant the order sought, namely, thatthe arbitrators' order of Mar. 5, 1983, that the hearing of the arbitration between the plaintiffs and thedefendants take place concurrently with that between the plaintiffs and Sanco, be set aside.

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