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Cite as: [2012] EWHC 3515 (Comm)

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Neutral Citation Number: [2012] EWHC 3515 (Comm)
Case No: 2012 FOLIO 73

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL
06/12/2012

B e f o r e :

THE HON. MR JUSTICE COOKE
____________________

Between:
Occidental Chartering Inc
Claimant
- and -

Progress Bulk Carriers Ltd
Defendant

____________________

Charles Priday (instructed by Winter Scott LLP) for the Claimant Disponent Owners
David Semark (instructed by Marine Law) for the Defendant Charterers
Hearing date: 5 December 2012

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    The Hon Mr Justice Cooke:

    Introduction

  1. The claimant Disponent Owners (OCI) seek relief in respect of three Arbitration Awards dated 14th June 2010, 8th October 2010 and 19th December 2011 (The First Award, the Amending Award and the Second Award respectively). The defendant charterers (PBC) do not challenge OCI's appeal on one element of the Tribunal's decision in the Second Award, namely the Tribunal's reversal of its finding in the First Award that OCI was entitled to its costs of the reference as against PBC. Otherwise, it resists any form of relief sought by OCI.
  2. OCI has framed its challenges against the Awards under section 67, 68 and 69 of the Arbitration Act 1996. In the event, the real issues which emerged from the parties' skeleton arguments related to two issues of law, one of a generic nature and one of construction in relation to paragraph D of the Amending Award. It is sufficient for me to determine these matters under section 69, permission to appeal having been given by Popplewell J.
  3. The History of the Reference

  4. The vessel Chada Naree was the subject of a string of charter parties. Precious Garnets Limited were the registered owners of the vessel and chartered her to Occidental Services Corporation (OSC) by a time charter dated 24th March 2004. OSC, on the uncontested evidence, as recorded in paragraph 25 of the Second Award, entered into an internal re-let of the vessel to OCI, a company in the same group. This re-let agreement was dated 8th April 2004. OCI in turn concluded a charter with PBC for 'about 5-7 months, charterers' option, plus or minus 20 days', that charter being dated 18th September 2004. Finally PBC entered into a voyage charter with CNAN dated 19th September 2004. All the charters were on materially identical terms in the context of the disputes that arose, including the internal re-let agreement between OSC and OCI.
  5. At some point in the history of the proceedings, CNAN was divested of its assets with the result that PBC was left exposed in respect of any claims made by the registered owners which were passed down the chain of charters. The fundamental claim made by the registered owners was in respect of damage suffered by the vessel on the 13th-15th November 2004. The registered owners claimed that OSC was liable for such damages by virtue of a breach of the safe port warranty in the charter and this claim was passed down the string of Disponent Owners and charterers and gave rise to three arbitrations where the same arbitrators were engaged. The three arbitrations took place under the head charter between Precious Garnets Limited and OSC, under the charter between OCI and PBC and under the charter between PBC and CNAN. There was no arbitration between OCI and OSC, the two being related companies but there was an agreement for an extension of time to preserve rights between the two. The resolution of the matters in issue was much delayed because, according to a Costs Award in the head arbitration, CNAN were uncooperative and difficulties arose in having all the matters decided together, which was plainly sensible and economic.
  6. On the 14th June 2010 the Arbitrators issued their first award in all three references, which, regrettably, in the case of the OCI/PBC First Award, contained manifest errors. It was intended to be an award between OCI and PBC but the party named as "Claimant/Disponent Owner" was OSC. The reasons which were attached to the Award were the same reasons as were attached to the Awards in the arbitration between the registered owners and OSC and the arbitration between PBC and CNAN. In essence, the arbitrators found that there was a breach of the safe port warranty in all the charters in the string, from top to bottom. The arbitrators held that the registered owners were entitled to recover damages in the sum of US $116,571.52 and Euros 6,751. The arbitrators also held that OCI was entitled to recover this sum from PBC and PBC to recover it from CNAN. Additionally, OCI were entitled to recover US $92,876.92 representing hire which PBC had wrongly withheld.
  7. The First Award stated that 'the Disponent Owners also claimed damages equivalent to their own costs in the reference between themselves and the registered owners, together with interest and costs in this reference. The charters denied liability in full'.
  8. In paragraph 28 of the Reasons forming part of the First Award the following passage appeared:-
  9. "So far as PBC's claim against CNAN for the costs which they had incurred in defending the claim brought against them was concerned, since this was a claim for damages and not for an indemnity, the question was whether the legal costs which Occidental were liable to pay to the head owners (and which PBC were liable to pay to Occidental)" were sufficiently foreseeable to be recoverable. That was a question which had to be determined by reference to the position as it stood in September 2004when the voyage charterparty was concluded. CNAN resisted liability for any such damages and PBC's solicitors reserved their clients' position in relation to any such liability. We concluded therefore that (unattractive though this position was given the history of the matter) we had no alternative but to reserve this aspect for further submission."
  10. It can be seen from this paragraph that the arbitrators referred to "Occidental" and its liability to pay the head owners' 'legal costs' and the issue of foreseeability in the context of recoverability of that item by PBC from CNAN.
  11. What is plain from any reading of the First Award, the Amended Award and the Second Award is that, for the purposes of the First Award, the parties and the arbitrators treated OSC and OCI as if they were one and the same. The reason for this is not hard to fathom, when the terms of the Second Award are read.
  12. At paragraph 11 of the Reasons attached to and forming part of the Second Award, the arbitrators state that it was clear to them at the time the arbitrations were commenced that there was a charter party other than the three with which they were concerned in the three references, those three being the head charter, the OCI/PBC charter and the voyage charter between PBC and CNAN. The arbitrators recited that it was clear that the charter party was a document internal to the 'Occidental organisation', whilst also reciting that it was common ground in the three arbitrations that the material provisions of the charterparties were back-to-back.
  13. At paragraph 12 of those Reasons the arbitrators stated that it did occur to them at the outset that it might be helpful to clarify, for the record, the position regarding the internal charter party but that they were not aware of any request made by PBC's solicitors for such clarification. Because the charters were back-to-back so far as concerned the material terms, they were unsurprised by any failure of PBC to obtain clarification of the position regarding the internal charter. The arbitrators state 'our assumption was that the solicitors acting for the Occidental companies (OSC and OCI), Winter Scott, had agreed with their opponents that for the purposes of the arbitration in which they were involved, the two Occidental companies could be treated as if they were one and the same.'
  14. At paragraphs 24-25 of the same reasons, the arbitrators accepted the submission made on behalf of OCI prior to the Second Award that 'both parties and the tribunal were aware, at all times, that Disponent Owners (OCI) were pursuing a claim for their liability incurred by OSC in the head charter party arbitration…….. The uncontroverted submission made on behalf of OCI was that during the course of the reference PBC had sought evidence of the basis of OCI's liability to OSC (and thus of OCI's indirect liability to the head owners) and that to this end copies of the OSC/OCI re-let and the documentation evidencing hire payments under that re-let had been attached to OCI's Amended Reply submissions. Winter Scott maintained (and Marine Law [PBC's solicitors] did not dispute) that PBC had apparently accepted this evidence of an unbroken chain of liability, since they had made no further attempt to dispute the existence of the chain of charter parties through which these liabilities had been passed onto OCI. That was a submission which seemed to us to be correct.'
  15. The terms of paragraphs A, B and C of the First Award bear recital in full:-
  16. "A. WE FIND, HOLD AND DECLARE that the Disponent Owners are entitled to be indemnified by the Charterers in respect of the sums of $116,571.52 and E6,751.00 which the Disponent Owners have been found liable to pay to the registered owners of the vessel in respect of damage to the vessel and associated expenditure arising, as a result of a breach of the safe port warranty in the charterparty, together with interest on such sums at the rate of 5.25% pa. compounded at three monthly rests from the 1st day of February 2005 to the date of payment.
    B. WE FURTHER FIND, HOLD AND DECLARE that the Disponent Owners are entitled to the sum of £92,876.92 currently held in an escrow account and that this sum shall therefore be paid forthwith to the Disponent Owners, together with interest accrued on this sum but that the Disponent Owners' claim for damages representing the costs which they have been found liable to pay to the registered owners fails and is hereby dismissed.
    C. WE AWARD AND DIRECT that the Charterers shall bear and pay their own and the Disponent Owners' costs of this reference (the latter to be assessed, if not agreed, on the standard basis by the High Court or by ourselves in an Award of Assessed Costs at the Disponent Owners' option for which purpose we expressly reserve jurisdiction) AND that the Charterers shall bear and pay the costs of this our FINAL AWARD which we hereby fix in the sum of £11,768.50 (inclusive of our interlocutory fees and charges) PROVIDED that if the Disponent Owners shall, in the first instance, have paid any part of the costs of this our FINAL AWARD, they shall be entitled to immediate reimbursement by the Charterers of the sum so paid, together with interest at the rate of 4.5% (four and one half a per cent) per annum, compounded at three monthly rests from the date of payment to the date of reimbursement."
  17. The First Award regrettably contained three errors:-
  18. i) As already mentioned, the heading referred to the Claimant in the reference as OSC rather than OCI

    ii) An incorrect figure was included in the damages awarded

    iii) The tribunal, in paragraph B of the First Award, mistakenly dismissed the Disponent Owners' claim against the charterers for damages consisting of the costs that the head owners had been awarded, whilst reserving the position in paragraph 28 of the reasons, as previously set out in this judgment.

  19. It is plain beyond peradventure that, at the time of the First Award, the parties all treated OCI and OSC as one and the same and that, where the arbitrators referred, in the First Award, to the 'Disponent Owners' as 'liable…..to the registered owners of the vessel in respect of damage to the vessel and associated expenditure arising as a result of a breach of the safe port warranty in the charter party' no distinction was being drawn between OSC and OCI, because the terms of the re-let charter meant that there was no live issue between them as to the passing of liability down the chain. OCI was liable to OSC in the same way as OSC was liable to the head owners because it was common ground that all the charters were on materially back-to- back terms.
  20. Although the last phrase of paragraph B of the award was inaccurate, (as shown by paragraph 28 of the Reasons), this again shows that the 'Disponent Owners' was a term used in respect of OSC and OCI jointly, since it could only be OSC which was directly liable to the registered owners, as OCI, PBC and the Arbitrators all recognised.
  21. So far as concerns paragraph C, this is the part of the award which the arbitrators purported to reverse in the Second Award. The appeal against the Second Award in this respect is agreed by PBC. The arbitrators had no power to reverse this decision.
  22. The parties drew the arbitrators' attention to the defects in the First Award, which led to the arbitrators issuing the Amending Award on the 8th October 2010. In this award they described the Claimant Disponent Owners as 'Occidental Chartering Inc of Panama'.
  23. Paragraph A of the First Award was amended by replacing the figure of US$115,571.52 with US$108,990. This was once again referred to as the sum 'which the Disponent Owners have been found liable to pay to the registered owners of the vessel'. Paragraph B was amended to delete the dismissal of 'the Disponent Owners' claim for damages representing the costs which they have been found liable to pay to the registered owners'.
  24. A further paragraph D was added in the following terms:-
  25. "We reserve jurisdiction to deal with the Disponent Owners' claim for damages representing any liability which they may incur to the registered owners of the vessel in respect of costs awarded to the registered owners in the arbitration under the head charter party, together with their own costs in that reference".
  26. Following the Amending Award and prior to the Second Award, PBC for the first time took a point about the distinction between OSC and OCI. This is recorded in the Second Award at paragraph 13, where the arbitrators say that this "came as a complete surprise". This Second Award, unaccountably, repeated the error in the First Award of naming the Claimant as OSC, rather than OCI in the arbitration with PBC. It referred at paragraph 4 to the Disponent Owners claiming 'an indemnity in respect of any liability they may face towards the registered owners of the vessel' in respect of the cost of repairs to the vessel and associated expenses and to damages 'equivalent to their own costs in the reference between themselves and the registered owners together with interest and costs in this reference'. In the Second Award, the arbitrators held that the Disponent Owners' claims in respect of both the costs of the arbitration with the registered owners and the costs of this arbitration failed and were dismissed.
  27. The Second Award

  28. In the Reasons forming part of the Second Award, the arbitrators set out the prior history of the reference and the remaining claims to be determined. OCI claimed £23,626.90 as the costs of the reference in the arbitration between themselves and PBC, which they had already been awarded in the First Award in principle, subject to assessment. They also claimed, as damages, costs incurred in the head arbitration between the registered owners and OSC. The sum of US$164,352.04 represented the costs of the registered owners in the head arbitration, which OSC had been ordered to pay, as assessed by the arbitrators in a Costs Award. The costs of the Award in that arbitration, which again OSC had been ordered to pay, amounted to £5,500.00. OSC's own costs in that reference, as claimed, amounted to £10,509.89.
  29. The arbitrators recorded at paragraph 5 of the Reasons forming part of the Second Award that they had anticipated that they would be concerned, at this stage, with the familiar issues that arise when costs in one arbitration are claimed as damages in another on the basis of the line of authorities from Hammond v Bussey (1888) 20 QBD 79 onwards. They recorded that such issues had not however featured in the written submissions made by the parties to the arbitrators and that it was accepted at the oral hearing, for which the arbitrators called, that if OCI had the necessary standing to bring a claim in respect of these costs as damages, there was no dispute as to their recoverability as a matter of causation. Instead they said that they had been confronted with a number of fundamental objections from PBC to the claim put forward by OCI.
  30. The basic objection was that OCI was not a party to any arbitration with the registered owners and it had not therefore incurred any liability for costs in that arbitration that was capable of being passed on to PBC as damages. Furthermore, the reservation which the arbitrators had made at paragraph D of the Amending Award did not enable the arbitrators to decide in favour of OCI on any such point. It was, as it always had been common ground that OCI had no direct privity of contract with the head owners and had not been party to any arbitration with them. It was always known and recognised that it was OSC that had concluded a charter with the head owners and OSC which had been held liable to the head owners for costs in the arbitration between them.
  31. The Issues between the parties

  32. The two crucial issues between the parties on the section 69 appeal therefore turned upon the terms of paragraph D of the Amending Award by which the arbitrators reserved to themselves the power to resolve particular disputes between OCI and PBC and on a general point of law as to the ability of a party, such as OCI to recover, as damages, sums for which it had not been held liable in an arbitration to pay to a third party.
  33. As set out earlier in this judgment, the arbitrators recognised in the Second Award that the parties had, until that point, been treating OSC and OCI as one and the same for the purposes of passing liability down the chain of charters. At paragraph 13 of the Reasons forming part of the Second Award they record that 'it therefore came as a complete surprise when, following the publication of our Amending Award (in which, amongst other things, we were asked by OSC's solicitors – and the request was not opposed by PBC's solicitors – to change the name of the Claimant Disponent Owners from OSC to OCI) PBC's solicitors seized on the point' and made two submissions, namely that OCI had not incurred any costs in defending the arbitration and that OCI had not been ordered to pay costs in the head, or any other arbitration. They also submitted that the only basis upon which OCI could seek to recover costs not incurred in the arbitration with PBC itself was under paragraph D of the Amending Award which, on its proper construction, did not allow for any such recovery to be made.
  34. The submission in relation to paragraph D does not appear to have been a submission in relation to the jurisdiction of the arbitrators. Certainly the arbitrators did not treat it as such. The point was considered in the context of PBC's fundamental submission that costs had not been incurred by OCI in any head arbitration and could therefore not be recovered. No suggestion was made that the arbitrators were functus and the parties specifically asked the arbitrators to determine the fundamental point at issue. Nonetheless Mr Semark, for PBC submitted to me that the arbitrators were, in fact, functus, and that they could not exercise any jurisdiction to award OCI damages in respect of the costs of the head arbitration in any event.
  35. Paragraph D of the Amending Award

  36. The arbitrators construed paragraph D of the Amending Award in the following way. They held that the reference to the 'registered owners of the vessel' could only mean Precious Garnet Limited. They held that the reference to 'costs awarded to the registered owners in the arbitration under the head charter party' could only mean the arbitration between Precious Garnet Limited and OSC. They held that the reference to 'their own costs in that reference' could only mean costs incurred in that head charter party arbitration. The Disponent Owners, as far as PBC were concerned, in the arbitration between them and OCI, were OCI. OCI had not incurred any liability to the registered owners of the vessel in respect of costs awarded to them in the head charter party arbitration; nor had they incurred any costs in that reference.
  37. At paragraph 32 of the Reasons, the arbitrators stated that 'there was no doubt in our collective mind at the time' what it was that they had been intending to achieve by paragraph D. 'There was no doubt, so far as we were concerned, (at least by the time that the submissions leading to our first Final Arbitration Award closed) that PBC were fully aware of the internal Occidental charterparty and its ramifications in terms of liabilities coming down the line from the Head Charterparty. However we were not persuaded that it was permissible for us to, in effect, re-write the terms of paragraph D so as to 'short-circuit' what seemed to us to be a clear gap in the chain of charterparties'. Thus the arbitrators considered that paragraph D, on its proper construction, because it failed to refer to the liability of OCI to OSC and that of OSC to the head owners under two different charterparties, did not allow them to find that a claim by OCI could succeed against PBC in respect of such liabilities. It did not enable a claim to be made, where it could not otherwise be made. At paragraph 40 of the Reasons, they refer to a "gap in the chain of charterparties which was fatal to OCI's claim for costs up the line as damages", which could not dealt with by construction of paragraph B (sic).
  38. It matters not whether this is seen as a point of jurisdiction or a point in the context of the fundamental argument about "a gap in the chain of charterparties" or "a gap in the chain of references", which the arbitrators considered was fatal to pursuit of the claim (and to which I shall come in a moment). The issue is one of construction of paragraph D in the context of the First Award and the Amending Award and the background knowledge of PBC, OCI and the arbitrators. In coming to their decision, the arbitrators completely overlooked the background to paragraph D of the Amending Award, a background known both to OCI and PBC, as well as to the arbitrators themselves, as recited in the Second Award.
  39. I was referred to the well known passages relating to construction of contracts in ICS v West Bromwich Building Society [1998]1WLR 896, Chartbrook v Persimmon [2009] 1 AC 1101 and Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900. At paragraph 23 of the latter, Lord Clarke says that "where the parties have used unambiguous language, the court must apply it". Elsewhere, however, and at paragraphs 14 and 21 in particular, Lord Clarke accepted the submission that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so the court must have regard to all the relevant surrounding circumstances and if there are two possible constructions, the court is entitled to prefer the construction with which is consistent with business common sense and to reject the other.
  40. At paragraph 73 in The Starsin [2003] 1 LLR 571, Lord Hoffman stated that 'the interpretation of a legal document involves ascertaining the meaning it would convey to a reasonable person having all the background knowledge which is reasonably available to the person or class of persons to whom the document is addressed. The construction of a judicial order is, like that of any other legal instrument a single coherent process'. So also the construction of paragraph D, which was an agreed form of words submitted by both PBC and OCI to the arbitrators to include in the Amending Award.
  41. In my judgment, it is clear that when the arbitrators reserved jurisdiction 'to deal with the Disponent Owners' claim for damages' they were referring to the Disponent Owners in the manner in which they had previously been referred to in the First Award. There, no distinction was drawn between OSC and OCI at all. 'Occidental', as referred to in the Reasons, was seen as the Disponent Owners, because the terms of the re-let charter between the two Occidental companies, OSC and OCI (on materially back-to-back terms to all the other charters in the chain), meant that there was no issue about passing liability from one Occidental company to the other. Any sensible reading of the First Award and the Amending Award shows that the two Occidental companies were treated as one and the same and were referred to for convenience together as 'the Disponent Owners' in the context of the arbitration with PBC, whilst being seen as liable up the chain to the head owners in respect of liability to the head owners for repair costs for the vessel and any other damages which flowed from a breach of the safe port warranty. The whole of the First Award proceeded on this basis so that OCI was able to recover from PBC the sums for which it was liable to OSC and for which OSC was liable to the head owners in respect of repair and associated expenses. When therefore a reservation was made in respect of any liability up the line for costs, the same principle applies.
  42. A narrow interpretation of the words used is wholly inadequate if the words 'the Disponent Owners' is taken to mean OCI alone and not OSC, which was being treated as the same entity, as a form of shorthand, because no one saw any problem about treating them together in the context of passing liability down the chain. No one at the time of the Amending Award could have thought any differently. The very object of paragraph D was to reserve the decision on the recoverability of the claim for those sums payable to the head owners as damages, together with the arguments available to CNAN and PBC in respect of them. If the paragraph did not do that, it had no meaning at all, which is what PBC now says is the position, despite putting it forward at the time, in agreement with OCI, to reflect paragraph 28 of the Reasons forming part of the First Award.
  43. I have already referred to paragraph 32 of the Second Award, where the arbitrators stated that 'there was no doubt in our collective mind at the time what we had been seeking to achieve by paragraph D'. Contrary to what the arbitrators say in the last sentence of paragraph 32 however, there was no need for them to 'rewrite the terms of paragraph D so as to short circuit what seemed to be a clear gap in the chain of charter parties' since the phrase 'Disponent Owners' was apt to include both OSC and OCI in context and to allow OCI to claim in respect of any liabilities which it owed to OSC and OSC owed to the head owners. If the two Occidental companies were treated as one and the same, as they were for the purposes of the First Award and Amending Award, the reservation in paragraph D was entirely apt to allow OCI to claim damages in respect of its liability to OSC in respect of its liability to head owners.
  44. The General Point of Law

  45. As I have already said, the Second Award makes it clear that the terms of the internal re-let charter party were not in issue. The arbitrators however in paragraphs 33-48 were concerned by the absence of any arbitration between the two Occidental companies or any express agreement between them to pass on the clear legal liabilities arising in the head charter party arbitration. They, according to paragraph 34, 'felt bound to accept that in circumstances where the tribunal under the OSC/OCI charter party had not yet even been constituted, let alone proceeded to an Award, it was impossible for OCI to show that it had suffered the losses by way of costs up the line which were claimed as damages in this arbitration'. At paragraph 37 they said that 'this gap in the chain of references seemed to us to be fatal to OCI's claim for costs as damages. If the loss had not been suffered by the party claiming it in the arbitration over which we had jurisdiction, then that seemed to us to be an end to the matter'. At paragraph 48 of the Reasons, they again refer to 'a gap in the chain of charterparties', which they were not entitled to fill.
  46. There is a basic underlying fallacy here. The claim made by OCI against PBC is a claim for damages based upon the breach of the safe port warranty. That is a breach for which the Arbitrators found that CNAN was liable to PBC, PBC was liable to OCI, (sub silentio that OCI was liable to OSC), and OSC was liable to the registered owners. If the arbitrators had not found that liability flowed down the chain from OSC to OCI, OCI could not have recovered from PBC in respect of the repair costs and associated expenses. The same breach which gave rise to damages in respect of the cost of repair and associated cost gives rise also to damages in respect of the costs of resisting the registered owners' claims which are passed on down the line of charter parties. There is no difference in character between these heads of damages. There is no need for any arbitration award to establish liability if that liability is plain from the terms of the back-to-back charter parties, which it is. PBC expressly eschewed any argument based on remoteness, foreseeability or causation in relation to such damages. There remained nothing to be proved, save the reasonableness of the costs incurred which were claimed down the string of charter parties. The registered owners' costs had been assessed by the arbitrators in a Costs Award and, in the Second Award itself, the arbitrators found that, with a minor exception, the costs of OSC and OCI were reasonably incurred and would not have been disallowed (save for photocopying charges), had they found that the claim worked in principle.
  47. OSC and OCI had entered into a written agreement pursuant to which each had granted the other a general extension of time, subject to termination on 14 days written notice, to bring any claims arising out of the charter party between them (as recorded at paragraph 36 of the Reasons for the Second Award). There was therefore no question of any liability elapsing by virtue of limitation provisions and/or effluxion of time.
  48. PBC sought to suggest that OCI could not demonstrate any proven liability to OSC. At paragraph 27 of its skeleton argument, it submitted that OCI would have to establish that:
  49. i) OSC remained liable for the head owners' costs,

    ii) OSC was still incorporated.

    iii) OSC's claim against OCI was not time barred.

    iv) OSC had demanded from OCI that OCI reimburses its exposure to head owners' costs

    v) That it had a clear legal liability under the OSC/OCI charter to do so.

    None of these points avail PBC. OSC was liable for the head owners' costs under the Costs Award. OSC remains incorporated without any suggestion of extinction. OSC's claim against OCI was preserved by the extension agreement to which I have already referred. There was no need for OSC to demand reimbursement from OCI if OCI was liable to it for damages, but in any event such a demand would readily be implied. There was a clear legal liability under the OSC/OCI re-let charter for breach of the safe port warranty, where it was accepted that no issues of causation or remoteness arose in relation to the incurring of the costs in the arbitrations in relation to the dispute about the breach of that safe port warranty. The establishment of the breach of warranty was therefore sufficient up and down the chain of charter parties to establish the recoverability of costs as a head of damage, in exactly the same way as the recoverability of costs of repairs and associated expenses. All that remained was the issue of quantum, which the arbitrators determined in the Second Award, whilst holding against OCI in principle.

    Conclusion

  50. It is plain in my judgment that this appeal should succeed, not only on the point conceded but also in relation to the recoverability of costs as a head of damages. The right order is for me to vary the Award rather than set it aside and remit it because the conclusion at which I have arrived is the conclusion which the arbitrators said that they would have liked to have reached, had they felt able to do so. At paragraph 48 of the Reasons for the Second Award, they said that their conclusion was one 'which seemed to us to be thoroughly regrettable from a commercial standpoint, even though we regarded it as unavoidable.' For the reasons I have given such a conclusion was not only avoidable, but one which, had they properly taken into account the background to the First Award and the Amending Award, and properly analysed the chain of liability under the charters, they could not have reached.
  51. The parties should be able to agree a form of order in the circumstances, but on the figures as they appear in the Second Award, OCI are entitled to recover damages in the following sums:
  52. i) US$164,352.04, which represents the costs of the registered owners in the head arbitration,

    ii) £5,500, which represents the costs of the Award in that arbitration.

    iii) £10,509.89, as OSC's own costs in that reference.

  53. OCI are also entitled to their costs of the arbitration between themselves and PBC as the award of costs made in the First Award, assessed in the Second Award at £23,371.63. If these figures fall to be adjusted, the parties should be able to agree them, together with the award of interest on them.
  54. There remains only the issue of costs in the applications to this court. Self evidently OCI have succeeded in their section 69 appeal and costs would ordinarily follow the event. I have not determined the section 67 or 68 applications. If parties cannot agree on the appropriate costs order, I will rule on it on the formal hand-down of the judgment.


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