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A platinum-coated mess reaches the Commercial Court

As any student (or former student) of chemistry will know, palladium forms one of the platinum group elements in the Periodic Table. And so the Commercial Court recently ruled upon a platinum-coated mess arising from an arbitration and settlement negotiations in a dispute concerning the paint system applied to the new-build superyacht, m/y “PALLADIUM”. The case of Goodwood Investments Holdings Inc. v Thyssenkrupp Industrial Solutions AG, heard in May 2018, arose from an application to the Court under section 45 of the Arbitration Act 1996 for determination of a question of law arising in the course of an arbitration.

Such ‘section 45’ applications to the Court are not common, it being accepted that where the disputing parties have agreed on arbitration to settle their dispute, the arbitral panel will have full authority to hear the case and make a binding decision. Of course, arbitration carries with it the added benefit of being a confidential process and, partly for this reason, arbitration clauses are commonly used in yacht build contracts. It is rare, therefore, to see arguments arising during in an arbitration being discussed and ruled upon in open court, and subsequently being reported in the legal press. For this reason alone the case is interesting, but the subject matter of itself merits reporting.

The question to be determined by the Court was whether the claim had actually been settled by the parties. Now, you would be forgiven for asking, shouldn’t that be self-evident? And the answer is, well, yes, normally it would be. In this case, the parties had tried to settle the dispute in without prejudice correspondence between their legal teams prior to the arbitration hearing. Then, on the first day of the arbitration hearing, on 9 October 2017, the shipyard made a renewed settlement offer via its solicitors to the solicitors for the claimant owner. It was stated that the shipyard’s offer was subject, among other things, to the conclusion of a formal settlement agreement and approval by the shipyard’s board and would expire after 17:00hrs on Wednesday 11th October 2017.

The purchaser’s solicitors responded on 11 October 2017, while the shipyard’s counsel was making their opening submissions to the arbitral tribunal. Their response, in terms, was that the shipyard’s offer was accepted, “subject only to the following points of clarification that are needed for logistical reasons”. Five “points of clarification” were then set out, the final one of which envisaged a settlement agreement being concluded to formalise all of the agreed points.

In the meantime, the arbitration was adjourned by the joint agreement of the parties and on the same day, the claimant’s solicitors sent to the solicitors for the shipyard a draft settlement agreement, which stated among other things, that the settlement agreement “is subject to the approval of the Board of the Builder, and it will only become valid and binding on the Builder when executed on its behalf by an authorised signatory(ies)”.

On 24 October 2017, the shipyard responded, setting out its position that its offer to settle of 9th October had not been accepted cleanly and it provided to the purchaser’s solicitors an extensively revised settlement agreement. The purchaser’s solicitors responded by insisting that the purchaser had accepted the shipyard’s offer of 9th October by its own letter of 11th October 2017.

This had become a bit of a mess and the questions before the Court, in essence, were whether (a) the shipyard on 9th October 2017 had made an offer capable of being accepted so as to give rise to an immediately binding contract and (b) the claimant had then accepted that offer by its letter of 11th October.

In his decision, Mr Justice Males takes care to discuss the submissions in some detail, however for the purposes of this article it suffices to report that the Court found that there had been no settlement of the parties’ arbitration dispute. Yes, the shipyard made an offer to settle on 9th October 2017, but the claimant purchaser’s response of 11th October amounted to a counteroffer, therefore there was no clean acceptance. In any event, the Court found that the shipyard’s offer to settle was clearly subject to (a) board approval and (b) the execution of by both parties of a settlement agreement – in effect, it was “subject to contract”. This means that the shipyard’s offer to settle was not an offer capable of being accepted so as to give rise to an immediately binding contract.

The moral of the story is, if one is presented with settlement terms that are broadly agreeable, then respond in the affirmative, with those terms set out in a formal settlement agreement already signed, awaiting only the signature of the offeror. Seeking “points of clarification” in response to an attractive offer of settlement is not advisable, particularly where those points can be addressed and sorted after the settlement agreement has been executed. The old adage applies, if the offer is acceptable, particularly when costs of litigation are about to increase markedly, then bite their hand off.

The content of this article is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content herein.

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