CENTRAL TRADING & EXPORTS LTD. V. FIORALBA SHIPPING CO. (THE KALISTI)  EWHC 2397 (COMM)
“The Scars of Misjudgment”
Section 67 of the Arbitration Act 1996 defines the right of a party to challenge an Arbitration Tribunal’s award on jurisdiction. In the “Kalisti” the experienced Tribunal consisting of Colin Sheppard and David Farrington, faced with claims against the Owners of m.v. “Kalisti” for loss of and/or damage to a cargo of bagged rice discharged at Nigerian ports, dismissed the claims on the basis that:
“The Claimants did not become the lawful holders of the Bills of Lading within sections 2(1)(a) and 5(2)(b) of the 1992 Act. We further rule that the Claimants were not within section 2(2)(a) of the 1992 Act.”
The Award did not expressly determine that the Tribunal lacked jurisdiction, but that is the effect of the above determination, in accordance with the Court of Appeal decision in Caltex v. National Petroleum Corp.
The reason why the Tribunal so determined was basically a failure in the disclosure process in the arbitration, despite what was described by the judge as “(to say the least) constant pressure”. This failure included failure to respond to an order of the Tribunal, made in peremptory terms, for full disclosure to accompany amended reply submissions, expressed as a condition to the grant of leave for the amendment. The Tribunal concluded:
“The absence of necessary evidence concerning the contractual arrangements…means that the Claimants cannot show their contractual right to possession of the Bills of Lading and thereby bring themselves within section 2(2)(a) of the Act…”.
So the claimants applied to the High Court under Section 67.
In their evidence to the Court, further piecemeal disclosure was exhibited and the question before the Court was to determine whether the Court should exercise its discretion to admit that new evidence. (It was common ground that a Section 67 application involves a rehearing and that the Court has such a discretion).
The application came before Males J. and his judgment provides a helpful guide to the exercise of that discretion, against a back-drop of the reported cases, which the judge conveniently summarised.
As relevant, however, the basis for the decision was expressed as follows:
“I do not consider that the court has an unfettered discretion to exclude relevant evidence or that the only ground on which it may do so is that the admission of new evidence would cause prejudice to the other party. I doubt, moreover, whether “prejudice” in the abstract is a free standing ground on which such evidence may be excluded and I do not read Aikens J in The Ythan as saying that it is. Undoubtedly, however, in a section 67 case as in any other, the court may refuse to allow a party to produce documents selectively where that would prejudice the other party. Equally, it may refuse to allow evidence which does not comply with the court’s rules for ensuring that evidence is presented in a fair manner, such as the rules relating to witness statements contained in CPR 32. That too is a form of prejudice which may not be capable of being remedied. Where that is the position, it may not be enough to say that the opposing party can make submissions as to the weight of the evidence. Fairness may require that the evidence is not adduced at all”.
After reviewing the new evidence, and the course of the arbitration in relation to disclosure, and in light of the Defendants’ objections, the judge proceeded to find that the claimant had failed to comply with the Tribunal’s peremptory order and that the failure was deliberate:
“It is apparent that the claimant failed to comply with this order for full disclosure. Mr Olbourne accepted this. It is apparent too that this failure was deliberate, although Mr Olbourne did not accept this, suggesting that the failure was the result of a misguided failure to understand what was required. In summary, the explanation put forward is that the claimant was confident that it had adduced sufficient evidence to satisfy its burden of proof in the arbitration, that it did not understand the defendant’s focus on matters which it regarded as irrelevant, and that it “could not have predicted that the Tribunal would fail to appreciate the significance of certain important evidence”. In other words, it thought it had done enough to win and was confident of victory. There cannot be many arbitration lawyers practising in London who do not bear the scars of a similar mis-judgment but this hardly provides an excuse for deliberately failing to comply with a crystal clear final order for disclosure”.
Applying the principles set out the judge concluded:
“I accept Mr Bright’s submission that against this background it would be unjust to permit the claimant to rely now on a selection of documents without giving the full disclosure which it was ordered to give in the arbitration. It is apparent that the claimant’s current approach has been, as Mr Olbourne put it, “to provide further confirmation in relation to certain of these matters which the Tribunal identified as being important lacunae in the Claimants’ factual case”. However, it is not the function of an award to operate as an advice on evidence enabling the claimant to plug the gaps in its case identified by the arbitrators. Although Mr Bright identified various inconsistencies and contradictions in the documents on which the claimant now relies on which he will if necessary rely at the substantive hearing of this section 67 challenge, it must be assumed for the purpose of this present application that these new and selected documents may possibly make all the difference to the outcome. But if that were to be so, the defendant would suffer an irremediable prejudice.”
The judgment was not solely related to disclosure, however. There was an attempt to introduce new evidence by way of hearsay evidence from the claimant’s Nigerian lawyer of information provided to him by an Executive Director of the Claimant and by way of a letter signed by two individuals in their Nigerian bank’s legal department. That evidence was not admitted. The letter was not compliant with CPR 32. As to the hearsay evidence, the Court considered that it would not be appropriate to permit the evidence of a director of the Claimant to be given in this way. Further:
“Still less would it be appropriate, even if these formal defects were to be cured, to permit evidence in the form of assertions by Skye Bank and Mr Reddy without the claimant providing the proper disclosure which would be necessary to enable the defendant to test those assertions, either by cross examination or by submission”.
“I do not accept that the defendant’s objections to all this new evidence can be fairly dealt with by submissions as to the weight which ought to be given to it. In my judgment they are more fundamental than that.”
Accordingly the Claimant was not permitted to rely on the new evidence which it sought to adduce. It is believed that this is the first reported decision where the court has refused the applicant a second bite of the cherry by adducing new evidence on a Section 67 application.
The circumstances of the case may be extreme, but the principle is clear. If a Section 67 applicant wants to introduce new evidence, which he did not see fit to place before the Tribunal, he must comply fully with his disclosure obligations. To do otherwise would be a denial of justice to the Defendant and could give rise to the risk of irremediable prejudice, with the consequence that the applicant may be limited to the evidence upon which the Tribunal made its determination.
ANDREW PATRINOS, partner in Jackson Parton, represented the successful Owners.
Robert Bright Q.C. and Mr. Charles Holroyd were the Counsel instructed on behalf of the Owners by Jackson Parton.
ROY HEWETT of Hewett & Co. Inc. represented the Owners in the arbitration.
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