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England and Wales High Court (Commercial Court) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Cameroon Airlines v Transnet Ltd. [2004] EWHC 1829 (Comm) (29 July 2004) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2004/1829.html Cite as: [2004] EWHC 1829 (Comm), [2006] TCLR 1 |
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QUEENS BENCH DIVISION
COMMERCIAL
COURT
Strand, London, WC2A 2LL | ||
B e f o r e :
____________________
| CAMEROON AIRLINES (a State-owned corporation created by and registered under the laws of the Republic of Cameroon) |
Claimant | |
| - and - |
||
| TRANSNET LIMITED |
Defendant |
____________________
Sir Sydney Kentridge QC, Mr M. Tselentis QC and Mr C.
Kimmins (instructed by Linklaters) for the Defendant
Hearing dates: 29th and
30th June and 1st July 2004
____________________
Crown Copyright ©
The Hon. Mr Justice Langley:
The Application
The Claims in the Arbitration.
"11. It is common cause that the total amount paid by Claimant to Defendant pursuant to the aforementioned maintenance contracts was the sum of US$55,553,886.03.
12. Of the sum of US$55,553,886.03 paid by the Claimant to the Defendant the amount paid by Claimant to Defendant as represented the provision for commissions payable to ATT in excess of the Defendant's non-negotiable selling price was the sum of US$9,887,480.38.
13.1. In the circumstances, Claimant is entitled to repayment of the sum of US$55,553,886.03, alternatively Claimant, in the bona fide and reasonable, but mistaken, belief that the amounts were payable to the Defendant, effected payments totalling US$55,553,886.03 to Defendant and Defendant was unjustly enriched at the Claimant's expense in such amount.
13.2. Alternatively to paragraph 13.1, Claimant is entitled to repayment of the sum of US$9,887,430,38, alternatively Claimant, in the bona fide and reasonable, but mistaken belief, that the amounts were payable to the Defendant, effected payments totalling US$9,887,430,38 to Defendant and Defendant was unjustly enriched at the Claimant's expense in such amount.
14. The Claimant has demanded payment of the said sums and the Defendant has refused to make payment thereof.
15. The Claimant therefore seeks an award against the Defendant as follows:
15.1 Payment of the sum of US$55,553,886.03, alternatively US$9,887,480.38;
15.2. Interest thereon a tempore morae."
"12. AD PARAGRAPH 11 THEREOF
The allegations herein contained are admitted.
13. AD PARAGRAPH 12 THEREOF
The Defendant denies each and every allegation herein contained as if specifically traversed and puts the Claimant to the proof thereof.
14. AD PARAGRAPH 13 THEREOF
14.1. each and every allegation herein contained is denied as if specifically traversed and the Claimant is put to the proof thereof.
14.2. Without derogating from the generality of the denial, Defendant pleads that:
14.2.1. it performed all its obligations under the maintenance contracts and gave good and proper value by way of its services thereunder to the Claimant;
14.2.2. it has not been unjustly enriched nor has the Claimant been prejudiced;
14.2.3. the Claimant has received the services it required and for which it had contracted at a fair cost.
14.3. The Defendant:
14.3.1. avers that if Claimant were to succeed in these proceedings, it would receive the full value in respect of the services rendered by the Defendant without counter-prestation and such benefit would, in all the circumstances, be inequitable and not in accordance with the law;
14.3.2 refers to the conditional counterclaim set out hereinbelow.
DEFENDANTS CONDITIONAL COUNTERCLAIM
1. In the event of it being found that the maintenance contracts entered into by the Claimant and the Defendant were tainted by bribery and/or corruption and that, as a result thereof, the Claimant is entitled to the relief sought herein, then and in that event the Defendant proceeds with the Conditional Counterclaim herein set out.
.
3. The Defendant avers that:
3.1. it performed all its obligations under the maintenance contracts and gave good and proper value by way of its services under the said maintenance contracts, in accordance with the provisions of the Claimant's approved maintenance schedule and further, in accordance with such instructions, as were given to the Defendant, by the Claimant, from time to time, for the rendering of technical services, in the form of, inter alia, special inspections and/or replacement of parts .
3.2. at the time it entered into the maintenance contracts, it was not aware of the possible illegality of the maintenance contracts and/or the possible illegality of the performance thereunder.
3.3. as the Defendant has performed under the maintenance contracts and has, in terms of the maintenance contracts, received payment in respect of the maintenance services rendered and the parts replaced on the aircrafts, an award to the effect that the Defendant should repay to the Claimant the amount of US$55,553,866,03 or any part thereof would have the effect of enriching the Claimant at the expense of the Defendant in the aforesaid sum of money, the Defendant having performed under the alleged illegal maintenance contracts.
3.4. the retention by the Defendant of the aforesaid sum of money would not be contrary to public policy, and/or would not be unjust and inequitable, in the circumstances.
4. In the premises, the Defendant is entitled to a declarator to the effect that it is entitled to the retention of the aforesaid amount of money."
"7.1. The information sought, is as a matter of law and fact, irrelevant to the issues to be determined at the hearing hereof.
7.2. Claimant contends that in consequence of it having lawfully avoided the Maintenance Agreements it is entitled to repayment of all amounts paid by it to Defendant alternatively it is entitled to repayment of all amounts paid by it under the condictio ob turpem causam.
7.3. Insofar as the Tribunal might entertain the Defendant's counterclaim, the Claimant persists in disputing the issues (of good and proper value). In relation thereto, the Claimant does not bear any onus, either true or evidential, but, nevertheless, Defendant is referred to the evidence of Schledorn, Benadι, Sama Juma and Jordan in relation to the performance by Defendant of its obligations under the maintenance agreements and the value received by Claimant.
7.4. In relation thereto, before making any allowance for the Defendant's non or defective performance of its obligations, the Claimant accepts that the cost to the Defendant of performing the power-by-the-hour services under the maintenance contracts was US$19,308,140.13. It is common cause that the sum paid by the Claimant to the Defendant pursuant to the maintenance contracts was US$55,553,886.03. From the amount must be deducted the value of the defective performance and damages suffered as a result thereof. The calculation of these figures arises from the evidence filed by Claimant's expert witnesses and in particular Annexure B to the Replying Affidavit of Schledorn read with paragraphs 36 and 37 of the Founding Affidavit of Sama Juma.
7.5. Save as aforesaid, Defendant is not entitled to the information sought nor is same necessary for the purposes of preparing for the hearing."
The Terms of Reference for the Arbitration.
"(1) Were the Maintenance Agreements tainted by bribery and corruption, as alleged?
(2) If so, was this done at the instance, or with the knowledge of, the Respondent?
(3) To what remedy, if any, is the claimant entitled?
.
(6) In any event has there been unjust enrichment or has the Claimant received good and proper value by way of the Respondent's services?"
The last issue was added at the request of Transnet.
The Procedural Orders.
"The Tribunal is not bound by any strict rules of evidence. It may receive and rely upon any evidence it considers relevant and helpful and in all cases will determine the relevance, materiality and weight of the evidence before it."
Disclosure.
Witness Statements.
"I submit, on the basis of the aforegoing, that the Claimant derived value for money from these agreements in that the SAA met its obligations under the maintenance agreement at very low rates. The aircraft were maintained to the same quality as SAA aircraft of similar model and age and were kept flying subject to scheduled and unscheduled downtime enforced by normal maintenance requirements of aircraft of that type and age and further, SAA did its best to assist the Claimant to obtain spare components and engines. The contract rates for the maintenance of the aircraft were very reasonable and on the low side given the risks associated with the maintenance of these aircraft."
"I created the invoices in accordance with the flight hours and the information recorded against the job account numbers. The said invoices occur on pp. 852-1220 of Bundle 4 of the documents."
"15. I have also been informed that in this arbitration SAA alleges it gave fair value for the maintenance work it undertook for Camair. This I say is not true. I attach hereto marked "A" my assessment, in my own words, of the profits which SAA made out of the maintenance contracts concluded with Camair. From such assessment it can be seen that SAA marked up its power-by-the-hour rates for Camair's Boeing 737 aircraft by over 40% and for Camair's Boeing 747 aircraft by also over 40% even before adding the commission agreed with ATT thereto. Based on market conditions prevailing at the time, SAA's mark-up should not have been more than 10%-20% exclusive of ATT's commission.
18. SAA's instruction to me was to refuse to provide any breakdown of the power-by-the-hour rates agreed for the reason that disclosure to Camair's management of the fact that SAA's power-by-the-hour rate included a substantial commission for ATT plus a profit margin which was well in excess of anything which could be considered reasonable at the time could have resulted in the maintenance contracts being set aside or terminated."
"I noticed in the evidence of Dr Theuns Kruger that he confirmed my experience that South African Airways Maintenance & Engineering was almost 100% capable and that its costs were very competitive in the industry. I say that the prices quoted in Dr Kruger's statement indicated an extraordinary profit opportunity for South African Airways from the Cameroon contracts. This is due to the obvious omission by Dr Kruger of the Line Maintenance, A & B Checks, Wheels/Brakes & Tires from his calculations for the Boeing 737-200 aircraft. I am informed that these items were not included in the contract with Cameroon Airlines and were to be performed outside of the scope of the contracted power-by-the-hour. South African Airways must have made a profit margin for the Boeing 737-200 aircraft of between 35-47% if the hourly figures quoted by Dr Kruger are correct. This profit margin was extraordinary and did not, in my opinion, represent fair value for Cameroon Airlines, considering that a substantial part of the work was done by CAMAIR and also considering the low in-house cost of SAA for this aircraft type.
The Boeing 747-200 aircraft contract was priced by Dr Kruger at $2640.00 per flight hour. Taking the direct cost which, based on my experience are those reflected in SAA's own document ., and minor additional overheads into account, South African Airways Maintenance & Engineering must have made a profit exceeding 40%. This margin too was extraordinary and did not, in my opinion, represent fair value, considering the low in-house cost of SAA for this specific type of aircraft.
I have examined the calculations on SAA profits made by Mr Peter Schledorn and can concur with them as they are very close to my own independently calculated percentages as noted previously in this affidavit."
The April 2002 Hearing.
"(i) The extent of the innocent party's possible enrichment and quantification thereof. Much of the material in the witness statements on both sides address this issue .
(ii) The conduct of the briber .
(iii) The conduct of the victim
These circumstances are the primary examples of possible circumstances which may prove relevant to the judicial exercise of an equitable discretion. The extent of these depends on the material contained in the witness statements or to be extracted in cross-examination. The plea (in paragraph 14.3.1 of the Defence that for Camair to recover in full would be inequitable) invokes such equitable consideration in the light of all the circumstances of the case.
This may well be the first case in the South African law which directly invokes the equitable consideration of the relevant circumstances to define the extent of the duty of restitution in a bribery case ."
The Burden of Proof Ruling.
Experts.
"The MCF offers the best available breakdown, in the documents presented to this Arbitration, of the various maintenance and engineering cost factors for the aircraft operations in question"
"12.1 Whether, in the light of the Defendant having not discovered any relevant documentation other than part of an IATA report, the cost of maintaining the Defendant's own aircraft or of the Claimant's aircraft by Defendant can be ascertained from any source documentation other than that relied upon by the Claimant's witness. (Experts Agreed: (1) That the MCF will be relied on to the extent recorded for item 3 above);
12.2 Whether the approach adopted by the Claimant's witnesses Schledorn, Benade and Jordan in ascertaining the Defendant's maintenance cost is-
12.2.1 appropriate; (Experts Agreed: (1) MCF is appropriate to the extent recorded for item 3 above);
12.2.2 the only method by which such costs can be reasonably ascertained in the absence of any documentation from the Defendant (other than part of an IATA report) evidencing the quantum of such costs. (Experts Agreed: (1) MCF is appropriate to the extent recorded for item 3 above)
12.3 Whether, and to what extent, the Defendant's overheads should be taken into account in calculating the costs incurred in maintaining the Claimant's aircraft and what impact any such overheads have on any of such calculations. (no final agreement reached).
12.4 Whether the Maintenance Costs Forecast (MCF) relied upon by the Claimant's witnesses is an accurate alternatively reasonable reflection of the Defendant's own maintenance costs. (Experts Agreed: (1) MCF is appropriate to the extent recorded for item 3 above)
12.5 .
12.6 Whether Dr Kruger's evidence of what it cost the Defendant to maintain its own aircraft, and the comparison of such cost to the average costs reported to IATA for a select number of airlines, to justify his opinion that the Defendant's charges to the Claimant were fair can be accepted having due regard to-
12.6.1 .
12.6.2 what reasonable profit margin for the Defendant's maintenance services was; (Experts agreed: the reasonable profit margin should be 15%);
12.6.3 .
12.6.4 the costs recorded in the Maintenance Cost Forecast relied upon by the Claimant's witnesses (against which the Defendant has offered no contradicting documentary evidence); (Experts Agreed: (1) MCF is appropriate to the extent recorded for item 3 above);
12.6.5 the Defendant's reports to IATA concerning its own maintenance costs; (Experts Agreed: (1) The MCF reflects SAA's costs to the extent recorded for item 3 above. Experts disagreed on Dr Kruger's use of the IATA average for comparison purposes)."
"2.1 The cost to SAA of providing the services under the maintenance agreements and, if there remains disagreement in regard thereto then-
2.1.1 recordal of costs that can be agreed and how they are made up: (Experts Agreed: (1) MCF agreed to the extent recorded for item 3 above);
2.1.2 .
2.1.3 agreement as to the impact on such cost figures if "indirect costs" are included or excluded. (Experts did not agree).
2.2 Whether the IATA costs can be used by the Tribunal as an indication of the costs which-
2.2.1 would be reasonably incurred by SAA in providing the services; or (Experts Agreed: (1) The MCF be used to the extent recorded for item 3 above);
2.2.2 would be reasonably incurred by any other service provider in supplying the services to Camair. (Experts did not agree).
2.3 The cost to Camair had the same service been rendered by another supplier. In that regard if the experts cannot reach full agreement, then they should record such costs upon which there is agreement and how those costs are made up and, in respect of any costs remaining in difference then the respective views of each side. (No final agreement reached)."
The First Hearing: Day 1
Day 2
Day 3.
"I just wanted clarity, so I do understand. And please, I think it is a yes or no. And if I say it unfairly please do say so. As I understand the position, now, of your evidence, we accept the MCF to the extent that I can disregard all your prior calculations and concentrate then only on the MCF for the various reasons you have said?
Dr Kruger replied "Yes".
Day 4.
The Second Hearing.
Closing Submissions.
Camair.
" to what extent would Claimant be unjustly enriched if all payments received by the Defendant are restored to the Claimant or, put differently, to what extent has Defendant not been enriched by the payments made by the Claimant to it."
Transnet.
"What the Claimant was required to tender was the value of the benefit or enjoyment derived which must be restored to its original owner. Where, as here, the benefits consisted of work, labour and parts, the appropriate measure is its value to the Claimant or the lesser amount it would have paid another contractor.
Presumably had the issue been canvassed in the light of the value of the benefit to the Claimant, the relevant considerations would have included:
(i) the contract price set
(ii) whether and at what cost the services were available to Claimant from other suppliers and on what conditions Air France and Aer Lingus;
(iii) whether Claimant could have done some part of the job itself and more cheaply;
(iv) the value of the services measured at going rates in the market place.
Discovery, affidavits, evidence and cross-examination would have been totally different. It is simply impossible to know what the outcome would then have been. The consequence is that the claim is irremediable, and in the event no amendment has been sought."
Reply Submissions
Camair.
"If the Defendant is entitled, in law, to any relief, it appears that the Defendant has accepted that the good and proper value it claims it gave is restricted to the costs incurred by it and that the Defendant cannot retain any profit".
Transnet.
"That a tender of restitution, or the explanation and excuse for its failure, is a requirement in proceedings for restitution is indeed trite. A contracting party who demands restitution consequent upon a purported rescission of the contract must tender the return of what he himself has received under the contract or its equivalent in money ."
i) Where an innocent party to a contract tainted by bribery seeks restitution of that which he has performed South African law requires that it must make or tender restitution of that which it has received or if this is not possible tender a monetary substitution of such benefits instead (paragraph 123);
ii) The issue as to the value to be attached to the services rendered under the maintenance contracts had been properly before the Tribunal as shown by the Terms of Reference (paragraph 142) and much of the evidence had been concerned with endeavouring to establish the proper costs of the maintenance contracts so as to put a monetary value on the benefits received by Camair under the contracts (paragraph 144). The Tribunal was therefore entitled to address the issues and to reject the submission by Transnet that the claim should in effect be struck out, because the issues fell within the Terms of Reference and the parties had had a proper opportunity of dealing with them (paragraph 145).
i) By South African law Camair was correct in arguing that if Transnet had to claim on the basis of Camair's unjust enrichment, Transnet could only claim its cost and not its profit (paragraph 158) whereas what had to be tendered by Camair was "the value to Camair" of the work done and materials supplied under the maintenance contracts or the lesser amount which Camair would have had to pay another contractor (paragraph 161).
ii) "In practice, this means the Tribunal must do the best it can in order to determine the value of the benefits received by Camair or the lower price it would have paid to another contractor"(paragraph 163).
The majority Award
i) Transnet had identified the commercial price at which it was willing to undertake the work and added the "commission" on top. "In the absence of any persuasive evidence to the contrary, the Tribunal takes this 'commercial price' that is to say the contract price less the so-called commission as representing the value of the work to Camair". This conclusion (see paragraphs 189-190 of the Award) was expressly based on Mr Schledorn's evidence (see paragraph 36 of this judgment) of which the Tribunal was otherwise critical (see paragraph 175 of the Award).
ii) Camair had failed to establish the amount paid to ATT as commission (paragraph 209) and would be awarded only the amount shown as paid and payable in R1 which amounted to an admission by Transnet that the total amount of commission was at least $8,421,765 (paragraph 207).
i) It conflicted with "the common understanding" of the parties that quantum was to be determined by reference to unjust enrichment including the principle that no man should profit from his own wrongdoing; and
ii) It conflicted with the "common approach" of the parties to the quantification of "value" that it was to be determined by reference to the cost to Transnet of carrying out the services it provided pursuant to the maintenance contracts.
i) The Tribunal had read and heard a considerable number of arguments and submissions as to the cost to Transnet of the work Transnet carried out under the maintenance contracts (paragraph 168).
ii) "the parties experts" looked at the "costs" incurred by Transnet in carrying out work on the Camair aircraft (paragraphs 182-3) and agreed a reasonable profit margin but "the work suffered from two major defects . First their approach appeared to be partisan, rather than objective; and, secondly, their focus was on costs rather than on price or value." (paragraph 184).
iii) "185. On the basis of South African law, as already explained, the Tribunal's task is to do the best that it can to establish the value to Camair of the work carried out by Transnet during the five years or so that Transnet was responsible for the maintenance and airworthiness of Camair's aircraft. It would have been helpful to know what airlines other than Transnet would have been likely to charge. However, it would appear from the evidence before the Tribunal that very few airlines were in fact interested in carrying out maintenance of Camair's aircraft. One of these airlines was, of course, Transnet and another was Air France but beyond this, there seem to have been very few, if any, contenders for the work. It will be remembered that Mr Sama Juma in his first witness statement complained that Air France's charges were "unreasonably high"; and Mr Schledorn, in his letter of 16 March 1999 refers to a quote from Air France, which the Tribunal has not seen, as being "very costly".
186. As already stated, it seems to the Tribunal that the emphasis on cost, which has taken up a considerable amount of time and paper during the course of this arbitration, is in fact misplaced. What the Tribunal has to assess, as best it can on the material before it, is the value to Camair of the work carried out by Transnet under the Maintenance Agreements.
187. Another way of putting this is to ask what price Camair would have paid for the work to be carried out by another airline? The Tribunal might have been in a position to answer this question if the Tribunal had been supplied, for instance, with quotations from Air France for comparable work. But there is no such evidence before the Tribunal only statements to the effect that their charges were "unreasonably high". The only evidence that the Tribunal has as to the value of the work done by Transnet is the price that Transnet charged and was paid. After deduction of the "commission", this amounts to approximately US $46 million."
"4. In approaching quantum, the majority has rejected the costs basis upon which the case was argued and the evidence presented and instead used the concept of the "alternative quotation" (if I may so summarise it) as a principle to be applied in this sort of case. This seems to me to be an objectionable approach. First, on the ground that there is no reason for the tribunal to decide the case on a basis other than that on which it was put forward by both sides. Second, while accepting that the alternative quotation was the basis of the decision in one case, it is clear that that case did not establish the alternative quotation as a principle and it should not be so used. The approach to be used in any particular case will depend on the facts of the case and on the evidence led by the parties.
5. If the alternative quotation approach is rejected, as I think that it should be, then one must ask what the correct approach is. In my view it is essentially a matter of enrichment what outcome comes closest to avoiding either party having an unjust enrichment. I say "comes closest" because there are likely to be difficulties in achieving a result that all would consider as delivering an wholly just result. I agree with my colleagues that the Extel case provides key guidance in this matter. .
6. In this context and on the facts of this case, it does not seem to me that utilisation of, or reliance on, the sums actually paid (less commission) is appropriate, particularly as no evidence was led of the actual cost to Transnet of doing the work. The whole of the evidence was directed to determining cost (and not value, as that expression is used by the majority) on an hypothetical basis. Accordingly, among other disadvantages, the Tribunal had no possibility of comparing the actual costs incurred by Transnet in doing the work that it undoubtedly did with the sums that it was paid.
PROFIT
7. If enrichment is the appropriate principle, then I do not expect anyone to challenge the proposition that not only the commission but also any profit made must be surrendered by Transnet."
"13. The majority has reached the conclusion that the amount of the commission is US$8,585,620. In my view the correct figure is US$9,854,260. My figure is based on Mr Sama Juma's evidence in his founding statement. It is sufficient to note that Mr Sama Juma's evidence was not challenged by Transnet in either of the rounds of written evidence; and he was not (in any meaningful sense) cross examined on them. Nor was Dr Kruger cross examined on Exhibit R1 or the basis for Exhibit R1. However, the majority has reached its conclusion on the basis of documentation that is summarised in Exhibit R1. Exhibit R1 was the subject of objection and comment on a number of occasions throughout the hearing as is apparent from the transcripts. In my view, the way in which it was introduced to the arbitration makes it unsafe to rely upon; and any approach to the documents it purports to summarise must start by noting that, effectively, and so far as the Tribunal was concerned, there was no forensic analysis of them by either side."
"(1) A party to arbitral proceedings may apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award.
(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant-
(a) failure of the tribunal to comply with section 33 (general duty of tribunal);
.
(c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed between the parties;
(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."
"(1) The tribunal shall-
(a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and
(b) adopt procedures suitable to the circumstances of the particular case so as to provide a fair means for the resolution of the matters falling to be determined."
i) The Award cannot be challenged on the grounds that the Tribunal had come to an erroneous decision whether of fact or (South African) law.
ii) The Award cannot be challenged on the ground that findings of fact were unsupported by the evidence.
iii) A failure to comply with Section 33 and so Section 68(2)(a) is not established by the existence of errors in the Award which are unfair to one party.
iv) Not all irregularities require the Court to intervene. Any irregularities must cause substantial injustice to Camair.
"The test of 'substantial injustice' is intended to be applied by way of support for the arbitral process, not by way of interference with that process. Thus it is only in those cases where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process that we would expect the court to take action In short, [section 68] is really designed as a long stop, only available in extreme cases where the tribunal has gone so far wrong in its conduct of the arbitration that justice calls out for it to be corrected."
"If an arbitrator is impressed by a point that has never been raised by either side, then it is his duty to put it to them so that they have an opportunity to comment. If he feels that the proper approach is one that has not been explored or advanced in evidence or submission then again it is his duty to give the parties a chance to comment. If he is to any extent relying on his own personal experience in a specific way then that again is something that he should mention so that it can be explored. It is not right that a decision should be based on specific matters which the parties have never had the chance to deal with, nor is it right that a party should first learn of adverse points in the decision against him."
"Here the award was made on the basis of a point which was never raised as an issue or argued before the arbitrators. The arbitrators failed to give the charterers the opportunity of dealing with the issue that the turning space at the entrance of the dock was insufficiently wide, there was technical misconduct on the part of the arbotrators and in the result unfairness to the charterers."
" an analysis of the whole course of the arbitration, coupled with standing back from it and looking at it as a whole, makes it plain, in my judgment, that the point never became an issue in the arbitration .
We are concerned with a case where the arbitrators appear mistakenly to have thought that the issue of the width of the turning place was one which had been raised before them and upon which they were entitled to decide the case, without drawing the point to the attention of the charterers. With great respect to the very experienced arbitrators who presided at the hearing, on this they were mistaken. I wish to stress that we in this Court have had the advantage of looking at the matter very clearly on a full transcript with the assistance of leading Counsel and having the benefit of full argument directed towards this very point, which has, no doubt, made it easier for us to assess the position; but the fact remains that the award was made on the basis of a point which was never raised as an issue or argued before the arbitrators. There is plain authority that for arbitrators so to decide a case, without giving a party any warning that the point is one which they have in mind and so giving the party no opportunity of dealing with it, amounts to technical misconduct and renders the award liable to be set aside or remitted."
"In truth, we are simply talking about fairness. It is not fair to decide a case against a party on an issue which has never been raised in the case without drawing the point to his attention so that he may have an opportunity of dealing with it, either by calling further evidence or by addressing argument on the facts or the law to the tribunal."
"The essential function of an arbitrator or, indeed, a Judge is to resolve the issues raised by the parties. The pleadings record what those issues are thought to be and, at the conclusion of the evidence, it should be apparent what issues still remain live issues. If an arbitrator considers that the parties or their experts have missed the real point a dangerous assumption to make, particularly where, as in this case, the parties were represented by very experienced Counsel and solicitors then it is not only a matter of obvious prudence, but the arbitrator is obliged, in common fairness or, as it is sometimes described, as a matter of natural justice, to put the point to them so that they have an opportunity of dealing with it."
"Fair Value"
i) The claim was based on unjust enrichment of Transnet: paragraph 12;
ii) The defence and conditional counterclaim referred to both unjust enrichment of Transnet and Camair. It averred that Camair received the maintenance services "at a fair cost", and that Transnet gave "good and proper value" by way of the services: paragraphs 14 and 15;
iii) The focus of Camair's approach to quantification was throughout on the cost to Transnet of supplying the services;
iv) Transnet maintained throughout the stance that the claim disclosed no cause of action unless Camair gave credit for "value received";
v) There was no focus on whether or why "cost to Transnet" should differ from "value to Camair". The two were apparently used interchangeably: paragraphs 14,15 and 45.
vi) Camair pursued Transnet's "costs" documents but was told they could not be located and appears to have accepted that. Certainly the matter was not pursued further. Transnet sought documents from Camair which would have shown the charges of Air France and perhaps others to Camair. But the application came late and although persisted in was rejected by the Tribunal: paragraphs 27 to 29. That is a matter of concern when it is seen how the majority of the Tribunal subsequently approached the Award: paragraph 85 of this judgment and the reference there to paragraph 186 of the Award. The charges of Air France could, I think, have relevance both to the commercial cost to Camair of the services and to the fair cost to Transnet of providing the services but more readily to the former;
vii) The opening round of witness statements (so far as relevant) was focused on the cost to Transnet (SAA) of providing the services and the profit margins in Transnet's pricing to Camair: paragraphs 36 to 38 (Mr Schledorn) and 33 (Dr Kruger);
viii) The reply statements reflected the same focus: paragraphs 39 to 41 (Mr Benade, Mr Jordan and Mr Sama Juma) and paragraphs 42 and 43 (Dr Kruger and Mr Du Plessis);
ix) The thrust of the Experts "Report" (paragraphs 47 to 50) was also on the cost to Transnet and a reasonable profit margin. But Transnet also raised the question of "the cost to Camair had the same service been rendered by another supplier" on which there was "no final agreement";
x) Transnet's case was that the extent of restitution required by law raised novel questions but would depend on equitable considerations in the light of the evidence: paragraph 45;
xi) At the time of the first hearing the focus of the evidence can fairly be said to have been on Transnet's costs but also on reasonable profit margins for maintenance services of the type in question;
xii) Each party had adopted an extreme position. Camair that upon proof of bribery it was entitled to recover every dollar paid under the maintenance contracts. Transnet that if Camair did not offer a credit it had no claim. Each also contended that the burden of proving the "value" of the services lay upon the other. But they went into the hearing none the wiser as to how that might be resolved: paragraph 46. At the hearing it became even more contentious: paragraph 54;
xiii) Camair's submissions at the hearing were consistent with its evidence and approach throughout namely that quantification of any sum to be restored to Transnet whether by reason of the defence or conditional counterclaim should be examined on the basis of cost to Transnet with particular issues as to whether overheads and/or profit were to be added to cost. In the course of the evidence and in the light of the "experts" agreement the evidence on the approach to cost, overhead and profit became substantially uncontentious in the sense that the MCF and levels of overhead and profit were established or debated: paragraphs 49, 50 and 58;
xiv) Camair's closing submissions proceeded on the basis of an examination of the costs to Transnet and a submission that what other airlines would have charged was irrelevant: paragraph 65;
xv) Transnet's closing submissions did expressly make the point that Camair was obliged to give credit for the value to Camair of Transnet's services on what may be called a commercial basis: paragraph 67. But it did so not only, I think, for the first time or at least the first time with any clarity, but also in the context that as a result "the true issue" had not been ventilated at all, was impossible to resolve, and so the matter was "irremediable" and the claim should therefore be, in effect, struck out. That submission included an express acknowledgement that the evidence, discovery and conduct of the hearing would otherwise have been "totally different": paragraph 67;
xvi) However in Chapter 2 (assuming the Tribunal found there was a proper cause of action: paragraph 66) and Chapter 3 Transnet's submissions on quantification were, like Camair's, made on the same basis whether the matter were looked at in terms of Transnet's defence or conditional counterclaim: paragraphs 66 and 68;
xvii) There was no issue, indeed a "consensus", that quantification on that basis looked to the reasonable cost to Transnet based on the MCF (unless Camair was enriched in a lesser amount) to the exclusion of profit: paragraphs 70,71,74,78 and 86. Despite Camair's assertion at various times of some earlier consensus or common understanding I think this is the first occasion on which such a description is appropriate;
xviii) The Award rejected the "no cause of action" submission by Transnet and also rejected (by the majority) the approach to quantification put forward as apposite by both parties in that event. It concluded that Transnet's "commercial price" (price less "commission") represented the value of the services to Camair. That was an approach not advanced by either party. On any view of the evidence such a price contained a profit to Transnet and was based on a cost derived other than by way of the MCF: paragraphs 78, 83(i) and 85;
xix) The approach of the majority was not raised with the parties nor were they given an opportunity to address it: paragraphs 79 and 86. Mr Tackaberry was right to make the criticism that the majority had decided the case "on a basis other than that on which it was put forward by both sides": paragraph 87.
The Amount of Commission
i) The Pleadings in the Arbitration put Camair to proof of the amount of commission: paragraphs 13 and 14 of the defence (paragraph 14) No positive case as to amount was put forward by Transnet;
ii) The only witness statement to address the amount of commission was the statement by Mr Sama Juma: paragraph 32. Mr Erasmus simply produced the invoices which became Bundle 4;
iii) The "experts" did not address the issue;
iv) The position remained unchanged at the start of the First Hearing;
v) On the first day of the hearing a direct challenge was made by Transnet to Mr Sama Juma's calculations and R1 was produced based on Bundle 4 which showed the figure ultimately accepted by the majority of the Tribunal: paragraph 53;
vi) Thereafter the use of R1 remained contentious but the (understandable) approach of the Tribunal was to try to encourage the parties to reconcile the figures: paragraphs 56 and 60;
vii) There is no evidence before this Court as to what, if anything, ensued by way of reconciliation of the figures. It is not known whether Mr Sama Juma or anyone else on behalf of Camair sought to check Camair's disclosed invoices with Bundle 4. It is clear, however, that nothing further was offered to the Tribunal by Camair save criticisms of R1 itself: paragraphs 62 and 74;
viii) Whilst Mr Tackaberry's criticisms of the evidential value of R1 and the manner of its introduction into the hearing have force (paragraph 88) the Tribunal had left it to the parties to seek to reconcile the two and had encouraged them to do so. There was, in the event, ample opportunity to do that, or to make further submissions, before the end of the proceedings either at the second hearing or in closing submissions.
Fair Value
Commission.
Fair Value.
Commission.
