BAILII is celebrating 24 years of free online access to the law! Would you consider making a contribution?
No donation is too small. If every visitor before 31 December gives just Β£1, it will have a significant impact on BAILII's ability to continue providing free access to the law.
Thank you very much for your support!
 |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] | |
England and Wales High Court (Commercial Court) Decisions |
||
|
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Nestor Maritime SA v Sea Anchor Shipping Co Ltd [2012] EWHC 996 (Comm) (20 April 2012) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2012/996.html Cite as: [2012] 2 Lloyd's Rep 144, [2012] EWHC 996 (Comm) |
||
[New search] [Printable RTF version] [Help]
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
||
B e f o r e :
____________________
| NESTOR MARITIME S.A. |
Claimant |
|
| - and - |
||
| SEA ANCHOR SHIPPING CO. LTD |
Defendant |
____________________
Timothy Hill QC and Leigh Williams (instructed by Clyde & Co) for the Defendant
Hearing date: 23 March 2012
____________________
Crown Copyright ©
Mr Justice Eder :
Introduction
"(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
(g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy "
As appears below, it is the Sellers' submission that the award was here obtained by fraud and that although the present application is brought out of time the court should nevertheless extend such time.
Summary of the Sellers' case under s.68(2)(g) of the 1996 Act
(i) The fact that the Supplement had been produced after, and in addition to, the Report was common ground in the arbitration. The Supplement (comprising 35 pages of purported measurements of steel thicknesses) related to areas of steel on the vessel that were replaced as part of the works that were carried out by the Buyers in Tuzla. Significantly, these pages included measurements of the "underdeck longitudinals" (structural beams running under the deck of the ship from fore to aft), which were the main items of the vessel's structure considered in the arbitration.
(ii) The Buyers' position during the arbitration was that ANCO (who produced both the 2007 Reports and similar reports in 2005 and 2003) had inserted numbers in the Report higher than those in fact recorded; and that the Supplement corrected this inaccuracy in that it provided the accurate, lower, measurements in fact taken by the ANCO operatives. While the Buyers sought to suggest that this fact was adverse to the Sellers, the explanation did not give rise to any suspicion of collusion between ANCO and the Buyers. To the contrary, the Buyers' explanation suggested that they had caught ANCO's error, or possible impropriety, and corrected it. The Sellers were provided an explanation by ANCO which did not give cause for concern: see Capt Bardakos' first statement at §9 and Mr Angelopoulos' statement at §§18-21.
(iii) Gkritzapis 1 as corroborated in important respects by the witness statement of Mr Nakos sets out a quite different version of events surrounding the production of the Report and the Supplement than advanced by the Buyers in the arbitration. It is to be noted that, in many cases, allegations of fraud are made by way of inferences to be drawn from the evidence. The Sellers' case is stronger than this; they now have two detailed statements from the individual who was integral in producing the fabricated documents which were fraudulently relied upon, explaining how the fabrication was carried out. The Sellers' allegation is a direct allegation of fraud - not an allegation which relies on inferences to be drawn from the documents or other evidence.
(iv) Mr Gkritzapis was the technician (employed by ANCO) who carried out the UTM measurements on the vessel between July and September 2007. As he explains in Gkritzapis 1:
(a) His usual practice, which was known to the Buyers' representatives and the DNV surveyors, was not to record thickness measurements for areas of steel on the vessel which he marked to be replaced (§§38-41).
(b) His instructions while on board the vessel were to mark for replacement (as a general rule) those areas of steel which were up to 0.4mm thicker than the "substantial" limit i.e. up to 7.7mm in respect of the underdeck longitudinals. (The "substantial" limit being the thickness below which sections of steel required expensive annual inspection (7.3mm), and some way thicker than the "minimum allowable" thickness at which replacement was compulsory (6.8mm).) (§33)
(c) The "clean drafts" of his drawings provided to ANCO for the purposes of producing the Report therefore did not have thickness measurements for the sections of steel to be replaced - but "blanks" were not acceptable in the final report. Consequently, "dummy" figures were inserted for those areas of steel marked for replacement in a range just below the "minimum allowable" thickness (6.8mm for the underdeck longitudinals) to meet Class' requirement for "a number in each box". These figures did not reflect the actual measurements taken and were ordinarily lower than the actual condition of the metal: §58 and §§57-60 of his second statement.
(d) At the same time, Mr Gkritzapis was asked to produce a second set of drawings for John Davaris, at the instruction of Iordanis Melis (both employees of Queensway, the Buyers' ship-managing agents) containing fabricated, and low, numbers for the areas of steel that had been replaced (§§48-51) .
(v) Some two or three months after the production of the Report, Queensway requested that ANCO amend that report to include the fabricated figures on the second set of drawings produced by Mr Gkritzapis. The "Supplement" was produced on the basis of the fabricated numbers recorded by Mr Gkritzapis on the second set of drawings. The Supplement was then signed off by the Class society DNV. (§§59-62)
(vi) Mr Gkritzapis' evidence in relation to how the measurements were actually carried out also contradicts the evidence of Murat Erzaim (the DNV surveyor supervising the UTM survey) in the arbitration to the effect that the 2007 measurements were taken in representative areas. Mr Gkritzapis confirms that the measurements (in fact improperly) were targeted in areas of localised corrosion, as the Sellers' expert, Dr Kirby, suspected. (See Paul Herring's Witness Statement at §§27-28.)
(vii) This evidence flatly contradicts the case put forward by the Buyers in the arbitration; that the Report overstated the condition of the vessel, and this was corrected by the Supplement. Instead, on Mr Gkritzapis' evidence, the Report already understated the condition of the vessel (in the sense that sections that were over the "substantial" limit were recorded as being below the "minimum allowable" limit), and the Supplement further understated the condition on the basis of fabricated figures.
Applicable legal principles
"73.(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Part, any objection (d) that there has been any other irregularity affecting the tribunal or the proceedings, he may not raise that objection later, before the tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection "
"Moreover, the expression "continues to take part in the proceedings" in section 73 is broadly worded and is designed to ensure that a party who believes he has grounds for objecting on the basis of serious irregularity should raise that objection as soon as he is, or reasonably ought to be, aware of it. He is not permitted to allow the proceedings to continue without alerting the Tribunal and the other party to a serious irregularity, which, in his view, renders the whole arbitral process invalid. As Moore-Bick J points out, this is not only to avoid a waste of time and expense but is based upon a more fundamental point of fairness and justice. It cannot be right for a party to participate in proceedings, which he believes to be fundamentally irregular, with the intention of taking advantage of any decision in his favour, whilst keeping up his sleeve an objection to an irregularity, which he will only produce in the event of an unfavourable decision."
Such conduct can properly be characterised as an abuse of process: see Thyssen Canada at para 57.
Alleged fraud must be that of the Defendant
" I agree with Moore-Bick J (as he then was) who stated in Profilati Italia Srl v Paine Webber Inc [2001] 2 Lloyd's Rep. 715 at para 17, that it would be unwise to attempt to define all the circumstances when an award is "obtained by fraud" or "procured contrary to public policy" within section 68(2)(g). However, I note that section 68(2)(g) does not refer to the fraud of a party to the arbitration. On the face of the wording it would seem that the "fraud" referred to in the paragraph can be committed by anyone who is connected with the arbitration process. If this were right, then (for example) if it were proved that a witness for one side or another has committed perjury when giving evidence before the tribunal, that would be a "fraud" within para (g). If so then, if it were also proved that the perjured evidence resulted in the award being in favour of that party then, logically, the award would have been "obtained by fraud".
80. But I have concluded that this is not the correct construction of the words "obtained by fraud". It is a party to an arbitration that obtains an award in its favour or has one made against it. The words "obtained by fraud" must refer to an award being obtained by the fraud of a party to the arbitration or by the fraud of another to which a party to the arbitration was privy. This fits in with the general ethos of the Act, which is to give the courts as little chance to interfere with arbitrations as possible. If this wording referred to the fraud of anyone that was involved in the arbitral process, whether or not the fraud was committed with the knowledge of the relevant party to the arbitration, then that would give unsuccessful parties carte blanche to apply to the court to set aside or remit an award. The unsuccessful party need only assert (for example) that a witness of the successful party had committed perjury (even without the knowledge of the successful party) and the award had as a result been in the favour of that party. It could then be asserted that the award had been "obtained by fraud", resulting in "substantial injustice"; therefore the award must be set aside or remitted." (Emphasis added)
Extension of time
"Where any provision of this Part requires an application or appeal to be made to the court within a specified time, the rules of court relating to the reckoning of periods, the extending or abridging of periods, and the consequences of not taking a step within the period prescribed by the rules, apply in relation to that requirement."
The relevant rule in relation to s.80(5) is CPR Part 62.9, which provides:
"(1) the court may vary the period of 28 days fixed by section 70(3) of the 1996 Act for (a) challenging the award under s.67 or 68 of the Act ..."
"52. ... Further, the relatively short period of time for making an application for relief under ss. 67, 68, 69 also reflects the principle of finality. Once an award has been made the parties have to live with it unless they move with great expedition. Were it otherwise, the old mischief of over long unenforceability of awards due to the pendency of supervisory proceedings would be encouraged.
53. At this point it is necessary to have in mind the general principle set out in s.1 of the 1996 Act:
"(1) the provisions of this Part are founded on the following principles, and shall be construed accordingly
(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense; ..."
54. The reference to unnecessary delay is pertinent to identifying the relevant discretionary criteria "
"(i) the length of the delay;
(ii) whether, in permitting the time limit to expire and the subsequent delay to occur, the party was acting reasonably in all the circumstances;
(iii) whether the respondent to the application or the arbitrator caused or contributed to the delay;
(iv) whether the respondent to the application would by reason of the delay suffer irremediable prejudice in addition to the mere loss of time if the application were permitted to proceed;
(v) whether the arbitration has continued during the period of delay and, if so, what impact on the progress of the arbitration or the costs incurred in respect of the determination of the application by the court might now have;
(vi) the strength of the application;
(vii) whether in the broadest sense it would be unfair to the applicant for him to be
denied the opportunity of having the application determined."
"Finally, as to factor (vii), general considerations of fairness, the judge must have had well in mind considerations of overall justice and fairness. They must, however, always be viewed in the particular context that Parliament and the courts have repeatedly emphasised the importance of finality and time limits for any court intervention in the arbitration process."
" (c) The weight to be given to factor (vi) (the strength of the section 68 application) is not a primary factor. However, an intrinsically weak case will count against the application for extension whilst a strong case would positively assist the application. An application which is neither strong nor weak will not add significant weight to the application for extension of time."
S.73 of the Arbitration Act 1996
The Buyers' case in relation to s.73 of the Arbitration Act 1996
a. The Sellers had a close relationship with ANCO. It had used ANCO to carry out the 2003 and 2005 UTM surveys.b. According to Capt. Bardakos' own evidence:
(i) He spoke with Mr Angelopoulos, the head of ANCO, before the arbitration from "time to time"; and they spoke "about the arbitration". Presumably, this would include the allegations being made by the Buyers that ANCO had been party to the fraud committed by the Seller and ANCO had produced false UTM reports in 2003 and 2005.(ii) Capt. Bardakos spoke with Mr Angelopoulos and asked permission for Mr Vastardis (who with Mr Nakos produced the 2005 Report) to give evidence; and Mr Angelopoulos agreed.(iii) Capt. Bardakos spoke with Mr Angelopoulos "either just before or at the very early stages of the arbitration" about the 2007 Report and why there were two versions; this conversation included a discussion about Mr Gkritzapis.(iv) At the time of the arbitration Capt. Bardakos recognised that there was "a tension" (to use his words) between the 2005 Report and the 2007 Report.(v) Mr Vastardis, who carried out the 2005 UTM survey in China in 2005, was called by the Seller to give evidence on its behalf. Mr Vastardis was assisted in 2005 by Mr Nakos (a fact Mr Nakos conveniently forgets to mention in his present witness statement). Mr Nakos also assisted Mr Gkritzapis at Tuzla to produce the 2007 Report.c. It is quite wrong for the Sellers now in this application to suggest that it did not challenge the accuracy of the 2007 Report at the arbitration because it had no reason to doubt it was done properly.
d. The Sellers inexplicably chose not to call evidence from Mr Nakos or Mr Gkritzapis at the arbitration in June 2010 notwithstanding the so-called "tension" between the two reports and the fact that the ANCO operatives' role (and in particular Mr Gkritzapis' role) was put squarely in issue in the Buyers' witness statements for the arbitration. The case it was running at the arbitration was that the 2007 Report was inaccurate because the UTM readings had been taken in way of localised corrosion.
e. As stated by Mr Williams, the Sellers' case in the arbitration was that the 2005 UTM survey had been done perfectly properly. Its apparent incompatibility with the 2007 UTM survey was to be explained, they argued, on the grounds that it was the 2007 Survey that had not been done properly. In particular, the readings were taken only in areas that were subject to localised corrosion that was unrepresentative of the general condition of the vessel. Moreover, the Sellers' expert, Dr Kirby, suggested in his report that one logical explanation for the incompatibility between the 2005 and 2007 UTM survey results was that the 2007 UTM survey results had been fabricated. The Buyers specifically addressed this contention with witness evidence from the senior DNV surveyor in Tuzla, Mr Murat Erzaim. Mr Erzaim was cross-examined in some detail about how the UTM measurements were taken and, indeed, how the record of the UTM measurements was created. Mr Erzaim gave evidence at the arbitration about that topic which goes to the very heart of the new s.68 challenge. Mr Davaris was also cross-examined at some length about how the UTM readings were recorded. That the 2007 UTM survey readings and the 2007 UTM survey supplemental report were topics that were under scrutiny by the Sellers is also confirmed by what the Sellers said in their closing submissions in the arbitration. For example, "The circumstances surrounding the revised set of measurements remain obscure and are discussed further below. Buyers have failed to proffer any real explanation" (para 110), "The events in Tuzla in 2007 thus remain somewhat murky to say the least." (para 115), "There are some curious features about the 2007 readings ." (para 125). These insinuations were without foundation, but were made nonetheless. They were made by the Sellers in order to persuade the Tribunal to reject the 2007 UTM survey measurements as unreliable. The Tribunal did not do so. However, the point is that the reliability of the 2007 UTM readings and how they were recorded was in issue and explored in the arbitration. Moreover, the documents that the Sellers are now saying are evidence of a fraud were disclosed by the Buyers and appeared in Bundle E22 in the arbitration. Mr Davaris was asked a number of questions about the documents in that bundle during cross examination. It is not the case that the documents that supposedly evidence this fraud have suddenly materialised or that somehow they did not receive any scrutiny at the time.
f. It is inconceivable that Capt. Bardakos did not fully investigate the 2007 Report and Supplement including the circumstances in which they were produced prior to the arbitration in June 2010. If what Mr Gkritzapis (and Mr Nakos) now says is the truth, this most certainly could have been discovered by the Sellers prior to the arbitration. The facts giving rise to the present allegation could with reasonable diligence have been discovered at the time. The Sellers clearly had access to all the relevant ANCO witnesses, the documents that evidence this alleged fraud were in evidence (indeed in a single trial bundle) and they were able to cross-examine during the arbitration the perpetrators of this alleged fraud, namely Mr Davaris, Mr Melis and, now, Mr Erzaim. Put bluntly, at the very least it was negligent for the Sellers and its lawyers to have interviewed Mr Vastardis and adduced evidence from him but not interviewed and adduced evidence from Mr Gkritzapis and Mr Nakos given the "tension" between the 2005 Report and the 2007 Report and Supplement, the Buyers' witness evidence about Mr Gkritzapis' role in the 2007 Report and the central importance of the inconsistencies to the factual and expert cases.
g. So how did Capt Bardakos learn of the alleged fraud? According to Capt Bardakos' own evidence, "it was only in the middle of November 2011 that I considered that the Buyer's story about the nature of the 2007 Supplement might not be true" ; and there was no event or anything in particular that triggered this thought in November 2011. Given that there was no event or trigger, what Capt. Bardakos did in November and December 2011 could and should have been done in the years or months leading up to the arbitration hearing.
The Sellers' case in relation to s.73 of the Arbitration Act 1996
a. Although the Sellers had previously used ANCO to carry out surveys, it was wrong to suggest that the Sellers had a close relationship with them.b. The Buyers advanced a positive (and, at the time, plausible) explanation as to how the Supplement came into existence in the arbitration. On day 7 of the arbitration, the Chair of the Tribunal asked counsel for the Buyers whether there was an "innocent explanation" for the fact that the Supplement was produced. (It is clear in the context that the suggestion that there was any guilt was not being levelled at the Buyers, but rather at ANCO, or even the Sellers.) In response, Mr Hill QC is recorded in the transcript as saying:
"There is an explanation which I can't there is no ANCO witness I can put it to, but the explanation is that in relation to those underdeck longitudinals that they had to replace in any event, i.e. they were marked with white, they were cropped and renewed, the ANCO operative took the view it wasn't necessary to show what the real level of corrosion was because it would highlight the inconsistencies for 2003 and 2005, so he did his company a favour by putting in a higher figure, which didn't matter because it was being cropped and renewed in any event."c. The contemporaneous documents disclosed in the arbitration supported this version of events. See, for example, the letter from Queensway to ANCO dated 22 January 2008 (exhibit CB1), which states:
"[W]e have asked ANKO [sic] to make all necessary corrections to the bundles dispatched to us, because the Column "gauged" does not reflect the actual measurements we all witnessed."d. As Mr Pavlis confirms in his witness statement in support of the present challenge, the Buyers maintained a consistent position in both civil and criminal proceedings in Greece relating to the sale of the Vessel.
e. Capt Bardakos confirms his, and the Sellers', understanding of the Buyers' account in his first witness statement in support of the present challenge and the reasons for that belief; and, in addition, the ANCO boss at the material time, Mr Angelopoulos, gave Captain Bardakos no reason to believe that the 2007 Supplement was a fabrication. Indeed, as Mr Angelopoulos himself confirms, he was entirely unaware of the production of the Supplement until after legal proceedings were afoot and DNV contacted his father. At that time however, he attached little significance to the Supplement as it related to areas of steel that had been replaced, and had no reason to doubt that the figures contained in the supplement were true. Mr Angelopoulos could not have alerted Captain Bardakos to the fraud, as he too was unaware of it.
f. In short, the Buyers represented at all times in all proceedings relating to the Vessel that the figures claimed in the Supplement were accurate. Any outstanding queries which might have been entertained about the circumstances of the production of the Supplement would reasonably have been directed at the original Report, and not the Supplement. Certainly, these queries would have been a very long way away from ringing an alarm bell that the Supplement might be fabricated.
Discussion in relation to s.73 of the Arbitration Act 1996
(i) & (ii) Length of Delay/Whether, in permitting time to expire and the subsequent delay to occur, the party was acting reasonably in all the circumstances
The period from 12 May/10June 2011 until mid-November 2011
The period from mid-November 2011 until 27 January 2012
a. It was eminently prudent and reasonable of Capt Bardakos to seek corroboration of what Mr Gkritzapis had told him from Mr Nakos before acting upon that information: §33 of Capt Bardakos' first witness statement.b. The fraud itself is bold and simply stated; the Buyers fraudulently procured a report detailing the condition of the Vessel. However, an understanding of how the fraud was orchestrated, and its full implications, requires some careful consideration of somewhat technical and complex details. It is entirely reasonable to take some time to consider the mechanism and impact of what has been discovered: §34 of Capt Bardakos' witness statement.
c. Mr Gkritzapis and Mr Nakos are Greek speakers and, while Capt Bardakos can read and write in English, he is not fluent. The need to translate documents and statements between Greek and English adds inevitable delay to the process; as does the need to coordinate between English and Greek legal teams.
d. The alleged fraud and the corroborative account were discovered not long before Christmas. Inevitably, access to professional advice and assistance is impacted upon during that period and that once this is taken into account the actual period of delay is no more than about 4 weeks until 27 January 2012 when the present application was issued.
e. By way of comparison only, in Elektrim v Vivendi Universal SA [2007] EWHC 11 (Comm) at §72, it was found that a delay of around 5 weeks between the discovery of a document alleged to have been fraudulently concealed in an arbitration was reasonable for the purposes of the lawyers investigating the matter in order to set out properly the grounds of an application under s.68(2)(g):
"It was reasonable to wait until the matter had been properly investigated, then to make an application to extend time on the same arbitration claim form as that for relief under section 68(2)(g), as provided for by CPR Pt 62.9(3). I am satisfied that there is sufficient in the merits of the application for it to be proper to extend time and so I order."
(iii) Whether the respondent to the application or the arbitrator caused or contributed to the delay
(iv) Would the Buyers by reason of the delay suffer irremediable prejudice in addition to the mere loss of time if the application were permitted to proceed ?
(v) Has the arbitration continued during the period of delay and, if so, what impact on the progress of the arbitration or the costs incurred might the determination of the application by the court have ?
(vi) The strength of the application
A. Buyers' case with regard to the strength of Sellers' application
a. Dirty drafts with thickness measurements for replaced steelMr Gkritzapis' original story in Gkritzapis 1 was that whilst taking measurements in the vessel he recorded thickness readings on a "dirty draft". However, he did not record on the dirty draft (or any document) the actual thickness measurements of steel that required replacement. He simply indicated on the "dirty draft" that steel needed replacing by a series of hash marks "////" [Gkritzapis 1 paras 38, 45, 48, 51]. Further, Mr Gkritzapis did not record on these "dirty drafts" (or any document) any thickness measurements below 7.7mm in respect of any longitudinal [Gkritzapis 1 paras 38]. He says that each evening he faithfully transferred the thickness readings recorded in his "dirty drafts" onto clean diagrams (the "clean drafts") and he would then throw away the "dirty drafts" [Gkritzapis 1 para 47]. In early August, however, Mr Melis allegedly asked Mr Gkritzapis to produce another set of "clean drafts" with fabricated low numbers (as well as hash marks) for the steel that had been replaced [Gkritzapis 1 paras 49]. However, contrary to Mr Gkritzapis initial evidence, a set of dirty drafts does exist with thickness measurements for the steel that was to be replaced: Williams paras 44, and 47-51. Furthermore, if the DNV surveyor's (Mr Erzaim's) evidence to the Tribunal is correct (and there is no reason to doubt it at all) Mr Gkritzapis' account is impossible. It is apparent that in concocting Mr Gkritzapis' story the first time round the Sellers failed to appreciate that a considerable number of these "dirty drafts" still existed, had been disclosed to them by the Buyers in the course of the arbitration and were to be found in Bundle E22 of the arbitration hearing bundle. This has prompted a wholesale 'revision' to Mr Gkritzapis' story as set in Gkritzapis 2 and which is discussed below.b. 175 thickness measurements in the First ANCO Report between 7.3mm and 7.7mm
Mr Gkritzapis is clear in his first witness statement that at Mr Melis' request, he used 7.7 mm as his replacement threshold. Coupled with his invariable practice of not recording the measurement of steel that required replacement (which would have a random number between 6.2mm and 6.7mm supplied instead by a secretary at ANCO's head office), there should be no thickness measurements whatever of longitudinal stiffeners in the first ANCO Report between 7.3mm and 7.7mm. However, there are in fact 175 such readings: see Williams para 52. This is not disputed by the Sellers.c. DNV surveyors not a party to the fraud
In his original story, Mr Gkritzapis did not in any sense seek to implicate the DNV surveyors at Tuzla, Mr Erzaim and Mr Erbil. On the contrary, the original story of both Mr Gkritzapis and Mr Nakos was that they were both almost always under the close supervision of the DNV surveyors, who were cautious and reading the figures of the gauging machine over their respective shoulders [Gkritzaptis 1 para 34; Nakos para 12]. This was also the evidence of Mr Erzaim at the arbitration. On that basis, it would have been almost impossible for Messrs Gkritzapis and Nakos to carry out such a fraud: see Williams para 57.d. "Fabricated" document in fact created first
Mr Gkritzapis' evidence is that he created the "genuine" clean drafts (without thickness measurements for steel to be replaced) first and then created the "fabricated" clean drafts second, by inserting false thickness measurements [Tab 4 / Gkritzapis 1 para 51; Nakos para 21]. As demonstrated by Mr Williams, the alleged "fabricated" clean draft was clearly produced before the alleged "genuine" clean draft: Williams paras 62 to 65.
e. Allegedly fabricated "clean drafts" provided to DNV
If Mr Melis and Mr Davaris asked Mr Gkritzapis to fabricate "clean drafts" to give up to their superiors at Queensway, it is inconceivable that they would have voluntarily drawn DNV's attention to these fabricated documents for fear of being caught out. However, that is precisely what Mr Melis did: Williams para 66 to 74. It is inconceivable that Mr Melis would have acted in the way in which he did if he had asked Mr Gkritzapis to fabricate a set of clean drafts.f. Documents show that the motive assigned to Mr Melis is false
Mr Gkritzapis's story requires Messrs Melis/Davaris to have set about deliberately to increase the costs of repairs by having steel replaced that did not need to be replaced. (Mr Gkritzapis never properly explains why this might be so.) However, this is quite contrary to the contemporaneous documents which show that Mr Melis was seeking to save money for the Buyers: Williams paras 75 to to 80.g. Random generation of thickness measurements in first ANCO Report
Mr Gkritzapis says that the Report contains "random" figures between 6.2mm and 6.7mm for steel that was replaced. This was to comply with a "technical rule" of DNV that even steel that was to be replaced needed to have a thickness measurement [Gkritzapis 1 para 57]. This is incredible: Williams paras 82 to 85.h. Mr Gkritzapis spoke only to a secretary in December 2007
In December 2007, when the errors in the Report were realised, the Buyers asked ANCO to amend their report. Mr Gkritzapis goes to some lengths to explain how it is that he never spoke to anyone senior at ANCO about the Buyers' request for an amended report [Gkritzapis 1 w/s paras 59, 60 and 63]. This is incredible: Williams para 86. It is an invention designed to overcome the obvious problem that Mr Angelopoulos would inevitably have been involved in such a serious matter given the prior history of their work with this vessel and would have told Capt. Bardakos well before the arbitration, given their close cooperation.
a. The very fact that a simple but already incredible story had changed so much in the space of a few weeks is of itself telling (to put it neutrally).b. Of particular significance is the introduction of a new, prior fraud. This was an alleged fraud by the DNV inspector, Mr Erzaim, on Mr Davaris whereby Mr Erzaim asked Mr Gkritzapis to concoct low thickness readings for underdeck longitudinal stiffeners in order to persuade Mr Davaris to purchase staging which he did not need or want. Despite its critical importance to what Mr Gkritzapis was doing and how it influenced his behaviour for the rest of the job it receives absolutely no mention whatever in Gkritzapis 1. To the contrary, Mr Gkritzapis makes absolutely no suggestion whatever in Gkritzapis 1 that Mr Erzaim (or Mr Erbil) behaved other than impeccably throughout (which is, of course, the case).
c. Furthermore, having made no suggestion originally in Gkritzapis 1 that Mr Erzaim was complicit in any fraud, Mr Gkritzapis now says "so far as I can recall" apparently, Mr Erzaim knew that Mr Gkritzapis was recording fabricated low numbers but, bizarrely, Mr Gkritzapis does not know why Mr Erzaim thought he was doing it [Gkritzapis 2 para 25].
d. The reason for this sudden change in story is that Mr Gkritzapis now needs to explain why it is there exist so many 'rough' or 'semi rough' drafts created by him with thickness measurements for steel that was replaced and which are consistent with one another. As explained in Williams paras 49-50, the measurements in a particular "rough draft" are to be found in subsequent 'semi-rough' drafts which measurements then find their way into the final allegedly fabricated clean draft. The obvious and natural explanation is that contrary to what he is now saying, Mr Gkritzapis was actually doing the job he was engaged to do and recording the measurements of all the steel that he was measuring, whether it required replacement or not. However, Mr Gkritzapis' explanation for this inconsistency is that he was doing the very opposite of what he was supposed to do. Essentially he was extending the original fraud he committed on Mr Davaris (at Mr Erzaim's request) into the alleged fraud Mr Davaris subsequently committed on his employer, the Buyers.
e. Having now explained that Mr Erzaim was himself guilty of having committed his own fraud on Mr Davaris (which Mr Davaris knew about [Gkritzapis 2 para 14.9]) and that separately he, Mr Erzaim, was also aware that Mr Gkritzapis was recording fabricated low numbers at Mr Davaris' request, Mr Gkritzapis then says he was nevertheless "not keen" to provide Mr Erzaim with copies of the fabricated documents because it would have created too much confusion for Mr Gkritzapis [Gkritzapis 2 para 28]. On top of all this. Mr Gkritzapis makes the similarly bizarre observation that he thought Mr Erzaim respected his judgment when it came to taking accurate metal thickness measurements [Gkritzapis 2 para 20.6].
f. The key measurements in this case were those of the underdeck longitudinals. This is what the Buyers spent most of their money on at Tuzla and this is what the case was all about. However, since it now transpires that the allegedly fabricated nature of thickness measurements for a number of those elements were fabricated because of an alleged fraud committed by a DNV surveyor on the Buyers' employee, Mr Davaris, this makes it even less of a case of an award having been procured by the alleged fraud of the party to the arbitration.
g. Having been absolutely clear in Gkritzapis 1 that there should be no metal thickness measurements between 7.3mm and 7.7mm recorded by him on any document he created because of the instruction given to him by Mr Davaris to mark for replacement steel that below 7.7mm rather than 7.3mm and his practice of never recording the thickness of steel marked for replacement, Mr Gkritzapis now says that this is not the effect of what he said in his first statement but that, in fact, his practice was not consistent. The existence of readings between 7.3mm and 7.7mm is explained by him in Gkritzapis 2 as having come about by a combination of (i) trying to make the fraud seem less obvious. In his own words, "a few [measurements] are also fabricated in order to disguise the fabrication " [para 20.2 and 20.3 and 21]; (ii) trying to help the Buyers save money despite Mr Davaris' and Mr Melis' alleged instruction to him to get rid of steel below 7.7 mm [para 20.5]; (iii) taking the seemingly unilateral decision to retain steel that was below 7.7 mm in thickness because "the condition was still sufficiently good" [para 20.6] and (iv) confusion about whose fraudulent instructions he was supposed to be following, Mr Erzaim's or Mr Davaris' [para 15.5].
h. Having said in his first witness statement that he created a set of fabricated documents for presentation to Mr Davaris at the end of the job on 19 September 2007 he now says the fabricated documents went through a drafting stage and were shown to Mr Davaris "in an incomplete form" [para 38]. In other words, he took a series of dry-runs at the fabricated documents and shared these drafts with Mr Davaris along the way.
i. Having said in Gkritzapis 1 that he created the genuine documents first and the fabricated documents second in his hotel bedroom he now says that "on the odd occasion" he may have created the fabricated document first "and then tippexed out the numbers to produce the "genuine draft"" and also he might have done this in the ship's office rather than his hotel room so he could make sure that that the fabricated documents that he ultimately presented to Mr Davaris at the end of the job were consistent with the fabricated documents that he had generated to facilitate Mr Erzaim's earlier fraud on Mr Davaris and which Mr Davaris had already seen and which were kept in a desk drawer there [para 14.10, 33 and 41].
j. Having said in Gkritzapis 1 that the thickness measurements for the forepeak tank bulkhead plating that he provided to Mr Davaris were fabricated ("I was asked to diminish the actual measurements of the bulkhead plating..." [para 55]) and having explained this particular feature of the vessel and this particular exercise at some length [paras 44 and 55], Mr Gkritzapis now says in Gkritzapis 2 "I would like to clarify that the measurements [of the bulkhead plating] .were accurate." [para 49]. The repair to the forepeak tank was one of the single most expensive repair jobs undertaken on this vessel.
k. Having said in Gkritzapis 1 that he thought Mr Davaris asked him to fabricate the thickness readings so that he could justify to his employer the amount of work he ordered from the yard [paras 50, 54], Mr Gkritzapis now says he made a mistaken assumption as to Mr Davaris' motive. He now says "I do not know what the Buyers' rationale was for the instructions they gave me. I did not know (and still do not really know) how this exercise fitted in with the Buyers' operations generally and I do not know why the Buyers instructed me as they did" [para 54]. Nevertheless he now ventures that the reason why he was instructed to mark for replacement steel that was 7.7mm thick rather than 7.3mm thick was so that the Buyers could justify the cost of the staging [para 56]. In other words this was a case of 'in for a penny, in for a pound' commercial madness whereby, since the Buyers had hired a great deal of very expensive staging, they thought that they might as well make the repairs extra expensive by replacing steel they did not need to replace. If viewed in terms of Mr Davaris' and Mr Melis' alleged conduct, Mr Gkritzapis' story is that, on the one hand, they wished to save money on staging and so had to be tricked by Mr Erzaim into doing so (presumably to obtain a kick back from the yard), but on the other were desperate to spend money on unnecessary steel renewals (presumably to obtain a kick back from the yard). But in order to justify steel renewals UTM readings indicating a need for replacement would need to be fabricated. Those could only be fabricated if staging was in place which Mr Davaris apparently did not want and tried to avoid. Mr Gkritzapis' story is utterly incredible.
l. Having said in Gkritzapis 1 that the insertion of dummy numbers in the first ANCO report was "automatic" and "random" and could afford to be because "DNV were not interested in the exact measurements" [para 57], he now says in Gkritzapis 2 that they were not actually supposed to look obviously automatic or random [para 60]. In other words, they are supposed to look genuine and authentic, which rather suggests that they were always supposed to be genuine and authentic.
m. Having explained in Gkritzapis 1 that he dealt with only a secretary at ANCO, Peggy, in relation to the production of the Supplement rather than the most obvious person, his boss Mr Angelopoulos, he now explains that "Peggy had quite a lot of responsibility for running the activities of the ANCO office at the time" [para 60]. Mr Angelopoulos' new evidence in this respect is clearly contrived and unbelievable: that he did not like to "micro- manage" and how "trusted" and "more than capable" the secretaries in his office were [para 6, 16].
n. Mr Gkritzapis goes to some considerable length to demonstrate that stains that look like oil stains on one of his dirty drafts are in fact ink stains from a leaking pen in his pocket [para 16.1]. He even exhibits the document to his statement to make the point that the stains are blue not black. Leaving aside the fact that the blue hue of a colour photocopy is hardly conclusive, this point of detail is frankly irrelevant since Mr Gkritzapis does not suggest the document is not his, he confirms it was in his pocket and thus apparently it was created by him inside a cargo tank. The Buyers' point is that these documents have all the hallmarks of being genuine, working documents not something created in a hotel bedroom late at night. Whether the stains are oil or ink makes no difference to that.
a. Mr Pagalos signed off the fraudulent CAP 1 certificate in 2003 and 2006 (following the 2005 UTM readings) and he is/was a manager of the DNV Piraeus office that oversaw this vessel between 2000 and 2007. To put it neutrally, he has a 'complicated' history with this vessel.b. Although the arbitrators made no findings against DNV in their award (as DNV were not a party to the arbitration and no DNV witnesses had given evidence), the Buyers did not, and do not, shrink from the allegation that DNV and its inspectors were complicit in the frauds in 2003 and 2005 and the Buyer made this clear at the arbitration. Indeed, the arbitrators found that "the involvement of Mr Pavlopoulos of DNV in the inspections of 2000, 2003 and 2005 was striking " [Award para 88]. Mr Pavlopoulos was a DNV colleague of Mr Pagalos and a co- signatory of the fraudulent 2006 CAP 1 certificate.
c. Mr Pagalos is a co-defendant with DNV and the Sellers' senior management in the civil proceedings that the Buyers are pursuing in Greece. He has every reason to help the Sellers overturn the award.
d. Significantly, Mr Pagalos says nothing in his witness statement that supports Mr Gkritzapis' story that Mr Davaris asked him to fabricate thickness measurements.
e. Mr Pagalos' evidence is that he spent 3-4 hours on the vessel in Tuzla on 18 July, he observed corrosion and cracks in the underdeck longitudinals but "[t]o verify and evaluate the extent of this corrosion and if the thickness was within or below acceptable limits close up surveys and UTMs were necessary, especially in the cargo tanks in the middle of the vessel" [para 19]. He then seeks to say that, from his cursory view, "the overall condition of [the] hull structure in the cargo tanks was found to be generally good for a vessel of her age". In other words, the Seller now seeks to adduce factual evidence of the condition of the vessel at Tuzla to show that the factual findings of the Tribunal at paragraph 65 of their award were wrong. The Sellers had every opportunity to adduce the evidence of Mr Pagalos at the arbitration and it is not entitled now to seek to undermine the Tribunal's award by adducing such evidence on a Section 68 application.
f. In any event, the best that the Sellers can say is that Mr Pagalos observed some problems at Tuzla in 2007 but was not in a position to tell what the extent of the problems was. The full and precise extent of those problems was identified in the 2 months following Mr Pagalos' visit when full staging was erected inside the cargo tanks and the UTM survey was carried out.
B. The Sellers' response with regard to the strength of the application
C. Discussion with regard to the strength of the application
(vii) Would it in the broadest sense be unfair to the Sellers for them to be denied the opportunity of having the application determined.
Conclusion
