Mr. Justice Teare:
- There are before the Court applications pursuant to sections 68, 69 and 70 of the Arbitration Act 1996 arising out of an arbitration award dated 24 October 2008. This is not the first time this case has been before the Court. Following the determination by the arbitration tribunal (Mr. Bruce Harris, Mr. Roger Rookes and Mr. Ben Leach) on 6 September 2007 that Churchgate, the Respondent, did not have title to sue in respect of a cargo damage and short delivery claim (the first award), permission to appeal was granted to the Respondent and the appeal was heard on 12 June 2008. The appeal was upheld and the matter was remitted to the arbitration tribunal. By a further award dated 24 October 2008 (the second award) the arbitration tribunal decided by a majority (Mr. Bruce Harris dissenting) that the Respondent had title to sue. Pace, the Applicant, now seeks to challenge the second award pursuant to section 68 (by way of remission on account of a serious irregularity) or section 69 (by way of an appeal on a point of law) and if necessary seeks further reasons pursuant to section 70.
The cargo claim
- The Applicant is the owner of MV PACE which, in June 2004, loaded a cargo of bagged rice in Thailand for carriage to Nigeria. Seven bills of lading were issued. The Respondent contends that the cargo suffered damage during the course of the voyage and that there was a small short delivery. The claim is for a sum of about $500,000. More than 5 years after shipment the parties are locked in combat on the question of the Respondent's title to sue. The hearing before me was the fifth occasion on which the parties have argued, either orally or in writing, title to sue; it has been argued three times before the tribunal (including, in addition to the two awards, an application to clarify the second award) and now twice before this court.
The first award
- The facts found by the tribunal in the first award (or assumed to be true in the absence of complete documentary evidence) included the following:
i) The cargo was sold under two contracts, both dated May 2004, one between Ameritech and the Respondent and the other between Soon Hua Seng and the Respondent.
ii) The tribunal assumed that the Respondent requested its bankers (who, it was common ground, were Guaranty Trust Bank) to open letters of credit in favour of New Burlington International Corporation ("NBIC") and NBIC then arranged for letters of credit to be issued in favour of the respective sellers.
iii) The bills of lading showed the Respondent as the notify party.
iv) The notify party under the letter of credit issued at NBIC's request in favour of Ameritech was to be the Respondents. It appeared to the tribunal that the provisions of the Soon Hua Seng letter of credit may have been the same or similar.
v) The sellers were in fact paid for the cargo under the letters of credit opened at the request of NBIC. Payment took place on 15 July. It appeared that NBIC acquired title to the goods rather than the Respondent.
vi) The Respondent became holders of the bills of lading in due course by virtue of the bills having been endorsed to it by its bankers (Guaranty Trust Bank) and then handed over to an employee of the Respondent. This appears to have happened on 30 August 2004, after completion of discharging at Lagos and roughly halfway through discharging at Port Harcourt.
The memoranda to the first award
- The tribunal issued two memoranda. The first was dated 16 October 2007 and recorded that the cargo was delivered, in the absence of the bills of lading, to the charterers of the ship, Ocean Transport and Trading, pursuant to a letter of indemnity issued by that company.
- The second was dated 25 November 2007 and confirmed that the tribunal had made no finding that the Respondent had paid for the cargo and "that there was insufficient evidence before them to make such a finding."
The second award
- The tribunal confirmed its finding that the Respondents "became holders of all the bills of lading by virtue of the bills having been endorsed by CN's [the Respondent's] bankers and then handed over to a CN employee, apparently around 30 August, after completion of the vessel's discharge in Lagos and about half way through discharge in Port Harcourt………There is nothing to suggest that CN became the holders other than lawfully. It is clear, and was in any event common ground, that at the time CN became holders of the bills they were "spent" bills; meaning that possession of them no longer, as against the owners of "PACE" gave any right to possession of the goods."
- Following the remission of the first award to the tribunal the tribunal was concerned with a claim to title to sue pursuant to section 2(2)(a) of the Carriage of Goods by Sea Act 1992. That provides as follows:
"Where, when a person becomes the lawful holder of a bill of lading, possession of the bill no longer gives a right (as against the carrier) to possession of the goods to which the bill relates, that person shall not have any rights transferred to him by virtue of subsection (1) above unless he becomes the holder of the bill-
(a) by virtue of a transaction effected in pursuance of any contractual or other arrangements made before the time when such a right to possession ceased to attach possession of the bill; ….
- The tribunal set out the respective cases. The account of the Respondent's case was a little muddled but it was that the Respondent became the holders of the bills of lading by virtue of a transaction, namely, the endorsement and delivery of the bills pursuant to a contractual arrangement, namely the Respondent's contract to purchase the bagged rice. The tribunal said that the Applicant's case was that it was necessary for the Respondents to show that the "immediate and proximate cause" of the transfer of the bills was a contractual undertaking which pre-dated the discharge of the cargo and that in this regard the evidence adduced by the Respondent was inadequate.
- The tribunal said that the Applicant made the following points:
(i) The mere fact that CN (or in the case of the Soon Hua Seng contract "or its nominee") were named as buyers did not justify the inference that the bills were endorsed pursuant to those contracts.
(ii) Seeing that we had found in paragraph 16 of the Reasons that property in the goods (probably) passed from the shippers directly to NBIC on 15 July 2004 when payment for the goods was made, the inference to be drawn was that NBIC were CN's nominees under one or the other contract or under both.
(iii) It followed that CN had no entitlement to receive the bills of lading under the sale contracts; the more so in the light of our comments in the Reasons concerning NBIC's alleged role as "sole purchasing agent" for CN.
(iv) The upshot of this was that there was no inferential basis to support the necessary finding of fact that CN required to succeed on title to sue under section 2(2)(a); that the sale contracts were the reason or cause of the endorsements of the bills of lading.
- The Respondent also relied upon the letters of credit as an alternative contractual arrangement pursuant to which the bills were endorsed and delivered but this was rejected by the tribunal. That rejection is not the subject of further challenge and therefore I shall say nothing further about it. I should however note that the reason this alternative argument failed was that the letters of credit issued at the request of the Respondent were not "effective payment instruments".
- The tribunal described the issue it had to decide as "one of fact" explaining that there was no difference between the parties as to the applicable legal principles. The tribunal said that the issue of fact was not easy having regard to the absence of comprehensive evidence and contemporary documentation.
- The majority then decided the issue as follows:
"14. Making the best we can of what we have before us, it seems to us that it is more likely than not that payment for the goods, by whatever means, was under the sale contracts, rather than under some other (in the terminology of section 2(2)(a)) "contractual or other arrangements". True, payment cannot have been made strictly in accordance with the terms of these contracts. This is so for the reasons relied on by the owners, as summarized above. But in our view this does not matter. Section 2(2)(a) requires the identification and proof of the "contractual or other arrangements" pursuant to which the bills were endorsed and, only so far as is relevant, exactly what those arrangements were. It is sufficient that CN were parties to the sale contracts, that payment was made and that as a result CN became the lawful holders of the bills."
15. It follows from our findings in our immediately preceding paragraph that we are also satisfied that the immediate and proximate cause of the transfer of the bills was the sale contracts and the payments made thereunder to CN's respective sellers.
16. In coming to this decision we have fully considered the owners' submissions concerning NBIC's apparent, but never satisfactorily explained role. In contracts for the international sale of dry bulk commodities it is not unusual for the buyer to be a named company "or nominee". Where the named company nominates another buyer, the named buyer's remaining rights and responsibilities will, in any particular case, depend on how the nomination is documented and upon how the contract is performed. Here there is no evidence to suggest that NBIC were nominated under the Soon Hua Seng contract. We are satisfied that CN entered into the contracts as principals and that they remained as principals.
17. In short CN have discharged the burden of proof that they bring themselves within the Section 2(2)(a). They have done so no more than barely. For the reasons given in paragraph 13 above we have not reached our decision with unbounded enthusiasm."
- The Applicant's challenge to this decision is set out in some 29 pages and 102 paragraphs of Counsel's Skeleton Argument. However, the essence of the challenge is as follows:
i) The conclusion of the majority is ambiguous and inexplicable. It is supported by no or no sufficient reasoning.
ii) The endorsement and delivery of the bills of lading can only have been effected "in pursuance of" the sale contracts if the Respondents were entitled to receive the bills of lading under the contracts of sale. The majority either rejected this proposition or failed adequately to address it.
iii) The majority either misdirected themselves as to the doctrine of proximate cause or reached a conclusion which no arbitrator properly instructed as to the relevant law could have reached.
Section 68
- The first part of this challenge gives rise to the application to set aside or remit the award on the grounds of serious irregularity pursuant to section 68 of the Arbitration Act 1996. One form of "serious irregularity" pursuant to section 68(2)(d) is a failure by the tribunal to deal with all the issues that were put to it. Another form of serious irregularity pursuant to section 68(2)(h) is a failure to comply with the requirements as to the form of the award. In the 12 page appendix to the Arbitration Claim Form setting out the grounds of the three applications now made by the Applicant 3 pages are devoted to the grounds of the application under section 68. It is there submitted that the tribunal's failure to deal properly or at all with the Applicant's request dated 20 November 2008 for clarification of paragraphs 14 and 15 of the Second Award or further reasons to remove the suggested uncertainty and ambiguity in those paragraphs was a serious irregularity. In the course of the application before me it was submitted on behalf of the Applicant that a failure to provide sufficient reasons is a serious irregularity under both sub-paragraphs (d) and (h) of section 68(2). In this regard reliance was placed on AHT v Tradigrain [2002] 2 Lloyd's LR 512 at paragraphs 70-72, Torch Offshore v Cable Shipping [2004] 2 Lloyd's Rep 446 at paragraph 28, WTC v Czarnikow [2005] 1 Lloyd's Rep 422 at paragraph 8, Benaim v Davies [2005] All ER (D) 104 at paragraphs 94-96 and Noble Assurance v Gerling [2008] 1 Lloyd's Rep. IR 1 at paragraph 46.
- In examining the tribunal's reasons it is necessary to bear in mind the observations of Donaldson LJ in Bremer v Westzucker [1981] 2 Lloyd's Rep. 130 that: "All that is necessary is that the arbitrators should set out what, on their view of the evidence, did or did not happen and should explain succinctly why, in the light of what happened, they have reached their decision and what that decision is. This is all that is meant by a 'reasoned award'".
- An arbitral tribunal should avoid reasoning which is "so opaque that it cannot be ascertained from reading it by what evidential route they arrived at their conclusion" (see WTC v Czarnikow [2005] 1 Lloyd's Rep 422 at paragraph 8) and bear in mind that "an award which contains inadequate rationale or incomplete reasons for a decision is likely to be ambiguous or need clarification" (see Torch Offshore v Cable Shipping [2004] 2 Lloyd's Rep 446 at paragraph 28). However, when reviewing the reasons of an arbitral tribunal the court should read the award "as a whole in a fair and reasonable way ….[and] should not engage in minute textual analysis" (see Kershaw Mechanical Services Ltd v Kendrick Construction [2006] EWHC 727 (TCC) [2006] 2 All ER (Comm) 81 at paragraph 57. The courts do not approach awards "with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults in awards and with the objective of upsetting or frustrating the process of arbitration" (see Zermalt Holdings SA v Nu-Life Upholstery Repairs Ltd [1985] 2 EGLR 14).
- The first award had been remitted to the tribunal "for reconsideration, in the light of the Court's judgment dated 12 June 2008, of the issue whether [the Respondents] acquired title to sue pursuant to section 2(2)(a) of the Carriage of Goods by Sea Act 1992." The tribunal considered and determined that issue. The majority of the tribunal determined that the Respondent did have title to sue pursuant to section 2(2)(a) of the Carriage of Goods by Sea Act. The tribunal considered the issue to be determined as one of fact. The majority concluded that the Respondents had discharged the burden of proof upon them "no more than barely". The majority considered, on the "skimpy documentation and ambiguous evidence" that it was "more likely than not that payment for the goods, by whatever means, was under the sale contracts". They accepted that payment cannot have been made "strictly in accordance with the terms" of the sales contracts but said that in their view that did not matter. They concluded that it was sufficient that the Respondents "were parties to the sale contracts, that payment was made and as a result [the Respondents] became the lawful holders of the bills".
- The tribunal had held in the first award that the Respondent was party to two sale contracts, that payment had been made on 15 July 2004 under the letters of credit opened at the request of NBIC who acquired title to the goods and that the bills of lading were endorsed and delivered to the Respondent on 30 August 2004. In the second award the tribunal added that there was nothing to suggest that the Respondents became the holders of the bills of lading "other than lawfully" and that the Respondent had entered "both contracts as principals and that they remained as principals." The majority felt able to conclude that the delivery and endorsement was "as a result" of the payment of the price and that "the immediate and proximate cause of the transfer of the bills was the sale contracts and the payments made thereunder to [the Respondent's] respective sellers."
- The majority dealt with the issue that was put to the tribunal, namely, did the Respondent have title to sue pursuant to section 2(2)(a) of the Carriage of Goods by Sea Act 1992. The majority concluded that the endorsement and delivery of the bills of lading on 30 August 2004 was in pursuance of the sale contracts to which the Respondent was party as principal. They gave their reasons for reaching that conclusion. They considered that the payment of the price to the sellers had been made under the sale contracts and that it was as a result of that payment that the Respondent became the lawful holder of the bills of lading on 30 August 2004.
- Reading the conclusion of the majority in a fair and reasonable way without minute textual analysis or a meticulous legal eye endeavouring to pick holes, inconsistencies and faults the conclusion of the majority is clearly not ambiguous. Further, the reasoning is explicable and makes sense. The Respondent had entered into contracts of sale to buy a cargo of bagged rice which was to be shipped from Thailand to Nigeria. It is to be expected that under such contracts and in the ordinary course of international trade the price would be paid and bills endorsed and delivered to the Respondent. Thus the reasoning makes sense. Whether or not the reasoning reveals an error of law is a matter to be considered with regard to the application for leave to appeal under section 69 of the Arbitration Act 1996.
- In circumstances where, as the majority accepted, payment had not been made strictly in accordance with the terms of the contracts of sale and where there appears to have been no evidence explaining the events between payment on 15 July 2004 under the letters of credit opened at the request of NBIC and the endorsement and delivery of the bills by Guaranty Trust Bank to the Respondent on 30 August 2004, there was plainly a serious risk that the Respondent would fail to discharge the burden of proof which lay on it. Mr. Bruce Harris, the dissenting arbitrator, could not agree with the majority because he considered the Respondent had failed to discharge that burden of proof. Where evidence is incomplete, skimpy and ambiguous triers of fact may reach different views as to whether the burden of proof has been discharged. Here there was such a difference of opinion but, notwithstanding that the dissenting arbitrator could "not see why my colleagues take the view they do", I do not regard the decision of the majority as inexplicable. The Respondent was plainly very fortunate to have persuaded the majority "no more than barely" but the conclusion of the majority was neither ambiguous nor inexplicable.
- Following the publication of the second award the Applicant requested the tribunal to give further reasons for its decision pursuant to section 57(3)(a) That section permits a party to apply to the tribunal to "correct an award so as to remove any clerical mistake or error arising from an accidental slip or omission or clarify or remove any ambiguity in the award." The Applicant's letter of request dated 20 November 2008 related to two matters, title to sue and costs. The section on title to sue is remarkable. It contained no less than 16 questions (which took 5 and a half pages to set out) for the tribunal to answer arising out of paragraphs 1, 4, 5, 12, 14 and 15 of the second award. These questions largely related to whether or not the tribunal had borne in mind the contents of the second memorandum to the first award, namely, that there was no evidence that the Respondent had paid for the goods. This application caused the Respondent to submit a 12 page response (of which 10 and half concerned title to sue) to be followed by a 20 page reply by the Applicant (of which 18 and half concerned title to sue). Mercifully for the tribunal the Respondent did not think it appropriate to burden the tribunal with yet further submissions.
- The tribunal replied to the Applicant's request on 14 January 2009. They suggested, with a measure of understatement, that the submissions made by the Applicant pursuant to its request under section 57(3)(a) were of "rather greater length.…..than those who drafted the Arbitration Act and the LMAA Terms had in mind for applications of this type." The majority replied to the questions concerning title to sue as follows:
"Title to Sue under Section 2.2(a) of COSGA '92
[This section is the response of Mr Leach and Mr Rookes only: Mr Harris did not assent to the Further Partial Award in the relevant respects and, for his part, did overlook the memorandum of 25 November 2007.]
The gravamen of Owners' complaint is that we overlooked the memorandum of 25 November 2007 concerning who paid for the goods. Whilst, ideally, §1 of the Reasons issued with our Further Partial Final Award should have mentioned this memorandum, our failure to do so does not mean that we did not take it into account in what we record and find in §§1-13 and in what, by a majority, we record and find in §§14-19. On the contrary, we did take the memorandum into account. It did no more than to make abundantly clear, beyond any doubt whatsoever, what was anyway pretty clear from our Partial Final Award of 6 September 2007 ie that we made no express finding that CN paid for the goods and that no finding to that effect was to be implied. That has throughout been, and remains, our unanimous position on this.
In the circumstances formally amending §1 of the Reasons issued with our Further Partial Final Award making specific reference to the memorandum would serve no useful purpose.
We do not accept that there is in an irregularity in our Further Partial Final Award within the meaning of Section 68(2)(i) of the Arbitration Act 1996.
As regards Owners' requests for further reasons/interpretation/clarification, we are told on Owners' behalf that our responses are necessary to enable Owners to take a further decision whether again to apply to the Court under one or other or both of Sections 68 and 69 of the Act. Excluding Mr Harris' dissenting views, the Reasons run to 19 paragraphs and we have been asked a large number of questions concerning five of those paragraphs. We have already clarified, if clarification were needed, the position regarding payment for the goods. Otherwise the Reasons accompanying our Further Partial Final Award are in our view (a) clear and (b) entirely consistent, as regards its findings of fact, with the Reasons accompanying our Partial Final Award. We agree with what Bentleys Stokes and Lowless say in part F the submissions in opposition to the application served on behalf of CN dated 8 December 2008."
- So far as the question as to costs was concerned the tribunal accepted that there had been an irregularity and corrected the second award.
- Most of the questions asked of the tribunal related to the question of payment. The majority clearly stated in response that they had had in mind that they had made no finding that the Respondent had paid for the goods. They did not accept that there had been an irregularity in the second award and regarded their reasons as clear and consistent. They agreed with the submission made by the Respondent that the reasons of the majority were not ambiguous and did not require clarification.
- I have already considered the majority's reasons and have concluded that they were not ambiguous and made sense. It follows that I do not accept that the tribunal's response to the request made pursuant to section 57(3) of the Arbitration Act 1996 was a serious irregularity. For the same reasons I do not consider that the majority's reasons amount to a serious irregularity within the meaning of section 68(2)(d) or (h) of the Arbitration Act 1996.
Section 69
- Applications for permission to appeal are normally considered on paper without a hearing. In this case the reasons for seeking permission to appeal were advanced both in writing and orally because there was a hearing of the section 68 application.
- The suggested errors of law were:
i) The endorsement and delivery of the bills of lading can only have been effected "in pursuance of" the sale contracts if the Respondents were entitled to receive the bills of lading under the contracts of sale. The majority either rejected this proposition or failed adequately to address it.
ii) The majority either misdirected themselves as to the doctrine of proximate cause or reached a conclusion which no arbitrator properly instructed as to the relevant law could have reached.
- Each of these suggested errors relate to the meaning of the phrase "in pursuance of" in section 2(2)(a) of the Carriage of Goods by Sea Act 1992 which provides that:
"Where, when a person becomes the lawful holder of a bill of lading, possession of the bill no longer gives a right (as against the carrier) to possession of the goods to which the bill relates, that person shall not have any rights transferred to him by virtue of subsection (1) above unless he becomes the holder of the bill-
(a) by virtue of a transaction effected in pursuance of any contractual or other arrangements made before the time when such a right to possession ceased to attach possession of the bill; …."
- The Applicant submitted that a transaction whereby A endorses a bill of lading to B can only be effected in pursuance of a contract if B is entitled to receive the bill of lading under that contract. In other words for an endorsement to be effected pursuant to a contract, the endorsee must have a right to receive the bill of lading under that contract at the time the endorsement takes place.
- The Respondent submitted that the endorsement needs to have been something which the pre-existing contract contemplated would happen, whether expressly by referring to bills of lading being endorsed or because of the nature of the way the trade is carried on.
- I am not sure that there is much if anything between these two positions. A contract can only "contemplate" that which its terms provide.
- There is however a preliminary point with which I must deal. Leave can only be given if the question of law is one which the tribunal was asked to determine. The Applicant says that the tribunal was asked to determine both questions of law which now form the basis of the application for leave to appeal. The Respondent says that the tribunal was not asked to consider the first question of law.
- The submissions made by the Applicant following the remission of the first award to the tribunal summarised the Applicant's case as follows:
1. The court has remitted the award to enable the tribunal to determine, on the existing factual evidence, whether or not Churchgate Nigeria Ltd ("CN") has discharged its burden of proving title to sue pursuant to section 2(2)(a) of COGSA.
2. To establish title under this section, CN is required to adduce evidence which satisfactorily proves that the "immediate reason and proximate cause" of the transfer of the bills of lading to CN on 30 August 2004 was a contractual undertaking that pre-dated the discharge of the cargo, see: The Ythan [2006] 1 Lloyd's Rep 457 at paragraphs 84-86 per Aikens J. where the test is explained.
3. There is no legitimate basis on which the tribunal can conclude that the evidence adduced by CN satisfies the requirements of s2(2)(a) of COGSA.
a. The incomplete and wholly unsatisfactory nature of the evidence relied on by CN means that the tribunal was (and remains) unable to make any positive findings as to the immediate and proximate cause of the endorsement of the bills of lading to CN on 30 August 2004.
b. Specifically, given the findings of fact already made and the inadequacy of CN's evidence, it is submitted that CN cannot establish (with the requisite cogency necessary to justify a finding of fact) that the endorsements were effected pursuant to either the contracts of sale with the original shippers or the letters of credit opened in favour of New Burlington International
- It is to be noted that in The Ythan at paragraph 84 Aikens J. agreed with a statement in Carver on Bills of Lading (see now the 2nd.ed at paragraph 5-059 by Treitel and Reynolds) that section 2(2)(a) requires the "contractual or other arrangements" to be the "reason or cause for the transfer".
- It is apparent from the Applicant's summary of its case to the tribunal that the tribunal was being asked to decide whether, on the evidence, the Respondent had discharged the burden of proving title to sue. The principle of law to which reference was made in that context was that in order to establish title to sue the Respondent had to adduce evidence which proved that "the immediate reason and proximate cause" of the transfer of the bills was a contractual undertaking that predated the discharge of the cargo. The question of law on which leave to appeal is now sought is that in order to establish title to sue the Respondent had to be entitled to receive the bills under a contract that predated the discharge of the cargo. That question was not raised in terms though the phrase "contractual undertaking" in paragraph 2 of the summary might be said (though was not said) to raise it in different language.
- When dealing specifically with the contracts of sale, the following was submitted:
8. The key point, though, is that given the finding that it is more likely that NBIC (rather than CN) acquired property in the goods from the shippers in July 2004 under the contracts of sale, it necessarily follows that CN would have had no entitlement to receive the bills of lading pursuant to those pre-existing contracts of sale on 30 August 2004 when the endorsements were made. This is all the more obvious given the fact that the tribunal was unable to accept or find that NBIC were acting as CN's "sole purchasing agent": the only evidence to this effect being the notorious letter of 21 May 2007 which the tribunal has correctly regarded as raising "more questions than it seeks to answer" and to which no evidential weight is to be afforded.
9. In these circumstances and given the incomplete and inconsistent evidence before the tribunal, there is no inferential basis for a factual finding to the effect that the May contracts of sale (under which NBIC probably acquired property) were the reason or cause of the endorsements to CN on 30 August 2004.
- It was said that "the key point" did indeed raise the question of law on which leave to appeal is sought. It is however to be observed that it was not submitted in terms that lack of an entitlement to receive the bills under the contracts of sale meant that section 2(2)(a) could not be satisfied. Rather it was submitted that given a lack of an entitlement (and the other matters referred to in the detailed submission) it could not be inferred that the contracts were the reason or the cause of the endorsements of the bills on 30 August 2004. That is of course a reference back to the decision in The Ythan in which Aikens J. held that section 2(2)(a) will be satisfied where the contractual or other arrangements are the reason or cause of the endorsement and delivery of the bills.
- The submissions made on behalf of the Respondent concluded by saying that the contracts of sale were "the 'reason' or 'cause' under COGSA 1992".
- The respective submissions by the parties thus explain why the tribunal said in the second award that there was "no difference between the parties as to the applicable legal principles."
- The tribunal noted the various matters relied upon by the Applicant in support of its submission that there was no basis for inferring that the sale contracts were the reason or cause of the endorsement of the bills; see paragraph 9 of this judgment. The tribunal described the issue it had to decide as "one of fact".
- Having reviewed the submissions put to the tribunal before it made the second award I have concluded that the first question of law on which the Applicant seeks leave to appeal was not one which the tribunal was asked to determine. The Applicant's case was that, following the decision of Aikens J. in The Ythan, the words "in pursuance of" in section 2(2)(a) required that the contractual or other arrangements must be "the reason or cause" of the endorsement and delivery of the bills. It is true that in support of its case the Applicant submitted that the Respondent cannot have had an entitlement under the contracts of sale to the endorsement and delivery of the bills but this was one of several points, albeit described as the key point, which led to the conclusion that the Respondent had failed to discharge the burden of proving that the contracts of sale were the reason or the cause of the endorsement and delivery of the bills. The tribunal was asked to consider all the circumstances of the case when deciding a question of fact.
- For this reason, namely, that the first question of law on which leave to appeal is sought was not one which the tribunal was asked to determine, I must refuse leave to appeal on that first question of law.
- In case I am wrong in concluding that the first question of law was not one which the tribunal was asked to decide I shall nevertheless consider that question upon the assumption that it is a question of general public importance and that the decision of the tribunal is open to serious doubt. In the unusual circumstances of this case I have heard full argument upon it before deciding whether leave to appeal upon that question should be granted.
- In The David Agmashenebeli [2003] 1 Lloyd's Rep 92 Colman J. said that the key question in applying section 2(2)(a) was whether the transfer of the bills of lading was "called for" by the contractual or other arrangements made before the bills were spent. This seems to me to be consistent with the Applicant's submission that the section requires the transferee to be "entitled" to the transfer of the bills pursuant to the terms of the contractual or other arrangements. In that case a contract of sale made before the bills had become spent had been replaced by a later agreement made after the bills had become spent. It was held that the buyers had acquired the bills under the later contract.
- In The Ythan [2006] 1 Lloyd's Rep 457 at paragraph 84 Aikens J., as I have already noted, agreed with a statement in Carver on Bills of Lading (see now the 2nd.ed at paragraph 5-059 by Treitel and Reynolds) that the words "contractual or other arrangements" refer to the "reason or cause for the transfer". In that case the vessel suffered an explosion the day after the cargo was loaded. The bills of lading were eventually delivered to the insurance brokers acting for the buyers and there was an issue as to whether that "transaction" was in pursuance of the marine open cover that was in place before the vessel and cargo were lost or in pursuance of a compromise agreement between the buyers and the underwriters made long after the vessel and cargo were lost. Aikens J. held that the reason for the delivery of the bills was because it was "contemplated" that underwriters would pay under the compromise agreement. He accepted that it could be said that the delivery of the bills of "arose out of the open cover" but in his view "the immediate reason and proximate cause of the transfer of the bills" was the compromise agreement.
- This decision is also consistent with the Applicant's submission because the buyers may be said to have been entitled to receive the bills under the compromise agreement. However, the terms in which Aikens J. himself expressed the test were that the contractual or other arrangements had to be the "reason or the cause" of the endorsement and delivery of the bills.
- In considering the meaning of the phrase "in pursuance of" it is appropriate to bear in mind the purpose of section 2(2)(a) of the Act. It provided that the rights of suit would only be transferred to those who became holders of the bills after the bills had been spent where they became holders "in pursuance of" contractual or other arrangements made before the bills had been spent. That was to prevent "trafficking in bills of lading simply as pieces of paper which give causes of action against sea carriers" (see The Law Commission Report on Rights of Suit in respect of Carriage of Goods by Sea at paragraph 2.43). Bearing that purpose in mind I consider that the words "in pursuance of" can most appropriately be understood to mean that the contractual or other arrangements must be the reason or cause for the transfer of delivery of the bills. In this regard I respectfully agree with Aikens J.'s understanding of section 2(2)(a) based as it was on the observations in Carver. Of course, that test will usually be satisfied where the holder receives the bills because he has a contractual entitlement to receive them (or to "call for" them) under the contractual or other arrangements in existence before the bills were spent. Those will be the typical circumstances in which the test is satisfied. But I do not consider that section 2(2)(a) should be restricted to cases where there is such a contractual entitlement. First, section 2(2)(a) does not use such words. Second, the objective or aim of section 2(2)(a) to avoid trafficking in bills of lading will be achieved if the reason or cause of the transfer is the contractual or other arrangements in existence before the bills were spent. Such an interpretation may have a wider scope than one based upon contractual entitlement in that it may be satisfied in the absence of a contractual entitlement but it is nevertheless consistent with the aim or object of section 2(2)(a). It will avoid trafficking in bills of lading.
- The majority of the tribunal concluded that "CN [the Respondent] were parties to the sale contracts, that payment was made and that as a result CN became the lawful holders of the bills." That is consistent with a finding that the reason or cause of the delivery of the bills was the sale contracts. No finding had been made that the Respondent had paid for the goods and the majority accepted that payment cannot have been made strictly in accordance with the terms of the contract of sale. But the majority found as a fact that the Respondent entered into the contracts of sale as principals and remained principals and that the payment (albeit by NBIC) had been made under the sale contracts. In those circumstances the majority inferred that the transfer of the bills to the Respondent was a result of the payment made under the contracts of sale. That is an inference they were entitled to draw, though in the absence of evidence as to precisely what had happened between payment by NBIC and endorsement and delivery of the bills by the Guaranty Trust Bank, others might not have not done and Mr. Harris did not do so. The facts that the Respondent entered into the contracts of sale as principals and remained as principals and that the payment by NBIC was under the sale contracts are, at the least, consistent with this not being a case of trafficking in bills of lading.
- The essence of the Applicant's complaint is that once the price had been paid by NBIC and the bills had been delivered to NBIC by the sellers the contracts of sale had been "exhausted" and there was no longer any entitlement on the part of the Respondent to delivery of the bills from the sellers. However, the Respondent was and remained the principal to the contracts of sale and "the payment for the goods, by whatever means, was under the sale contracts". Whether or not the obligation of the sellers to deliver the bills in exchange for the price had been "exhausted" the Respondent in due course had the bills of lading endorsed and delivered to it, which was what the contracts of sale had contemplated by their terms and what would be expected in the ordinary course of international trade. I do not consider that the conclusion of the majority reveals an approach to section 2(2)(a) which is inconsistent with its meaning and purpose. The majority held that the contracts of sale entered into by the Respondent as principal before the bills became spent were the reason or cause of the endorsement and delivery of the bills to the Respondent.
- Thus, had I decided that the first question of law had been a question which the tribunal had been asked to determine and given leave to appeal I would have dismissed that appeal.
- The second alleged error of law is that the majority either misdirected itself as to the difference between a proximate cause and a causa sine qua non in concluding that the underlying contracts of sale were the proximate and immediate cause of the endorsements and delivery of the bills or reached a conclusion which a properly directed tribunal could not properly have reached.
- It was not said, and could not be said, that the question of proximate cause was not one which the tribunal had been asked to determine. Having concluded that the Respondent became the holders of the bills as a result of the payment of the price under the contracts of sale the majority stated that "it follows from our findings in our immediately preceding paragraph that we are also satisfied that the immediate and proximate cause of the transfer of the bills was the sale contracts and the payments made thereunder to CN's respective sellers."
- Just as the conclusion of the majority that the Respondent became the holders of the bills as a result of the payment of the price under the contracts of sale was an inference they were entitled to draw so the majority were entitled to conclude that the immediate and proximate cause of the transfer of the bills was the sale contracts and the payments made thereunder. Others might not have been prepared to draw that inference in the absence of clear evidence as to the circumstances in which Guaranty Trust Bank endorsed the bills to the Respondent but I do not consider that it is possible to say that the majority must have misdirected itself or reached a decision which a properly directed tribunal could not have reached. This was not a case where a competing cause was suggested (as was the case in both The Ythan and The David Agmashenebeli) and the tribunal expressly stated that there was nothing to suggest that CN became the holders other than lawfully. (It was only after the second award had been published that the Applicant suggested that "trafficking" in bills of lading might have been the reason for the transfer of the bills.) The decision of the majority on this question of causation was neither obviously wrong nor open to serious doubt (as those expressions are used in section 69(3)(c) of the Arbitration Act 1996) notwithstanding that in assessing the evidence and in particular the significance of those matters that had not been proved others might have reached, and Mr. Harris did reach, a different conclusion.
- I therefore refuse permission to appeal on the second question of law.
Section 70
- In the light of my decision on the applications under sections 68 and 69 there is no need to ask the tribunal to state further reasons for its decision. The reasons of the majority have been adequately stated.
Conclusion
- The applications under sections 68, 69 and 70 of the Arbitration Act 1996 must be dismissed.
