Section 68 Arbitration Act 1996: Commercial Court Sets Aside Part Of An Award For Breach Of The Tribunal's Duty Of Fairness

• Published date: 12 April 2022
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: Quadrant Chambers
• Author: Mr Joseph Gourgey

OVERVIEW

Butcher J in the Commercial Court handed down judgment in Ducat Maritime Ltd v Lavender Shipmanagement Incorporated [2022] EWHC 766 (Comm), setting aside part of an award made by an arbitrator in an LMAA arbitration ("the Arbitrator") under section 68 of the Arbitration Act 1996, on the grounds that the Arbitrator breached his general duty of fairness. The decision provides useful authority on the recourse a party has under section 68 where an arbitrator has made an obvious mistake but declines to make a correction under the slip rule.

The Facts

The Award in question arose from a dispute between the Owners (Lavender Shipmanagement) and Charterers (Ducat Maritime) under a time charterparty in respect of the MV Majesty. Owners commenced arbitration under the LMAA Small Claims Procedure and claimed US$37,831 by way of unpaid hire on the basis of their Final Hire Statement ("FHS"). Charterers denied that the outstanding sums listed on the FHS were due and owing - save that they admitted bank charges and additional war premiums were due - and further sought to deduct US$15,070 for the Vessel's underperformance by way of set off and counterclaim.

If the Owners were successful on every issue, they would have been entitled to US$37,831. If Charterers had succeeded on all of their defences, and succeeded on their underperformance counterclaim, they would have been entitled to US$6,258 (representing the underperformance counterclaim less the admitted sums).

The Arbitrator found that Owners' claim succeeded, save that one item, US$9,553 for damages for inadequate hull cleaning, was not due and owing. He also found that Charterers' underperformance counterclaim failed.

It was common ground that what the Arbitrator should have done was award Owners US$28,277.91. This represented the claimed sum (US$37,831.83) less the unsuccessful hull cleaning claim (US$9,553.92). Instead, the Arbitrator added the Charterers' unsuccessful counterclaim of US$15,070 to Owner's total claim of US$37,831.83, rather than simply not deducting this sum from the total claim. As a result, he awarded Owners approximately 33% more than they were entitled to.

Charterers twice applied under section 57(3) of the 1996 Act to the Arbitrator to correct the Award on the basis of a clerical mistake or error. Owners opposed the application and the Arbitrator declined to correct the Award. It was against this background that Charterers sought to have part of the Award set aside under section 68.

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