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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Daewoo Shipbuilding And Marine Engineering Company Ltd v Songa Offshore Equinox Ltd & Anor [2020] EWHC 2353 (TCC) (01 September 2020) URL: https://www.bailii.org/ew/cases/EWHC/TCC/2020/2353.html Cite as: [2020] EWHC 2353 (TCC) |
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BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
____________________
DAEWOO SHIPBUILDING AND MARINE ENGINEERING COMPANY LIMITED |
Claimant |
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- and - |
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(1) SONGA OFFSHORE EQUINOX LIMITED (2) SONGA OFFSHORE ENDURANCE LIMITED |
Defendants |
____________________
Simon Rainey QC and Mark Chennells (instructed by Clyde & Co LLP) for the Defendants
Hearing dates: 2 and 3 December 2019
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Crown Copyright ©
COVID-19: This judgment was handed down remotely by circulation to the parties' representatives by email. It will also be released for publication on BAILII and other websites. The date and time of hand-down was 10.30am on 1st September 2020.
MRS JUSTICE JEFFORD DBE:
Introduction
The Arbitration Act 1996 and the law
(i) Section 33 General duty of the tribunal.
"(1) The tribunal shall
(a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and
(b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined."
(ii) Section 68: Challenging the award serious irregularity
"(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. ..
(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant
(a) failure by the tribunal to comply with section 33 (general duty of the tribunal);
.."
(iii) Section 69: Appeal on point of law
"(1) Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings. .
(3) Leave to appeal shall be given only if the court is satisfied
(a) that the determination of the questions will substantially affect the rights of one or more of the parties,
(c) that, on the basis of the findings of fact in the award
(i) the decision of the tribunal on the question is obviously wrong, or
(ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and
(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.
"
"(1) The arbitrator ascertains the facts. This process includes the making of findings on any facts which are in dispute.
(2) The arbitrator ascertains the law. This process comprises not only the identification of all material rules of statute and common law, but also the identification and interpretation of the relevant parts of the contract, and the identification of those facts which must be taken into account when the decision is reached.
(3) In the light of the facts and the law so ascertained, the arbitrator reaches his decision."
Factual background
The Contracts and the arbitrations
"Provided that BUYER shall have fulfilled all of its obligations under this Contract (including but not limited to full payment of the Contract Price and settlement of any indebtedness to BUILDER), delivery of the SEMI-RIG shall be duly made hereunder by BUILDER, and such delivery shall be evidenced by a Protocol of Delivery and Acceptance signed by the parties hereto, acknowledging delivery of the SEMI-RIG by BUILDER and acceptance thereof by BUYER."
(i) Under [the Contracts], did DSME's right under Item 2 in the Yard Clarification List to notify Songa of errors in documents and/or drawings apply to errors in FEED (front-end engineering design) documentation?
(ii) If so, then in the event that DSME duly notified such an error within the 90-day period, which party bore responsibility for any additional costs, expenses or delays resulting from such errors?
The background to the hearing of the preliminary issues
"In the meantime, you mentioned that there is only a very limited period for the parties to find a suitable accommodation. However, as we mentioned from the beginning of the letter and you can see from our view set out above, the current difficulty and wide differences are attributable to the parties' different views regarding the design responsibility.
Therefore, DSME consider that the time has arrived for the difference with regard to design responsibility to be resolved.
DSME propose that for a quick resolution of the design responsibility issue, the parties refer the issue of design responsibility to London arbitration to be resolved as a preliminary issue on a very expedited basis and timetable.
DSME are strongly of the view that once the issue of the design responsibility has been ruled upon by an independent Tribunal, all other matters should be able to be discussed and be dealt with amicably thereafter on what is hoped would be a practical and commercial basis."
"In addition, the Parties wish to address how they intend to proceed with certain other matters that are in dispute between the Parties so as to allow delivery of the Semi-Rig to proceed and these matters are addressed below."
" The Builder asserts a claim in this regard (the "FEED Claims"), which the Buyer rejects in full, which encompasses:
5.1.1 the Builder's claims for losses and schedule extension resulting from deficiencies in the design documents, including but not limited to those covered in the Builder's letter dated 26 May 2015 addressed to Songa Offshore SE.
5.2 It is agreed that notwithstanding the delivery of the Semi-Rig pursuant to the agreement evidenced by this Addendum No. 2, the Builder is entitled to pursue the FEED Claims against the Buyer in arbitration under the relevant provisions in the Contract and that both the Builder's and the Buyer's rights in this regard are fully reserved."
"Your letter refers to the need to incur significant time and expense in addressing extensive and highly technical material and obtaining specific input from experts. However, if your clients are prepared to agree to a preliminary issue on design responsibility, there will be no need for them to expend such time and costs at this stage. DSME would be prepared to agree to an order whereby your clients pleaded back on the issue of design responsibility only, with any need to plead back to the balance of the claim postponed by agreement.
We are also bound to say that the reference in your letter to the highly technical and expert aspects of the case fully justifies DSME's proposal of a preliminary issue on design responsibility. Put shortly, unless DSME's case on design responsibility is well-founded, the technical aspects of the case do not arise, and there is no need to spend the undoubtedly significant time and costs which would be required to investigate and resolve these issues." (my emphasis)
The letter then addressed claims in relation to two further Semi-Rigs with Hull nos. 3034 and 3035 where the surrounding facts were said to be somewhat different. It was proposed that the parties proceed with the issue of design responsibility on Hull nos. 3031 and 3032 first but:
"For the avoidance of doubt, the preliminary issue in relation to H.3031 and H.3032 remains potentially determinative of the references in the cases of H.3034 and H.3035, in the sense that DSME accepts that if its case on design responsibility in relation to the earlier hulls fails, its claim in relation to the later hulls would also necessarily fail."
"You baldly assert that the undefined "design responsibility" preliminary issue will be dispositive if decided against your clients, thereby commending it for consideration as a preliminary issue as it will dispose of any factual enquiry and hearing into how your clients constructed the vessels.
Again, until you properly identify what it is that you have in mind, it is hard to know whether a preliminary issue will be dispositive of the case or a substantial part of it. ."
If the Respondents win on the preliminary issues and the Claimant's claims fail, the Respondent's counterclaims will still need to be determined with the same evidential enquiry into your clients' handling of the construction of the vessels and the FEED aspects impinging on that construction. ."
"In our client's view, the time has now come to grasp the nettle and for the Tribunal to direct a preliminary issue on design responsibility. If our client's case on that point fails, that will be the end of our client's claim in this reference. If our client's case succeeds, the Tribunal will have to consider then how to proceed with regard to the balance of the technical issues in the case .."
"This Reply and Defence to Counterclaim is served without prejudice to DSME's right to serve a Reply and Defence to Counterclaim dealing with the balance of the Defence and Counterclaim following determination of such preliminary issues, or in the event that no order for the determination of preliminary issues is made."
The thrust of this paragraph, therefore, was that DSME was responding (in Reply and Defence to Counterclaim) to the matters that might arise on the hearing of the preliminary issues. Following the determination of the preliminary issues, DSME reserved the right to respond to the balance of the Defence and Counterclaim which included Songa's case as to the causes of delay.
(i) Paragraph 8 read as follows:
"This application is based upon a consideration which has been apparent to DSME since the outset of this dispute: unless DSME is correct that it had a contractual right under the [contracts] to notify Songa of design defects within 90 days of contract award, with the result that the defects notified within that period are for Songa's account, the technical issues adverted to above do not arise. No matter how fundamentally defective the FEED was, if DSME bore unqualified design responsibility under the [contracts], these defects are irrelevant. Whatever delays and cost overruns resulted will be for DSME's account in any event. The issues concerning whether and how these defects resulted in delays and cost over-runs, and the calculation of the losses resulting, will never need to be determined and no legal consequences will attach to them." (Emphasis added)
I observe that this paragraph was as clear as it could be in stating that if DSME was responsible for defects in the FEED, then all delays and cost overruns were also DSME's responsibility. That necessarily must have included the delay in respect of which Songa had deducted liquidated damages and now claimed unliquidated damages (if the latter claim was open to it). That is emphasised by the statement that if DSME was wrong, the issues about how the defects resulted in delays and cost overruns never arose.
(ii) Paragraph 9 stated that the issue of design responsibility was a short issue of contractual construction.
(iii) Section C, paragraphs 21 to 31 recited the correspondence between the parties on the proposal that there be a preliminary issue.
(iv) In section G, DSME addressed the Counterclaim. It was said that Songa had contended that the existence of the Counterclaim was fatal to the application for the hearing of a preliminary issue because the decision on the preliminary issue would not be decisive. DSME said that its primary submission was that the fact that the preliminary issue would be decisive of the claim was sufficient reason for it to be heard. DSME indicated (at paragraph 61) that it would be content for the issue of whether unliquidated damages were recoverable to form a further preliminary issue and that the exclusion of the claim for damages for delay would cut each counterclaim by over 90%.
(v) Paragraph 62 then said: "Whilst, therefore, the preliminary issue would not be entirely determinative of the counterclaim, it would be determinative of the vast majority of the counterclaim." I read that as a reference to the preliminary issue as to the recoverability of unliquidated damages and not design responsibility.
(vi) So far as the balance of the counterclaim was concerned (that is, the discrete heads of claim), DSME's position (at paragraph 63) was that they were the reverse side of the FEED claims coin.
(vii) The penultimate paragraph of the letter/submission read as follows:
"DSME has now served a Reply and Defence to Counterclaim in both references. The Reply is concerned only with the contractual arguments, on the basis that if there is a trial of preliminary issues, the work which would be required to provide a Reply on the technical issues, which would be substantial, would potentially be wasted. In the event that there is a preliminary issues trial and DSME is successful at that trial, DSME will seek permission in due course to serve an Amended Reply covering also the technical issues. ."
"That said, having considered the partial Replies served by DSME and the clarification of the issues on construction and rectification, it is now clear that preliminary issues on design responsibility and rectification will be wholly dispositive of DSME's claims if decided as Songa contends that they should be. Songa is accordingly content to accede to this course .".
The hearing of the preliminary issue
The Amended Claims Submissions
"Further and/or alternatively, DSME relies on the matters set out hereinbelow as a defence to Songa's Counterclaim.
DSME's claim included a claim (at paragraph Q.58) for the repayment of liquidated damages asserting that Songa was not entitled to make the deduction "having caused such late Delivery and thereby acted in breach of contract and/or on the basis that time was at large by reason of Songa's breaches."
The majority Award and the dissenting reasons
(i) The application to amend, if granted would give rise to an abuse of process because DSME could and should have brought or at least intimated its further claims before the hearing of the preliminary issue.
(ii) Songa withdrew its opposition to the hearing of a preliminary issue in consideration of DSME's promise not to make new claims. This was intended to be a binding and legally enforceable agreement. The parties thus entered into a binding agreement that if Songa consented to an order for the trial of a preliminary issue, and if the Tribunal decided that preliminary issue in favour of Songa, DSME would not make any further or different claims against Songa.
(iii) The new claims stood no prospect of success because they were debarred by the terms of Addendum No. 2 under which the only claims which were reserved by DSME were the FEED claims (and not any claims for damages of the nature now sought to be advanced).
(i) He was in no doubt that the claims now advanced were not within the scope of the original Claim Submissions which made no allegations of breach against Songa.
(ii) Mr Marrin QC agreed with the majority that Addendum No. 2 preserved some claims but precluded others. He appears to have agreed that the preserved claims were the FEED Claims. However, in his view, the definition of the FEED claims was wider than the claims or disputes already referred to arbitration. He gave the example of damage consequent upon alleged interference with the design process and the refusal to approve changes which he considered was comprehended by the FEED claims. He, therefore, took the view that some, at least, of the amended claims were within the scope of the FEED claims, had not been advanced before, and could now be "restored to life" by amendment.
(iii) He was then not persuaded that the arrangements between the parties in respect of the preliminary issues were contractual or precluded DSME from seeking to amend if they were unsuccessful.
(iv) He doubted whether there had been any intention to create legal relations and would have expected more formality if there was such an intention. At paragraph 26, he said that he would have found that the parties did not intend to create legal relations.
(v) On the issue of abuse of process, he said this (at paragraph 17):
"Here, the parties reached an understanding as to the fate of DSME's claim but the Reply and Defence to Counterclaim was pleaded by agreement on a partial basis; and there was no discussion as to whether it would be open to DSME to advance alternative justifications for delay in the event that DSME lost on the preliminary issues."
(vi) Mr Marrin QC then addressed various factors relied on by Songa in support of the contention that DSME's application was oppressive and abusive. These included the interests of finality in arbitration and economy and efficiency in the conduct of the arbitration which weighed in Songa's favour. However, the issue that then seems to have outweighed these considerations for him was the impact on DSME's Defence to the Counterclaim:
"Beyond these, there is to my mind a further matter to be taken into account. It concerns the ambit of the Defence to Counterclaim. By its counterclaim, Songa claims liquidated damages in respect of some 487 critical days of delay. So far, DSME has, in defending that claim, sought to justify the delay solely by reference to its case, now rejected by the Tribunal, that Songa was responsible for the defects in the FEED. However, DSME now seeks to rely on its new allegations of breach in support of alternative defences to the counterclaim. These are, first, that time was set at large and, second, that the delay was attributable to Songa's breach. So much is clear from paragraph Q.58 of the Amended Claim Submissions. Yet, if Songa's argument on abuse is well-founded, DSME will be shut out from advancing these defences even though they were never mentioned, still less expressly abandoned, in the exchanges leading up to the order for the hearing of preliminary issues upon which Songa relies."
The questions of law
Section 1
1.1 Whether the correct approach to determining whether the proposed amendments would give rise to an abuse of process was to apply the rule as formulated in Henderson v Henderson or by reference to the test stated in Johnson v Gore Wood [2002] 2 AC 1.
1.2 Whether the grant of the proposed amendments in the DACS [the Draft Amended Claim Submissions] fell properly to be considered to give rise to an abuse of process in circumstances in which they constitute a proposed amendment and not the bringing of a new action.
1.3 Whether the proposed amendments fell to be refused on the ground that their grant would constitute an abuse of process by reason of alleged reliance on DSME's representations by non-parties (against whom it was not suggested that any attempt would be made to bring proceedings).
1.4 Whether, in deciding whether grant of the proposed amendments should be refused on the ground that their grant would constitute an abuse of process, such can properly be decided by analogy with the cases of Aldi Stores Ltd. v WSP Group plc [2008] 1 WLR 748 and Otkritie Capital International Ltd. v Threadneedle Asset Management Ltd. [2017] EWCA Civ 274l; [2017] CP Rep 27.
1.5 What is the proper effect of Rule 10 of the LMAA Terms 2012 on the rule of abuse of process as applicable to an application to amend submissions to introduce new claims.
1.6 Whether the proposed amendments in the DACSs properly fell to be refused on the ground that their grant would constitute an abuse of process.
1.7 If DSME's amended claims in the DACSs properly fell to be rejected on the grounds that grant would give rise to an abuse of process, whether such prevents DSME from relying upon the matters pleaded in the DACSs by way of defence to Songa's counterclaim.
Section 2
2.1 Whether the proposed amendments in the DACS properly fell to be refused on the basis that by (sic) the parties, in the course of the arbitration proceedings, entered into a binding agreement by which if Songa agreed to consent to, or not oppose, an order for the trial of a preliminary issue and if the Tribunal were to decide that issue in Songa's favour, DSME would not make any further or different claim against Songa.
2.2 Whether such binding agreement precludes DSME from relying upon the matters pleaded in the DACSs by way of defence to Songa's counterclaim.
Section 3
3.1 Whether Addendum No. 2 to the Contract precludes DSME from relying upon the matters pleaded in the DACSs by way of defence to Songa's counterclaim.
3.2 Whether Addendum No. 2 to the Contract precludes DSME from relying upon the matters pleaded in the DACSs by way of defence to Songa's counterclaim.
Section 3: Addendum No.2
(i) Firstly, the Tribunal expressly said that the description of clause 5.1 of the Addendum as an exclusion clause was inapposite. They regarded it as a clause that preserved claims (by DSME against Songa). Mr Marrin QC took the same view.
(ii) Secondly, the Tribunal did not, as such construe Article VII.2 or the effect thereof. The Tribunal's point was that the reservation of claims was explained by the presence of Article VII.2 in the contracts.
(iii) What they said, at paragraph 67 of the Award was this: "The parties to Addendum No. 2 (and also no doubt the financiers) clearly assumed that, without a reservation of claims, delivery of the rigs would amount to an acceptance by DSME [that Songa] had "fulfilled all its obligations under this Contract". It is debatable whether or not this was what Article VII.2 was intended to achieve, or whether it was simply a condition precedent to DSME's obligation to deliver. But it was clearly the assumption underlying Addendum No. 2, and the intention of both parties that Addendum No. 2 should reassure the financiers in their decision to pay the delivery instalment." (The words in square brackets appear to be missing from the sentence.)
(iv) What is apparent from this passage is that the Tribunal's inference as to the parties' understanding of Article VII.2 served to explain and inform the construction of Addendum No. 2. Indeed, that is a further issue on which DSME argues the Tribunal was obviously wrong in law.
(i) the Tribunal wrongly took into account the negotiations leading up to Addendum No. 2 as a guide to construction.
(ii) The Tribunal wrongly ascertained the factual background.
(iii) The Tribunal wrongly ascertained the contract by reference to the (alleged) subjective intentions of the parties.
Mr Catchpole QC's oral submissions concentrated on these three alleged errors of law.
"After considerable negotiation with DSME and Songa's financiers from the end of May and through June 2015, this was dealt with in Addendum No. 2 which also contained a specific reservation for DSME's claims which were stated to be the FEED claims. There was no reference to breach of contract or non-fulfilment of obligations or default on the part of Songa in Addendum No. 2."
Section 2
"However:
a. The Tribunal went on to assert . that "in truth the arrangement [for a PIH] made no sense unless DSME was not merely stating that it was its intention not to make new claims, but was actually promising not to do so if the Tribunal ordered the trial of preliminary issues." This was a false leap in logic and/or result for which there was no reasonable explanation ., which assumed what had to be proved, and the Tribunal identified no passage in the correspondence from DSME in which it made any such promise, let alone an offer to contract on that basis. The Tribunal identified no authority supporting its finding that a contract was made. It was and is generally perfectly sensible for the parties to agree to a hearing of Preliminary Issues on the basis of the (then) currently pleaded case: that is what such hearings entail.
b. Immediately following the passage in the Awards cited above, the Tribunal stated "That there was otherwise no outcome of the preliminary issues which could result in the very large saving of further time and expense which would result from a decision in favour of Songa." However, this was an illogical conclusion which was incorrect in law as to the effect of the preliminary issues: the outcome of the preliminary issues did indeed have the effect which DSME had stated in correspondence would be the outcome if unfavourable: the claims pleaded were rejected and the then pleaded case failed."
Section 1
"It may well be .. that what is now taken to be the rule in Henderson v Henderson has diverged from the ruling which Wigram V-C made, which was addressed to res judicata. But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present, the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceedings involves what the court regards as undue harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should, in my opinion, be a broad, merits-based judgment which takes account of the public and private interests involved but also takes account of all the facts of the case, focusing attention on the crucial question whether, in all circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. it is in my view preferable to ask whether in all the circumstances a party's conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask where the abuse is excused or justified by special circumstances. "
(i) They placed reliance on the representations of DSME to the Songa companies (or specifically their parent companies) that a decision against DSME on the preliminary issues would put an end to its claims, which representations had been relied upon to their disadvantage.
(ii) They further placed reliance on the lack of a satisfactory explanation as to why "the new claims were not brought forward earlier".
(iii) In the absence of such an explanation, they found "that the failure by DSME to state that it had further claims up its sleeve when applying for a preliminary hearing is a compelling reason why there should not now be an amendment on a huge scale leading to a potentially prolonged and costly further hearing."
(iv) They considered that "the slightest inquiry" before the application for the hearing of a preliminary issue would have brought the relevant facts to light.
(v) In that respect, the Tribunal saw an analogy with the cases of Aldi Stores Ltd. v WSP Group [2007] EWCA Civ 1260 and Otkritie Capital International Ltd. v Threadneedle Asset Management [2017] EWCA Civ 274 which they described as cases where there was a conscious decision not to mention possible further claims at a case management conference and further claims stopped.
(vi) The Tribunal concluded that, in the present case, the failure was not perhaps conscious or deliberate:
" but it was certainly the result of a failure to make the reasonable inquiries which could and should have been made before making a serious representation to the tribunal about the state of the case, and which was calculated to influence the decision of the tribunal and the opposite party."(paragraph 38; my emphasis).
(i) the onus of proving abuse is on the party alleging it. In saying that there was no compelling reason to set aside the arrangement between the parties, the Tribunal reversed the burden of proof. To my mind that takes one part of a sentence out of context. It is clear from the explanation the Tribunal then proceeded to give, and which I have summarised above, that there was no such error of law.
(ii) As I understand it, it is submitted that the Tribunal had no regard to the fact that there was no public interest in the issue. That is one aspect of or factor in the reasoning in Johnson v Gore Wood. It does not preclude the finding of an abuse of process.
(iii) There will rarely be a finding of abuse unless the later proceedings involve what the court regards as unjust harassment of a party. It is on this basis that DSME submits that the Tribunal's statement that it is the process that must be protected and not the individual party is wrong in law and thus that the Tribunal wrongly ascertained the law. There is nothing in this point. There is nothing in Johnson v Gore Wood that departs from the proposition that "abuse of process" is concerned with exactly what it says, namely abuse of the process and that there is both a public and private interest in preventing abuse of the process. Unjust harassment is to be found in the representation as to the consequences of a finding unfavourable to DSME of the hearing of the preliminary issues and in what DSME did once it had lost. Having acceded to the course repeatedly advocated by DSME, Songa and the Tribunal would, if the amendments were allowed, now find themselves in exactly the position that DSME represented they would not that is the position of having to investigate at great time and cost a complex technical case and the causes of delays and cost overruns.
(iv) The Tribunal failed to take into account that the issues raised by DSME were relevant to its defence to Songa's counterclaim and DSME had expressly reserved the right to plead its defence more fully. I repeat what said about this reservation above.
Question 1.2
"The amendment point was contemplated, and was clearly not sought to be invoked in relation to post transfer date bulk transfers. That was a conscious decision on which the other parties were entitled to, and did, rely, to their prejudice on the matter referred to above. If the point was going to be taken it ought to have been taken at that point. All parties intended that the list of issues should be conclusive. That means that matters which must have been known to the parties as potential issues, but which were not to be litigated because a position was conceded, should be taken conclusively not to be issues. Once the litigation, based on that position, has started, and a decision issued which depends on it, it becomes too late to raise the point thereafter it should have been raised before."
"g. The doctrine is not restricted to cases where the alleged abuse comes in a separate, later action. It is possible to conclude that a claim or defence not initially raised ought properly, if it was raised at all, to have formed part of an earlier stage within a single action at which at least some matters were finally determined.
h. It is a strong thing to shut out pursuit of a point not actually decided previously against the party raising it; and it may be an even stronger thing to do so in relation only to different stages of a single action. I would though add, as to the latter, that much may depend on the nature of the stages involved. Here, the parties had their final trial of all issues, not merely, for example, a decision on preliminary issues or a summary judgment decision on some particular claim or defence or a final determination of an individual point as part of dealing with some other interlocutory application. If the doctrine be available, as indeed it is, in the context of a single set of proceedings, the potential for it to apply on the facts where those are the circumstances plainly may arise more readily than during the interlocutory life of the process."
"47. So far as the authorities are concerned, the proposition that the Henderson principle can be invoked even at a later stage in the same proceedings is now clearly established by Tannu and the line of subsequent cases that have applied it. Contrary to Mr Hutchings' submission, the weight to be afforded to Jackson J's decision in Ruttle is itself diminished by the fact that the earlier Court of Appeal decision in Tannu was not cited to him.
48. So far as the point of principle is concerned, I do not see why the existence of a broad discretion in the context of an application to amend is a reason to preclude altogether the application of the Henderson principle within the same action. A finding that a new claim would amount to an abuse must lead to the claim being disallowed, as a rule of law, and not merely as an exercise of discretion. If a new claim would amount to abuse, therefore, the mere fact that it is sought to be introduced in circumstances where the court has a broad discretion is not sufficient reason to preclude the application of the Henderson principle.
63. For these reasons, while I consider that the Henderson principle is capable of being engaged upon an application to amend made after the strike-out of the original claim in the same proceedings, it is likely to be appropriate to apply it in more limited circumstances than if the earlier judgment was given after a trial (for example on a preliminary issue) at an earlier stage in the same proceedings."
"a. The principle is a principle to obtain finality in litigation;
b. The principle applies to prevent litigation of an issue which has been decided by a previous Tribunal, or of an issue relevant to the determination of that issue which ought to have been raised at the time of such determination;
c. The principle does not apply to new issues not decided upon by a Tribunal previously where those are not issues within the scope of the issues previously determined;
d. The principle relates to such issues which have been decided, as opposed to being a principle concerning pleadings."
(i) As Coulson J recited the case had a long and rather unfortunate history. It concerned a claim against insurers by specialist contractors who had designed and installed glazing which was defective and had to be replaced at great cost. There was a dispute as to the scope of the indemnity and the (single) deductible for design liability or (multiple) deductibles for workmanship defects. By the time the matters reached Coulson J, there had been a trial before Field J and an appeal to the Court of Appeal. The defendant accepted that design errors were a single occurrence with a single deductible and the Court of Appeal decided that workmanship defects in each window represented a separate occurrence with a separate deductible. The claimants then sought permission to amend to plead that the majority of defects were design defects and not workmanship defects.
(ii) Coulson J noted (at [44]) that Field J had described the trial before him as the being in respect of "a set of issues designed to determine whether the claimant is entitled to be indemnified". He further found that the issue as to whether the defects were a matter or workmanship or design was an issue before Field J and before the Court of Appeal and had been decided. The decision that the defects were ones of workmanship or design could not be opened up.
(iii) Coulson J addressed that primarily as a matter of issue estoppel and he considered the three arguments advanced as to when an issue could nonetheless be opened up. At [92]-[93] he said this:
"92. I am conscious that the CPR encourages the parties and the court to try and find ways in which the underlying disputes between the parties can be resolved in the quickest and most cost-effective way possible, having regard to the overriding objective. This means that there has been an increase in the number of cases which are resolved by way of preliminary issues, sub-trials and the like. In those circumstances, it is possible to see how a potential issue might slip through the net early on, and be decided as it were by default, only for it to become of great significance and relevance at a later date. In such circumstances, I could see that a court may baulk at the potentially draconian consequences of the issue estoppel principle.
93. However, I am satisfied that this is not such a case. The "design v workmanship" issue was on the pleadings and was the subject of evidence. It was decided by both Field J and the Court of Appeal without any indication of dissent from either side, and without any suggestion that the issue was, in fact, something to be determined at a later date. In those circumstances, I think it would be wrong to allow the matter to be litigated all over again."
(iv) The judge then went on to consider the Henderson v Henderson abuse argument (at [97]) expressly on the basis that he was wrong that the "design v workmanship" issue had been raised or was part of the claimant's cause of action. That paragraph is important because it makes it plain that the context of the decision Coulson J came to on abuse was that (contrary to his preferred analysis of the facts) the issue had not been raised or decided in the previous hearings before Field J or the Court of Appeal.
(v) He then concluded that the issue could and should have been raised:
"99. In my judgment, there can also be no doubt that (on the assumption that it was not) the issue should have been raised both before Field J and before the Court of Appeal. The parties wanted to have one hearing on liability/policy matters, so that they could either be in a position to resolve the dispute without a further hearing or, failing that, have a hearing simply devoted to the figures. It was therefore the parties' clear intention to have a hearing of all issues of liability before Field J. Although, as a matter of form, that hearing was a trial of 13 defined Issues (as opposed to a sub-trial on liability), I am in no doubt that this would have been regarded by the parties as a distinction without a difference, because those 13 issues were regarded by both parties as the issues that arose between them on liability."
(vi) It was no part of the reasoning on this matter that the issue ought to have been raised because it was relevant to the issues actually determined. What was important was the parties' intention to have all liability issues determined. Whilst it is the right that in this arbitration, the hearing of the preliminary issues was not expressly characterised as a hearing on all liability issues, it was proposed by DSME as a hearing that would dispose of the issues of responsibility for the design errors and, if disposed of unfavourably to DSME, of the need to address the technical issues, the delay and the cost overruns.
(vii) Having reached that point, the judge then undertook the broad merits based approach to the facts and asked himself (at [103]): "How much was all this within the claimant's control, and to what extent would the defendant be gaining some sort of unfair advantage if the amendments were not now permitted."
(viii) So far as the first question was concerned, the judge said this (at [104]):
" The "design v. workmanship" issue could and should have been raised by the claimant: indeed, it was plainly and obviously in the claimant's interests to raise it at an early stage. Apparently, because the claimant felt that it had a better argument (to the effect that workmanship was one event), it did not pursue the design case with very much vigour and its evidence on the point was best described as thin. But that was entirely a matter for the claimants; it was part of the tactical decisions that it took two years ago. ."
(ix) Similarly, in this arbitration, whether to raise the breach case was entirely within DSME's control.
(x) On the issue of a windfall advantage to the defendant, Coulson J said that the defendant had fought and won a liability hearing and that it would be inappropriate to allow the claimant to open up the design v workmanship issue at this stage. I observe again that that was said in the context that the issue had not already been raised and/or decided.
(xi) Coulson J next turned to the issue of whether it made any difference that the abuse of process argument was raised in the same, and not subsequent, proceedings. He concluded that it did not. He said that his reasons were the same as at paragraphs 91-93 in respect of issue estoppel. Since the premise of this part of the decision was that the issue had not been raised and decided, it seems to me that the judge's view must have been that the facts that there had been no suggestion of an issue to be raised at a later date and that the issue in question had not slipped through the net were equally relevant in this context.
(xii) On the latter point, he said this:
"107. Again I accept that, where certain issues are dealt with by the court in advance of others, genuine mistakes may occur, where it would be unfair and unreasonable to prevent one party from raising an issue on the merits which, for whatever reason, has not been the subject of a clear determination before. Tannu and Aldi Stores are good recent examples of such a case. But at the same time, the court should be astute to prevent a claiming party from putting its case one way, thereby causing the other side to incur considerable expense, only for the claiming party to lose and then come up with a different way of putting the same case, so as to begin the process all over again. I have no doubt that, on the basis of the facts as I have summarised them in Section D above, it would be wrong and unfair to allow the claimant in these proceedings to go back to go back to square one and attempt to run a case which could and should have been raised years ago.
"108. Therefore, even if it is "unusual" for Henderson abuse to arise in the same proceedings, then I consider that, on the facts of this case as set out in Section D above, it is appropriate for those principles to apply here. It would be plainly oppressive for the defendant to be vexed again with this issue, on which it has already been successful." (my emphasis)
Question 1.4
Question 1.5
"Notwithstanding the terms of any appointment of an arbitrator, unless the parties otherwise agree, the jurisdiction of the tribunal shall extend to determining all disputes arising under or in connection with the transaction the subject of the reference, and each party shall have the right before the tribunal makes its award (or its last award if more than one is made in the reference) to refer to the tribunal for determination any further dispute(s) arising after the commencement of the arbitral proceedings. When and how such dispute is dealt with in the reference shall be in the discretion of the tribunal."
Conclusion and question 1.7
"A broad, merits-based judgment is required which takes account of the public and private interest involved and also takes account of all the facts of the case (Johnson v Gore Wood at 31D. The Tribunal did not purport to undertake such an exercise. ."
That submission is hopeless. The merits based judgment is exactly what the Tribunal undertook. There was no obvious and express error of law and nor could it be inferred that there was such an error from the outcome.
Section 68: serious irregularity
"It follows from the fact that the Respondent's defence and counterclaim submissions advance a positive case as to the causes of delay that DSME's Reply and defence to Counterclaim submission shall need to be amended in due course to reflect the points in the Amended Claim Submissions. To that extent, DSME seeks permission for such amendments. The Respondents' objections cannot form a proper basis for refusing DSME permission to defend the Counterclaim advanced by the Respondents. (At this stage draft submissions have not been advanced, in part because one would expect that Respondents' Defence and Counterclaim to be amended in the light of the Amended Claim Submissions).
"But as I understand what my learned friends are saying in this hearing is that not only should we not be allowed to pursue our claim for the amended claim, but that we should not be allowed to pursue that as a defence to their counterclaim.
That is their case, and that is a remarkable submission. And although many of their arguments, I submit, don't go to whether or not you should be allowed to pursue a defence, for example limitation wouldn't arise, but that is their case. I will come back to that in a moment."
"What should not happen, in my submission, is that you have applications made where another party seeks to shut out someone, certainly from running bona fide claims, or, going beyond that, running a defence to a substantial claim on grounds, not that this has been decided before or some kind of genuine abuse, but because of something that was said in the course of submission during a procedural debate."
Note 1 rule 10 of the 2010 terms and rule 12 of the 2017 terms [Back]