KING'S BENCH DIVISION.
Friday, July 29, 1938.
IN RE AN ARBITRATION BETWEEN THE OWNERS OF STEAMSHIP " CATALINA" AND OTHERS AND THE OWNERS OF MOTOR VESSEL " NORMA."
Before Mr. Justice CHARLES and Mr. Justice DU PARCQ.
Arbitration — Arbitrator — Misconduct — Partiality—Motion for removal of arbitrator—Collision between Portuguese steamship Catalina and Norwegian motor vessel Norma off Ushant —Agreement by parties to arbitrate in England—Appointment of legal arbitrator—Hearing of arbitration— Evidence given by witnesses from each, ship—Remarks made by arbitrator during course of hearing suggesting that he held preconceived views as to the general truthfulness of the nationality of witnesses on one side —Motion by owners of Catalina that arbitrator be removed—Jurisdiction of Court to remove arbitrator on ground of misconduct — Arbitration Act, 1889, Sect 11 (1)—Arbitration Act, 1934, Sect. 15.
Held, that the facts disclosed that the arbitrator had expressed an actual bias amounting to misconduct, which made it imperative, if justice was to be done, that he should be removed from his position of arbitrator. (It was of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done.)
This was a motion by the claimants, the owners, master and crew of the Portuguese steamship Catalina, and the owners of the cargo, for the removal of Sir William Norman Raeburn, Bart., K.C., the arbitrator appointed in a reference between the claimants and the respondents, the owners of the Norwegian motor vessel Norma, in regard to a collision between those vessels near Ushant on Sept. 28, 1937, on the ground that he had misconducted himself by acting unfairly and without impartiality between the parties.
Mr. F. A. Sellers, K. C., and Mr. J. V. Naisby (instructed by Messrs. Clyde & Co.) appeared for the claimants; Mr. H. G. Willmer (instructed by Messrs. Thomas Cooper & Co.) represented the respondents.
Mr. SELLERS said that the motion concerned an arbitration before an eminent and distinguished member of the Bar and an experienced arbitrator. It was submitted that in the course of the arbitration, by an unfortunate lapse, and no doubt in an unguarded moment, the arbitrator said something which created an impression of unfairness or of partiality, or an impression of some preconceived views as to the general truthfulness of the nationality of witnesses on one side. The basis of the motion was that he showed a lack of judicial propriety. The arbitration was between foreigners who had voluntarily come to this country to have their dispute settled. They frequently availed themselves, particularly on the commercial and Admiralty side, of the facilities to come here and have their cases tried either in the Courts or before experienced arbitrators and thus have the advantage of British justice.
This arbitration, continued COUNSEL, concerned a collision between two foreign vessels off Ushant, and therefore it was entirely outside the jurisdiction of the English administration either in the Courts, or by arbitration. But the parties decided to have the dispute tried here and submitted their case to an arbitrator. The hearing occupied two days, commencing on July 13, 1938, when two witnesses on each side were called. Then the matter was adjourned until the 21st, when surveyors gave evidence and there was legal argument. Mr. Eugene Moreira, the managing director and a large shareholder in the Portuguese company owning the claimant vessel, was present throughout the whole of the proceedings. He had been educated in an American University, understood and spoke English very well, and had extensive shipping interests in Portugal and other European countries. It was only fair to state that probably the learned arbitrator did not know that he was present. No award had yet been given, but at the termination of the proceedings on July 21 the arbitrator said that he would give his award in due course. He 361 indicated, however, that he was in favour of the Norma and against the claimants. He then made remarks which caused the claimants to feel that they were bound to bring forward the present motion. It was the only proceeding open to them to remedy what they undoubtedly felt was a grievance.
The principle most applicable to this case, said COUNSEL, was one enunciated in a large number of cases, including the observations of Lord Hewart, C.J., in Rex v. Sussex Justices (Ex parte McCarthy),  1 K.B. 256. The Lord Chief Justice said that it was "of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done."
Mr. Justice CHARLES said that that principle was so well known that Counsel need not elaborate it. If it was admitted that the words complained of in the affidavit were said, there was no need to elaborate the principle.
Mr. SELLERS said that it was admitted, because an affidavit had been put in by Mr. Ebison, managing clerk of the solicitors to the respondents, agreeing with the facts stated in the affidavit for the claimants in pars. 1 to 5. Mr. Ebison went on to state:
"With regard to par. 6 of the said affidavit, while I do not remember the exact words used by the learned arbitrator, I do remember the incident referred to by Mr. A. Maurice Hill, and I confirm that the general effect of the learned arbitrator's remarks was as stated in the said affidavit.
COUNSEL then read the following affidavit of Mr. Eugene Moreira, of Oporto:—
I am a Portuguese subject, and I am a graduate in electrical engineering of Columbia University, New York. I am the managing director of and a large shareholder in the Portuguese Company C. A. Moreira & Cia., Ltda., shipowners, of Oporto, in the Republic of Portugal.
One of the vessels owned by my company is the steamship Catalina, a vessel of 632 tons gross register, of the port of Oporto.
On Sept. 28, 1937, the Catalina, when on a voyage from Oporto to Brussels, was involved in a collision with the Norwegian motor ship Norma.
As a result questions arose as to the liabilities of the respective vessels for the collision, and by an agreement dated Jan. 14, 1938, and made between my company C. A. Moreira & Cia., Ltda., of 61— 1° rua Infanta de Henrique, Oporto, in the Republic of Portugal, Bernado Ferreira, the owner of the cargo laden on the Catalina, and the master and crew of the Catalina of the one part, and Messrs. W. K. Webster & Co., of 149, Leadenhall Street, in the City of London, for and on behalf of the owners of the m.s. Norma of the other part, by which it was agreed that the disputes should be submitted to the decision of Sir William Norman Raeburn, Bart., K.C., as sole arbitrator, each party being at liberty to call not more than two of their ship's witnesses and their surveyors, the remainder of their evidence being in the form of written statements.
The arbitration was heard by the above-named arbitrator on July 13 and 21, 1938. I sat in the arbitration room throughout the whole of the proceedings and heard all that took place. I am fully conversant with the English language, and had no difficulty in following the proceedings, and I fully appreciate the contents of this affidavit.
I was greatly surprised and shocked to hear in the course of the proceedings certain remarks from the arbitrator, to whom my company had readily submitted the decision of our dispute.
Whilst our Counsel, Mr. J. V. Naisby, was addressing the arbitrator on our behalf, and was making a reference to Italians and to a case involving an Italian steamer, I was astonished to hear the arbitrator say words to this effect: —
They (referring to the Norma's witnesses) are not Italians. The Italians are all liars in these cases and will say anything to suit their book. The same thing applies to the Portuguese. But the other side here are Norwegians, and in my experience the Norwegians generally are a truthful people. In this case I entirely accept the evidence of the master of the Norma.
I felt at once that this was very unfair and that our evidence should not be judged in this way, and I complained to our English solicitor, Mr. Hill, who was conducting the case for my company.
We had voluntarily agreed to arbitrate in England before an English 362 arbitrator and in accordance with English law, although the collision was between Norwegian and Portuguese vessels and occurred off Ushant. I have always held a high appreciation of English justice and I did not think that such views as these were held about my fellow countrymen by English lawyers or that any distinction would be drawn between the Norwegian and Portuguese people or indeed between any nationalities to the detriment of one or I certainly would not have agreed to arbitrate in London.
The arbitrator stated that he would give his award in writing in due course but he intimated verbally that he found the respondents' vessel Norma free from blame and that he did not believe the evidence of the two Portuguese witnesses and the statements in the claimants' documents.
I do not feel that the claimants have had a fair trial and one of the fairness and impartiality which we expected. I do not mind losing any action which has been fairly fought out but I resent very strongly this reflection on my countrymen and the rejection of the evidence of our witnesses in the arbitration oh the ground that Portuguese in general are incapable of speaking the truth.
The renowned principles of British justice have for long past attracted foreigners to the Admiralty Jurisdiction and I honestly and truly believe that this arbitration was not conducted in accordance with those principles, and that the confidence in and respect for this valued administration of law to which foreign shipowners can resort has been and will be seriously undermined.
Mr. SELLERS, continuing, said that that affidavit was supported by an affidavit of Mr. Arthur Maurice Hill, a partner in the claimants' solicitors, Messrs. Clyde & Co. Then there was a counter-affidavit Of Mr. Ebison, of which he (Counsel) had read the part which admitted the substance of his allegations.
Mr. Justice CHARLES said that the rest of Mr. Ebison's affidavit, which he had looked at—he had thought it right to do so—did not seem to be applicable to the present proceedings.
Mr. WILLMER, for the respondents, said that he would be the first to agree that it was most unfortunate that any foreigner referring his case on his own free will to this country for decision by an English Court should be in any way dissatisfied or feel that he had not had a fair trial. He (Counsel) agreed that the Court had a discretion to remove the arbitrator if it thought that the foreign gentleman had not had a fair trial, but it was for the claimants to satisfy the Court of that fact. That was particularly so in the case of an arbitration where the parties had submitted their dispute to a tribunal of their own choosing. The Court was then slow to interfere with the tribunal which the parties had selected for themselves. The first answer to the complaint was that it was wrong for Mr. Sellers to take the words used by the arbitrator out of their context, put them in an affidavit and then say that that showed that the arbitrator was biased. Casual remarks made by almost anybody in that way by any arbitrator or any Judge, might be made to seem to be biased.
Mr. Justice DU PARCQ: What do you mean by casual remarks?
Mr. WILLMER: These remarks were casually made in the course of my friend's argument.
Mr. Justice CHARLES: But you cannot say that they were casually made. There is a definite statement that the evidence could not be believed because of the liability of one side always to lie.
Mr. WILLMER: The remarks were that the Portuguese were generally untruthful people in his experience.
Mr. Justice CHARLES: It is a great deal more than that. He says that the Italians are all liars in these cases, and that the same thing applies to the Portuguese, and therefore the witnesses he has heard are people who have not come to tell the truth, but are liars, who will say anything to suit their book.
Mr. WILLMER: The arbitrator's disbelief of the particular witnesses in this case was founded on what the witnesses said.
Mr. Justice CHARLES: I do not know. That is just the difficulty when you are predicating something with which I, if I were a Portuguese, would profoundly disagree. It is all very well to say, after an arbitrator has said that the witnesses on one side, because of their nationality, are all liars and will make up any story to suit their book, that he did not mean the particular witnesses in the particular case.
Mr. Justice DU PARCQ: If the arbitrator had said, "My opinion at present is that these witnesses have told lies ", no one could object to that, but this really went beyond that in what he said. He might have said, as any Judge might say, when he has listened to a case and heard part of the argument: "At the moment I do not believe your witnesses."
Mr. Justice CHARLES: He says that all Portuguese are liars, and he makes it still Worse by saying that the Norwegians are generally truthful people, and puts them in antithesis. It is a hopeless position.
Mr. Justice DU PARCQ: Supposing the arbitrator undertaking the burden of the reference of liability had said: "I am quite willing to undertake this arbitration, but it is only right that I should tell the parties that whereas my experience has been that Norwegians generally are a truthful people, it has also been my experience that in these cases the Portuguese are liars and will say anything to suit their book." Do you think that in those circumstances both parties would cheerfully have entered upon the arbitration?
Mr. WILLMER: Probably not, my Lord.
Mr. Justice DU PARCQ: If so, when they discover that that is the arbitrator's view, surely they are entitled to say: "Here is a bias, of which we had no knowledge, of this man."
Mr. WILLMER: I want to submit that the arbitrator's view of the witnesses in this case was not founded upon a general bias. It is an expression of general dislike of the Portuguese.
Mr. Justice CHARLES: He said that they will make up any story to suit their book and that they are liars—all of them—not the witnesses in this case.
Mr. WILLMER: But he does not say that because of that view he had arrived at his conclusion in this particular case. He arrived at his conclusion because he saw these two witnesses.
Mr. Justice DU PARCQ: He says that all Portuguese are liars.
Mr. Justice CHARLES: If you turn the story round so that our own nationals said they would agree to a Portuguese arbitrator, who then said that all Englishmen were liars, what would you think?
Mr. WILLMER: I should share the view of the claimants, but it does not follow from the mere fact that an arbitrator makes that remark that he has arrived at his conclusion in the particular case for that reason.
Mr. Justice CHARLES: That is not the point. The question is whether by using these words he raised in the minds of those submitting the matter to arbitration the idea that he was prejudiced, having a bias in favour of one side. It does seem to be so completely indefensible and to go so absolutely to the heart of the spirit of justice which has to guide an arbitrator as to make it almost inevitable that we should take the step of removing the arbitrator.
Mr. WILLMER: Then I will not attempt to persuade you otherwise.
Mr. Justice CHARLES said he thought that Mr. Ebison's affidavit was very fair and extremely frank.
Mr. SELLERS said the Court had power to appoint a person to act in place of Sir William Raeburn, but no doubt that could be agreed upon by the parties.
Mr. Justice CHARLES: In this case this Court is moved for an order that Sir William Norman Raeburn, Baronet, one of His Majesty's Counsel, the arbitrator appointed in the reference to arbitration between the owners, master and crew of the steamship Catalina and the owners of the cargo lately laden therein, and the owners of the motor vessel Norma, under the submission dated Jan. 14, 1938, be removed on the ground that he has misconducted himself by acting unfairly and without impartiality between the parties.
The circumstances which gave rise to this arbitration may be stated in a few words. On Sept. 28, 1937, these two vessels, the Catalina and the Norma, came into collision off Ushant. It was desired by both parties that the matter of liability for that collision should be submitted to an arbitrator in this country, and, having so agreed, the arbitrator mentioned was appointed. He sat on July 13, 1938, in the arbitration, and at the hearing of that arbitration heard two Portuguese witnesses who appeared for the steamship Catalina, and two Norwegian witnesses who appeared for the steamship Norma; for the Catalina was a Portuguese vessel, Portuguese owned, and the Norma was a Norwegian vessel. Those witnesses of those two nationalities having been heard, the matter was then adjourned until July 21. Upon that day 364 expert evidence was taken—the evidence of surveyors, who spoke, I suppose, to the condition of the vessels.
Now, the managing director of the owners of the Catalina was present and he bad been present during the whole proceedings. He is a man who understands English perfectly—Mr. Eugene Moreira— and he is a Portuguese subject and the managing director of the company which owned the steamship Catalina. No award was made, but in the course of the proceedings, and in the presence of Mr. Moreira, unfortunately, the learned arbitrator made the following observations: "They" (he was then referring to the two Norwegians who had given evidence upon July 13)
are not Italians. The Italians are all liars in these cases and will say anything to suit their book. The same thing applies to the Portuguese [directly then referring to the two Portuguese who had given evidence on July 13]. But the other side here are Norwegians, and in my experience the Norwegians generally are a truthful people. In this case I entirely accept the evidence of the master of the Norma.
Now, if he had only spoken the last sentence of those observations, no possible complaint could have been made. He is entitled and was entitled, as we all are, to accept or reject the evidence given by particular witnesses, and to state in public and in Court that we do so accept or do so reject the evidence given by a particular witness. But unfortunately in this case the observations connote only one thing, and that is that, as nationals, the Portuguese who had given evidence were people who are all liars in these cases—that is, cases of this type—and will say anything to suit their book. Quite naturally, as it appears to me, Mr. Eugene Moreira felt most bitterly about this attack upon his nationals and upon the witnesses who were of Portuguese nationality, and, as he says in his affidavit which has been read, after all, they voluntarily agreed to arbitrate in England because of the appreciation they had of the extreme and well-known impartiality of English justice, and, as he says, he was very much shocked to hear the learned arbitrator make such a general statement as he made. I do not suppose for one moment, had anybody known that Sir William Norman Baeburn held views of that sort about Portuguese nationals, that Mr. Moreira or his company would ever have submitted the matter to him at all.
What does it amount to, then? It amounts to this: that he approached the matter, according to his own observations, with a bias against witnesses of Portuguese nationality, he having within his mind the view that they were all liars in these cases, who will say anything to suit their book.
It is a most unfortunate case. One does not know exactly how it was that the learned arbitrator came to make the observations; or in whose presence he thought he made those observations I know not. The fact is that he made them in the presence of the managing director of the company owning the steamship Catalina.
It is quite clear that it is within our competence under Sect. 11 of the Arbitration Act, 1889 (which was slightly but for the purposes of our consideration not effectively amended by Sect. 15 of the Arbitration Act, 1934), to comply with the request made for an order that this arbitrator should be removed on the ground that he has misconducted-himself. In my opinion, and in my very clear opinion, he did express such an actual bias in this case as would amount to misconduct, which makes it imperative, if justice is to be done, that he should be removed from his position of arbitrator. As has been said by Lord Hewart in the case of Rex v. Sussex Justices (Ex parte McCarthy),  1 K.B. 256, at p. 259:
A long line of cases shows that it is not merely of some importance but is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done.
It is impossible in this case to suppose that the parties who were acquainted of those words so spoken by the arbitrator should feel anything but bitter dissatisfaction, and an almost certain conclusion would arise in their minds that justice was not being done and that the arbitrator had not acted impartially in the matter.
For these reasons we consider that we must make an order in the terms prayed: that Sir William Norman Baeburn, Baronet, one of His Majesty's Counsel, the arbitrator appointed in the reference to arbitration between the owners, master and crew of the steamship Catalina and 365 the owners of the cargo lately laden therein, and the owners of the motor vessel Norma under the submission dated Jan. 14, 1938, be removed on the ground that he has misconducted himself by acting unfairly and without impartiality between the parties. We consider that as this is a misfortune for which neither party is responsible, there should be no costs in these proceedings.
It is within our competence to appoint another arbitrator. We think that the better way would be to give liberty to apply. The parties may be able to agree upon another arbitrator, but at any rate it is open to them, under the section, to make an application to the Master in Chambers.
Mr. Justice DU PARCQ: I recognise the great importance of this case and my only reason for saying nothing more except that I agree is that if I were to add anything, it would be idle repetition, because all that I could wish to say has already been expressed in the judgment which has just been delivered. I agree both as to the reasons given and in the result.
Mr. SELLERS : If your Lordships please.
END OF VOL, 61.