Eagle Bulk PTE Ltd v Traxys North America LLC

Mr Justice Butcher :

1. The Claimant, to whom I will refer as ‘Owners’, makes claims under ss. 68(2) (a) and (d) Arbitration Act 1996 (‘ the Act ’) in relation to an arbitration award issued by Stephen Hofmeyr KC, Michael Allen and Richard Rayfield (‘the Tribunal’) dated 7 July 2025 (‘the Award’).

2. The underlying claims arose out of a voyage charter for the MV Canary (‘the Vessel’) by which the Defendant (‘Charterers’) chartered the Vessel from Owners for a voyage to carry 46,300 MT of petcoke cinder from India to New Orleans, USA.

3. After arrival at New Orleans for discharge on 21 December 2021, on opening Hold 4, the hold and cargo within it were found to be flooded with a substantial quantity of water. Water was also observed in Holds 2, 3 and 5. Discharge of the cargo was disrupted and a dispute arose between the parties which related, at least in large part, to which of them bore contractual responsibility for delays and extra expenses caused by the presence of water in the Holds.

4. Owners’ position was that all the water was loaded with the cargo, claiming, amongst other things, demurrage of US$ 544,350.81. Charterers’ case was that, at the time of loading, the cargo did not have an excessive moisture content. Their case was that, rather, water entered Holds 2-5 and particularly Hold 4 as a result of leaking valves on the Vessel, and that the delayed unloading of the cargo was the Owners’ responsibility. Charterers also brought a shortage claim, based on the difference in weight between the cargo recorded as loaded and that recorded by the truck weighbridge scales after discharge.

5. The Tribunal held that: (1) The effective cause of the delays was the ingress of water via leaking and defective valves in the Vessel’s bilge system. In particular the Tribunal found that there had been ingress into Hold 4. (2) The Owners were liable for the shortage claim.

6. Following the Award, Owners made an application under s. 57 of the Act , seeking clarification and/or corrections to the Award in relation to these findings. The Tribunal responded saying, in summary that ‘(a) we do not consider that the award requires correction by the removal of a clerical mistake or error arising from an accidental slip or omission; (b) there is no ambiguity that requires clarification or removal; and (c) there is no claim that was presented to the tribunal but not dealt with in the award’.

7. The Owners’ application under s. 68 challenges the Award on the following grounds: (1) That the Tribunal failed to comply with its general duty pursuant to s 33 of the Act for the purposes of s 68(2) (a) of the Act , by determining the arbitration on the basis of an argument which had not been made by either party and which contradicted the common ground between the parties, without giving the parties the opportunity to deal with it: in particular by finding that Item 18 on the 3 February Defect List referred to BLV 12 or 13 as leaking and defective. (2) That the Tribunal failed to deal with issues which were put to it for the purposes of s. 68(2) (d) of the Act , by failing to determine whether Charterers suffered a loss if the weight differential on loading / discharge was due to water being removed from the cargo, whether such loss would have been suffered irrespective of any breach, and whether, if the weight differential was due to a loss of water, Charterers suffered a loss when they were to be paid for the cargo through commission on the vanadium refined from the petcoke cinder. The relevant law

8. Section 68 of the Act provides, in part, as follows: ‘ 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. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3). (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 tribunal); … (d) failure by the tribunal to deal with all the issues that were put to it; (3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may— (a) remit the award to the tribunal, in whole or in part, for reconsideration, (b) set the award aside in whole or in part, or (c) declare the award to be of no effect, in whole or in part. The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration. (4) The leave of the court is required for any appeal from a decision of the court under this section.’

9. Section 33 of the Act provides in part: ‘ 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 …’

10. As a general and introductory, but important, matter, it is clear that an applicant, under section 68 , has to surmount a ‘high hurdle’, as it was put in Bandwidth Shipping Corporation v Intaari (The ‘Magdalena Oldendorff’) [2007] 2 CLC 537 at [35], or ‘high threshold’ as it was put in Lesotho Highlands Development Authority v Impregilo SpA and Others [2006] AC 221 at [28] and bears a ‘heavy burden’, as was said in New Age Alzarooni 2 Ltd and Another v Range Energy Natural Resources Inc [2014] EWHC 4358 (Comm) at [12]. As was explained in paragraph 280 of the DAC report on the Arbitration Bill which led to the Act , the section was ‘really designed as a long stop, only available in extreme cases, where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected’. Section 68(2)(a): Butterfly Valves

11. Owners’ argument here is as follows. To find for Charterers it was not sufficient for the Tribunal to find that there had been water ingress during the voyage. The Tribunal had to be satisfied that the water ingress was as a result of leaks through defective valves at each of five stages of the bilge system. If the Tribunal could not be satisfied that butterfly valves BLV 12 and 13 were defective and leaking, but could, rather, have been left open, then it could not uphold the Charterers’ pleaded case.

12. The Charterers had relied, in support of their claim, on Defects Lists created on the Owners’ documentary systems. The Award refers to a Defects List for 3 February 2022. This Defect List had referred to ‘Non Return Valves of CH Bilge System leakage’, to ‘overboard valves BAV 37, BAV 38 is leakage’, and to ‘Bilge valves BL2, BL47, BL 54 is leakage.’ The Owners say that it was common ground that that list did not refer to BLV 12 or BLV 13; and that the reference to ‘Non Return Valves of CH Bilge System leakage’ was a reference to non-return valves, not to butterfly valves.

13. Another Defect List, dated 9 January 2022, had been referred to by Charterers in these proceedings, but had not been cited by the Tribunal in the Award. It had included an entry referring to BLV 12 and 13. But it had been the position of both parties that the inference to be drawn from this, and the subsequent List(s) was that it indicated that BLV 12 and 13 were not defective.

14. What the Tribunal had done, the Owners said, was to find that the reference in the 3 February 2022 Defect List included BLV 12 and 13 within ‘Non Return Valves of CH Bilge System leakage’ notwithstanding that it had not been argued by the parties that this was the case, and without giving the parties an opportunity of addressing this interpretation, which was an essential building block in its decision. That was a serious irregularity and caused substantial injustice, in that had the Owners been entitled to address the Tribunal on its interpretation of the 3 February Defect List it might well have reached a different view on whether BLV 12 or 13 were defective, which would have produced a significantly different outcome. Accordingly the question of whether BLV 12-13 were leaking and defective should be remitted to the Tribunal.

15. In my judgment this complaint falls, markedly, short of establishing a serious irregularity. What Owners effectively seek to do by this application is to try to appeal the Tribunal’s factual findings that: ‘there was … a wealth of contemporaneous evidence of serious and long-standing defects in the bilge system’, that there were ‘copious records in the Owners’ maintenance system’ which identified defects, and that ‘the defects thus identified were capable of providing a route for water to find its way to and enter number 4 cargo hold’ (see para. 77 of Award). This is not a legitimate use of a s. 68(2) (a) application.

16. More specifically, I cannot accept the contention that Item 18 of the 3 February Defect List was the only evidence on which the Tribunal based its finding that BLV 12 and 13 were defective. Instead, the Tribunal based that conclusion on the 3 February Defect List and on the other ‘copious records’ in the Owners’ maintenance system, which records were themselves to be understood in the context of the ‘wealth of contemporaneous evidence of serious and long-standing defects in the bilge system.’ The other evidence, as is apparent from the transcript of the hearing and the submissions to me, included the 9 January 2022 Defect List. It also included contemporaneous communications which showed that Owners’ personnel thought that BLV 12 and 13 were defective (see Award, paras. 19, 21, 22). And it included further evidence which might be regarded as supporting a conclusion that the water found in Hold 4 came through leaking valves, namely (i) the additional weight that the Vessel took on board during its voyage to New Orleans, (ii) the Vessel’s subsequent voyage with a petcoke cargo when she had pumped out water but had not lost weight, indicating a continuing problem with water coming from overboard; (iii) a spike seen in the Vessel’s soundings when she ballasted in the Mississippi; and (iv) that the water in Hold 4 was saline.

17. The Owners certainly had every opportunity of addressing the issue of whether the water in Hold 4 came from outside the Vessel during the voyage and during ballasting. They also had, and took, the opportunity of addressing the question of whether BLV 12 and 13 were defective. That they were not was a submission which Mr Hamblen put forward clearly in his closing submissions. He made the point again in his reply submissions, and at that point was challenged by Mr Hofmeyr KC on the basis that the 9 January Defect List suggested that those valves were defective.

18. Whether there was a serious irregularity in the Tribunal’s giving the 3 February Defect List a construction which, for forensic reasons, was not that of the parties, ultimately depends on whether what the Tribunal did was unfair. In my judgment, it was not. The 3 February Defect List was not what has been called in the authorities ‘an essential building block’ of the Tribunal’s reasoning. In any event it was ‘in play’, and the Tribunal was clearly going to be considering it, and its meaning and effect, in the context and light of all the other evidence. The Tribunal was not bound by the cases of the parties as to what that document meant. It is very frequently the case that a tribunal may interpret a document, either because of the meaning accorded to its own words, on in the light of surrounding documents and communications, in a way which does not exactly accord with the contentions of the parties. Nor, in my view, was it unfair for the Tribunal not to have notified the parties of the interpretation which it would be putting on that particular document before rendering the Award.

19. Furthermore, even if I had concluded that there was a serious irregularity in relation to the Tribunal’s treatment of the 3 February Defect List, and that the Tribunal should have given notice to the parties of the interpretation it was intending to put on it, I would in any event not have been satisfied that this irregularity had caused substantial injustice. As I have said, the 3 February Defect List was considered by the Tribunal in the light of the totality of the other evidence. I do not accept that, even if the Owners had been invited specifically to address the way in which the Tribunal interpreted the 3 February Defect List, the Tribunal might well have reached a different view on whether BLV 12 or 13 were defective. On the contrary, it seems clear that the Tribunal would have reached the same conclusion. Section 68(2)(d): Shortage Claims

20. The Owners seek to appeal the Award on the ground that the Tribunal failed to deal with issues put to it, by failing to determine the issues in relation to the Charterers’ cargo claims which I have set out in paragraph 7(2) above.

21. I did not understand the following to be in issue, as to the proper approach under s. 68(2) (d): (1) There is a serious irregularity for the purposes of s. 68(2) (d) where there is ‘a failure by the tribunal to deal with all the issues that were put to it’. This requires a party to show: (a) that there was an issue, (b) which was put to the tribunal, (c) which the tribunal failed to deal with, and (d) and that this caused substantial injustice: see Primera Maritime (Hellas) Ltd v Jiangsu Eastern Heavy Industry Co Ltd [2014] 1 Lloyd’s Rep 255 at [7]. (2) There is a distinction to be drawn between ‘issues’ on the one hand and ‘arguments’ ‘points’, ‘lines of reasoning’ or ‘steps’ in an argument on the other; but a matter will constitute an ‘issue’ where the whole of the applicant’s claim could have depended on how it was resolved, such that ‘fairness demanded’ that the question be dealt with; and there will be a failure to deal with an ‘issue’ where the determination of that ‘issue’ is essential to the decision reached: see Secretary of State for the Home Department v Raytheon Systems Ltd [2014] EWCH 4375 (TCC) at [33(g)(iii) and (iv)]. (3) If a tribunal has dealt with the issue in any way, s. 68(2) (d) is inapplicable and that is the end of the enquiry: it does not matter for the purposes of s. 68(2) (d) that the tribunal has dealt with it well, badly or indifferently: SSHD v Raytheon at [33(g)(vi)]. A failure to provide any or sufficient reasons for a decision is not the same thing as failing to deal with an issue: SSHD v Raytheon [33(g)(viii)]. (4) A tribunal does not fail to deal with issues if it does not answer every question that qualified as an ‘issue’. It can ‘deal with’ an issue where that issue does not arise in view of its decisions on the facts or its legal conclusions. It is up to the tribunal to structure an award and address the essential issues; if the issue does not arise because of the route the tribunal has followed for the purposes of arriving at its conclusion, section 68(2) (d) will not be engaged: SSHD v Raytheon [33](g)(x)-(xi)]. (5) Whether there has been a failure by the tribunal to deal with an essential issue involves a matter of a fair, commercial and commonsense reading (as opposed to a hypercritical or excessively syntactical reading) of the award in the factual context of what was argued or put to the tribunal by the parties: SSHD v Raytheon [33(g)(xii)]. (6) It is inherently likely that substantial injustice would have resulted if the tribunal has failed to deal with essential issues: SSHD v Raytheon [33](h)].

22. The Charterers’ claim was based on the difference in weight between the cargo loaded and that recorded by the truck weighbridge scales after discharge. Owners contend that, in response, they raised various arguments, including that Charterers’ claim could not succeed as Owners were entitled to pump water from the petcoke, such that the Charterers could not establish that any reduction in the weight of the cargo on discharge was causative of any losses or would not have been incurred irrespective of any breach by Owners. Further, a witness statement served by Charterers during the hearing indicated that their receivers had made no claims and that Charterers would be paid through commission on the processed petcoke cinder, and this further demonstrated that Charterers would suffer no loss for any water lost from the petcoke.

23. Owners argued that the Award had simply found that the Charterers’ claim succeeded based on the difference in weight relied on by Charterers. The Tribunal failed to address the issues: (1) whether Charterers suffered a loss if water was removed from the petcoke; (2) alternatively, if they did, whether such loss would have been suffered in any event, as Owners would have pumped water from the petcoke irrespective of any breach; and (3) whether Charterers suffered a loss when their evidence made it clear that no claim for loss of petcoke had been made by US Vanadium against Charterers, and Charterers were to be paid for the petcoke through commission on the vanadium refined (as opposed to for the weight of petcoke and water delivered).

24. The Charterers’ response is that what Owners were suggesting was that what had been lost was not petcoke but water, because water was being pumped out of the cargo. However, given the loading/unloading weight differential, the onus of establishing this was on Owners. Owners had not been able to demonstrate the amount of water which had been pumped out of the cargo over the course of the voyage. The Tribunal had found that the bilge drainage log, which should have recorded how much water was pumped off, was in part fabricated and in part incomplete. Meanwhile the Tribunal had also found that water was coming in. Thus the Owners had simply not been able to establish that the difference in weight was due to water having been extracted rather than their having lost petcoke in one way or another. Accordingly, and in light of the findings of fact on the part of the Tribunal, it was not necessary for it to deal with the further arguments which Owners contend it should have. The Tribunal had been left with the difference in weight between amount on and amount off, and Owners had not been able to excuse or explain it.

25. In my judgment, the approach of the Tribunal was substantially as described by Charterers. It had indeed ‘dealt with’ the ‘issue’ of the cargo shortage. Read fairly, commercially and in a common sense way, what the Award said was that there was a shortage, which the Owners had not explained, and which they were unable to demonstrate was attributable to a loss of water because they lacked the evidence to do so. There was, therefore, a loss of cargo established. The Tribunal did not fail to deal with an ‘issue’ because it did not consider arguments which did not, on its view of the facts, law and evidence, arise. Whether its conclusion on the ‘issue’ was good, bad or indifferent is not a matter for the court under s. 68(2) (d). Nor is a complaint that it would have been desirable for the Tribunal to have given more reasons for its decision on the issue. Conclusion

26. For these reasons, I dismiss the Owners’ application both under s. 68(2) (a) and s. 68(2) (d).