Monthly Archives: March 2018

[RHC O16] The Normar

Cases referred to in judgment

Barclay’s Bank v Tom [1922] All ER Rep 279, [1923] 1 KB 221, 92 LJKB 346, 128 LT 558, 50 Digest (Repl) 511, 1839.

Eden v Weardale Iron and Coal Co (1884), 28 ChD 333, 54 LJCh 384, 51 LT 726, 50 Digest (Repl) 521, 1915.

James v Page (1888), 85 LTJo 157, 40 Digest (Repl) 454, 391.

McCheane v Gyles [1902] 1 Ch 287, 71 LJCh 183, 86 LT 1, subsequent proceedings, [1902] 1 Ch 911, 50 Digest (Repl) 511, 1842.

Renton, Gibbs & Co v Neville & Co [1900] 2 QB 181, 69 LJQB 514, 82 LT 446, 40 Digest (Repl) 454, 392.

Toke v Andrews (1882), 8 QBD 428, 51 LJQB 281, 40 Digest (Repl) 453, 390.

Appeal.

This was an appeal by the second defendants, Morris & Butters against a decision of the Admiralty registrar refusing to strike out parts of a third party defence and counterclaim by the third defendants, Cozens & Sutcliffe, Ltd

The plaintiffs were the owners of the motor vessel Normar which suffered damage on 25 February 1966, when a crane collapsed on to the ship at Alexandra Dock, Hull. They sued the first defendants, British Transport Docks Board, as owners and occupiers of the dock for damages for negligence. The first defendants by their defence denied negligence and claimed that the fall of the crane was due to the negligence of the manufacturers of the crane or of the sub-contractors who had erected the crane under sub-contract with the manufacturers, or of both the manufacturers and the sub-contractors. The plaintiffs thereupon amended their writ and statement of claim to add the manufacturers as second defendants and the crane erectors as third defendants, alleging negligence against each of them. The second defendants by their defence admitted that they had manufactured the crane under contract with the first defendants and had sub-contracted the erection of it to the third defendants, but they denied negligence and alleged that the fall of the crane was due to the negligence of the first defendants (the dock owners) or of the third defendants (the erectors of the crane). The third defendants admitted by their defence that they had erected the crane in pursuance of such a sub-contract, but they denied negligence and alleged that the fall was due to the negligence of the first defendants (the dock owners) or of the second defendants (the manufacturers). After discovery in the action, the second defendants (the manufacturers) served a third party notice on the third defendants (the crane erectors) claiming indemnity under an indemnity clause in the sub-contract, alternatively, contribution under the Law Reform (Married Women and Tortfeasors) Act, 1935. An order for directions was made, ordering that the third party notice should be treated as the second defendants’ (manufacturers’) statement of claim, and providing for the third defendants’ (crane erectors’) defence thereto, for discovery and for trial of the third party claim at or immediately after the trial of the action. The third defendants’ defence to the second defendants’ claim against them admitted the sub-contract but denied the right to indemnity or contribution. By para 4 of their defence the third defendants

[1968] 1 All ER 753 at 755

(crane erectors) claimed to set-off the sum counterclaimed in para 6. By para 5, they counterclaimed indemnity or contribution under the Act of 1935. By para 6, they counterclaimed £4,444 11s 5d, alleged to be due for work done under the sub-contract. The second defendants (the manufacturers) applied to the Admiralty registrar to strike out para 4, para 5 and para 6 of the third defendants’ (the crane erectors’) defence and counterclaim. The registrar made no order on the application save as to costs. The second defendants (the manufacturers) appealed and asked that either all three paragraphs be struck out or else that the issues raised by para 5 and para 6 be tried separately from the other issues. The appeal was heard in chambers but judgment was given in open court.

J C Tylor for the plaintiffs.

R E Hopkins for the first defendants, the dock owners.

A P Clarke for the second defendants, the manufacturers.

J P M Phillips for the third defendants, the crane erectors.

21 December 1967. The following judgment was delivered.

read the following judgment. This is an appeal from a decision of the Admiralty registrar refusing to strike out parts of a third party defence and counterclaim. [His Lordships stated the facts, and continued:] The second defendants first contend that, as a matter of law, a defendant on whom a third party notice is served by another defendant cannot counterclaim. There is no authority directly in point, but there are two decisions of the Court of Appeal dealing with the right of an ordinary third party, nor a defendant in the action, to counterclaim. The first of these cases is Eden v Weardale Iron and Coal Co, where it was decided that a third party could not counterclaim against a plaintiff; but Bowen LJ expressed uncertainty ((1884), 28 ChD at p 338.) whether a third party could counterclaim against the defendant who had brought him in. The second case is Barclays Bank v Tom. In that case it was decided that a counterclaim would lie by the third party against the defendant who had brought him in, and I shall read a passage from the judgment of Scrutton LJ where he said ([1922] All ER Rep at pp 279, 280; [1923] 1 KB at pp 223–225.):

“The question whether a third party can counterclaim against the defendant requires careful consideration, because BOWEN, L.J., when deciding, in Eden v. Weardale Iron and Coal Co., that a third party could not counterclaim against the original plaintiff, said ((1884), 28 ChD at p 338.): ‘If the application had been for leave to the third party to counterclaim against the defendant, I should have desired to consider the question. It appears to me an open question whether the court could have given leave.’ It is important to keep clearly in mind what the third-party procedure is. A plaintiff has a claim against a defendant. The defendant thinks that if he is liable, he has a claim over against a third party. With that matter between the defendant and the third party the plaintiff has clearly nothing to do, not being concerned with the question whether the defendant has a remedy against somebody else. His remedy is against the defendant. But the defendant is much interested in getting the third party bound by the result of the trial between the plaintiff and himself, for otherwise he might be at a great disadvantage if, having fought the case against the plaintiff and lost, he had then to fight the case against the third party possibly on different materials, with the risk that a different result might be arrived at. The object of the third-party procedure is therefore, in the first place, to get the third party bound by the decision given between the plaintiff and the defendant. In the next place, it is directed to getting the question between the defendant and the third party decided as soon as possible after the decision between the plaintiff

[1968] 1 All ER 753 at 756

and the defendant, so that the defendant may not be in a position of having to wait a considerable time before he establishes his right of indemnity against the third party while all the time the plaintiff is enforcing his judgment against the defendant. And, thirdly, it is directed to saving the extra expense which would be involved by two independent actions. With these objects in view the third-party order usually provides that the third party may appear at the trial between the plaintiff and the defendant. When the third party has so appeared, as party to the proceedings, various questions arise as to what he can do. Can he counterclaim against the plaintiff? The answer is ‘No’, for such a counterclaim would have nothing to do with the issue in the action to which he is admitted as a party—Eden v. Weardale Iron and Coal Co.. Can he interrogate the plaintiff? The answer is ‘Yes’, if the object of the interrogatories is to show that the plaintiff’s claim against the defendant cannot be supported—Eden v. Weardale Iron and Coal Co.. I remember in one case in which I was counsel the third party was, on the same principle, allowed to raise a defence on behalf of the defendant which the defendant would not raise on his own behalf. When it has been ascertained that the defendant is liable to the plaintiff the next step is to try, in such manner as the judge may direct, the question between the defendant and third party. The defendant says, ‘You owe me so much by way of contribution or indemnity’. How may the third party defend himself? Of course he may deny that he is under any such liability at all. But he may admit his liability and say that he has a cross-claim against the defendant which prevents any effective judgment being given against him. He may say, ‘Your right to contribution will result in £100 being due from me to you, but I have a set-off in another matter in respect of which £100 will be due from you to me’. Or, again, he may, while admitting his liability to contribution, say that he has a claim against the defendant which cannot be made the subject of a set-off but will result in the defendant having to pay him so many pounds. It seems to me that the proper view to take on this part of the third-party procedure is that taken by COZENS-HARDY, L.J., in McCheane v. Gyles([1902] 1 Ch 287 at p 301.)—namely, that ‘The Act, therefore, treats the third party procedure

The other member of the court was Eve J. He gave a short judgment, saying ([1922] All ER Rep at pp 280, 281; [1923] 1 KB at pp 225, 226.):

“I agree. I respectfully agree with the view expressed in McCheane v. Gyles that the Judicature Act, by which the third-party procedure was created, treats that procedure ‘as analogous to a cause instituted by the defendant as plaintiff against the third party’. It is clear that the service of the third-party notice does not make the person on whom it is served a defendant to the action, but it seems to me that it does make him a defendant quoad the person serving the notice. That seems to be the reasonable view to take, because the main object of the procedure was to obviate the need for two actions. In the main action the rights of the plaintiff and the defendant are determined without reference to the defendant’s claims over against the third party, but when those rights have been ascertained it is then open to the person brought in by the third-party notice to have all relevant disputes determined between him and the person serving the notice. I think that a

[1968] 1 All ER 753 at 757

third party being in the position of a defendant in relation to the person who served the notice, is entitled to counterclaim against him.”

On behalf of the second defendants it was contended that this ruling has no application where the third-party is already a defendant. No reason was suggested why the law should so distinguish. It is said to follow from the wording of RSC, Ord 16, r (3), as contrasted with r 1(3) of the same order. Rule 1(3) is the rule which provides for the service of a third-party notice on a person who is not already a party to the action, and provides:

“Where a third party notice is served on the person against whom it is issued, he shall as from the time of service be a party to the action (in this order referred to as a third party) with the same rights in respect of his defence against any claim made against him in the notice and otherwise as if he had been duly sued in the ordinary way by the defendant by whom the notice is issued.”

Rule 8 is the rule which enables a similar notice to be served on a person who is already a party to the proceedings, and r 8(3) provides as follows, and I shall omit the references to “appearances” which form part of the sub-rule. The relevant part is this:

”… the same procedure shall be adopted for the determination between the defendant by whom, and the person on whom, such a notice is served of the claim, question or issue stated in the notice as would be appropriate under this order if the person served with the notice were a third party … “

What is pointed out on behalf of the second defendants is that, whereas under r 1(3) there are conferred on the third party the same rights “in respect of his defence … and otherwise” as if he had been sued in the ordinary way, all that is provided by r 8(3) is the procedure for determination of “the question or issue stated in the notice”—and it is suggested that the latter sub-rule does not give the person on whom the third-party notice is served all the rights which an ordinary defendant would have, including the right of counterclaim, but gives strictly only rights of defence in respect of the particular claim made on him. It is argued that the right to counterclaim in the case of the ordinary third party is derived from the words “and otherwise” in the sub-rule relating to him. I cannot believe that it was intended by the use of those words “and otherwise” to make a wholly meaningless difference between the two kinds of third party. In my view, the right to counterclaim does not arise under the word “otherwise” in r 1(3), but under the word “defence“. It will be clear from the passage that I read from the judgment of Scrutton LJ in the Barclays Bank case ([1922] All ER Rep at pp 279, 280; [1923] 1 KB at pp 223–225.) that he based his decision on the view that the counterclaim was a manner of defending the claim made against the third party.

For these reasons, I hold that there is jurisdiction to entertain the counterclaim.

Counsel for the second defendants goes on to say that, in the event of my holding that there is jurisdiction in the court to entertain a counterclaim, nevertheless there is clearly jurisdiction to strike out the counterclaim if it would be convenient to do so, and reliance is placed here on RSC, Ord 15, r 5(2), which provides that

“If it appears on the application of any party against whom a counterclaim is made that the subject-matter of the counterclaim ought for any reason to be disposed of by a separate action, the court may order the counterclaim to be struck out or may order it to be tried separately or make such other order as may be expedient.”

Counsel for the second defendants invites me to say that, under that rule, there is a discretion to strike out the counterclaim, or to order separate trials, and I ought to exercise my discretion in one or other of those ways in relation to para 4

[1968] 1 All ER 753 at 758

and para 6, but not para 5, of the counterclaim. Counsel for the second defendants concedes that, once it is held that there is jurisdiction for the third defendants to counterclaim against the second defendants, it is convenient that the issue raised by their para 5 should be tried along with the other issues in this case. But in relation to the claim for the £4,444 odd, it is contended that it would be inconvenient and unjust that that should be allowed to stand and be tried along with or immediately after the main action. I am satisfied there is a discretion in the court in the matter under the rule that I have just read, and, therefore, the question is, how should my discretion be exercised?

The £4,444 odd is the balance of account not merely for one crane which was involved in this accident, but for sixteen cranes which were erected by the third defendants under their contract with the second defendants. There is, on the face of it, no connexion between this claim and the issues raised in the action or by the third-party notice, and, consequently, it is not, to use Eve J’s language ([1922] All ER Rep at p 281; [1923] 1 KB at p 225.), a “relevant” counterclaim. The third defendants say, however, that the only possible answer that they know of for recovering this money is by way of a cross-claim for defective workmanship and that this forms a link with the action. This raises the question whether, if the third defendants’ counterclaim is allowed to stand, the second defendants can counterclaim against them for damages. If not, it would clearly be inequitable that the present counterclaim should be allowed to stand. It is clear that, when a defendant counterclaims against a plaintiff, there is a right for the plaintiff to counterclaim against the defendant’s counterclaim. In this connexion, it is convenient to look first at a case which was decided under the old Rules of the Supreme Court, namely, Renton Gibbs & Co Ltd v Neville & Co. In that case, a counterclaim against a counterclaim was allowed. The leading judgment was given by Collins LJ who said ([1900] 2 QB at pp 185–187.):

“It has been argued that a counterclaim cannot be set up by a plaintiff in his reply, and that the rule do not contemplate such a case. In support of that view reference is made to James v. Page, a case only noticed in the Law Times. An incidental observation on that case is that what was there set up was a counter-claim properly so called—a counterclaim used not as a shield but as a sword. It is contended on behalf of the defendants that the plaintiffs must submit to have their counterclaim struck out, and that their proper course is to introduce the subject-matter of their counterclaim into the statement of claim as an alternative original cause of action. It is clear that it would be inequitable to allow the defendants to have the benefit of their counterclaim free altogether from the matters raised in the reply. The question is whether the rules are so framed as to necessitate the putting of the parties to the unnecessary expense of beginning the pleadings de novo. What would be the result if they had to do this? The plaintiffs do not want to rely on the contract upon which the defendants base their counterclaim, and indeed they deny that it is binding on them. If they are bound to deal with the contract in their statement of claim, they would be embarrassed by having to set up a cause of action, whose existence they deny, inconsistent with and hampering their real cause of action. In that state of circumstances it would be an obvious injustice to the plaintiffs to oblige them to introduce this question under the contract into the statement of claim by an amendment. The natural place for it is in the reply in which it is now found. In this way the plaintiffs, in dealing with the counterclaim under the contract, can deny their liability on the ground that the contract is not binding on them, and can add that, if they are liable, then and only then do they claim to shield themselves from the result of that liability by claiming unliquidated damages from the defendants arising out of an alleged breach of the contract by them. I do not think that we are prevented from allowing the plaintiffs so

[1968] 1 All ER 753 at 759

to shape their case. Toke v. Andrews establishes a principle which abundantly justifies us in affirming the decision of the learned judge. In that case the action was brought for rent in arrear. Before delivery of a statement of defence the tenancy was determined, and thereupon a claim arose to the defendant as outgoing tenant, and another quarter’s rent became due to the plaintiff. In answer to the claim in the action the defendant set up a counterclaim on an outgoing valuation to a larger amount than the rent claimed. To that counterclaim the plaintiff in his reply set up a counterclaim for the further quarter’s rent accrued since the action commenced. There was no machinery in that case any more than there is in this for effecting that under the rules; but FIELD, J., and HUDDLESTON, B., held that it would be an injustice to the plaintiff if he were obliged to submit to the counterclaim overtopping the amount claimed in his statement of claim. It was held that, looking at the wide language of sub-s. (3), s. 24, of the Judicature Act, 1873, and sub-s. (7) of the same section, it was impossible to say that a matter upon which, if well founded, the plaintiff was clearly entitled to relief as against the defendant’s counterclaim was not within the words and the spirit of the enactment, or to hold that such a matter was not properly brought forward at the only stage and in the only manner in which it could be raised. That is practically the state of affairs in the case before us, because it would be unjust to the plaintiffs to make them set up as a claim that which they only want as a defence and a shield to the counterclaim. In my opinion the order of PHILLIMORE, J., was right, and the appeal must be dismissed;”

and Romer LJ ([1900] 2 QB at p 187.) gave judgment to the same effect. So at that time it is clear that a counterclaim against a counterclaim could be allowed, but, on the basis as indicated by Collins LJ that it was permissible as a shield rather than as a sword, that is to say, that it could be used only to such extent as might be necessary to defeat the counterclaim of the defendant, but not by way of claiming something against the defendant over and above the amount for which he was counterclaiming.

It would, however, appear that this limitation has now disappeared in relation, at any rate, to a counterclaim and cross-counterclaim as between plaintiff and defendant. This emerges from RSC, Ord 15, r 2, which provides:

”(1) Subject to r. 5(2), a defendant in any action who alleges that he has any claim or is entitled to any relief or remedy against a plaintiff in the action in respect of any matter (whenever and however arising) may, instead of bringing a separate action, make a counterclaim in respect of that matter; and where he does so he must add the counterclaim to his defence.

”(2) Rule 1 shall apply in relation to a counterclaim as if the counterclaim were a separate action and as if the person making the counterclaim were the plaintiff and the person against whom it is made a defendant.”

So the effect of that is clearly to give an express right to a plaintiff to counterclaim against a counterclaim, and a note in The Supreme Court Practice 1967, p 145, with the side note “15/2/5”, interprets the rule in that way, because it reads:

“Counterclaim to a counterclaim. Paragraph (2), supra, adopts and probably extends the previous law, and enables the plaintiff to raise a counterclaim to the counterclaim raised by the defendant against him, even though the plaintiff’s counterclaim may be more than a mere protection against the defendant’s counterclaim … “

and then it mentions a separate point. Does this apply to third party proceedings of the type with which I am concerned? I think that it does. In my view, the effect of RSC, Ord 16, r 8(3), which I have already read, is to throw one back to look at r 1(3) of the same order, and that, in turn, throws one back to RSC, Ord 15, r 2, and, therefore, in my view, the second defendants would be

[1968] 1 All ER 753 at 760

entitled to counterclaim against the third defendants’ counterclaim and to counterclaim not merely so much as was necessary to defeat the third defendants’ counterclaim, but to counterclaim the whole of their damages. That is a view about which, I may say, I have had some doubt. I was very much inclined at one stage to the contrary opinion, but, in the end, I have reached the conclusion that that is the true view of the law.

I must, therefore, envisage that, if the present counterclaim is allowed to stand, there will be a counterclaim against it by the second defendants which has some connexion with the original action. However, the area of dispute between the second and third defendants would be greatly enlarged, expensive discovery ranging over the whole of the business between those two parties relating to all the sixteen cranes would be needed, and inevitably there would be delay, and it may well be substantial delay, in bringing the action to trial. This particularly affects the plaintiffs, who support this appeal. They point out that it is nearly two years since the accident in which their ship was damaged. They issued their writ promptly, they have proceeded with their steps in the action with reasonable expedition, discovery is nearly complete, and they will shortly be asking for a date for the action to be tried. They are clearly entitled to damages against somebody, and why should they suffer delay while matters which have no connexion with that claim are investigated? I think that this is an important objection to allowing the counterclaim to stand. Other inconveniences were suggested which made less impression on me. One was that the length of the hearing would be much increased if the counterclaim were allowed to stand. This could, perhaps, be avoided if the third party issues were tried immediately after the trial of the action instead of along with it, a course which would be in accordance with the existing order for directions. Another point made is that the second defendants’ solicitors are instructed by insurers under a policy which covers their liability to the plaintiffs, but not any liability to the third defendants. I do not attach much importance to this. It is a situation which arises whenever a defendant is insured in respect of a plaintiff’s claim but has a counterclaim in which the insurers are not interested. A point made by counsel on behalf of the first defendants was that there are other claims, or possible claims, between these various parties. If the third defendants are allowed to counterclaim against the second defendants for the balance of their account, and if the second defendants can then counterclaim against the third defendants for damages for negligent performance of the whole contract, what of the first defendants’ claim for their damaged crane against the second and third defendants? Then, the crane driver was injured and may sue the first defendants as his employers. Ought they to be allowed to make a claim over in these proceedings against the second and third defendants? Further enlargement of the scope of the proceedings in these various ways is clearly undesirable.

However, I think that the present issue should be decided without speculating as to what course other defendants might take hereafter. It does seem to me, for the reasons which I have indicated, that the prospect of delay, with its inconvenience to the plaintiffs, and the prospect of making these proceedings very complicated, are good reasons for removing para 4 and para 6 of this defence and counterclaim unless there is some really good reason why they should be allowed to stand. I cannot see that there would be any injustice or inconvenience to the third defendants in removing this part of their present counterclaim. Their claim can perfectly well be tried in a separate action, and I look at what was said by Scrutton LJ in the Barclays Bank case ([1922] All ER Rep at pp 279, 280; [1923] 1 KB at pp 223–225.) about the objects of third party procedure, which seem to me to be equally applicable to the case of a counterclaim arising in third party proceedings, and he mentioned three objects. The first of them was to get the third party bound by the decision between the plaintiff and the defendant. That does not arise here. All these defendants are already

[1968] 1 All ER 753 at 761

parties to the plaintiffs’ suit, and, on the basis of the existing pleadings, including the third-party notice and para 5 of the third defendants’ counterclaim, the issues will be decided in a way which will be binding on all those concerned. The next object referred to by Scruttion LJ was to get the question between the defendant and the third party decided as soon as possible after the decision between the plaintiff and the defendant so that the defendant may not be in a position of having to wait a considerable time before he establishes his right to indemnity. That is a point which arises only when it is a question of indemnity or, of course, of contribution, and that is already covered by the third party notice itself and the counterclaim in para 5. Thirdly, says Scrutton LJ there is the question of saving extra expense which would be involved by two independent actions. It seems to me highly improbable that any great expense would be caused by separate actions here. There will be the trivial expense of issuing a fresh writ, but I should have thought that, if anything, expense will be saved by having a comparatively simple form of action running alongside, or subsequent to, the existing action rather than complicating the existing action with the addition of this part of the counterclaim. The only conceivable injustice which I can see that could arise in relation to the third defendants would be if judgment were given against them in favour of the second defendants for contribution and if that judgment were enforced before the third defendants had had an opportunity of having tried their claim for balance of account. That matter can easily be dealt with by means of a stay of execution if it does happen that the second defendants get judgment against them for some contribution, and I have no doubt that any court would grant such a stay if informed that the action on the balance of account was pending.

The third defendants contend that a good reason for allowing the counterclaim to stand is that there is one main question in these proceedings, namely, whose fault was it that certain defects in the crane which caused the accident were there and were allowed to continue to be there? They say that, once this question is determined, there will be no real dispute about anything else except the quantum of damages. That may or may not be so. I do not yet know whether the second defendants accept the third defendants’ claim for balance of account, subject to the counterclaim, and I do not know whether, if it is once established who was responsible for the defects in this particular crane, this will determine whether the third defendants were guilty of defective workmanship in regard to the other cranes. Counsel for the third defendants says: “Let the counterclaim stand. Let the second defendants plead to it and then at that stage, or after discovery, let somebody apply under RSC, Ord 15, r 5(2), if necessary for a separate trial.” I do not accede to this proposal for several reasons. First, if I am wrong in my view that the second defendants can counterclaim their damages in full against the third defendants, then it would follow that it would be wrong for the third defendants’ counterclaim to stand. It would be most unfortunate if I allowed it to stand and at a later stage some other court were to hold the second defendants’ right to counterclaim was limited to using it as a shield against the third defendants’ claim for balance of account.

Next, if the question enunciated by counsel for the third defendants is really the only question of substance in this litigation, it will be determined as between the second and third defendants on the existing pleadings; it will then be res judicata and there will be no danger of two courts coming to different conclusions on the same issue. Next, I cannot see any practical disadvantage to the third defendants in proceeding by separate action. They can issue their writ tomorrow with their claim specially endorsed on it, and, if they serve it at once, the second defendants’ time for defence will expire almost as soon as if I gave them twenty-one days from today. I cannot accept that proceedings by way of counterclaim would produce any acceleration of the hearing of the issue raised by them; and delay in bringing on the plaintiffs’ action for trial would probably be caused if it was left uncertain today whether the wider issues were to be

[1968] 1 All ER 753 at 762

tried along with or immediately after it, or were at some later stage to be given a separate trial or struck out. Finally, again because of the doubt which remains in my mind about the scope of a counterclaim on a counterclaim, and because I see little or no advantage in directing separate trials over striking out the paragraphs in question, I think that the better course is to strike them out.

I, therefore, allow the appeal and direct that para 4 and para 6 of the third defendants’ counterclaim to the second defendants’ third party notice be struck out.

Solicitors: Bentleys, Stokes & Lowless (for the plaintiffs); John Rigby, British Transport Docks Board (for the first defendants); Clyde & Co (for the second defendants); Beddington, Hughes & Hobart (for the third defendants).

N P Metcalfe Esq Barrister.

[Inherent Jurisdiction of the Court] Bremer Vuklan Schiffbau und Maschinenfabrik v South India Shipping Corp

Actions

By a writ dated April 25, 1977, the plaintiffs in the first action, Bremer Vulkan Schiffbau und Maschinenfabrik (a body corporate), sought an

[1981] A.C. 909 Page 915

injunction restraining the defendants, South India Shipping Corporation Ltd., by themselves or their agents from proceeding with, pursuing or taking any further step in a reference to arbitration, wherein the defendants were claimants and the plaintiffs were respondents, commenced pursuant to an arbitration clause in a contract between the parties dated August 6, 1964. Alternatively, they sought a declaration that the arbitrator had power to make and issue a final award in the reference dismissing the claim on the grounds only that the defendants had failed to prosecute their claims in the reference with diligence and had been guilty of gross and inexcusable delay causing serious prejudice to the plaintiffs and/or that the dispute could not fairly be tried at the likely time of hearing.

In the second action, by a writ dated December 1, 1978, the plaintiffs, Newton Gregg, Lucile Gregg and Malcolm Kelly, sought an injunction against the continuance of an arbitration commenced by the defendants, Raytheon Ltd., against the plaintiffs and which concerned disputes arising out of a contract between the plaintiffs and the defendants dated June 2, 1970, by reason of the defendants’ inordinate and inexcusable delay in prosecuting the arbitration, and for a declaration that the arbitrators in the arbitration had power to strike out the defendants’ claim therein for want of prosecution.

The facts are stated in the judgment.

Kenneth Rokison Q.C. and David Grace for the plaintiffs in the first action.

Cur. adv. vult.

APRIL 10.DONALDSON J. gave the following written judgment. These two actions raise issues of fundamental importance to English arbitration. In each case the plaintiffs are the respondents in arbitrations initiated by the defendants. The plaintiffs contend that the conduct of the defendants has been such that had their claims been the subject matter of litigation, the court would have dismissed the claims for want of prosecution. They further contend that in such circumstances the court can and should enjoin the defendants from further proceeding with the arbitrations. Further or alternatively, they seek a declaration that the arbitrators have power to issue a final award dismissing the defendants’ claims. So far as I or counsel know, the claim for an injunction is completely novel and the contention that arbitrators have power to dismiss claims for want of prosecution has only once been considered by the courts. This occurred in Crawford v. A. E. A. Prowting Ltd. [1973] Q.B. 1, when Bridge J. held that arbitrators had no such power.

I mention this dearth of authority not as casting doubt upon the validity of the plaintiffs’ submissions, but as showing their importance. The novelty of submissions must always cause a court to consider with

[1981] A.C. 909 Page 916

particular care whether (a) the contention is so obviously correct that no one has ever seen fit to challenge it, (b) it is so obviously wrong that no one has ever before thought to put it forward or (c) it has surfaced for the first time because the law is in one of its evolutionary stages But it has no other significance. In the present case I have little doubt that the explanation is that in this, amongst other fields, the law is in a state of active evolution responding to the changing needs of the times.

Let me start by considering the law as it applies to litigation. It has developed considerably in the last 12 years and the guidelines which are to be applied are now mainly to be found in two cases: Birkett v. James [1978] A.C. 297 and Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229. However, assistance is also obtained from County & District Properties Ltd. v. Lyell, July 12, 1977; Court of Appeal (Civil Division) Transcript No. 314 of 1977 and President of India v. John Shaw & Sons (Salford) Ltd, The Times, October 28, 1977. These guidelines can, I think, be summarised as follows:

1. The power to dismiss for want of prosecution should be exercised only where the court is satisfied either that:

A. the default has been intentional and contumelious, e.g., disobedience to a peremptory order of the court or conduct amounting to an abuse of the process of the court;

OR B. (i) there has been inordinate and inexcusable delay on the part of the plaintiff or his lawyers, and (ii) such delay (a) either will give rise to a substantial risk that it is not possible to have a fair trial of the issues in the action, (b) or is such as is likely to cause or to have caused serious prejudice to the defendants either as between themselves and the plaintiff or between each other or between them and a third party.

2. Only in exceptional cases should an action be dismissed before the relevant limitation period has expired, at least if it is likely that the plaintiff will issue a new writ.

3. As Parliament has conferred a legal right on plaintiffs to institute proceedings at any time within the relevant limitation period, the action of a plaintiff in delaying for almost all or any part of that period cannot be relied upon as constituting inordinate or inexcusable delay. Nor, without more, can the defendant rely upon this delay as having caused him prejudice or as giving rise to a risk that there can be no fair trial. But such delay is far from being irrelevant. It will have an important bearing on the degree of expedition which is required of the plaintiff once the proceedings have been instituted, although again he will be entitled to the benefit of the time table provided by the Rules of the Supreme Court. Delay in the course of the proceedings which would have been acceptable if they had been begun promptly, may become inordinate and inexcusable if it occurs after a late start. Similarly, whilst the defendant must show prejudice flowing from delay in the course of the proceedings, the degree of prejudice created by any given period of delay may be greatly heightened if proceedings were not begun promptly. Contrary to legend, it was not the last straw which broke

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the camel’s back. It was the addition of that straw. The defendant must show that straws of the appropriate kinds were heaped upon his back during the course of the proceedings, but the court must have regard to the load which he was already carrying when the proceedings began.

4. Prejudice to the defendant can take many forms. Lapse of time may affect the ability of the defendant to marshal the evidence which would have been available to him at an earlier time. Thus witnesses may die, become untraceable or their recollections may dim. Again they may retire or leave the defendant’s employment, depriving them of the personal interest which they might otherwise have had in the proceedings and tending to reduce the enthusiasm with which they search their recollections. But prejudice is not limited to matters of recollection and evidence. The very fact of having a large unquantified claim hanging over the head of the defendant for a long period may itself be highly prejudicial.

5. The defendant will lose his right to have the action dismissed if he induces in the plaintiff a reasonable belief that, notwithstanding the delay, he is willing for the action to proceed and, in consequence, the plaintiff does work or incurs expense in the further prosecution of the action. But the right may be revived by further delay. As Diplock L.J. said in Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229, 260, in such circumstances the defendant cannot obtain dismissal of the action “unless the plaintiff has thereafter been guilty of further unreasonable delay.” Salmon L.J. in the same case at p. 272 said that the defendant “will be precluded from relying on the previous delay by itself as a ground for dismissing the action.” This has led to an interesting discussion in the present case on whether, following acquiescence in the plaintiff’s delay, the defendant can rely upon that delay for any purpose. The extreme view is that he cannot. He must show inordinate and inexcusable delay following the acquiescence and must further show prejudice following from that delay. I do not think that this is right.

Much will turn upon the nature of the acquiescence. For example, if the defendant by words or conduct leads the plaintiff to believe that he is content that matters shall drift on unless and until he indicates that he wishes the dispute to be brought to trial, the plaintiff will be entitled to take his time. It will not then be open to the defendant to complain of subsequent delay until he has given notice to the plaintiff that time is of the essence and thereafter further delay has occurred. But a more usual situation is one in which the defendant shows that he is prepared to overlook previous inordinate and inexcusable delay and any prejudice caused thereby, if the plaintiff will now bring the matter to trial with expedition. If the plaintiff still drags his feet, it may be said that the condition upon which the acquiescence is based has not been fulfilled and that the defendant is entitled to rely upon all delay and prejudice, whether occurring before or after the acquiescence. An alternative view is that in such circumstances the defendant must show some delay and prejudice following the aquiescence, but that the extent of delay and prejudice which will give rise to a fresh right to have the

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action dismissed will be influenced greatly by events prior to the acquiescence.

I doubt whether it is possible to lay down any rule of general application. Acquiescence in delay is not a permanent bar to a subsequent successful application for an order dismissing the action for failure to prosecute it. Each case will have to be considered in the light of its own particular facts, the court asking itself the question: “Bearing in mind the conduct of the defendant, is it just and equitable in all the circumstances that the plaintiff shall be denied a trial of his action on its merits?”

6. Mere inactivity upon the part of a defendant is not to be construed as acquiescence in delay by the plaintiff. “… sleeping dogs, in the form of sleeping plaintiffs, need not be aroused by defendants from their slumbers;”: see per Roskill L.J. in Compagnie Francaise de Télévision v. Thorn Consumer Electronics Ltd. [1978] R.P.C. 735, 739. The reasons underlying this attitude by the courts were discussed by Diplock L.J. in Allen v. Sir Alfred McAlpine and Sons Ltd. [1968] 2 Q.B. 229, 257- 258. His conclusion was that it was inherent in an adversary system of litigation, which relied exclusively upon the parties to an action to take whatever procedural steps appeared to them to be expedient to advance their own case, that a defendant could, with propriety, refrain from spurring the plaintiff to proceed to trial and then, if the facts otherwise justified such a course, apply to have the action struck out for want of prosecution.

I now turn to consider whether these guidelines have any application in the control of arbitration. Whether an arbitrator had power to dismiss a claim for want of prosecution was considered by Bridge J. in Crawford v. A. E. A. Prowting Ltd. [1973] Q.B. 1. It was a small building dispute. The contract to build the house was made in 1960, points of claim were served in May 1966 and discovery was completed in October 1966. The builders sought further and better particulars of the claim, but in vain. In January 1968, there was an appointment for directions, but the arbitrator “made no order and it was left to the parties to arrange a fresh appointment to fix a date for the hearing.” Neither party arranged a fresh appointment and in November 1970, the builders applied to the arbitrator to dismiss the claim for want of prosecution. The arbitrator refused this application and stated a case for the opinion of the court. That special case was in many respects inadequate, but it was sufficient to raise the issue of principle.

Bridge J. held that arbitrators had no power to dismiss claims for want of prosecution. He said, at p. 7, that the argument to the contrary rested upon the assumption

“… that in an arbitration, as in proceedings in court, and apart from any express obligation being put upon him, there is a duty upon the claimant to the exclusion of the respondent to promote the progress of the arbitration and correspondingly it is assumed, as the basis of Mr. Scott’s argument, that the respondent to the arbitration can sit by and do nothing, letting the sleeping claimant dog lie until he

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is ready to wake him up with his application to dismiss for want of prosecution.”

The judge then referred to the remarks of Diplock L.J. in Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229 and having said (no doubt correctly) that the court in that case did not have the conduct of arbitrations in contemplation, expressed the view:

“… there is a fundamental difference between the nature of the duties upon the parties in relation to interlocutory progress in an action on the one hand and in an arbitration on the other.”

He supported this conclusion by contrasting the position under the Rules of the Supreme Court, which he said put the onus of keeping the litigation moving fairly and squarely on the plaintiff, with the position in arbitration where, although there may be a heavier duty on the claimant to pursue his claim than on the respondent to take steps for his part:

“… nevertheless it is for both parties, having agreed that the arbitrator shall resolve their differences, to obtain from the arbitrator such interlocutory directions as are appropriate to enable the matter to be prepared for trial.”

He concluded that the respondents’ remedy lay in seeking an interlocutory order from the arbitrator requiring the claimant to take some step, such as delivering points of claim, and in default of compliance, seeking an ex parte hearing of the claim.

This decision is not binding upon me and, with all respect to Bridge J., I do not think that it is right. Arbitrations vary greatly in their character from major proceedings which are wholly indistinguishable from a heavy High Court action to disputes on the quality of commodities (the “look-sniff” arbitration). But so do actions. Actions prosecuted under the small claims procedures in the county courts are indistinguishable from similar claims determined by arbitration under the auspices of the motor, building or travel industries or by so-called small claims courts, which are in fact not courts but arbitral bodies. With the sole exception of the look-sniff arbitration, all employ the adversary system. In saying this, I am not overlooking the fact that section 12 (1) of the Arbitration Act 1950 gives the arbitrator power to examine the parties on oath or affirmation. This power is essential in any proceedings in which the parties may be unrepresented and a similar power is, in effect, exercised by judges in the county court every day of the week. Nor is it to be thought that a court is powerless to take the initiative itself in order to ensure that proceedings make progress. The National Industrial Relations Court did so frequently and I have recently threatened to list a case of my own motion, because it is being incorrectly reported in the press that this court is dragging its feet in fixing a date for the hearing. The only real difference between litigation and arbitration is that, in the case of litigation, rules of court provide a basic time table for taking interlocutory steps. In the case of arbitration, there is no such basic time table unless it is provided by relevant arbitration rules, by agreement of the parties or by order of the arbitrator. But this does not mean that

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there is no obligation upon the claimant to pursue his claim with reasonable dispatch. Indeed, in so far as one of the advantages claimed for arbitration is that it leads to a speedier resolution of disputes, there may well be a heavier onus on the parties to arbitration to use expedition than there is upon parties to litigation. And I say “parties” rather than “plaintiffs and claimants,” because it is not correct that the onus in litigation is always on the plaintiff. There are times, for example, after delivery of a statement of claim, when the onus is upon the defendant. The same is true of arbitration.

The suggestion that the respondents’ remedy in arbitration lies in obtaining an order for the delivery of points of claim and, in default, seeking an ex parte hearing of the claim seems to me to require careful examination. If there has been inordinate and inexcusable delay which causes serious prejudice to the respondent and a fortiori if it has been such as to render a fair trial impossible, any requirement that before an order is made summarily terminating the proceedings the arbitrator must first make an interlocutory order, such as to deliver points of claim, with which the claimant can comply would, in the words of Salmon L.J. in Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229, 270 “be an encouragement to the careless and lethargic.” And what happens if the claimant does not comply with the order? It is clear law that the arbitrator can proceed ex parte if one of the parties, having been duly summoned, does not attend: see Wood v. Leake (1806) 12 Ves. Jun. 412. But what if he does attend and wishes to present his case. Can the arbitrator refuse to allow him to do so? Unless there is power to dismiss the claim for want of prosecution I do not think that he could. And if he could not, the respondent would be at a hopeless disadvantage.

The power of the courts derives from statute and their inherent jurisdiction. The power of arbitrators derives from statute and from a consensual conferment of jurisdiction by the parties when agreeing to submit disputes to arbitration. There are at present no statutory provisions which are directly material. The question is therefore what jurisdiction is impliedly conferred by the parties on the arbitrator. This was considered by the Court of Appeal in the context of a power to award interest on damages in Chandris v. Isbrandtsen-Moller Co. Inc. [1951] 1 K.B. 240. The headnote to the report reads:

“… the power of an arbitrator to award interest was derived from the submission to him, which impliedly gave him power to decide ‘all matters in difference’ according to the existing law of contract, exercising every right and discretionary remedy given to a court of law;…”

Although the decision is in terms limited to the power to award interest, I think that the generality of this part of the headnote is justified. Thus Tucker L.J. said, at pp. 251-262:

“For myself, I cannot see why any distinction should be drawn between the duty of an arbitrator to give effect to such statutes as the Statute of Limitations and his jurisdiction to give effect in his

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discretion to the award of interest. After all, an award of interest is only a part of the damages recoverable, and, to adapt the words of Lord Salvesen in the Ramkissendass case [1929] W.N. 27 which were approved by Lord Maugham, they would read as follows: ‘Although the Law Reform (Miscellaneous Provisions) Act 1934 does not in terms apply to arbitrations, I think that in mercantile references of the kind in question it is an implied term of the contract that the arbitrator must decide the dispute according to the existing law of contract, and that every right and discretionary remedy given to a court of law can be exercised by him.’ To that there are, of course, certain well-known exceptions, such as the right to grant an injunction, which stand on a different footing; one of the reasons why an arbitrator cannot give an injunction is, of course. that he has no power to enforce it; but such an objection does not apply to the award of interest.”

Whilst it is always open to the parties to agree to curtail the arbitrator’s jurisdiction, other than his power to state an award in the form of a special case for the opinion of the High Court or in any other respects which are contrary to law, if this is not done I think that an arbitrator has the same power as do the courts to make peremptory orders which provide that, in default of compliance, the claim will be dismissed or, as the case may be, the respondent will be debarred from defending and also of making orders dismissing a claim for want of prosecution. Courts and arbitrators are in the same business, namely, the administration of justice. The only difference is that the courts are in the public and arbitrators are in the private sector of the industry. Their problems are the same and so should be the solutions which they adopt. In my judgment, parties who submit disputes to arbitration impliedly clothe the arbitrators with jurisdiction to give effect to their rights and remedies to the same extent and in the same manner as a court, subject only to the well-known exception in relation to injunctive orders and the grant of a remedy, such as rectification, which would indirectly extend their own jurisdiction.

The next question is whether the courts can intervene and enjoin a claimant from further proceeding with an arbitration in a situation in which, if the problem arose in litigation, they would dismiss the claim for want of prosecution. The supervisory jurisdiction of the courts in respect of arbitration is limited. In appropriate cases they can and will require an arbitrator to state a question of law arising in the course of a reference or an award or part of an award for their decision under section 21 (1) of the Act of 1950. They can and will remit an award for further consideration by the arbitrator or set it aside under sections 22 or 23 of the Act. They can and will give leave to a party to revoke the authority of the arbitrator under section 24 of the Act. But they will not substitute their discretion for that of the arbitrator, by ordering him to allow amendments to pleadings of otherwise reversing his interlocutory orders: Exormisis Shipping S.A. v. Oonsoo[1975] 1 Lloyd’s Rep. 432.

But there is another class of case in which the courts will intervene

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in arbitration proceedings. Although they may appear to be exercising a supervisory jurisdiction, that is not in fact the case. I refer to the jurisdiction to intervene by injunction to prevent a party proceeding with an arbitration where the agreement to refer is itself being impeached. The leading case is Kitts v. Moore [1895] 1 Q.B. 253, in which the plaintiff was denying that he had ever entered into an arbitration agreement hut the principle applies wherever the agreement is impeached, whether on grounds of fraud, mistake or otherwise: see Malmesbury Railway Co. v. Budd (1876) 2 Ch.D. 113 and Beddow v. Beddow (1878) 9 Ch.D. 89. And it is not infrequently exercised in the commercial court to this day when, for example, a plaintiff alleges that the agent who purported to commit him to a purchase of a commodity under a contract containing an arbitration clause had no authority to act on his behalf or where it is alleged that there is no agreement to arbitrate because the parties were not ad idem on the terms of the alleged contract which contains the arbitration clause: see Sociedade Portuguesa de Navios Tanques Limitada v. Hvalfangerselskapet Polaris A/S [1952] 1 Lloyd’s Rep. 407, and also Russell on Arbitration, 18th ed. (1970), pp. 79-80.

It has been objected in the present case that this is contrary to the decisions of the Court of Appeal in North London Railway Co. v. Great Northern Railway Co. (1883) 11 Q.B.D. 30, which was followed in London and Blackwall Railway Co. v. Cross (1886) 31 Ch.D. 354. I confess that I find these cases difficult to understand, although, for what they may decide, this does not render them any less binding upon me.

In the earlier case of Beddow v. Beddow, 9 Ch.D. 89, 93, Sir George Jessel M.R. granted an injunction restraining an arbitrator from proceeding with the arbitration upon the grounds that he was unfit or incompetent to act. He considered the limits of the court’s jurisdiction under section 25 of the Judicature Act 1873 and held that he had:

“… unlimited power to grant an injunction in any case where it would be right or just to do so: and what is right or just must be decided, not by the caprice of the judge, but according to sufficient legal reasons or on settled legal principles.”

In doing so he was affirming his earlier expression of opinion in Malmesbury Railway Co. v. Budd, 2 Ch.D. 113. Both those decisions were considered in the North London Railway case, 11 Q.B.D. 30. Brett L.J. held that the section did no more than extend the jurisdiction of any division of the High Court to all divisions. The position had previously been and remained that no court could issue an injunction where there was “no legal right on the one side or no legal liability on the other at law or in equity.” He agreed with Sir George Jessel M.R.’s decisions, because prior to the Judicature Act the common law courts would have removed an arbitrator in such circumstances and the grant of an injunction produced the same result. Cotton L.J. expressed the same view. I would only comment that it is in the highest degree inconvenient if judges exercising jurisdiction in 1979 have to try to find out what was the extent of the jurisdiction of their predecessors over a century ago.

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The next case is London and Blackwall Railway Co. v. Cross, 31 Ch.D. 354. Mr. Cross instituted arbitration proceedings under the Lands Clauses Consolidation Act 1845 against the railway company using the name of the Poplar and Greenwich Ferry Co. The railway company sought an injunction to restrain him from carrying on these proceedings on the grounds that he had no authority to use the ferry company’s name. Chitty J. granted the injunction, but his decision was reversed on appeal. Lindley L.J. at p. 368 held himself bound by the North London Railway case, but added that it only decided that the settled practice of the courts as to when injunctions would be granted had not been altered by the Judicature Acts and that there was still no right or jurisdiction to restrain a person from proceeding for compensation under the Lands Clauses Consolidation Act on the ground that he was not entitled to compensation. He added, at p. 368:

“The case does not decide that in no case is it right to restrain persons from proceeding to arbitration; there are cases in which it is quite right to do so. One of such cases came before Vice-Chancellor Wood, Maunsell v. Midland Great Western (Ireland) Railway Co., 1 H. & M. 130. It was an action by a shareholder on behalf of himself and the other shareholders in the company, against the company and its directors and another company, to restrain them from proceeding to arbitration under an agreement in respect of breaches of clauses which were ultra vires. That case, and cases of that kind, are wholly unaffected by the decision to which I am alluding. The case must not be supposed to go this length, that there is no authority whatever in the Court of Chancery to restrain proceedings before an arbitrator, but I think it goes this length, that in all cases under the Lands Clauses Act the practice is that the question of right or no right to compensation is to be tried by an action on the award, and not by an action for an injunction in the earlier stage of the proceedings. One can easily see that there are conveniences on the one side and on the other, but in my opinion the balance of convenience is in favour of declining to interfere by injunction.”

This brings me to Kitts v. Moore [1895] 1 Q.B. 253. Lindley L.J. said that before the Judicature Acts, courts of equity had granted injunctions to stay references upon the ground that the agreement containing the arbitration clause was impeached. In the North London Railway case there was no impeaching of the arbitration agreement and no more ground for stopping the arbitration than for stopping an action because it was a frivolous one. That decision in no way reduced the power of the courts to continue to grant injunctions, where the arbitration clause was impeached.

So far as I know, nothing more was heard of the North London Railway case until 1912 when it was considered in Den of Airlie S.S. Co. Ltd. v. Mitsui & Co. Ltd. (1912) 17 Com.Cas. 116. There the Court of Appeal affirmed its headnote, namely:

“… the High Court has no jurisdiction to issue an injunction to

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restrain a party from proceeding with an arbitration in a matter beyond the agreement to refer, although such arbitration proceeding may be futile and vexatious.”

It was two world wars later before this troublesome case re-appeared. It was then resurrected (to my personal discomfiture as counsel, because I had failed to find it) in Government of Gibraltar v. Kenney [1956] 2 Q.B. 410. Sellers J. clearly shared my lack of enthusiasm for the decision and also my inability to overrule it. However, he held, obiter, that it did not restrict the power of the court to grant a declaration. Since then it has been cited in Montgomery v. Montgomery [1956] P. 46 for the unexceptionable proposition that the High Court can enforce any legal right which was capable of being enforced either at law or equity prior to 1873; in Siskina (Owners of Cargo lately laden on board) v. Distos Compania Naviera S.A. [1979] A.C. 210 for the equally unexceptionable proposition that the High Court has no power to grant an interlocutory injunction except in protection or assertion of some legal or equitable right which it has jurisdiction to enforce by legal judgment; in Rasu Maritima S.A. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Government of the Republic of Indonesia intervening) (Pertamina) [1978] Q.B. 644 in which Lord Denning M.R. at p. 600 and Orr L.J. at p. 664 seem to have considered that the decision was not binding in so far as it purported to fetter the discretion of the court to grant injunctions “in any case where it would be right or just to do so”; in Ben & Co. Ltd. v. Pakistan Edible Oils Corporation Ltd., The Times, July 13, 1978, where Lord Denning M.R. held that to allege that there was no arbitration agreement was to impeach the alleged agreement and that accordingly the court had jurisdiction to grant an injunction; and in Gouriet v. Union of Post Office Workers [1978] A.C. 435, 516, by Lord Edmund-Davies for the proposition that it was not “just” to grant an injunction, save in defence of a legal right recognisable by the courts.

Accordingly, on the authorities, the courts can issue an injunction in cases in which the respondent to an arbitration alleges that there never was an agreement to arbitrate or that the agreement has ceased to bind him, but not where he alleges that the arbitrator is about to exceed his jurisdiction or that whilst he agreed to arbitrate with the claimant, the person using the claimant’s name is not authorized to do so. However, in all these cases the courts can give a declaration. This seems to me to be very strange, but that is a matter for the House of Lords and not for me to consider.

I have already said that in my judgment an arbitrator has power in an appropriate case to make an award dismissing a claim for want of prosecution. But I further think that conduct by the claimant which justifies such an order also constitutes a repudiatory breach of the agreement to submit disputes to arbitration. It is implicit in such an agreement that each party will use reasonable endeavours to bring the matter to a speedy conclusion. Any unjustified delay will constitute a breach of that agreement, but one which is inordinate and inexcusable and which further causes serious prejudice to the defendant or is likely to give

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rise to a substantial risk that it will not be possible to have a fair trial seems to me to be more than a simple breach of contract – it strikes at the root of it. In such a situation the respondent has a choice. He can affirm the agreement to arbitrate by carrying on with the arbitration either generally or in the form of an application to the arbitrator to make an award dismissing the claim for want of prosecution. Alternatively, he can accept the claimant’s conduct as a repudiation, thus, if he is right, terminating the agreement to refer and can then apply to the court for injunctive relief. It will be within the court’s power to grant such relief, because the issue between the parties will involve the impeachment of the arbitration agreement.

Having considered the matter in terms of general principle, and without regard to the Arbitration Act 1979, which received the Royal Assent on April 4 and is not yet in force, I now have to apply those principles to the facts of these two actions.

The shipbuilding dispute

The plaintiffs, Bremer Vulkan Schiffbau und Maschinenfabrik, are, as their name implies, German shipbuilders. Equally self-evidently the defendants, South India Shipping Corporation Ltd. are shipowners. In August 1964, the plaintiffs agreed to build five bulk carriers for the defendants. They were duly built and delivered between November 4, 1965, and December 3, 1966.

The shipbuilding contract was governed by German law, but it also provided that any disputes should be referred to arbitration in London pursuant to the Arbitration Act 1950. The contract contained a clause whereby the plaintiffs agreed to rectify defects appearing within 12 months of delivery and reserved the right to keep a guarantee engineer on board during this period. This right was exercised. The guarantee periods expired between November 4, 1965, and December 3, 1967. The plaintiffs have been advised that, subject to any agreement to the contrary, all claims under the contract would become time barred as a matter of substantive German law six months after the end of the guarantee period. On this basis the last date for beginning an arbitration would have been May 3, 1967. This view of German law is not accepted by the defendants and, for present purposes, I have to assume that they are right and that the relevant law is English.

The arbitration proceedings in fact began in January 1972, over five years after the last vessel was delivered. Points of claim were served in April 1976, over 9 years after that delivery. These proceedings, which were begun a year later in April 1977, have only been heard in March 1979, over 12 years from the delivery of the last vessel and nearly 15 years from the time when the contract was concluded. Clearly some explanation is called for, not only from the parties, but also from the court.

The court’s responsibility could not begin until the writ was issued in April 1977 but the nature of the proceedings was such that I should have expected that they would have been heard and determined before

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the end of July in that year. If one party is alleging that there has been intolerable delay, it is clearly of the greatest importance that no time be wasted in deciding whether or not the proceedings shall be allowed to continue. I was, therefore, concerned to find out whether the delay was the responsibility of the court or of the parties. The facts, I think, speak for themselves.

Although the writ was issued in April 1977, it was not until June 1978 that the matter was brought to the attention of the court. There was then an application to fix a date for the hearing and a date in November 1978 was allocated. Taking account of the fact that a five-day hearing was involved and that the long vacation was approaching, this was, I think, an excusable delay, although I should have preferred it to have been less. The next event was an application by the parties to vacate the November date. This was done and the case was refixed for December 1978. Unfortunately – and exceptionally – the court itself had to vacate this date, because of unexpected congestion in the list. The parties were asked when it would be convenient to fix a new hearing date and they agreed upon March 1979. They could have had an earlier date had they wished.

Let me now turn to the chronology which is relevant to my decision in these proceedings. If the relevant limitation period is to be found in English law, the defendants had a period of six years from the accrual of the various causes of action in which to begin arbitration proceedings. Sir Gordon Wilmer accepted appointment as sole arbitrator in January 1972. Some complaints relate to the first vessel which was delivered in November 1965. This does not mean that these complaints are time barred, because there may well be a separate cause of action based upon a failure to remedy the defects during or shortly after the expiration of the guarantee period for that vessel in November 1966. Complaints in respect of the other vessels would have arisen later, but the guarantee period on the last vessel to be delivered expired in December 1967, four years before the arbitration proceedings began.

The fact that the arbitration only began in January 1972 cannot be a matter for complaint. The defendants were entitled to take as much time as they wished before beginning proceedings, provided only that they did not allow the statutory limitation period to supervene. But their exercise of this right has some bearing on the degree of expedition which they should have shown after the proceedings began.

[His Lordship considered the facts, referred to letters written by the parties’ solicitors and continued:] The first matter which I have to consider is whether the delay following the institution of the arbitration proceedings was inordinate and inexcusable. Notice of arbitration had been given in April 1971 and the appointment of the arbitrator was perfected by January 1972. The ships had been delivered between November 1965 and December 1966, and the last guarantee period had ended in December 1967. Consulting surveyors had been appointed by the defendants in November 1967. Having had so long to consider and prepare their claim before the arbitration proceedings were begun, the delay thereafter was prima facie inordinate and inexcusable.

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Two different explanations are offered. The first rests upon the complexity of the claim, the difficulty in arranging meetings with the plaintiffs to discuss a settlement, the other commitments of the defendants’ solicitors and the limited number of counsel capable of handling such claims. The second rests upon an allegation that the plaintiffs led the defendants to conclude that there was no hurry.

I entirely accept that this was a very heavy claim and that it presented problems both to busy solicitors and to busy counsel. I also accept that, in litigation of this type, solicitors, having once instructed counsel, would find it difficult to “change horses,” especially as there are a very limited number of counsel who are familiar with this sort of work. But counsel were only instructed to settle the points of claim in November 1972 and there was throughout not the slightest sign of any sense of urgency.

This lack of a sense of urgency is virtually admitted and forms the basis of the second explanation. Thus, it is said that the points of claim could have been served at latest by early 1975, if the plaintiffs or their solicitors had given any indication at any stage that they were concerned that they might be prejudiced by the delay in settling the points of claim. This is the “sleeping dogs” explanation and I do not accept it. As early as May 1973, the defendants’ solicitors were saying that the points of claim would be served “shortly” and the plaintiffs’ solicitors were talking of “inordinate” delay saying that they had rather assumed that the proceedings had been abandoned. A year later, in March 1974, the points of claim were to be served “in the very near future.” After another year, “one or two points on the figures were still outstanding.” The only conceivable encouragement which the plaintiffs’ solicitors gave to the defendants was in April 1975, when they agreed to the explosion claim being included. They could well have refused and made the present application at that stage. No doubt in fact they applied their minds not to the current arbitration, but to whether the plaintiffs ought to insist upon separate proceedings in respect of the explosion claim, which incidentally has still not been included. If the points of claim had been delivered shortly thereafter, it might have been said that there was acquiescence, but nothing which was said or done by the plaintiffs or their solicitors could have led the defendants to think that they could delay delivery of the points of claim for a further year. That delay is said to have been caused by the decision in Miliangos v. George Frank (Textiles) Ltd. [1975] Q.B. 487; [1976] A.C. 443 and the new possibility of making a claim in German marks. But this possibility existed in relation to arbitrations long before then and, in any event, the points of claim could have been delivered and subsequently amended.

I am therefore driven to conclude that the delay in delivering the points of claim was both inordinate and inexcusable and, further, that no significant part of the delay was induced by the conduct of the plaintiffs.

The plaintiffs claim that they have thereby suffered serious prejudice in three ways. Two of these I accept.

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Destruction of documents

The plaintiffs say that under German law records do not have to be preserved after seven years and that some may have been destroyed. German law does not appear to require the destruction of documents and, if they have been destroyed, the plaintiffs have no one to blame but themselves.

Witnesses

Sixteen senior employees engaged in the design and building of these vessels are now dead, retired or have left the plaintiffs’ employment. In addition, one of the five guarantee engineers is dead and three left the plaintiffs’ employment many years ago. The defendants say that statements should have been taken from them. There is something in this, but such statements would have been of limited value unless related to the points of claim. The defendants also say that in so far as the witnesses are dead, they died before the proceedings could have been heard even if there had been no delay and, further, that in so far as recollections have dimmed, again, they would have dimmed before the hearing in any event. I accept that the hearing might not have taken place before September 1973, when Herr Erlinwein died and would not have taken place before Herr Hofman died in June 1971. But Herr Hofman was an assistant manager in the electric lay-out department and his death made the recollection of Herr Leo, the head of the department, all the more vital. He died in February 1977.

Nature of the defence

The defendants’ claims are based upon repair costs, replacement items, port expenses and damages for delay over a period stretching back to 1965-66, including many ship repair firms and many ports. The yard had no opportunity of checking many of them before the points of claim were received and it was then far too late to do so. In addition, and perhaps even more important, assuming that the various breakdowns are proved, the arbitrator will have to decide whether the cause was something for which the plaintiffs were responsible or was due to poor seamanship, bad maintenance and abuse of the vessel’s machinery. If, and to the extent that, they were not the fault of the plaintiffs, I do not see how the plaintiffs can hope at this stage to collect the necessary evidence to ensure that justice is done.

I am satisfied that if the proceedings had been pursued by action, I should have dismissed them for want of prosecution. It follows that the defendants’ inaction was repudiatory and that, the plaintiffs having accepted it as terminating the arbitration agreement, I should grant them an injunction restraining the defendants from proceeding further with the arbitration agreement.

The share deal dispute

In June 1970, the plaintiffs and others agreed to sell their shareholdings in Gregg International Publishers Ltd. The purchaser was Raytheon Ltd., the defendants. The contract contained the usual warranties as

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to the balance sheet, stock valuation, taxation, book debts, litigation, and so on. By clause 11 it was provided:

“In the event that any dispute or controversy shall arise between the parties hereto, the same shall be resolved by arbitration in Geneva Switzerland, under the rules then prevailing of the International Chamber of Commerce. The laws of England and the laws of the State of Delaware shall be deemed equally applicable to this agreement and in the event of conflict between the two bodies of law the arbitrator shall be free to apply whichever of said laws will in his opinion most equitably secure the results contemplated herein. The decision of the arbitrator(s) shall be final and binding upon both parties and judgment thereon may be entered in any court of competent jurisdiction.”

Disputes arose after completion and on April 28, 1971, the defendants wrote to the plaintiffs and to Mr. Teesdale who was another vendor claiming indemnity for losses consequent upon alleged breaches of the warranties. The total amount claimed was about £500,000 and it was advanced under a number of different heads. The plaintiffs’ solicitors sent a detailed reply denying liability in a letter dated October 21, 1971, and asked for further details of the claim which were provided in November and December 1971. Correspondence continued between the parties and on April 14, 1972, the defendants’ solicitor, Mr. Leslie Wainstead, asked that the dispute be referred to arbitration. A formal application for arbitration was made to the International Chamber of Commerce by the defendants in June 1972.

The defendants had suggested that the venue be changed from Geneva to London and in July 1972, the I.C.C. confirmed this change and also called upon each party to pay a deposit of U.S. $15,000 to secure the arbitrator’s fees and the administration charge. The plaintiffs failed to pay their deposit and in Febuary 1973, the defendants paid it in order to get the proceedings under way. This default by the plaintiffs was a constant source of irritation to the defendants, but does not seem to have had any causal connection with the delays which were later to occur. Exercising hindsight, a more serious problem was created by the change of venue because Mr. Wainstead took the view, which he still maintains, that, save in so far as the arbitral procedure was prescribed by the I.C.C. rules, the law of Geneva and not the Arbitration Act 1950 would apply.

The plaintiffs complain of delay during the winter of 1972-73, but I do not think that this was of any importance. By May 1973, Mr. Desmond Miller Q.C., Mr. Michael Mustill Q.C. and Mr. I. F. H. Davison had been appointed as arbitrators. On May 2, 1973, there was a meeting for directions. An order was made that points of claim be delivered within 21 days, unless the defendants wished to rely upon their letters which had already outlined their claims. In fact, the defendants relied upon the letters. Points of defence were to be delivered 21 days thereafter and in fact a detailed pleading was delivered on June 14, 1973. Points of reply were ordered for 14 days thereafter with discovery 21

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days after the close of pleadings and inspection 21 days after discovery. The arbitrators also fixed December 3, 1973, as the date for the hearing.

In July 1973, the defendants asked for and were granted an extension of time for filing points of reply. On October 5, 1973, the plaintiffs’ solicitors complained of lack of progress and, in particular, of the fact that discovery would be time consuming and could not begin before pleadings were closed. They, therefore, suggested that the date for the hearing would have to be vacated. On November 20, 1973, the points of reply were delivered and the arbitrators (a) ordered discovery within a little under four months and (b) fixed a new date for the hearing in June or July 1974.

Lists of documents were exchanged in May 1974 and at the same time the defendants applied for a further short adjournment of the hearing date until August 1974, on the grounds that two witnesses in the United States were not available in June or July. The plaintiffs for their part complained that discovery by the defendants was wholly inadequate.

This led to yet another meeting for directions on June 4, 1974. The second date for hearing was vacated by consent, but there was considerable discussion about discovery. On the evidence it is quite clear that Mr. Wainstead gave an undertaking to give specific discovery as set out in a form which appears in the bundle of correspondence, subject to two minor qualifications contained in a letter from him dated June 18, 1974. The arbitrators directed that discovery should be completed by the end of August 1974, notwithstanding that Mr. Wainstead had said that in view of “the formidable nature of the task” he might not be able to give discovery within this period, although he was making every effort to do so.

On October 1, 1974, the parties once again appeared before the arbitrators. Mr. Wainstead said that he had a further 1,000 relevant documents in his possession and that he had been unable to comply with the time table. A list would be delivered within a week. In addition two further files had come to light each containing about 100 documents and a list would be delivered within two weeks. The arbitrators took the view that no further order could profitably be made until they were satisfied that discovery was complete and they adjourned until November 15, 1974.

During October two further lists of documents were served by Mr. Wainstead, but by November 15 discovery was still not complete. Various other matters were dealt with by the arbitrators on that day and in particular, the hearing was re-fixed for September 29, 1975. This was the third date which had been fixed.

In December 1974 eleven supplementary lists of documents were served by Mr. Wainstead. The plaintiffs’ solicitors complained in March 1975 that they had been unable to relate the lists to the documents disclosed and further complained that there still had not been full compliance with Mr. Wainstead’s own undertaking of June 1974.

On July 3, 1975, the arbitrators met yet again and considered the problem of discovery. Mr. Wainstead said that he had given full disclosure of all documents under his direct control and that he had asked

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the defendants in the U.S.A. to make an additional search for any documents relevant to discovery as understood in English law. He also undertook to verify discovery by affidavit. The September hearing date was abandoned and the arbitrators suggested that they should meet again later in the month to give further directions. However, after discussions between the plaintiffs’ solicitors and Mr. Wainstead, the former decided to seek an order from the High Court concerning discovery and also the provision by the defendants of security for costs. Accordingly, by a letter dated July 22, 1975, they invited the arbitrators to adjourn the proceedings generally with liberty to either party to restore. The arbitrators made an order accordingly.

On October 9, 1975, before any application had been made to the High Court, Mr. Wainstead told the plaintiffs’ solicitors that a bundle of documents was on its way to him from the defendants in the U.S.A. The plaintiffs’ solicitors replied by letter dated October 15, 1975, that in the circumstances they would wait for the defendants’ next (and sixteenth) list of documents before taking the matter any further. They also asked that any new documents should be identified as such. The documents in fact arrived from the U.S.A. on or about October 23, 1975.

Apart from a “without prejudice” meeting in December 1975, it was over three years before the plaintiffs’ solicitors heard anything more from the defendants or from Mr. Wainstead. On November 16, 1978, they received a letter from Mr. Wainstead offering inspection of a report by Cooper & Lybrand and of several thousand invoices on which the report was based. This was apparently relevant to one item of claim – the slow moving stock item. Mr. Wainstead also said that he was preparing a comprehensive substitute list of documents. This was in fact delivered on December 13, 1978, but meanwhile the plaintiffs’ solicitors had notified him that they had proposed to institute the present proceedings. This was done by a writ issued on December 1, 1978.

Mr. Wainstead has two answers to the plaintiffs’ complaint of inordinate and inexcusable delay. The first is that he is a single-handed practitioner and that early on in the proceedings it had become apparent to him that he could entrust the task of discovery to no one else. Accordingly, he could only get on with it “at such times as I could spare from any other work.” I am sure everyone sympathises with the plight of the one-man firm. But the short answer is that they should not take on work which they cannot handle. The second answer is that there was an agreement that the arbitration should stand adjourned until after an application had been made to the High Court by the plaintiffs in relation to discovery and security for costs. He says that the plaintiffs never made any such application and that, therefore, the arbitration still stands adjourned by consent. This explanation ignores the sensible letter from the plaintiffs’ solicitors dated October 15, 1975, telling Mr. Wainstead that they would take no further steps until the defendants’ next list of documents was served. I say “sensible” because that list might have resolved the whole problem of discovery. Security for costs was a quite separate matter, which might not have been worth pursuing by

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itself, bearing in mind the likelihood of the court taking account of the plaintiffs’ failure to contribute their half of the I.C.C. deposit. Furthermore, Mr. Wainstead has never suggested that the plaintiffs’ failure to seek an order on discovery caused him to abate his efforts to comply with his undertaking given in June 1974. His astonishing lack of progress with discovery was in no way attributable to anything said or done by the plaintiffs’ solicitors and, in the light of their letter of October 15, he had not the slightest reason to think and did not think that the plaintiffs were content that he should do other than comply promptly with his own undertaking.

On these facts I have no doubt that the defendants’ delay in prosecuting the proceedings generally, and in particular in relation to discovery, would, if it had occurred in litigation, have rightly been characterised as inordinate and inexcusable.

I now have to consider whether the plaintiffs have been prejudiced by the delay. As a result of that delay I doubt whether it would have been possible to have arranged for a hearing before the summer of 1979. This would have been nearly nine years after the transaction. Mr. Marcus Jones, appearing for the defendants, submits that recollections will be irrelevant and that the claim falls to be determined on the basis of contemporary documents and, in particular, the company’s accounts. The conflict between the parties will, he says, be as to matters of law and accountancy practice. No doubt he is right, working at the matter from the point of view of the defendants. Indeed, this is an important feature of the case. As Mr. Mark Waller, appearing for the plaintiffs, pointed out, delay usually prejudices the claimant as much or more than the respondent. But in this case the defendants as claimants will have no problem.

But the matter is quite otherwise from the point of view of the plaintiffs as respondents in the arbitration. Their defence rests in most cases upon allegations that the matters relied upon as constituting breaches of warranty were fully explained to the defendants at or about the time when the contract was concluded. These explanations were all oral. Furthermore, in the case of one head of claim, there is an issue as to whether a particular document is a forgery. Personal recollections will be vital to sustain these defences. It may well be that those concerned prepared proofs of evidence when the hearing was first fixed for December 1973, but at that time they had had no discovery. They will now have to check their recollections against discovery (which may still not be complete) and this will be extremely difficult.

The prejudice which the plaintiffs have suffered as a result of the defendants’ delays is, in my judgment, most serious.

In these circumstances, I have no doubt that if the dispute between the parties had been the subject matter of an action, I should have made an order dismissing the defendants’ claim for want of prosecution. On the view which I take of the law, the plaintiffs could have asked the arbitrators to make an award in similar terms. Instead they have issued their writ and elected to treat the defendants’ conduct as repudiatory. I think on the facts they were entitled so to do. This terminated

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the arbitration agreement. As the defendants do not accept that this is the position, I am entitled to order them to desist from taking any further action in purported pursuance of the arbitration agreement.

Solicitors: Norton Rose, Botterell & Roche; Richards, Butler & Co.; Herbert Smith & Co.; Leslie Wainstead.

[Reported by MRS. CLARE BARSBY, Barrister-at-Law]

The defendants appealed to the Court of Appeal.

The second appeal was heard first.

Mark Saville Q.C., V. V. Veeder and Brian McClure for Raytheon Ltd.

Cur. adv. vult.

November 23. The following judgments were read.

LORD DENNING M.R. When I was young, a sandwich-man wearing a top-hat used to parade outside these courts with his boards back and front, proclaiming “Arbitrate, don’t litigate.” It was very good advice so long as arbitrations were conducted speedily: as many still are in the City of London. But it is not so good when arbitrations drag on for ever.

These cases mark a new development in the law of arbitrations. Parallel to the development 11 years ago when we started to strike out actions at law for want of prosecution. That development has had some beneficial results. It has taught practitioners that they must observe the time schedules provided by the Rules of Court. They must enter in their diaries the latest dates by which writs must be issued and served, pleadings delivered, discovery made, and cases set down for trial. They must keep those dates or get them extended by consent: else they may find themselves in serious trouble. The consequences have, I believe, been beneficial. Many actions are started as “try-ons.” The plaintiff’s claim is weak, but it is hoped that the defendant will pay up or settle. Where the try-on is unsuccessful – and the defendant resists it – the plaintiff or his advisers lose heart. Sooner or later they let things slide. At length the defendant applies to dismiss it for want of prosecution. The plaintiff’s advisers then

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take fright – lest they be held responsible. But the court is adamant. The action is struck out. Other actions are much more genuine. The claim is well-founded, but the plaintiff’s advisers become busy with other things. They put this case on one side until they have more time to deal with it. Before long they forget about it altogether. This may be their own fault: or it may be the fault of the plaintiff himself for not reminding them: or for not doing what the advisers ask of him. But whatever it is, the time may come when the delay is so inordinate and so inexcusable that a fair trial is impossible. In that case too the court is strict. It strikes the action out. Not for want of sympathy with the plaintiff: but out of justice to the defendant. During the lapse of time, witnesses will have died, memories will have faded, documents will have been lost – all of which might have served the defendant to defend himself against the plaintiff. It is not fair to the defendant to make him fight a case with his hands tied behind his back. So here too the plaintiff or his advisers have to take the consequences. The action is struck out for want of prosecution.

Now in the year 1979 we are invited to make a like development in regard to arbitrations. Three recent cases now show that, in arbitrations, as well as in courts of law, cases may last “so long as to turn justice sour.” They show, too, that an arbitrator has far less power than a judge. If the parties drag their feet, the arbitrator can do nothing to quicken them up. He cannot dismiss a claim for want of prosecution. He cannot strike out a dilatory plea which is put in just to gain time. He must abide the pleasure of the parties. He has no sanctions with which to enforce his orders. Seeing that he can do nothing, the question is: can these courts do anything about it?

Just see what has happened in these three cases. In the first case (the second appeal) it is 13 years since five big bulk carriers were built and delivered to the owners. They have sailed the oceans ever since earning money for their owners. The owners now make claims for damages against the builders. Starting modestly, the claims now come to a large figure. It is so large you could buy two of the five ships with it. They say that the five ships were badly designed and badly built those 13 years ago. Most of the engineers who worked on them have died or retired. The arbitration was not started for over five years. The parties appointed Sir Gordon Willmer, who had recently retired from this court. They could not have picked anyone better. But that was nearly eight years ago, when he was 72. The parties have not been near him since. He is now 80. The arbitration has only got as far as points of claim. They cover 137 pages of foolscap with masses of detail. They go into all the alleged defects of 13 years ago and the damage said to result from them in the succeeding years. If the arbitration is to proceed, it will need several years more to prepare for the hearing. The arbitrator will have died, or got past it. A new arbitrator will have to be appointed. A fair trial is quite impossible. Much of the delay is due to the claimants. They went to sleep – off and on – for months at a time. Not even a snore was heard. Time and again they said they were just about to deliver full points of claim. Eventually, after a whole year – without a word – the claimants delivered those portentous points of claim. The judge has held that their

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delay was inordinate and inexcusable, and that the builders had suffered serious prejudice from it. Is the arbitration to be allowed to go on?

In the second case (the first appeal) it is nine years since some shareholders called Gregg in a publishing company sold their holding to Raytheon Ltd. The Greggs gave several assurances to Raytheon about the amount of business being done by the publishing company. The transaction was completed in 1970 those nine years ago when Raytheon took over the business. A few months later Raytheon complained that the business was not what it was represented to be. They claimed £500,000 as damages. The matter was referred to arbitration in accordance with the rules of the International Chamber of Commerce: but by agreement the arbitration was to be held in London. Over six years ago, in 1973, three arbitrators were appointed, all very suitable, Mr. Desmond Miller Q.C., Mr. Michael Mustill Q.C. and Mr. I. A. H. Davison. The arbitrators ordered pleadings and discovery. Over the years pleadings were delivered, but discovery was never complete. Time and time again the arbitrators fixed dates for hearing, but time and time again these were abandoned. The reason every time was because the claimants, Raytheon Ltd., had not given proper discovery. It was a case where full discovery was essential. The claimants had bought the shares and were in control of the publishing company. They would have all the papers showing what business the publishing company did before and after the deal, showing whether the assurances were broken or not, and if so, what the damages were. They promised many a time to get the documents from the U.S.A. Eventually, in July 1975, over four years ago, the three arbitrators adjourned the case generally with liberty to either party to restore. It never has been restored. The claimants went silent for three whole years. When they bestirred themselves, two of the arbitrators had gone off and put on new suits. Mr. Desmond Miller Q.C. had left the bar and become a man of business. Mr. Michael Mustill Q.C. had become a judge of the High Court. So it looks as if one or two new arbitrators will have to be appointed. It was only last November, 1978, after three years of silence, that the claimants’ solicitor wrote offering inspection of thousands of documents. It will take a long time before these can be analysed and the case ready to be heard. And then much will depend on oral conversations 10 years before when the shares were sold. The judge held that the delay of the claimants was inordinate and inexcusable and that the prejudice to the respondents would be most serious. Is the arbitration to be allowed to go on?

The third case is not before us, but it is so pertinent that I would mention it. In 1969, 10 years ago, the Splendid Sun carried 10,400 tons of maize from Mexico to Venezuela. On arriving at the discharging port, she grounded and suffered damage in over $200,000. The owners claimed damages from the charterers for not nominating a safe port. In that same year, 1969, two experienced commercial arbitrators in the City of London were appointed, Mr. Cedric Barclay for the owners and Mr. Lynn for the charterers. Nothing happened for eight whole years. Then on January 3, 1978, the owners delivered points of claim. By this

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time Mr. Lynn had died, though Mr. Barclay is still going strong. Lloyd J. has held that the delay has been such as to frustrate the arbitration agreement. Is the arbitration to be allowed to go on? The case was Andre et Compagnie S.A. v. Marine Transocean Ltd. (The Splendid Sun) [1980] 1 Lloyd’s Rep. 333.

We had a good deal of discussion about the facts in our two cases: especially as to whether there had been acquiescence by one party in the delay of the other. All I need say on this is that, so far as court cases are concerned, even when there has been acquiescence up to a point, nevertheless if the plaintiff is thereafter guilty of further delay, he does so at his peril: because on an application to dismiss for want of prosecution, the court can and should look at the whole of the case from beginning to end. If, owing to the plaintiff’s inexcusable and inordinate delay – before and after the acquiescence – a fair trial is impossible, the case may be struck out for want of prosecution. I agree entirely with the observation of Donaldson J. ante, pp. 917 – 918, on this point. I do not think we need pause on the unreported cases of County & District Properties Ltd. v. Lyell (unreported), July 12, 1977, Court of Appeal (Civil Division) Transcript No. 314 of 1977, C.A.; Murrayfield Real Estate Co. Ltd. v. C. Bryant & Sons Ltd. (unreported), July 20, 1978, Court of Appeal (Civil Division) Transcript No. 473 of 1978, C.A. They should be left in the oblivion to which the law reporters quite rightly consigned them.

I see no reason to differ from the judge’s assessment of the facts in these cases. So I turn to the law.

The powers of an arbitrator

One question is of importance: has an arbitrator any power to dismiss a claim for want of prosecution? If he has such a power, I should have thought that any application should be made to him rather than to the courts. At present, however, there are two conflicting decisions at first instance. In Crawford v. A. E. A. Prowting Ltd. [1973] Q.B. 1, Bridge J. held that an arbitrator had no power to dismiss a claim for want of prosecution. In the present cases Donaldson J. ante, pp. 915 – 925, has held that an arbitrator has the power.

To decide between those two, I would say this. The powers of an arbitrator are derived from the agreement of the parties. In the ordinary way the parties agree simply to refer any matters in dispute to arbitration without saying what powers the arbitrator is to have. In this situation his powers are to be defined by the law itself. Scrutton J. once said that he has “inherent powers as a judicial officer”: see In re Crighton and Law Car and General Insurance Corporation Ltd. [1910] 2 K.B. 738, 745. He also has the powers set out in paragraph f of Schedule 1 to the Arbitration Act 1889, and repeated in section 12 (1) of the Arbitration Act 1950. These require the parties to do “all other things which during the proceedings on the reference the arbitrator… may require.”

Apart from previous authority, I would have been disposed to think that an arbitrator would have the power to do – and to require the parties to do – all the same things as a judicial officer could do. He could require

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the delivery of pleadings, and the disclosure of documents. He could allow or disallow the amendment of pleadings. He could fix a day for hearing, and so forth. If his orders were disobeyed, I should have thought that he could have imposed sanctions for non-compliance. But there is a decision going back for over 60 years now which says he has no power to inflict sanctions for disobedience. It is In re Unione Stearinerie Lanza and Wiener [1917] 2 K.B. 558. An Italian buyer bought goods from an English seller. The contract contained an arbitration clause. The Italian buyer claimed damages in an arbitration here in London. The English seller asked the arbitrator to order the Italian buyer to put up security for costs. That would have been automatic in a court of law, because the claimant was resident abroad. But it was held that the arbitrator had no power to make an order for security for costs. The reason, as I see it, was because implicit in such an order there would be an implied sanction: namely, that unless security were given, the proceedings would be stayed. Viscount Reading C.J. said, at p. 561: “The words in clause (f) [of Schedule 1 to the Arbitration Act 1889]… do not give the power to order a stay of proceedings….”

Likewise, suppose that an arbitrator made a peremptory order for delivery of points of claim adding that “unless” they were delivered in seven days, the proceedings would be stayed. Such an “unless” order would be beyond the powers of the arbitrator, because in the words of Lord Reading C.J. “the words in clause (f)… do not give the power to order a stay of proceedings…”

This view of the law has been accepted by practitioners: and the parties at arbitrations have taken advantage of it. Especially respondents who want to get more time. They will instruct their arbitrator to delay as much as he can. They will say they are not ready. They will manufacture counterclaims or set-offs. They will get up to no end of tricks, such as were described by MacKinnon J. in the Report of Committee on the Law of Arbitration (1927) (Cmd. 2817) and by myself in Associated Bulk Carriers Ltd. v. Koch Shipping Inc. [1978] 1 Lloyd’s Rep. 24, 26. In 1978 the Commercial Court Committee in their Report on Arbitration (1978) (Cmnd. 7284) observed, at para. 57:

“A favourite ploy by those who seek delay is to ignore the timetable fixed by the arbitrator or to fail to comply with directions for the delivery of a defence or for discovery. Parties to an action in the Commercial Court who adopted similar tactics would receive short shrift, since the court would strike out the claim or counterclaim or debar the defendant from defending.”

In this situation I am afraid we must recognise that arbitrators are impotent. They can make all sorts of orders for pleadings, discovery and the like: but they are exhortatory only. Either party can cock-a-snook at the arbitrator. Either can disobey with impunity. It is only the court that can bring a party to book.

Parliament has just given some remedy in section 5 of the Arbitration Act 1979, but it only applies to arbitrations started after August 1, 1979.

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The powers of the court

It is some confirmation of this view that Parliament has intervened to correct the position. It has set out some specific orders which the court can make in aid of an arbitration in section 8 of the Arbitration Act 1934, now replaced by section 12 (6) of the Arbitration Act 1950, which provides:

“The High Court shall have, for the purpose of and in relation to a reference, the same power of making orders in respect of – (a) security for costs; (b) discovery of documents… as it has for the purpose of and in relation to an action or matter in the High Court…”

In case, therefore, a party to an arbitration desires security for costs, or discovery – which the other refuses to give – he can apply to the court. Then the court can make an order and apply sanctions to enforce obedience. It can make a peremptory order saying that “unless” such and such is done within such and such a time, the proceedings in the arbitration shall be stayed. Just as it could stay proceedings in an action. So, although the arbitrator has no power to inflict sanctions, the court has the power.

Some may say that section 12 (6) is exhaustive: that the court can only intervene in the cases specified in (a) to (b) of that subsection: and in no others. I do not take that view. That section was enacted so as to make it clear that the courts can intervene in those cases at any rate, leaving it open to the courts to intervene in any other cases in which its inherent jurisdiction enables it to do. We have recently held that the powers of the court are not to be found exclusively in the statute, but also in its inherent jurisdiction: see Japan Line Ltd. v. Aggeliki Charis Compania Maritima S.A. (The Angelic Grace) [1980] 1 Lloyd’s Rep. 288.

The inherent jurisdiction of the court

There is a difference between the powers of the court after an award has been made and before it. It is quite clear that, after it has been made, the court can set it aside if the arbitrator has wholly or partially exceeded his jurisdiction, or if he has been guilty of misconduct, or if there is an error of law on the face of the award. Before any award is made, the court can restrain the parties and the arbitrator from proceeding further with it in the following cases. First, where one party brings an action impeaching the supposed arbitration agreement, saying that there was no binding agreement: see Maunsell v. Midland Great Western (Ireland) Railway Co. (1863) 1 H. & M. 130; Kitts v. Moore [1895] 1 Q.B. 253. Second, where the arbitrator has done something or other which shows him to be unfit or incompetent to continue with the arbitration: see Beddow v. Beddow (1878) 9 Ch.D. 89; Jackson v. Barry Railway Co. [1893] 1 Ch. 238, 249.

Mr. Saville submitted that those two were the only cases where the courts would restrain an arbitrator from continuing. He said that there was no general jurisdiction in equity to prevent an arbitrator from continuing. He relied on North London Railway Co. v. Great Northern

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Railway Co. (1883) 11 Q.B.D. 30. Two trains were in collision. One railway company said it was the fault of the other company’s signalman. The other railway company said it was the fault of the first company’s driver. One company started arbitration proceedings. The other company said the dispute was not within the arbitration clause and started an action at law. The Court of Appeal refused to stay the arbitration pending the trial of the action. They realised that the arbitration might be futile because the dispute might not be within the arbitration clause. Yet they allowed the arbitration to go on. Both the arbitration and the action went on together. Nowadays it is obvious that the two proceedings would not be allowed to continue side by side. Either the arbitration should be stayed, or the action should be stayed. The procedure of these courts has altered so much in the last 100 years that that case cannot, in my view, afford any guidance to us today.

On the other side Mr. Waller referred us to a case in 1865: Pickering v. Cape Town Railway Co. (1865) L.R. 1 Eq. 84. There was a contract for the construction of a railway. It contained an arbitration clause, but instead of proceeding under it, the company took possession of the works. The company afterwards sought to insist on going to arbitration. Page Wood V.-C. restrained them, saying, at pp. 87-88:

“If… the court should be of opinion that they have debarred themselves from exercising those rights” – to take arbitration proceedings – “by the course of conduct which they have adopted, there arises an equity, which prevents them from prosecuting proceedings, however they might otherwise be entitled to do so…”

In the next edition of Russell on Arbitration, 7th ed. (1891), that case was cited as authority for this proposition, at p. 204:

“Parties, however, sometimes conduct themselves in such a manner as to induce the Court of Chancery to restrain them from proceeding in a reference.”

That proposition was accepted in New South Wales in Sneddon v. Kyle (1902) 2 S.R. (N.S.W.) Eq. 112 and underlies a case in Ontario Danforth Travel Centre Ltd. v. British Overseas Airways Corporation (1972) 29 D.L.R. (3d) 141. In Halsbury’s Laws of England, 3rd ed. vol. 21 (1957), p. 406, 4th ed., vol. 24 (1979), para. 1038 it is said:

“The court has jurisdiction to interfere in arbitration proceedings on equitable grounds where the parties have by their conduct excluded themselves from the benefit of their contract to arbitrate.”

Following these persuasive authorities, I am of opinion that this court has an inherent jurisdiction to restrain arbitration proceedings where it would be right and just to do so: and it may be right and just when the claimant has been guilty of such inexcusable and inordinate delay that a fair hearing is impossible. In other words, the court can dismiss the claim for want of prosecution, just as it can an action.

Frustrating delay

There is, however, another way of reaching the same result. It must

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be remembered that the parties, having agreed to submit their differences to arbitration, are bound to pursue that method of proceeding. Co-operation by both is essential to its success. On the one hand, it is the duty of the claimant to proceed with reasonable despatch so that the respondent is not prejudiced by delay. On the other had, it is the duty of the respondent not to baulk the claimant by devious manoeuvres.

Those duties are, in my opinion, imposed by law: and not by any application of the Moorcockprinciple. They are imposed by more general considerations, such as Viscount Simonds remarked in Lister v. Romford Ice and Cold Storage Co. Ltd. [1957] A.C. 555, 576; and Lord Wilberforce and Lord Edmund-Davies approved in Liverpool City Council v. Irwin [1977] A.C. 239, 255, 266-267; and I spelt out in Shell U.K. Ltd. v. Lostock Garage Ltd. [1976] 1 W.L.R. 1187, 1196 (first category).

So there is, in my opinion, a duty imposed by law on the claimant to use reasonable despatch. He may often break that duty with impunity. Delay often does no harm to the respondent. Even unreasonable delay may do no harm to anyone but the claimant himself. But sometimes the delay may reach such proportions as to frustrate the very object of the venture – the very purpose of the arbitration itself – so that there cannot be a fair hearing and the arbitrator cannot reach a just result. When the delay is as great as this – when it is so great as to frustrate the arbitration itself – the respondent is entitled to treat the contract of arbitration as at an end: see the cases collected by Devlin J. in Universal Cargo Carriers Corporation v. Citati [1957] 2 Q.B. 401, 430-434. That was the approach favoured by Lloyd J. in The Splendid Sun [1980] 1 Lloyd’s Rep. 333, 335, when he said: “The rest should be the same as in other cases of delay, namely, such delay as would frustrate the arbitration agreement.”

Frustrating delay in this sense is equivalent to a repudiation of the arbitration agreement: which the respondent can elect to accept: and, on doing so, can apply to dismiss the claim for want of prosecution. He can also claim as damages the cost to which he has been put in preparing for the arbitration – thus rendered fruitless.

International Chamber of Commerce

Before us Mr. Saville raised a point which was not taken below. It only applies to the shares case, Gregg v. Raytheon Ltd., where the arbitration was to be held “in Geneva, Switzerland, under the rules then prevailing of the International Chamber of Commerce.” By agreement London was substituted for Geneva. The proper law of the contract was governed by the laws of England and of the State of Delaware, but the procedure was governed by the law of England: see Whitworth Street Estates (Manchester) Ltd. v. James Miller & Partners Ltd. [1970] A.C. 583, 616, per Lord Wilberforce.

Mr. Saville took us through the rules of the I.C.C. He showed us that, in addition to the three arbitrators named by the parties, there was a “Court of Arbitration” in Paris which exercised some kind of supervision over the arbitration proceedings. He submitted that, under the rules, the Court of Arbitration in Paris was the superior authority in matters of procedure: and that, if one of the parties was guilty of

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unreasonable delay, the remedy was to apply to the Court of Arbitration in Paris. He relied on the practice as set out in an affidavit by Dr. Eisemann, at one time the head of the Secretariat of the I.C.C., and also on article 31 of the I.C.C. rules:

“In any circumstances not specifically provided for above, the Court of Arbitration and the arbitrator shall act on the basis of these rules and make their best efforts for the award to be enforceable at law.”

I do not propose to go into the rules in detail. Suffice it to say that I do not find in them any power in the Court of Arbitration in Paris to inflict sanctions on a party, or to dismiss a claim for want of prosecution. There is a further difficulty in this case. No terms of reference were drawn up by the arbitrators so as to satisfy article 19. No hearing could be held until the terms of reference were drawn up.

I regard the arbitration in London under the I.C.C. rules as virtually equivalent to an ordinary English arbitration. The Court of Arbitration in Paris is a body with administrative functions only. It has no power to interfere in the judicial process of the arbitrators. If there is inordinate and inexcusable delay, the courts in England can take a hand, but no one else.

I would reject, therefore, the point on the I.C.C.

Conclusion

In the end I think we should make the new development which we are invited to make. We should develop the law as to arbitration on the same lines as we did 11 years ago for the law of actions. The judges in the courts below – Donaldson J. and Lloyd J. – have pointed the way. Both are most experienced in the ways of arbitrations. By their opinions we set great store. They have struck out these three commercial claims for want of prosecution. I would do the same. In doing so, I do not overlook the further development which is foreshadowed. It may often happen that it is the respondents who cause the delays. They may put up one excuse after the other – so as to gain more time – or so as to avoid payment of a just demand. If the arbitrator has no power to bring them to book, can the courts intervene? If our decision today is correct, the principle underlying it may – I only say “may” – apply to respondents as much as to claimants. If the respondents to an arbitration are guilty of such wilful delay as to frustrate the arbitration agreement itself – they may be said to have broken the agreement and be liable in damages. The damages would be assessed according to the chance which the claimant had of succeeding in the arbitration. I throw that out only by the way because one has to look ahead as far as one can when new developments are made new law. We are in for some exciting times. But for the reasons I have given I would uphold the decision of Donaldson J. in these two cases, and dismiss the appeals.

ROSKILL L.J. These two appeals from decisions of Donaldson J. dated April 10, 1979, raise, as the judge said at the outset of his judgment,

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ante, p. 915E-F, questions of great importance relating to the conduct of arbitrations in this country and especially in relation to the conduct of those arbitrations to which section 5 of the Arbitration Act 1979 will not apply. Before us the appeal in Gregg v. Raytheon Ltd. was argued before the appeal in Bremer Vulkan Schiffbau und Maschinenfabrik v. South India Shipping Corporation Ltd., though before the judge the cases were apparently heard in the reverse order. I shall call the first appeal “the Raytheon appeal” and the second “the Bremer appeal.” In each action the judge has held that the appellants, who were the defendants in the two actions and the respective claimants in the two arbitrations had been guilty of inordinate and inexcusable delay which had caused such prejudice to the plaintiffs in each of the two actions, who were the respective respondents in the two arbitrations and of course in these appeals, that had the appellants commenced these proceedings in the High Court by way of action instead of by arbitration in accordance with the arbitration clauses in the respective agreements under which the disputes concerned arose, such proceedings would have been dismissed by the High Court for want of prosecution in accordance with the principles laid down in Birkett v. James [1978] A.C. 297 and Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229. The judge summarised those principles in six succinct paragraphs, ante, pp. 916 – 918. Subject to what I say in the next sentences on the question of acquiescence – see paragraph 5 of the judge’s summary – I accept as correct and gratefully adopt the judge’s summary without repetition. Mr. Butler argued that acquiescence was an absolute bar and that once there was acquiescence in delay, the existence of that delay ceased to be relevant. Only further delay is relevant. Since I take the view, as did the judge, that there was no acquiescence in the Bremer case, this point does not arise for decision. But, as at present advised, I think Mr. Butler’s argument is inconsistent with what Salmon L.J. said in Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229, 232.

The question for decision before him was, and in this court is, whether those principles have any application to the conduct of arbitrations in this country. Until the present cases no court has held that they have. But the judge has held, first, that an arbitrator (I include an umpire in that word) has power to dismiss for want of prosecution and to make an award to that effect: ante, p. 921D-F. He has further held, at pp. 482-483, that in such a case the courts have power to intervene and prevent a dilatory claimant in an arbitration from further proceeding with his claim by granting an injunction restraining him from so doing. The judge based this conclusion upon the view that unjustified delay by a claimant struck at the root of an agreement to arbitrate which a respondent might treat as repudiatory conduct and accept as such, thus bringing to an end the agreement to arbitrate, and enabling him to obtain an injunction and also, where appropriate, damages, e.g. for wasted expenditure.

The judge’s first conclusion that an arbitrator had power to dismiss for want of prosecution was contrary to an earlier decision of Bridge J. in Crawford v. A. E. A. Prowting Ltd. [1973] Q.B. 1, where he held that

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there was no such jurisdiction vested in an arbitrator. The argument that the court had power in effect to achieve the same result by an injunction was not and indeed could not have been advanced in that case since the matter came before Bridge J. by way of case stated by an arbitrator who had been invited to dismiss the claimant’s claim in that arbitration for want of prosecution.

Before us Mr. Saville, for the appellants in the Raytheon appeal, argued as almost his last submission that the judge had reached the wrong conclusion upon the facts of that case. Mr. Butler, for the appellants in the Bremer appeal, devoted virtually the whole of his argument to a like submission and was content for the rest to adopt (with one exception) Mr. Saville’s submissions on the other issues so far as relevant to the Bremer appeal. In neither appeal did this court find it necessary to call upon counsel for the respondents to support the judge’s conclusions upon the facts of the case for, notwithstanding the arguments of counsel for each of the appellants, I think the judge’s conclusions upon the facts in each case are quite unassailable. For my part, I would in each case have unhesitatingly reached the same conclusion as did Donaldson J. But even if I had felt any doubt as to the correctness of either or both of his conclusions, which I do not, I would not have been willing to interfere with his exercise of his discretion on a matter of this kind, assuming, of course, he was right in applying to arbitrations the same principle as is now clearly established to apply to actions in the High Court.

It follows that for the first time this court is asked to decide, first, whether arbitrators have power to dismiss for want of prosecution in such circumstances and make an award to that effect, and, secondly, whether or not they have such power, whether the court has power to interfere in such circumstances by injunction. It is convenient to mention at this juncture that since the instant decisions, Lloyd J. in The Splendid Sun [1980] 1 Lloyd’s Rep. 333, granted an injunction restraining claimants in an arbitration from proceeding with their claim. The question whether arbitrators had power to strike out did not arise for decision. The delays in that case were even worse than in the instant cases since the arbitration in question had been begun in 1969 and no steps had been taken thereafter for over eight years. Lloyd J. stated that, as is the fact, until the instant cases no court had granted an injunction such as Donaldson J. granted.

But following Donaldson J.’s decisions Lloyd J. granted such an injunction, resting his decision upon the submission that the delay in question was such as would frustrate the agreement to arbitrate, a submission apparently not advanced before or considered by Donaldson J. As will later emerge, I think Lloyd J. was right to rest his decision upon this foundation rather than upon that enunciated on this branch of the case by Donaldson J. if, which still remains to be considered, the court has any power to interfere by injunction in the circumstances under consideration.

It should be mentioned that neither Mr. Waller nor Mr. Rokison, for the respective respondents, who as the plaintiffs obtained injunctions from

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Donaldson J., found it easy to support that part of the judge’s judgment which held that arbitrators had power to dismiss for want of prosecution and to make an award to that effect. Mr. Waller dealt with this question only towards the end of many submissions, while Mr. Rokison, whose help we had invited in order to make sure that no point favourable to the judge’s view had inadvertently been overlooked, recognised his difficulty in supporting this part of the judgment.

It is strange that if arbitrators have this power it has never been invoked, at any rate in such a way as to obtain a decision of the court upon its existence. The inadequacy of the powers of arbitrators to deal with delays – often deliberate delays – has long been a matter of complaint. Many of the proposals of the powerful committee over which MacKinnon J. presided in 1927 were directed towards strengthening the Arbitration Act 1889 so as to avoid delays which by 1927 were already notorious. Those of the proposals which were ultimately adopted found their place upon the statute book in the Arbitration Act 1934. As recently as 1978 the Commercial Court Committee, over which Donaldson J. himself presided, in a Report on Arbitration (1978) (Cmnd. 7284) bewailed the constant delay and discussed the “favourite ploy” by those seeking delay. Paragraph 57, which bears the rubric “Sanctions in case of delay or failure to comply with the arbitrator’s directions” merits quotation in full:

“A favourite ploy by those who seek delay is to ignore the time table fixed by the arbitrator or to fail to comply with directions for the delivery of a defence or for discovery. Parties to an action in the Commercial Court who adopted similar tactics would receive short shrift, since the Court would strike out the claim or counterclaim or debar the defendant from defending. In cases which fall within section 12 (6) of the 1950 Act, it is possible for parties to obtain an order from the High Court and for that court to apply sanctions in the event of default. However this is not widely known, does not cover all forms of foot-dragging and involves at least two attendances on the High Court – first to obtain an order and further attendances to invoke sanctions. What is required is a power for the High Court to apply sanctions for disobedience of orders made by the arbitrator. This too is a suitable subject for the attention of an Arbitration Rules Committee.”

That report was in part responsible for the passing of the Arbitration Act 1979, including section 5. But in neither the report of MacKinnon J.’s committee nor in this report of the Commercial Court Committee does one find any hint or suggestion that arbitrators have so readily to hand this lethal weapon which the judge in his judicial capacity has held to exist.

On the other hand, it must be said that before Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229 and the other related cases it had not readily occurred to practitioners that this weapon of striking out was available to dispose of personal injury and other actions of seemingly indefinite duration, and perhaps it is not surprising that the possibility of

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using this weapon had not occurred to those engaged in arbitrations rather than litigation. Nonetheless complaints of delays in arbitration have been of as long – or longer – standing as complaints of the law’s delays, and it has at long last in 1979 been thought necessary to deal with this problem by legislation.

In my view, it is necessary to consider the correctness of the judge’s view both as a matter of history and of principle. Until well into the last century the courts looked askance at arbitrations. The procedure was suspect as tending to oust the jurisdiction of the courts, and indeed one finds traces of this attitude in decided cases well into this century notwithstanding the passing, first, of the Common Law Procedure Act 1854 and, secondly, of the Arbitration Act 1889.

As Lord Moulton pointed out in Bristol Corporation v. John Aird & Co. [1913] A.C. 241, 256, it was not until the Common Law Procedure Act 1854 that Parliament gave to the courts the limited power of stay which section 11 of that statute accorded in cases where the parties had agreed that existing or future differences should be referred to arbitration provided, of course, the other conditions in that section were also satisfied. Until then if one of the parties to a submission refused to proceed to arbitration the other was left to a useless remedy in an action for damages: see also in this connection the judgment of this court in In re Smith & Service and Nelson & Sons(1890) 25 Q.B.D. 545, where it was held that the only remedy for unilateral revocation of a submission to arbitration before section 1 of the Arbitration Act 1889 was enacted lay in an action for damages for breach of contract. But the Act of 1854 is singularly silent as to the powers as distinct from the duties of arbitrators – for example, section 15 provided that an arbitrator should, save in circumstances for which the section made provision, make his award within three months of his appointment. Those and other sections of the Act of 1854 dealing with arbitrations were repealed by Schedule 2 to the Arbitration Act 1889. That statute in section 4 re-enacted in a somewhat different form section 11 of the Act of 1854. By section 2 of and Schedule 1 to the Act of 1889 nine provisions respectively lettered a to i were ordered to be implied into submissions to arbitration unless the parties had otherwise provided. The former section 15 found new and extended life in paragraphs c, d and e of that schedule, provisions which were castigated by the MacKinnon Committee as of no practical value: see paragraph 5 of that report. It is to be observed that paragraph f created an implied obligation on parties to give evidence and also discovery, but notwithstanding that provision no sanctions were provided for any failure so to do. Curiously enough, Schedule 1 contained no express power to order pleadings or indeed to allow amendments to pleadings, nor was any power given to arbitrators to order a claimant to give security for costs in cases where in an action a court would order such security to be given.

It is difficult to think that if between 1889 and 1934, when some of the recommendations of the MacKinnon Committee took effect in the Arbitration Act 1934, anyone had been bold enough to assert that an arbitrator had power to dismiss an arbitration for want of prosecution and to make an award to that effect without more ado, such a submission

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would have been favourably received in any court of law. That that is so is supported, I think, by two decisions in this period, especially the second, to neither of which was the judge referred when this matter was before him. In In re Crighton and Law Car and General Insurance Corporation Ltd. [1910] 2 K.B. 738 a Divisional Court which included Scrutton J. held that an arbitrator had both inherent power and also power under paragraph f of Schedule 1 to the Act of 1889 to order pleadings and to allow or to refuse amendments to them. No doubt it was this decision which made it unnecessary for the MacKinnon Committee to recommend that this apparent gap in Schedule 1 be filled by legislation. More important, in In re Unione Stearinerie Lanza and Weiner [1917] 2 K.B. 558, the Divisional Court held that an arbitrator had no power to order security for costs. That court declined to extend Scrutton J.’s reasoning in In re Crighton[1910] 2 K.B. 738 to the length necessary to enable security for costs to be ordered by an arbitrator. Viscount Reading C.J. said, at p. 561:

“I do not think that Scrutton J. meant by those words to imply that an arbitrator under a submission by agreement was in the same position as and had all the powers of a judge. I think he meant that he had power to ascertain the facts, and, under clause (f), power to order points of claim to be delivered, and, that that being so, he must have the power also, sitting as the person to decide the questions, to allow an amendment. I do not think he meant anything more than that.”

This decision led to the recommendation of the MacKinnon Committee that the court, not be it noted arbitrators, should be given power, inter alia, to order security for costs, a provision subsequently enacted in the Act of 1934 and now finding its place in section 12 (6) (a) of the Arbitration Act 1950.

It was faintly suggested that we should overrule the Unione case [1917] 2 K.B. 558. It would be completely wrong for us to do so even if I had any doubts (which I have not) as to its correctness. When a decision has been accepted for over 60 years and its consequences remedied by statute, though not so as to give arbitrators power to order security for costs, it would indeed be strange for the Court of Appeal to hold at this late stage that this latter power had always existed.

I cannot but think that, if the judge had been referred to this decision and in particular to the passage I have just quoted from the judgment of Viscount Reading C.J., he would not have reached the conclusion that he did, namely that parties by their agreement to arbitrate impliedly clothed the arbitration tribunal with jurisdiction to give effect to their rights and remedies to the same extent and in the same manner as a court, subject only to certain well recognised exceptions: see ante, p. 921E-F

The judge relied on the decision of this court in Chandris v. Isbrandtsen-Moller Co. Inc. [1951] 1 K.B. 240 as supporting his view. With great respect, I do not think that that decision goes so far as the judge thought. An arbitrator may award interest on damages in a proper case for the

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reasons given by this court in the Chandris case. But that is not to say, as the judge sought to say, that an arbitrator has in all the circumstances all the powers of the court, subject only to the exceptions which he mentioned. I venture to think that the members of this court who decided the Chandris case would have been surprised to learn that they had impliedly held that an arbitrator had power to dismiss for want of prosecution and had also impliedly reversed the decision in the Unione case [1917] 2 K.B. 558.

So far I have dealt with the question only by considering the history of the relationship between the courts and arbitrators and what I conceive to be the principle which has to be applied in these cases. But we were referred to an ill-reported case: Wilson, Sons & Co. v. Conde d’Eu Railway Co. (1887) 51 J.P. 230. That was a decision of the Divisional Court (Day and Wills JJ.) in which it appears to have been held that an arbitrator, seemingly vested with all the powers of a nisi prius judge, nonetheless had no power to strike out the claims that were before him, but that he must adjudicate upon them: see the brief report of the successful argument of the then Attorney-General and also of the judgment of the court. That decision was before the Act of 1889, but for what it is worth supports the conclusion at which I have independently arrived.

One reason which Bridge J. gave in the Crawford case [1973] Q.B. 1 for holding that there was no power in an arbitrator to dismiss for want of prosecution was what he suggested was the different position of a respondent in an arbitration from that of a defendant in an action. He described the position of a defendant in an action as “relatively privileged,” because such a defendant could sit back, do nothing and then apply to dismiss the action against him for want of prosecution. In the case of an arbitration the judge thought there was an obligation on both parties to enable the matter to be prepared for trial: see Donaldson J. ante, pp. 918 – 920 disagreed with this view, suggesting that save in what he called “look sniff” arbitrations, arbitrations and actions were indistinguishable in principle in their adversarial characteristics.

Mr. Saville submitted that on this issue Donaldson J. was wrong and Bridge J. was right and that arbitrations were inquisitorial rather than adversarial in their character. He relied upon what he claimed to be the duty of an arbitrator to make his award promptly and referred to the penalties for which provision is made in section 13 of the Arbitration Act 1950 for the removal of an arbitrator from office and deprivation of remuneration. I think, with respect, this submission is without foundation. The section is dealing with an arbitrator who will not go forward when everyone wishes him to do so. But an arbitrator who insisted on proceeding against the wishes of the parties and attempted to make an award when they were not ready to proceed might at least in some cases find himself accused of misconduct.

With great respect to any view of Bridge J., I find it difficult to distinguish between litigation and arbitrations on the grounds which he suggested. Both, to my mind, are essentially adversarial. Even in a case where each party has appointed an arbitrator and the arbitrators meet and agree upon their award before appointing an umpire I think the

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proceedings can properly be characterised as adversarial. If the commercial judge tries an action in the Commercial Court, it is by concession an adversarial process. If he is invited and agrees to hear precisely the same dispute as an arbitrator or umpire under section 4 of the Administration of Justice Act 1970, I find it difficult to see how or why the whole character and quality of the proceedings suddenly changes. Indeed an arbitrator or umpire, who in the absence of express agreement that he should do so, attempting to conduct an arbitration along inquisitorial lines might expose himself to criticism and possible removal.

On this point, therefore, I respectfully prefer the reasoning of Donaldson J. to that of Bridge J. I take the view that almost all arbitration proceedings and certainly the instant arbitration proceedings are essentially adversarial in their character. As will appear later in this judgment, I do not think that a respondent in an arbitration is in an in any way different position from a defendant in an action. Neither is under any obligation to stir his adversary into action. The dictum which Donaldson J. quoted, at p. 476, about sleeping dogs seems to me to apply equally to sleeping claimants in an arbitration as to sleeping plaintiffs in an action.

If Donaldson J.’s view that arbitrators do, with certain exceptions, possess all the powers of a court, were right, one wonders why the express powers listed in section 12 (6) of the Act of 1950 were necessary, since an arbitrator would already have possessed the greater number of these powers pursuant to some inherent powers vested in him.

In support of the Raytheon appeal Mr. Saville advanced two further arguments, neither of which, he frankly admitted, had been advanced by counsel appearing for the claimants in that case before the judge.

The first was that even if the criticism of the first part of the judge’s judgment were well-founded, his conclusion could be supported on the ground that the position was different in the case of what Mr. Saville called an “institutional” arbitration, by which phrase I understood him to mean an arbitration conducted in accordance with the rules of and under the supervision of some organisation of arbitration such as, in the Raytheon appeal, the International Chamber of Commerce (“I.C.C.”), or perhaps the Institute of Arbitrators in this country. The second was that even if the three arbitrators appointed by the parties under the I.C.C. rules had no jurisdiction to dismiss for want of prosecution, nonetheless under those rules the respondents’ remedy was to apply to the I.C.C. Court of Arbitration, a body for which their rules make provision, for an appropriate order which Mr. Saville claimed that court could make under the rules. He relied in this connection on an affidavit by Dr. Eisemann, a former Secretary-General of the Court of Arbitration of the I.C.C. To this affidavit the respondents replied with an affidavit from Dr. Mann, whose experience in the field of international arbitration requires no endorsement from this court. We admitted these affidavits notwithstanding formal objection from Mr. Waller.

The arbitration clause in the contract concerned in the Raytheon appeal, which was dated June 2, 1970, is found in clause 11 of that contract and reads:

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“In the event that any dispute or controversy shall arise between the parties hereto, the same shall be resolved by arbitration in Geneva, Switzerland, under the rules then prevailing of the International Chamber of Commerce. The laws of England and the laws of the State of Delaware shall be deemed equally applicable to this agreement and in the event of conflict between the two bodies of law the arbitrator shall be free to apply whichever of the said laws will in his opinion most equitably secure the results contemplated herein. The decision of the arbitrator(s) shall be final and binding upon both parties and judgment thereon may be entered in any court of competent jurisdiction.”

Thus the originally intended place of arbitration was Geneva. But this was later changed to London by agreement between the parties and with the consent of the I.C.C. It was argued that this change cannot have been intended to import into the agreement to arbitrate all the striking out procedure applicable to English High Court actions. Since I take the view that by English law an arbitrator has no such power, the interesting discussion we had on the extent of the applicability of the lex fori to arbitrations which is elaborated in Dr. Mann’s affidavit and also in an article he wrote “Lex Facit Arbitrum” in a presentation book of essays, Liber Amicorum, requires no further consideration.

But I find it difficult to accept Mr. Saville’s suggested distinction between institutional and non-institutional arbitration, for which he claimed some support in a textbook entitled Handbook of Institutional Arbitration in International Trade (1977). No doubt institutions concerned with furthering arbitration as a means of disposal of disputes seek emancipation from control of the courts of the countries where such arbitrations take place, perhaps in the belief that such freedom facilitates expedition of decision. Dr. Mann’s affidavit shows the limited success of such attempts and this court recently had to consider similar problems in relation to I.C.C. arbitrations in Dalmia Dairy Industries Ltd. v. National Bank of Pakistan [1978] 2 Lloyd’s Rep. 223, to which frequent reference was made during the arguments. For my part, I am unable to accept that there can be any logical distinction between arbitrations of one kind and the other according to whether some label such as “institutional” can be attached. In each case the relevant question is – on what terms and conditions have the parties agreed to go to arbitration? That question must be answered without regard to any attachment of suggested labels.

Ultimately Mr. Saville did not argue that the three named arbitrators had power to dismiss for want of prosecution. But he contended that the respondents had pursued the wrong remedy and that to achieve their objective they should have applied not to the arbitrators nor to the courts of this country, but to the I.C.C. Court of Arbitration. To some extent this submission overlaps with the question whether or not the court has power to grant and, if it has power, should grant an injunction, for clearly if an alternative remedy existed an English court would be less willing to grant a discretionary remedy such as an injunction.

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I therefore turn to the I.C.C. rules. We are concerned with the 1955 edition, which were those in force at the date of the relevant contract. I think it is clear that for the purpose of the present proceedings we must interpret those rules in accordance with English principles of construction. There is no evidence that the law of Delaware is any different from our own. Section B (1) of those rules deals with the Court of Arbitration and arbitrators and articles 6 and 7 set out the method of appointment of and the functions of the Court of Arbitration. Article 13 gives further powers to the Court of Arbitration. Article 26 reads:

“Before completing the award, the arbitrator shall submit the same to the Court of Arbitration. The court may lay down modifications as to its form and, if need be, draw the arbitrator’s attention even to points connected with the merits of the case, but with due regard to the arbitrator’s liberty of decision. No award shall under any circumstances be issued until approved as to its form by the Court of Arbitration.”

Article 31, much relied upon by Mr. Saville, reads:

“In any circumstances not specifically provided for above, the Court of Arbitration and the arbitrator shall act on the basis of these rules and make their best efforts for the award to be enforceable at law.”

In addition I should refer to articles 1, 2, 3 and 4 of the statutes of the Court of Arbitration.

In paragraph 40 of his affidavit Dr. Eisemann claims that I.C.C. arbitrations are more expeditious than others. I do not stop to consider whether this assertion would be universally accepted. Paragraph 37 of his affidavit states:

“If the claimant was merely stalling for time, no extension would be granted; and the claimant would be warned by the I.C.C. Secretariat or the arbitrators on behalf of the Court of Arbitration that unless he remedied his dilatory conduct within a specified time the Court of Arbitration would treat his request for arbitration as withdrawn, settle the fees of the arbitrators and reimburse the deposit paid by the respondents.”

It is true that Dr. Mann does not contradict this statement. Accepting therefore for present purposes that this is what does or may happen in practice, but construing the rules as a matter of English law, I feel bound to say that I see nothing in those rules which justifies such a course of action as a matter of contract. I derive some comfort for this conclusion from an article in the Handbook of Institutional Arbitration in International Trade, to which I have already referred. In a passage dealing with I.C.C. arbitration under the most recent rules (we were told that article 13 of the most recent rules is virtually identical with article 19 of the rules with which we are concerned), the writer says, at p. 24:

“The first of the ‘anti-frustrating’ measures provided by the rules are those which enable the preliminaries to the proceedings to go

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ahead, once certain time limits have been reached. The second is that provided in article 13 where a party fails to cooperate in the definition of the precise limits of the dispute, and of the points on which the arbitrators are to rule. This, obviously, does not mean that there is any default procedure, since no party can ever be deprived of its rights to defend its interest.”

This passage hardly supports Mr. Saville’s submissions or suggests that Dr. Eisemann’s paragraph 37 is justified by the rules, whatever may happen in practice. Moreover, to my mind paragraph 37 suggests something more akin to action of an administrative nature than to action with any contractual force or effect behind it. I am of the clear view, therefore, that the respondents could not have found any satisfactory remedy by application to the Court of Arbitration.

Thus far I have reached these conclusions:

(1) There is no power in an arbitrator to dismiss an arbitration for want of prosecution. In this I respectfully disagree with Donaldson J. and agree with Bridge J., though for reasons which I fear differ from his.

(2) Mr. Saville’s submissions regarding the possible distinction between “institutional” and other arbitrations and especially his submission on the I.C.C. rules regarding an application to the Court of Arbitration fail.

(3) It must follow that unless the court can interfere by injunction, as the judge has held, an aggrieved respondent in an arbitration is without remedy save himself to press the proceedings forward, which as a defendant in an action he would be under no obligation to do and which in an arbitration might well not be in his interest.

Underlying the view of the judge that the court had power to interfere by injunction was the undoubted fact that the relationship between the parties to an arbitration agreement was a contractual one. An agreement to arbitrate might, like any other contract, be broken or become incapable of performance. If the particular breach in question took the form of repudiatory conduct, then there was no difference in principle between conduct evincing an intention not to perform an agreement to arbitrate and such conduct evincing an intention not to perform any other type of contract. Such conduct could be accepted by the innocent party as a repudiation and a claim to rescind would follow coupled with a claim for damages and an injunction where either or both of these were the appropriate remedies. Such an injunction could then be granted in support of the innocent party’s contractual right to cancel.

The judge further took the view that terms could be implied into an agreement to arbitrate as into any other contract. In addition to the implication, which I have for the reasons already given felt unable to accept, that parties to an arbitration impliedly clothe the arbitrators with jurisdiction to give effect to their rights and remedies to the same extent and in the same manner as a court (ante, p. 921), the judge also held, at p. 924, that it was “implicit” in – by which he meant an implied term of – an agreement to arbitrate that each party would use his reasonable endeavours to bring the matter to a speedy conclusion. In the light of the judge’s findings of fact, he held that the claimants in each case had

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been guilty of repudiatory conduct by failing to proceed with reasonable despatch, repudiatory conduct which each of the respondents was entitled to accept as bringing the agreement to arbitrate to an end.

Mr. Saville was quick to attack the implied term theory both in principle and in its application to the facts of these cases. In principle, he said, there was no need to imply any such term as being both reasonable and necessary in order to make the agreement to arbitrate work. The Arbitration Act 1950, like its predecessors, in the absence of any contrary agreement, imported by statute certain implied terms into a submission to arbitration, for example, section 12 (1). There was, therefore, no need in order to make the agreement to arbitrate work to imply any other terms and no justification for so doing. Moreover, whereas in the Raytheon appeal the complaint was of delay in giving discovery, the respondents had ready to hand a statutory remedy by application to the High Court under section 12 (6) (b), a submission much relied upon by Mr. Saville in his argument on the facts that the respondents were responsible for much, if not all, of the delay by failing to pursue their statutory rights under that paragraph, as indeed they had indicated in correspondence at one time that they intended to do.

Mr. Saville also contended that the judge’s implied term imposed an equal obligation on both parties to proceed with due diligence. Whatever might be said against the claimants in this connection, the respondents had equally done nothing and therefore were equally in breach of their obligation vis-à-vis the claimants, as the claimants were to the respondents, if the judge’s implied term were correctly imported into the agreement to arbitrate. Mr. Saville further argued that if a respondent in an arbitration did nothing it was for the arbitration tribunal itself to get the arbitration moving and that if a respondent did nothing to galvanise that tribunal into action, the respondent was without more ado acquiescing in the delay.

Mr. Butler, however, did not adopt this part of Mr. Saville’s argument, contenting himself with the submission that there was no duty on either party or on the arbitration tribunal to move an arbitration forward. In addition Mr. Saville argued that the respondents’ submission and the judge’s view that an agreement to arbitrate could be repudiated for breach of the implied term which the judge held to exist involved that the innocent party was purporting to revoke his submission to arbitration which, Mr. Saville argued, he was not entitled to do without the leave of the court in view of the provisions of section I of the Arbitration Act 1950. This further argument had not been advanced before the judge and we therefore do not know whether, had he thought this submission well founded, he would have granted the necessary leave under that section. Both respondents before us sought and obtained leave to amend their writs to seek such leave if it should prove necessary. For my part, in the light of the judge’s reasoning I feel little doubt that he would, if he had thought it necessary so to do, have granted leave to revoke.

The submission that a term such as that which the judge held must be implied into this agreement to arbitrate was in the court below based

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upon what in lawyers’ shorthand is known as the “Moorcock principles.” Those principles were recently restated by the majority of this court in Liverpool City Council v. Irwin [1976] Q.B. 319, in terms later unanimously approved by the House of Lords [1977] A.C. 239. Mr. Saville devoted the greater part of his attack upon the implication made by the judge to showing that it was neither reasonable nor necessary to imply such a term so as to make this agreement to arbitrate work. This is, however, not the only basis upon which a court will imply a term into a contract. As their Lordships held in Liverpool City Council v. Irwin, there are certain classes of contract to which a court will, in the absence of agreement to the contrary, attach an implied term as a matter of law. Thus in that case their Lordships held that the particular implied term there in question attached to the contract concerned, which was a contract for the letting of a flat, as a legal incident of that contract: see per Lord Wilberforce at pp. 254-255 and per Lord Edmund-Davies at pp. 266-267. There are plenty of other examples of the operation of this principle in the law of contract. For example, sections 13 and 14 of the Sale of Goods Act 1893, and section 39 of the Marine Insurance Act 1906 attach certain implied conditions to contracts of the particular class with which those two statutes are respectively concerned, and each of those statutory provisions merely reproduces the relevant antecedent common law.

Sale of goods law, landlord and tenant law and marine insurance law are all part of our general law of contract. To each as to other types of contract the law will or may attach certain particular implied terms as legal incidents of the relevant contract. I see no reason in principle why contracts to refer disputes to arbitration should not also be treated as part of our general law of contract, be governed by the same legal principles and have attached to them where appropriate one or more implied terms as incidents of those particular contracts, those implied terms if necessary being in addition to those other implied terms for which the relevant legislation makes statutory provision.

Mr. Saville’s attack upon the implication into the agreement to arbitrate which the judge held to be correct has, to my mind, considerable force. Mr. Waller found difficulty in supporting the judge’s implied term. Adroitly he rested this part of his submission on a different basis. Founding himself on the decision in Universal Cargo Carriers Corporation v. Citati [1957] 2 Q.B. 401, he argued that following the reasoning of the House of Lords in Liverpool City Council v. Irwin [1977] A.C. 239there attached to this agreement to arbitrate and to other similar agreements as a legal incident of such agreements a duty not to be guilty of such delay as would frustrate the whole purpose of the arbitration in question. In the Citati case the delay which was ultimately held to be frustrating delay of a repudiatory character was the charterer’s failure to load the ship within such time as did not wholly destroy the commercial purpose of the adventure so that the shipowner thereupon became entitled to throw up the charterparty by reason of the charterer’s repudiatory conduct.

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By parity of reasoning Mr. Waller argued that a claimant in an arbitration who, like a plaintiff in an action, has the conduct of the case and who is guilty of prejudicial delay of such a kind as would in an action lead to that action being struck out by the court was equally guilty of frustrating delay of a repudiatory character, thus enabling the innocent party, the respondents in the Raytheonappeal, to rescind the agreement to arbitrate.

This is indeed a formidable submission. As I have already said, agreements to arbitrate are but part of the general law of contract. The Citati doctrine [1975] 2 Q.B. 401 is of general application. It is not limited to contracts of particular types. This court recently applied that same principle in Unitramp v. Garnac Grain Co. Inc. [1979] 1 Lloyd’s Rep. 212, a decision against which I understand their Lordships’ House has recently refused leave to appeal.

Mr. Saville sought to meet this argument by submitting that the Arbitration Act 1950 was a complete code and that, therefore, there was no justification for attaching by implication to any agreement to arbitrate any further legal obligations beyond those for which the statute provided, such an agreement to arbitrate was not inefficacious or futile without making the implication, especially as the aggrieved party could always invoke his statutory remedies and in particular in the Raytheon appeal a remedy under section 12 (6) from the court.

The short answer to this submission seems to me to lie in the fact that it presupposes, contrary to my view, that a respondent in an arbitration is under some obligation to galvanise a dilatory claimant into action, e.g. by an appropriate application to the High Court under section 12 (6) of the Act of 1950. In my view, for the reasons already given, a respondent is under no such obligation. He can sit back and wait. If this conclusion be right, I see little or no difficulty in attaching to an agreement to arbitrate as a legal incident of such a contract an implied obligation in point of law upon the claimant who, like a plaintiff in the action, has the conduct of the case not to be guilty of such dilatory conduct in the prosecution of his claim as will defeat the whole purpose of the agreement to arbitrate by making a fair hearing before the arbitration tribunal impossible because of the lapse of time involved. This is merely another way of saying that a claimant must in such circumstances not be guilty of frustrating delay of a repudiatory character and it is difficult to think of a better example of frustrating delay of a repudiatory character than delay of such kind as would in an action cause the High Court to strike out the action in its entirety for want of prosecution.

Thus far I accept the judge’s view that a term can properly be implied into the agreement to arbitrate which reflects what I regard as the obligation of a claimant not to delay the prosecution of his claim. But I venture to think that the correct basis for implying such a term is that which I have just stated rather than that which the judge adopted and that the correct implication is also that just stated rather than that suggested by the judge.

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In this connection it should be mentioned, as Mr. Rokison told us, that the suggestion of implying a term originally emanated from the judge during the hearing of the Bremer action and not from counsel arguing that case. Mr. Rokison frankly admitted to us that he displayed little enthusiasm for the suggestion when the judge first made it and that the judge thereupon appeared to drop the suggestion – we have been shown the relevant extract from the transcript which contains the interchange between the judge and Mr. Rokison on this topic. But during the subsequent hearing of the Raytheon case, the judge seemingly revived the idea and ultimately it has formed the basis of this part of his judgment.

Mr. Saville also argued that before the innocent party can treat delay of a repudiatory character as giving him the right to rescind the contract, he must give the guilty party notice making time of the essence. No doubt in certain classes of contract, for example where an innocent party has allowed a guilty party to think that a specific obligation as to timeous performance will not be insisted upon, such a notice making time of the essence would be required and a failure to comply with that notice established before rescission could successfully be sought for non-compliance. But, in my judgment, the present is not such a case. The whole basis of the reasoning in the Citati case [1957] 2 Q.B 401 is inconsistent with this submission. The guilty party remains under a continuing obligation to prosecute his claim and there will come a time, not always very easy to determine in point of fact, when the innocent party can say to the guilty party “enough and no more” and rescind without giving the guilty party any further locus penitentiae. In my view, therefore, this further submission fails.

As to the submission on section I of the Arbitration Act 1950, the short answer is that the rescission with which we are concerned is of the agreement to arbitrate, and not of the appointment of the arbitrators. It is, however, clear that logically the latter appointments must disappear as an inevitable consequence of the rescission of the agreement to arbitrate. Section 1 is only concerned with revocation of the appointment of an arbitrator and not with an agreement to arbitrate. I do not think the dictum of Denning L.J. in Frota Nacional de Petroleiros v. Skibsaktieselskapet Thorsholm [1957] 1 Lloyd’s Rep. 1, 5 is any authority for the contrary view. That was a case where the arbitration in question was continuing. There was no suggestion in that case of a repudiation of the agreement to arbitrate. But, even if I be wrong in the views I have just expressed and leave is required under section 1, I would unhesitatingly give such leave, as I feel reasonably certain that the judge would have done had this issue been raised before him. Finally, on this branch of the case, Mr. Saville argued that there was no clear acceptance of the repudiation by the respondents for he contended that the writ treated the arbitrators as still having power to strike out and that therefore the declaration sought in the writ affirmed the agreement to arbitrate. I do not think this submission is sound – at best it is certainly highly technical. The writ claims an injunction on the footing that the agreement to arbitrate was not subsisting. The claim for a declaration was really no

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more than a claim for an alternative remedy, namely, striking out by the arbitrators consequently upon the rescission of the agreement to arbitrate.

I now turn to the question whether the court has power to grant an injunction restraining the claimants from proceeding with the arbitrations. I approach this question on the basis that the respondents have established a right to rescind owing to frustrating delay which the respondents have exercised. Mr. Saville argued that before section 5 of the Arbitration Act 1979 was enacted the court had no such power.

It is true that such a power, if it exists, has never, at least in recent times, been exercised to restrain the prosecution of an arbitration in support of a claim that the arbitration agreement has been rescinded by repudiatory conduct of one of the parties to that agreement. But if Mr. Saville’s main submission be right and I am right in disagreeing with the judge’s views that the arbitration tribunal itself has no power to strike out, it follows that there is no power anywhere to prevent a dilatory claimant guilty of frustrating delay from ultimately proceeding with his claim notwithstanding the impossibility of the issues between him and the respondent being fairly tried. This of course gives the claimant a grossly unfair advantage.

Mr. Saville argued that the cases where injunctions had been granted in connection with the prosecution of arbitrations fell into two classes, first, misconduct of the arbitrators and, secondly, where there was a dispute whether a particular party was or was not a party to the agreement to arbitrate. He claimed that the respondents by their submissions were trying to add a third class to these two.

In support of the first part of his suggested dichotomy he relied on a recent unreported decision of this court – Japan Line Ltd. v. Aggeliki Charis Compania Maritima S.A. (The Angelic Grace) [1980] 1 Lloyd’s Rep. 288, 292 where it was stated by Lord Denning M.R. that the High Court had jurisdiction to supervise the conduct of arbitrators in order to make sure that they were not guilty of “real misconduct.” In support of the second part of Mr. Saville’s suggested dichotomy he relied upon the decision in Kitts v. Moore [1895] 1 Q.B. 253, where this court granted an injunction to a plaintiff who sought to impeach an alleged agreement to arbitrate by alleging that he was not bound by it: see per Lindley L.J. at pp. 259-260 and per A. L. Smith L.J. at p. 262.

In the present case it was urged there was no “impeaching” of the agreement to arbitrate since it was admitted that initially each of the respondents had been bound by it. There was no suggestion that either agreement to arbitrate was void or voidable on the ground of fraud or mistake. Mr. Saville relied upon Den of Airlie S.S. Co. Ltd. v. Mitsui & Co. Ltd. (1912) 17 Com.Cas. 116 as illustrating a case where a court would not grant an injunction to restrain a defendant from proceeding with an arbitration, saying that there was in such a case no initial impeaching of the agreement to arbitrate.

In answer to these submissions Mr. Waller demonstrated, as he submitted, the development of the relevant equitable jurisdiction before the passing of the Judicature Act 1873 by taking us through many 19th

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century authorities, not all of which were referred to before the judge. I do not propose to examine all these cases, in some of which injunctions were granted and in others injunctions were refused. I think references to three of the cases only will suffice. First and foremost is Pickering v. Cape Town Railway Co., L.R. 1 Eq. 84, a decision of Page Wood V.-C. later varied by Lord Cranworth L.C. The Pickering case has had a curious history and we are indebted to Mr. Waller and his junior for having traced its history . It was treated in the 7th ed. of Russell on Arbitration as authority for the proposition, at p. 204, that:

“Parties, however, sometimes conduct themselves in such a manner as to induce the Court of Chancery to restrain them from proceeding in a reference.”

The passage and the relevant reference to the Pickering case was however later dropped in subsequent editions of Russell and the case is not mentioned in the current or indeed any recent edition of that work. It is, however, cited in Halsbury’s Laws of England, 4th ed., vol. 24 (1979), para. 1038, as authority for the proposition:

“The court has jurisdiction to interfere in arbitration proceedings on equitable grounds where the parties have by their conduct excluded themselves from the benefit of their contract to arbitrate.”

In Pickering’s case, L.R. 1 Eq. 84 there was a contract between the plaintiff and the defendants for the building of a railway in the former Cape Colony. That contract contained an arbitration clause and a certain Mr. Hawkshaw was appointed what was called “standing referee.” Disputes arose and the defendants then resorted to the Supreme Court of the Cape Colony to eject the plaintiff from the site. Later the defendants sought to insist upon their right to go to arbitration in respect of matters arising from the plaintiff’s ejection from the site. The plaintiff sought and obtained from Page Wood V.-C. an injunction restraining the arbitrator from proceeding to make an award. Page Wood V.-C. stated the position thus, at pp. 87-88:

“We have nothing in this court in the nature of a writ of prohibition authorising the court to proceed against an arbitrator, and the only jurisdiction that exists to stop the proceedings before arbitration is founded upon the conduct of the parties. If, for example, defendants are seeking to enforce certain rights which they conceive they are entitled to exercise under a deed for submission to a reference, and the court should be of opinion that they have debarred themselves from exercising those rights by the course of conduct which they have adopted, there arises an equity, which prevents them from prosecuting proceedings, however they might otherwise be entitled to do so under the particular jurisdiction which is beyond the control of this court.”

Lord Cranworth L.C. subsequently discharged this injunction: L.R. 1 Eq. 89. As I read the very brief report of his judgment, he discharged the injunction because it had, in his opinion, been premature to grant it

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before the relevant facts had been fully ascertained. It is important to note that Lord Cranworth L.C. is reported as having said, at pp. 89-90:

“The Vice-Chancellor might have come to a correct conclusion as to the parties having by their conduct excluded themselves from the benefit of their contract to arbitrate, but his Lordship could not see his way to that conclusion until the cause was heard.”

I do not read this passage as disagreeing with Page Wood V.-C.’s statement of basic principle upon which the Court of Chancery would proceed in granting relief to a plaintiff seeking to restrain a defendant from proceeding with an arbitration under an arbitration clause.

Mr. Saville strongly argued that the Pickering case was no authority for the proposition that the court could or would interfere with an arbitration because owing to delay a fair trial was no longer possible: Pickering was, he said, a case where the agreement to arbitrate had been impeached. He reinforced this submission that Pickering was no authority for the wider proposition by urging that nothing could be more unfair than an arbitrator whose award could be shown to have proceeded on a wrong view either of the facts or the law or both. Yet there was ample authority in such cases that the court would not interfere. If, therefore, before 1979 the case did not come within section 12 (6) of the Act of 1950, no one had power to interfere.

I shall return to this submission later, but it will be convenient next to consider the two other principal cases. In Beddow v. Beddow, 9 Ch.D. 89 Sir George Jessel M.R. enjoined an arbitrator from acting because of his own unfitness. That case on its facts, of course, falls comfortably within Mr. Saville’s first category. But Sir George Jessel M.R. said, at p. 93:

“… it appears to me that the only limit to my power of granting an injunction is whether I can properly do so. For that is what it amounts to. In my opinion, having regard to these two Acts of Parliament, I have unlimited power to grant an injunction in any case where it would be right or just to do so: and what is right or just must be decided, not by the caprice of the judge, but according to sufficient legal reasons or on settled legal principles.”

In the third and last of these cases, North London Railway Co. v. Great Northern Railway Co., 11 Q.B.D. 30, this court refused to grant an injunction where the plaintiff asserted that the arbitrator had no jurisdiction to hear the dispute. The court, after considering the judgment of Sir George Jessel M.R. in Beddow v. Beddow, 9 Ch.D. 89, held that it had no jurisdiction to grant the injunction sought because if there were no jurisdiction in the arbitrator to hear and determine the arbitration there would be no legal injury and no legal right in the plaintiff which he was entitled to protect by injunction: see per Brett L.J. pp. 35 and 36 and Cotton L.J. at pp. 40 and 41. Cotton L.J. pointed out that Beddow v. Beddow proceeded upon the basis that the plaintiff had a legal and equitable right to protect by injunction.

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At the present day the problem to which the North London Railway case, 11 Q.B.D. 30 gave rise could and no doubt would be swiftly solved by an action for a declaration that the arbitrator had no jurisdiction. The North London Railway case clearly troubled the judge: see [1979] 3 W.L.R. 471, 480. I do not think the North London Railway case decides more than, as is indeed clear law, the court will not grant an injunction save in support of some legal or equitable right: see the recent restatement of this principle by Lord Diplock in Siskina (Owners of cargo lately laden on board) v. Distos Compania Naviera S.A. [1979] A.C. 210, 256. Lord Diplock in that passage appears to treat this as the ratio decidendi of the North London Railway case. Curiously enough it does not seem to have been argued in that case that the plaintiffs had a legal or equitable right to be protected by injunction against wasted costs in an arbitration in which such costs would be irrecoverable if the arbitrator had no power to determine the dispute. He would indeed be a brave lawyer who, where a problem of this kind arises, advises his clients that they can safely stay away from such an arbitration and risk the arbitrator deciding the issue of jurisdiction against them merely in order to save costs which might prove to he irrecoverable.

There is always a tendency where courts, whether of equity or common law, possess some power whether equitable, at common law or by statute and over a long period of time can be shown to have exercised or refused to exercise that power in widely differing cases to seek to group those cases and to categorise them and then, having drawn up those categories, to limit the exercise of those powers to such cases and to contend that there is no wider power which may be exercised in other cases which do not fall within those categories. With respect, I think this is the basic fallacy which underlies Mr. Saville’s suggested dichotomy. No doubt many of the cases I have referred to and others to which we were referred in argument and which were also referred to by Donaldson J. in his judgment, can be grouped or categorised as Mr. Saville suggests. But to accept that grouping or categorisation is not to say that every future case must fall within such a group or category before such an injunction can be granted. Equity has never proceeded along tramlines. In the instant case, as already stated, the respondents have, in my view, a legal right to rescind the arbitration agreement. They also have a right, whether it be called an equitable right does not matter, to a fair hearing before the arbitration tribunal. The claimants’ conduct has led to their having acquired this legal right to rescind. Their right to a fair hearing cannot now be fulfilled because of the claimants’ conduct.

Why then, when there is no other remedy available, should the court not interfere and protect both those rights by injunction? Without an injunction the claimants can go on with the hearing which ex hypothesi cannot be fair to the respondents.

I think, therefore, the judge was entirely right to grant the injunctions in both these cases. It would, in my judgment, be a lamentable gap in our jurisprudence were claimants in arbitration to be preferred to plaintiffs in litigation, as would be the case if the judge were wrong in

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that they can drag out arbitrations indefinitely, being arbitrations to which the Act of 1979 does not apply, without any penalty being imposed upon them.

That leaves the question of damages. This only arises in the Raytheon appeal. The respondents claim as damages their wasted expenditure and the judge ordered the quantum of such damage to be assessed by a taxing master. Mr. Saville argued that the respondents were not entitled to damages unless they could show that they would have, or at least had stood a good chance of winning the arbitration. I do not think this submission is well founded. Some cases, for example, an action for negligence against solicitors, may require proof of the prospects of success as an essential prerequisite of a successful claim for damages for what would have been gained in the action which the solicitors have negligently failed to bring is the measure of the plaintiff’s loss in his action for negligence. But the question in the Raytheon appeal is: what loss or damage flows naturally and directly from the claimants’ repudiatory conduct? My answer is that the damage which flows naturally and directly from their breach is the wasted expenditure which has been incurred by the respondents to no useful purpose because of the determination of the arbitration by rescission of the agreement to arbitrate and by the injunction. In reaching this conclusion I have not lost sight of the dictum of Lord Macmillan in Heyman v. Darwins Ltd. [1942] A.C. 356, 371 that the remedy for breach of an agreement to arbitrate is enforcement and not damages. That statement, however, must be read in its context and not divorced from it. Lord Macmillan was not intending to override the earlier decisions to which I have already referred which emphasise the contractual character of an agreement to arbitrate, a breach of which can in certain circumstances give rise to a claim for damages. In my judgment, therefore, the respondents in the Raytheon appeal are entitled to damages on the basis determined by the judge.

It remains to mention two other matters for the sake of completeness The first is a submission which Mr. Saville sought to raise for the first time in this court. There were, he correctly pointed out, only three respondents in the Raytheon appeal who were the three plaintiffs in the original action. But when one looks at clause 9 of the agreement between the claimants and the respondents one finds that the indemnity upon which the claimants sought to rely in the arbitration was jointly and severally given by four persons, the fourth being a Mr. Teasdale. Mr. Teasdale was not a plaintiff in the proceedings presently before the court and is not a respondent to this appeal. Therefore, argued Mr. Saville, the respondents’ cause of action was incomplete without Mr. Teasdale being joined either as a plaintiff or as a defendant. This became known as the “Teasdale point.” Mr. Teasdale unfortunately is an undischarged bankrupt. Naturally his trustee in bankruptcy is interested as to any terms upon which leave to join Mr. Teasdale might be granted. Since this was a new point taken for the first time in this court, Mr. Saville could only take it with our leave and we were only prepared to grant such leave on terms which Mr. Saville declined to accept. The Teasdale point, therefore, disappears.

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The second matter was raised by Mr. Butler. He sought to introduce for the first time in this court controversial evidence as to German law on the implication of terms into contracts of which German law is the proper law. Since it seemed to us that it would be impossible to resolve this issue even if it be relevant, as to which I express no opinion, without hearing the expert witnesses cross-examined, we declined to allow the matter to be raised for the first time before us. Clearly, if this were intended to be raised as an issue in these proceedings, the matter ought to have been investigated before Donaldson J. so that he might make his findings of fact upon the disputed questions of German law which would be available for us. We, therefore, declined to allow this matter to be raised.

In the result, for the reasons which I have given, I would dismiss both appeals. I would venture to add this. In the addendum to his judgment Lord Denning M.R. has referred to the position of a respondent who was guilty of inordinate and frustrating delay as were the plaintiffs in the present two cases. I prefer to express no view as to the position which might arise in that event which does not now arise for decision and was not presented in argument before us.

CUMMING-BRUCE L.J. I agree that both appeals should be dismissed on the grounds stated by Lord Denning M.R. and Roskill L.J. I take the same view as Roskill L.J. of North London Railway Co. v. Great Northern Railway Co., 11 Q.B.D. 30. The power to intervene by injunction only falls to be exercised in support of a legal or equitable right as stated by Lord Diplock in the Siskina case[1979] A.C. 210, 256, and the respondents in each case have established a legal right to accept the repudiation of the arbitration agreements arising from the repudiatory conduct of the claimants. The decision of Page Wood V.-C. in Pickering v. Cape Town Railway Co., 1 Eq. 84 is correctly stated in Halsbury’s Laws of England 4th ed., vol. 24 (1979), para. 1038 as authority for the proposition quoted in the judgments which have just been delivered. The fact that the courts have not been asked before to intervene by injunction in a case of repudiatory delay is explained by the history of the procedural remedy of striking out an action at law for want of prosecution. A new chapter began with Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229. The principles which were therein explained and applied are as relevant to proceedings taken pursuant to an agreement to arbitrate as to proceedings at law.

Solicitors: Lovell, White & King (instructed only on the appeal); Herbert Smith & Co.

Richards, Butler & Co.; Norton Rose, Botterell & Roche.

C. N.

South India Shipping Corporation Ltd. appealed to the House of Lords.

Anthony Evans Q.C. and P. G. Caldin for the appellants. The broad issue is whether a claim for damages arising under a shipbuilding contract, referred to arbitration in 1971, should now be effectively dismissed, not on the merits, but because of delay by the claimants (the present appellants) in delivering their points of claim. During the period between 1972 and 1976 there came to light further defects in the ships constructed under the contract and there was express agreement that they should be included in the arbitration. During that time the respondents never applied to the arbitrator for directions as to the conduct of the arbitration or for his finding whether there had been adverse or prejudicial delay. The House of Lords is concerned with issues of fact and law. The question also arises whether the arbitrator can dismiss a claim on the ground of delay without regard to the merits.

(2) Does the court have the same power in relation to arbitrations as it would in the case of High Court actions? The court itself cannot make an award.

(3) Should an injunction be ordered on the ground that the agreement to arbitrate was wrongfully repudiated by the claimant and the repudiation was accepted by the other party thus excusing him from performance of the contract of arbitration? In relation to this issue the respondents rely on breach of an implied term of the contract. There cannot be a repudiation without a breach. There cannot be a breach without a term to be broken. The respondents say that the suggested implied term is a necessary legal incident of every contract of arbitration. If so, the implied term has not been noticed for 300 years. It would be a startling development of the law producing a most unjust result.

(4) In any event, would an injustice be produced in the present case? See Crawford v. A. E. A. Prowting Ltd. [1973] Q.B. 1.

(5) Has an arbitrator a like power to that of a High Court judge? On this issue the Court of Appeal was in favour of the appellants. The respondents suggest that the power to dismiss is inherent in the arbitrator’s power to determine the matter, but they are seeking to have the claim dismissed, not on the merits, but as a punishment for delay.

(6) Further factual issues arise in relation to the suggested breach of an implied term. If there was an implied term was there a breach of it?

One of the advantages of arbitrations is that one is not tied to court timetables and the parties can choose their own pace.

The question is whether the respondents, who are seeking to have the claim dismissed without inquiry into the merits, can succeed without first obtaining some order from the arbitrator. Assuming everything else in the

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respondents’ favour, in the absence of a notice making time of the essence for service of the points of claim, the respondents have failed to establish a repudiatory breach. The breach relied on is the failure to deliver the points of claim. It is admitted that there was a breach of the obligation but time was never made of the essence of the agreement of April 1972. The principle expressed in Charles Rickards Ltd. v. Oppenhaim [1950] 1 K.B. 616, 623-624, 628 applies generally to contracts. The leading case on sale of land is Stickney v. Keeble [1915] A.C. 386. See also Jamshed Khodaram Irani v. Burjorji Dhunjibhai (1915) 32 T.L.R. 156, 157. The general rule is that notice must be given to make time of the essence: Halsbury’s Laws of England, 4th ed., vol 9 (1974), para. 481, pp. 337-338, para. 485, p. 340. and Chitty on Contracts, 24th ed. (1977), vol. 1, para. 1271, pp. 604-606 A contract to arbitrate is subject to the general law. The breach was not a repudiatory breach since no notice was given making time of the essence. Universal Cargo Carriers Corporation v. Citati [1957] 2 Q.B. 401, 429-430, 433 was relied on against the appellants, but it was dealing with anticipatory breach looking to the future and is in a different category. The question is whether there is here an implied fundamental breach.

On the face of it any implied term as to arbitration proceedings is likely to refer to the arbitration agreement rather than to the original shipbuilding contract. Were the term implied in the original contract the results would be startling: see Photo Production Ltd. v. Securicor Transport Ltd. [1980] A.C. 827, 850B-C, and Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331, 350.

The obligation to arbitrate, the arbitration clause, gives rise to a primary obligation under the contract. If there was a breach by the claimant in the arbitration while performance of the shipbuilding contract was continuing would he have to bring the shipbuilding contract to an end if he wished to end the arbitration? That would be an unlikely and an unsatisfactory result and it points to that analysis being wrong. But if the implied term is in the arbitration agreement the effect will be different and more satisfactory. It is unusual for such a matter as this to be dealt with without any reference to the arbitrator. A straightforward analysis of the contract suggests that to make time of the essence the respondents would have to give notice to that effect. It would be wrong for the House of Lords to make new law in order to help them.

Should any term be implied and, if so, what? Prima facie any term of this sort must be mutual, the consensual basis of the arbitration, i.e., there must be similar obligations on both sides. The foundation for that is the consensual basis of the arbitration. The only possible jurisdiction for a one sided implied term would be some agreement that the Rules of the Supreme Court should apply. But that is an implication which could not possibly be made here. In the context of an arbitration one is looking at something which is mutual. Unless there is some ground for importing High Court procedures there is no ground for not implying a mutual term. The difference between litigation and arbitration is that litigation provides a basic timetable for every step and arbitration does not.

An innocent party alleging breach of the arbitration agreement and

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seeking to treat delay as a repudiatory breach must first give notice making time of the essence, no matter how gross or inexcusable or prejudicial the delay may be. If the appropriate course is to seek a direction from the arbitrator, the two merge, the giving of the notice and the seeking of a direction. The conduct of an arbitration is almost entirely consensual. In an arbitration one should not let sleeping dogs lie and then shoot them without notice. Application to the arbitrator is the proper course: Powell v. Main Colliery Co. Ltd. [1900] A.C. 366, 372-373. Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229, 257, illustrates the approach to “sleeping dogs” which is made possible by the Rules of the Supreme Court. But in the case of an arbitration reliance is placed on Crawford’s case [1973] Q.B. 1, 5-8.

There are manifold differences between arbitration and litigation. though both are adversarial. An arbitrator need give no reasons for his decision and there is no appeal from it on the facts. The basis of the enforcement of his award is that the arbitration represents a contractual arrangement between the parties. Complying with the award is a contractual obligation: see Bremer Oeltransport G.m.b.H. v. Drewry [1933] 1 K.B. 753 and F. J. Bloemen Pty. Ltd. v. City of Gold Coast Council [1973] A.C. 115, 126. The consensual basis of an arbitration is radically different from that of plaintiff and defendant in litigation in the courts.

Section 12 (6) of the Arbitration Act 1950 gives the court disciplinary powers in relation to certain matters. The terms of arbitration began life as common form agreed terms between the parties. As to the implied terms, see section 2 of and Schedule 1 to the Arbitration Act 1889. It was an implied term that the parties would obey the directions of the arbitrator. Schedule 1 was based on Key and Elphinstone Compendium of Precedents in Conveyancing, 2nd ed. (1883) (the edition current at the time of the Act), vol. 1, pp. 148-150. See also the Report of the Committee on the Law of Arbitration (1927) (Cmd. 2817), para. 5. The relevant provision in the Arbitration Act 1950is section 13. The statutory scheme enables either party to complain of delay by the arbitrator, giving them a remedy. There is nothing expressed about delay by a party but the ability to apply to the arbitrator goes some way towards remedying the omission.

Judicial views differ as to the scope of implied terms: see Liverpool City Council v. Irwin [1977] A.C. 239, 257-258, 261-262, 264-269, 270 and Shell U.K. Ltd. v. Lostock Garage Ltd. [1976] 1 W.L.R. 1187, 1196. This suggests that here there is no such term to be implied as the respondents contend. Such a term is not to be implied in every arbitration as a matter of necessity. It has never been implied by law for over a century. There is no authority to support such an implication. There is a duty to act fairly. There is a duty to determine the issues in accordance with the law. There is no implied term that the parties are entitled to natural justice; in many commodity arbitrations there is no question of a hearing. Arbitrations need not follow court procedure: Star International Hong Kong (U.K.) Ltd. v. Bergbau-Handel G.m.b.H. [1966] 2 Lloyd’s Rep. 16. Sections 12 and 13 of the Arbitration Act 1950 between them give a safeguard against excessive delay. The obligation under section 12 (1) to comply with the arbitrator’s directions means that the

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parties can apply to him to fix a day for any step. If, because of modern business practice or legal necessity, an implied term is required, the ends of justice and the protection of the interests of both parties would be achieved by a term that “each party will comply with the lawful directions of the arbitrator or umpire.”

As to the suggested implied term that each party would use reasonable endeavours to bring the arbitration to a speedy conclusion, that might conflict with the statutory implied term in section 12 (1) of the Arbitration Act 1950, since there is no guarantee that the arbitrator would fix a time limit which the court would regard as reasonable. If a claimant starts arbitration proceedings and then is guilty of delay the arbitration agreement cannot be treated as frustrated or repudiated: Gulf Shipping Lines Ltd. v. Jadranska (unreported) July 31, 1980, Neill J. There is no implied term not to be guilty of such delay as would lead to the striking out of an action in the High Court. If delay could be said to amount to a repudiation of the contract of arbitration the question would arise whether the law of frustration also applied. If it did the respondent could go to the arbitrator and say that the contract could no longer be performed. Difficulty would arise in applying the law of frustration to arbitrations. In the present case the respondents have not shown that they accepted the alleged repudiatory breach, if there was one.

The arbitrator decides on the form of hearing on the contentions the parties put before him. Where there has been culpable delay by one party, the other party may submit that he has been deprived of the sort of hearing he might otherwise have had.

Suppose the delay causes prejudice as regards some, but not all, of the claims (e.g. if one engineer was prevented from giving evidence) the court might allow the other claims to proceed, but in such a case a repudiatory breach could not be shown because that would involve repudiation of the arbitration contract as a whole.

A dispute as to whether a contract to arbitrate has come to an end, whether by acceptance of repudiation or by frustration or otherwise, is for the determination of the arbitrator: Heyman v. Darwins Ltd. [1942] A.C. 356, 366, 378. It would be undesirable that the court should have to consider the issues and the evidence in a complex matter originally referred to an arbitrator, perhaps for that very reason.

There is no clear law on the question of the court’s power to stay an arbitration unless security for costs is given. The courts are reluctant to exercise their discretionary power to intervene where there is a valid reference to arbitration and the arbitrator is fit to act. The court can remove an arbitrator for misconduct but it will not substitute its own discretion for his.

As to the jurisdiction of the High Court to grant injunctions to control the conduct of parties to an arbitration, its jurisdiction is confined to injunctions granted for the enforcement or protection of some legal or equitable right: Siskina (Owners of cargo lately laden on board) v. Distos Compania Naviera S.A. [1979] A.C. 210, 256. In granting an injunction to restrain an arbitrator from proceeding the court is not exercising a supervisory jurisdiction: see Pickering v. Cape Town Railway

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Co. (1865) L.R. 1 Eq. 84. (Three years later the plaintiff’s bill was dismissed, the matter being treated as a straightforward application to dismiss for want of prosecution (1869) L.R. 7 Eq. 224.)

Two questions arise: (1) Should the extra remedy of an injunction be granted to the respondents who themselves had taken no steps to end the delay? Faced with a shillyshallying opponent they could have approached the arbitrator and given notice that time was of the essence. The correspondence shows that the appellants were not “sleeping dogs” but “sleepy dogs.” (2) Is it fair that all the claims should be dismissed without inquiry into the merits? They give rise to different issues and all were notified to the respondents when they arose.

Both Donaldson J. and the Court of Appeal misdirected themselves (i) in failing to compare the hearing which could be envisaged in April 1976 with the hearing contemplated and accepted by the respondents in April 1971 and April 1975 (ii) in holding that the points of claim included claims, apart from those arising out of defects discovered after 1971, which had not mostly been fully and promptly notified to the respondents before the arbitration began, and (iii) in failing to consider whether the respondents’ alleged difficulties in relation to individual items of claim affected the likelihood of a fair hearing of other claims or of the arbitration as a whole.

The very fact that the court would be involved in considering issues referred to arbitration is a reason for not adopting the suggested approach.

The case would be entirely different if the respondents had sought from the arbitrator any exercise of his power to give directions. The court should not create a new remedy for them where they have not exercised the one they have.

An arbitration should not be equated with litigation. The court has no general jurisdiction to interfere in arbitrations.

Since the decision of Donaldson J. in the present case, it has been followed in Andre et Compagnie S.A. v. Marine Transocean Ltd. [1981] 3 W.L.R. 43.

Kenneth Rokison Q.C. and David Grace for the respondents. The real issue is whether arbitrations should be put on the same footing as litigation but it was not a question of extending the principles stated in Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229.

Under the Rules of the Supreme Court express power is given to the court to strike out for failure to comply with specific rules. But in the case mentioned the court recognised and applied an inherent power to strike out for a plaintiff’s failure to prosecute his claim generally. In the case of arbitration the power of the court to intervene rests on section 45 of the Supreme Court of Judicature (Consolidation) Act 1925. The power can be exercised whenever it is “just or convenient.” Even if this application was thought to be novel the House of Lords should not be repelled by any suggestion that it is contrary to the spirit of the Arbitration Act 1979. The Act represents no tendency to limit interference by the court. The Act gave certain parties rights to contract out of the appellate jurisdiction of the court but it did not remove the disciplinary or supervisory powers of the court. One of the main complaints against English

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arbitrations which led to the passing of the Act was delay in the final resolution of the issues. The Act dealt with procedure and was designed to prevent inordinate delay. One of the advantages of arbitration is that it is supposed to be quick. Foreigners would object to a system which would allow a claim in an arbitration to be put to sleep for a long time and then revived possibly when the respondent was no longer in a position to defend himself. One matter on which it would be helpful for the House of Lords to express a view is the extent to which it is desirable to assimilate the procedures of arbitration and litigation. This has been done to a large extent in recent years; e.g., it was the law that a judgment of the House could not be given in any currency but sterling. However, this rule was abolished in Milliangos v. George Frank (Textiles) Ltd. [1976] A.C. 443 in which force was given to the fact that it had become common practice of arbitrators in London to make awards in foreign currencies when this was appropriate.

It is not desirable that there should be differences between litigation and arbitration. The court has jurisdiction under section 45 of the Act of 1925. It is conceded that this jurisdiction can only be invoked in the case of infringements of some legal or equitable right. The real issue is whether, when a claiment in an arbitration is guilty of such delay in prosecuting his claim that the respondent is seriously prejudiced or a fair trial is no longer possible, the arbitration must nevertheless continue or there is some legal or equitable right vested in the respondent which the court can and will protect by injunction on the ground that it is just and convenient for the court to do so. There is a legal or equitable right not to be harassed by futile arbitrations. There is also a right to a fair trial. There are different sorts of arbitration just as there are different sorts of proceedings before the courts. On the nature of the dispute depends the particular form of trial appropriate to that particular case, but entitlement to natural justice and a fair trial is a basic right independently of any enactment. There is no rigid practice of going or not going to the arbitrator at each step in an arbitration. In the present case neither party went to the arbitrator at the preliminary stages.

It does not matter whether the right to a fair trial derives from contract or goes deeper as a right which the contract will not take away unless that is very clearly expressed; such rights are not readily modified by contract. The respondents prefer the latter alternative. Equity does not run on tramlines and it is no answer to the exercise of the jurisdiction under section 45 of the Act of 1925 now suggested to say that it has not been exercised in the past. In the absence of some authority that the jurisdiction cannot be so exercised the question whether it is “just or convenient” is in the judge’s discretion. In a fair trial a party is entitled not to be made the victim of such delay that he is no longer in a position to defend himself: see Beddow v. Beddow (1878) 9 Ch.D. 89. 91-93. The principle there stated has recently been applied in Mareva injunction cases (Mareva Compania Naviera S.A. v. International Bulk-carriers S.A. [1975] 2 Lloyd’s Rep. 509: see Rasu Maritima S.A. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Government of the Republic of Indonesia intervening) (Pertamina) [1978] Q.B. 644, 659-660, 666.

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There may be a repudiatory breach of the agreement to refer the matter to arbitration. The implied term may be a fundamental term or an innominate term which is broken in a fundamental way. In that case the right would arise from breach of contract.

In the absence of authority that the court has no jurisdiction in the present case reliance is placed on section 45 of the Act of 1925 on the basis of the right to a fair trial. Assuming that the court will only intervene in cases where, were the proceedings before the court, they would be struck out for want of prosecution, this will only be where so much time has been allowed to elapse that there is a substantial risk of a fair trial of the issues in the dispute being impossible. The legal right in cases where the agreement to submit disputes to arbitration is impeached, must be one not to be harassed by being obliged to take part in arbitration proceedings which have no validity and are therefore futile. Here there is a similar right not to be harassed by being obliged to take part in arbitration proceedings which are so stale that no fair trial of the issue is possible. In Kitts v. Moore [1895] 1 Q.B. 253 the question was whether there had been a submission to arbitration at all; it had nothing to do with the question of a fair trial. Here the question is whether the agreement has come to an end and is no longer binding by reason of a repudiatory breach.

An arbitration agreement may be impeached because it is said not to be binding on a party: Ben & Co. Ltd. v. Pakistan Edible Oils Corporation Ltd., The Times, July 13, 1978, and Mylne v. Dickinson(1815) Coop.G. 195. North London Railway Co. v. Great Northern Railway Co. (1883) 11 Q.B.D. 30, 38 per Brett L.J. was a case in which the court declined to intervene in an arbitration, though it was said that the matters in issue were not within the scope of the arbitration clause. It is only authority for the proposition that an injunction can only be granted in support of a legal or equitable right. London and Blackwall Railway Co. v. Cross (1886) 31 Ch.D. 354 followed that case. But those cases cannot be regarded as authority for the proposition that the court will not intervene by injunction to stop an arbitration proceeding if the agreement is impeached. These cases cannot be reconciled with Beddow v. Beddow, 9 Ch.D. 89 and also with Mylne v. Dickinson, Coop.G. 195; Kitts v. Moore [1895] 1 Q.B. 253 and Ben’s case, The Times, July 13, 1978, where the question was whether there was a binding agreement to arbitrate. The North London Railwaycase, 11 Q.B.D. 30, stands on its own.

In the context of a modern commercial arbitration, such as the present, it cannot be said that the respondents would suffer no legal injury if forced to take part in the belated arbitration. Further, if there has been a repudiatory breach of the arbitration agreement, the court has jurisdiction to act. Futher, in the case of a breach of his own order the arbitrator could say that the breach is so flagrant that he will not allow the arbitration to go on. In doing so he would only be exercising the sort of powers the court exercises in the case of breach of its own rules. There is no reason why the arbitrator should not have the same powers in the case of a frustrating delay. Before the Arbitration Act 1979 the remedies available from the arbitrator were thought to be inadequate. If neither the

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arbitrator nor the court had the power to stop the arbitration proceeding in circumstances such as this it would represent a lamentable gap in our jurisprudence. Either the court or the arbitrator can act. In the present case for the respondents to have applied to the arbitrator for an order for delivery of the points of claim would not have provided an effective remedy.

On the basis that the trial judge reached a correct conclusion on the facts a fair trial was no longer possible. The question then is what is just or convenient to be done. The appellants who are responsible for the delay should bear the disadvantages, since the primary burden of getting on with the case lies on the claimants. There was nothing the respondents could do, while waiting for the points of claim, save trying to prod the claimants into proceeding. It would be grossly unfair if the arbitration proceeded although by the delay of the claimants the respondents could no longer defend themselves.

The court has an inherent jurisdiction in such cases: Japan Line Ltd. v. Aggeliki Charis Compania Maritima S.A. (The Angelic Grace) [1980] 1 Lloyd’s Rep. 288, 289, 290, 292, 293-294, which did not follow Exormisis Shipping S.A. v. Oonsoo [1975] 1 Lloyd’s Rep. 432.

There is an implied term in the agreement to arbitrate that, in the event of a dispute being referred, the claimant will prosecute it with reasonable dispatch; this also becomes an implied term in the submission itself. It is also an implied term that the claimant in any submission will not be guilty of such inordinate and inexcusable delay as will cause serious prejudice to the respondents or give rise to a real risk of a fair trial of the issues becoming impossible. The second of these terms may only be an extended form of the first, which is to be classified as an innominate term. The term ripens into repudiation if the failure to proceed with reasonable dispatch amounts to frustrating delay. The appellants admit the obligation of reasonable dispatch. The obligation is mutual in that it is a term of the agreement to refer, since either party might be claimant in an arbitration. There is an agreement that each party will comply with the arbitrator’s directions. The consensual agreement to arbitrate is that disputes will be referred to arbitration in whatever manner the parties have agreed. The law imposes an obligation on both parties to proceed with due dispatch in carrying out their part, but once the claim is launched, it is the claimant’s claim and it is then for him to take the next step to get things moving and the obligation is to do it in a reasonable time. All that mutually means is that the ball passes from one party’s court to the other’s as it does in litigation. After the points of claim have been served the burden passes to the respondent to serve his points of defence. The initial burden is on the claimant and does not pass till he has discharged it. The obligation depends on whose court the ball is in at any given time. If the claimant has a claim it is primarily for him to pursue it.

The relevant principles relating to time being of the essence arise from land law and are stated in Stickney v. Keeble [1915] A.C. 386. Where a time for completion is prescribed in a contract equity will not require strict compliance and will allow further time, but the other

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party can make time of the essence by giving reasonable notice; but the principle does not apply where the time for completion is reasonable. As to the right to terminate for delay, see Stickney v. Keeble [1915] A.C. 386, 404 and Hongkong Fir Shipping Co. Ltd. v. Kawasaki Kisen Kaisha Ltd. [1962] 2 Q.B. 26, 57, 61, 64-65, 66-67, 70. There is no mention in the latter case of the necessity of notice to make time of the essence.

The jurisdiction of the court to investigate the facts is not excluded on the ground that the matter has been referred exclusively to the arbitrator. The arbitrator cannot have exclusive jurisdiction to determine a question of fact on which his jurisdiction depends.

The questions which arise are whether the principle in litigation that defendants are entitled to let sleeping dogs (i.e., plaintiffs) lie is applicable to arbitrations and whether it is just or convenient to dismiss the claim when the respondent in the arbitration has taken no steps to urge on the claimant. Should a term be implied that the claimant will not delay so long the prosecution of his claim as to cause serious prejudice to the respondent, so that there is a duty not to be guilty of frustrating delay? Has the arbitrator an inherent residual power akin to that of the court to dismiss the claim in such circumstances?

In considering whether the principle applies one must examine (a) what is the reason for its application in court proceedings; (b) whether the same reasons apply in relation to arbitrators and (c) whether there is any relevant distinction between proceedings in court and in this type of arbitration which would lead to the conclusion that the same reasons do not apply.

The principle is stated in Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229, 257-258. The reason is that it can rarely be in a defendant’s interest to press on with litigation. The Rules of the Supreme Court prescribe a timetable under which the parties take steps in turn. The same applies to arbitrations. The first step for a claimant to take is to call on the other party to concur in the appointment of an arbitrator. The court should look at the matter from the point of view of reality and not of theory. In the relevant respect there is no difference between litigation and reference to arbitration. The consensual aspect of arbitration is that the parties have agreed that instead of the court resolving a dispute an arbitrator will, but the respondent in an arbitration is no more willing than a defendant to have a claim pressed against him. There is no relevant difference between arbitration and litigation in the Commercial Court. It is usually contrary to a person’s instinct to galvanise into action someone who has a claim against him. It is normally to his benefit if it fizzles out, but it ceases to be in his interest if the delay is such that he can no longer defend himself. The procedure in both litigation and arbitration is adversarial. The consensual character of an arbitration is not a relevant distinction between it and litigation. The arbitrator is acting in a judicial capacity. The views expressed in Allen’s case [1968] 2 Q.B. 229 are applicable to arbitrations. It is always open to a respondent in an arbitration to get an order from the arbitrator, but it does not follow that he ought to do so. When the

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ball is in the other man’s court he is under no obligation to do so. The right to apply to the arbitrator is not the same as an obligation to do so. The distinction drawn in Crawford v. A. E. A. Prowting Ltd. [1973] Q.B. 1, 5, 7 is not valid. The term implied by section 12 (1) of the Arbitration Act 1950 is not enough to dispense with the inherent power to dismiss a claim for delay. By section 12 (1) the parties are taken to agree to comply with the orders of the arbitrator. But the parties must comply with the orders of the court as well. Section 12 (1) is inadequate to ensure the proper and speedy conduct of arbitrations: see section 5 of the Arbitration Act 1979. Arbitrators have no effective sanction to deal with breaches of their interlocutory orders. Unless they have jurisdiction to dismiss a claim for want of prosecution, they are limited to ordering the claimant to take further steps in the reference. This would not deal adequately with the mischief in the present case, delay causing the impossibility of a fair hearing. If the innocent party will be prejudiced by delay in failing to deliver points of claim within a reasonable time, it is not necessary to apply to the arbitrator in order to establish breach of the implied term. Succula Ltd. v. Harland and Wolff Ltd. [1980] 2 Lloyd’s Rep. 381, 383, 388, illustrates that there are different sorts of arbitration just as there are different sorts of court proceedings.

Terms should be implied as a matter of business efficiency when it is necessary to make a contract work in a business sense under the doctrine in The Moorcock (1889) 14 P.D. 64. The courts do not imply terms out of the air merely because they are reasonable. They imply them where it is necessary to do so. The basis is practical necessity. Here it is necessary to imply a term so that the respondents shall not be prejudiced in their ability to defend themselves. The court will punish delay in an action beyond what is prescribed in the Rules of the Supreme Court and also in an arbitration because delay may defeat the object of the arbitration. The implied term contended for would not conflict with any order made by the arbitrator under the Act.

If the respondents establish frustrating delay on the part of the claimants that provides sufficient legal right to justify the court’s intervention. One can accept repudiation of a contract without specifically saying so. No principle of law requires express acceptance of the repudiation; the important thing is not to affirm the contract. Such a notional duty has not been hitherto imposed.

Alternatively, it is acknowledged that the power to dismiss for want of prosecution is a powerful weapon best reserved for the courts; it is a dangerous weapon for arbitrators. But there is no reason why the arbitrator should not have the same power as the court effectively to strike out. The court can dismiss a claim for the plaintiff’s failure to take out a summons for directions or give judgment against a defendant for not producing a defence. An arbitrator has similar powers because he is a judicial officer under a duty to act in a judicial manner: In re Crichton and Law Car and General Insurance Corporation Ltd. [1910] 2 K.B. 738, 745 and Chandris v. Isbrandtsen-Moller Co. Inc. [1951] 1 K.B. 240, 259-263. In re Unione Stearinerie Lanza and Wiener [1917]

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2 K.B. 558 was wrongly decided. An arbitrator can order pleadings. He has power to make orders and he can make an award against a dilatory plaintiff.

Evans Q.C. in reply. The implied term on which the respondents rely is not necessary in addition to the statutory term. They have not shown that the alleged power is just and convenient in all the circumstances. See also section 5 of the Arbitration Act 1979. The court should not intervene outside the statutory scheme. The contract to arbitrate is regulated by the implied term in the Arbitration Act 1950. If a reasonable time expires without points of claim being delivered, the respondents can require them within a certain time and the arbitrator can then make an order and, if this is disobeyed, the respondents can show repudiatory breach. The arbitrator is the master of the proceedings. There may be a distinction between total inactivity and slow performance

It is submitted: (1) The agreement to arbitrate itself imposes a duty to refer matters of procedure to the arbitrator, who is the master of the arbitration and has control of the proceedings. There are no timetables for arbitrations as there are for litigation.

(2) There is a mutual obligation to take steps to bring the matter to a conclusion, i.e. an award. It is the implied term expressed by Donaldson J. below, ante, p. 924H.

(3) There is an equitable obligation to take such a step. Where notice must be given to make time of the essence there is a duty to apply to the arbitrator. If ultimately what is sought is the equitable relief of an injunction one must look at the overall position including the attitude of the respondent who may refrain from waking a sleeping dog in case it bites him severely.

The defendant’s privilege of shooting sleeping dogs in litigation derives from the Rules of the Supreme Court, in particular their timetable. It arises because the proceedings are adversarial and governed by the rules. The court’s power to dismiss an action for want of prosecution arises from the court’s inherent power to regulate its own proceedings. The power of an arbitrator derives from statutes and the consensual agreement of the parties to submit to arbitration. Arbitrations are not governed by the Rules of the Supreme Court. The privilege in an action to shoot sleeping dogs in no way arises from any agreement between the parties. If one implies any agreement as to procedure it is to act as ordered by the arbitrator. The law has developed on the basis of the duties and powers of arbitrators. Section 12 (1) of the Arbitration Act 1950 is directed more to arbitrators than to parties.

On matters of procedure the parties go to the arbitrator. If they want to complain of the arbitrator they go to the court. As to The Angelic Grace [1980] 1 Lloyd’s Rep. 288, 292 the court has never sought to regulate the proceedings at all arbitrations as distinct from exercising a supervisory jurisdiction over arbitrators. The same principle underlies the North London Railway case, 11 Q.B.D. 30. The court will decide whether there has been a valid agreement to arbitrate and ensure that the arbitrator is fit to act, but it will not go further than that because that would be to interfere in the contract of the parties.

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Here the court is being asked to intervene in a procedural matter. That is contrary to law and a retrograde step. There is no gap in the law. If the claimant does not produce a proper case when ordered the arbitrator can decide against him on the merits because the onus is him to establish it. It is unlikely that a claimant will do nothing when directed.

The Arbitration Act 1979 marks a step forward. There is there the same underlying approach that the arbitrator controls the proceedings in the first instance and the court will only intervene when there is a failure to obey his directions.

In the present case it would be draconian to dismiss all the claims because of a failure by the appellants in respect of some of them.

Glasgow and South-Western Railway Co. v. Boyd & Forrest, 1918 S.C.(H.L.) 14 was not a case in which the House of Lords was being invited to interfere in a procedural matter. In the Hongkong Fir case [1962] 2 Q.B. 26 there was not just delay but inability to perform.

Rokison Q.C. The Glasgow case, 1918 S.C.(H.L.) 14 recognises impliedly the right not to be harassed by futile arbitrations or litigation.

Their Lordships took time for consideration.

January 22. LORD DIPLOCK. My Lords, this case concerns an arbitration clause contained in a shipbuilding contract dated August 6 1964, for the construction of five bulk carriers. The shipbuilders (Bremer Vulkan) who are respondents to this appeal, are a German company and their shipyard at which the vessels were built was in Germany. The purchasers (South India) who are appellants in the appeal are incorporated in India where their principal place of business is situated. It was expressly provided by the contract that it was to be governed by German law. The only connection that the whole transaction had with England was that the contract contained an arbitration clause couched in the widest terms providing that any “dispute or difference shall be referred to arbitration in London within the meaning of the English Arbitration Act 1950, and the rules, regulations, etc., of the said Act shall solely apply.”

The five vessels were delivered over a period of some 13 months. between November 4, 1965, and December 3, 1966. The contract provided for a guarantee period of 12 months after delivery; so the last of these periods expired on December 3, 1967. A number of complaints in respect of alleged defects in each of the five vessels were notified by South India to Bremer Vulkan during the respective guarantee periods. Some of these were rectified and others were disputed. The parties hoped to reach an amicable settlement and on October 13, 1967, they agreed in writing not to have recourse to arbitration for the time being. Efforts to reach an amicable settlement continued until the autumn of 1969. In the meantime in July 1969, South India complained to Bremer Vulkan that cracks had appeared in the cylinder heads in respect of which they claimed damages for breach of the shipbuilding contract. Bremer Vulkan by letter of September 3, 1969, rejected this claim both on the merits and

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upon the ground that having regard to the guarantee periods of 12 months from delivery of each vessel this claim and any other claims first notified to them after the expiry of the relevant 12-month period were time barred under German law. In May 1970 South India wrote to Bremer Vulkan a long letter summarising their various claims under 15 heads and suggesting a further meeting. This meeting was postponed from time to time by agreement between the parties. It ultimately took place in April 1971, but no settlement was reached as Bremer Vulkan intended to rely upon their defence that under German law the bulk of the claims were time barred. South India then gave notice to Bremer Vulkan of their intention to refer the disputes between them to arbitration and invited Bremer Vulkan to concur in the appointment of an arbitrator. Discussion followed between the parties’ solicitors as to whether the terms of reference to the arbitrator should provide for him to hear the time-bar point as a preliminary issue. In the result it was not until January 1972 that there was appointed as sole arbitrator Sir Gordon Wilmer who had retired from the Court of Appeal some three years previously. His notice of appointment referred, without particularising them, to disputes having arisen between the parties under and concerning the shipbuilding agreement and that Bremer Vulkan’s time-bar point should be determined in the arbitration.

No application was made to the arbitrator for a preliminary appointment. Instead, in April 1972 it was agreed between the parties, both of whom were represented by London solicitors very experienced in commercial arbitration, that South India should deliver “a full statement of claim” so that Bremer Vulkan could plead the time-bar defence to specific claims to which they contended this defence applied.

Later in 1972 South India claimed that structural defects had been discovered in the stern frames of the vessels and in May 1973 it was agreed between the parties that claims in respect of these alleged defects should be added to the points of claim in the current arbitration without the need for any further formal submission. A similar agreement was reached in April 1975 in respect of an alleged defect in a collision bulkhead which was discovered in November 1974 as a result of an explosion on one of the vessels. In the result the points of claim, which together with its accompanying schedules, is a very long and detailed document, was not delivered until April 23, 1976.

No application for directions had been made by either party to the arbitrator. The notice of his appointment couched in the broad terms that I have mentioned was all that he received and all he ever knew about the arbitration until the proceedings in which this appeal is brought appeared in the law reports.

The court proceedings were started by Bremer Vulkan on April 25, 1977, in the High Court by writ claiming in the alternative (1) an injunction restraining South India from proceeding with the arbitration or (2) a declaration that the arbitrator has power to dismiss South India’s claim for want of prosecution. The case was tried on affidavit, without pleadings, in the Commercial Court by Donaldson J. although not until nearly two years later in March 1979. It was heard together with another action

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between different parties which raised similar points of law. Donaldson J. granted Bremer Vulkan the injunction sought. South India’s appeal to the Court of Appeal (Lord Denning M.R., Roskill and Cumming-Bruce L.JJ.) was dismissed on November 23, 1979.

My Lords, this summary and time-table of events makes it evident that the disputes between the parties that give rise to this appeal have been dealt with in a most dilatory way at all three stages: (1) from the expiry of the guarantee periods in 1966/67 to the appointment of the arbitrator in January 1972; (2) from his appointment to the issue of the writ by Bremer Vulkan in April 1977; and (3) from the issue of the writ to the hearing of the action at first instance in March 1979. It is, however, common ground that your Lordships are concerned only with the delay at the second stage from January 1972 to April 1977, and in particular the delay between the nomination of the arbitrator and the delivery of the full points of claim in April 1976. That is because the basis on which the action was argued and decided in the courts below was that the High Court had the same discretionary power to enjoin a dilatory claimant from proceeding with an English arbitration at the behest of a respondent who had passively endured the delay, as it had to dismiss for want of prosecution an action brought by a dilatory plaintiff in the High Court. Though this was the effect of the conclusion reached alike by Donaldson J. and all three members of the Court of Appeal the trains of reasoning by which each came to this conclusion were not identical. All, however, were at one in holding that to justify the court in granting such an injunction in cases where there has been no application to the arbitrator for directions, the principles (first stated by the Court of Appeal in Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229 and approved by this House in Birkett v. James [1978] A.C. 297), applicable to the exercise of the court’s discretion to dismiss a plaintiff’s action in the High Court for want of prosecution, would apply mutatis mutandis to the exercise of the court’s discretion to enjoin a claimant from proceeding further with an arbitration.

Upon the application of these principles to the facts of the instant case, Donaldson J. and the Court of Appeal were also at one in holding that the delay by South India as claimant in proceeding with the arbitration during the period between the appointment of the arbitrator and the delivery, more than four years later, of the detailed points of claim was so inordinate and inexcusable and had given rise to so substantial a risk that a fair trial of the issues could not be had, that if the arbitration had been an action it ought to have been dismissed for want of prosecution. It was on this ground that the injunction was granted and upheld.

My Lords, an injunction is a discretionary remedy, and if the analogy between dismissing an action in the High Court for want of prosecution and granting an injunction to restrain a claimant from proceeding with a pending arbitration is sound, I apprehend that your Lordships, having regard to what was said upon this topic in Birkett v. James [1978] A.C. 297, would not think it right to review the facts yourselves with a view to considering whether either collectively or individually your Lordships

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would have exercised the discretion in the same way as the learned judge. The question that lies at the heart of this appeal is whether that analogy is sound in law. For my part I think that it is not and that nothing that had happened had given the judge jurisdiction to grant the injunction that he did.

Much reliance was placed by Mr. Rokison upon the similarity of what he called “this kind of arbitration” to an ordinary heavy action in the Commercial Court. No doubt where heavy claims for damages under a shipbuilding contract are the subject matter of a reference to English arbitration before a legal arbitrator familiar with the procedure of English courts, and the parties are represented in the arbitration by English solicitors and counsel, the way in which the proceedings in the arbitration are, in fact, conducted, except that they are not held in public or in wigs and gowns, will show considerable resemblances to the way in which an action to enforce a similar claim would be conducted in the Commercial Court. The method of trial when it comes to the hearing will be substantially the same. So, it is suggested on behalf of Bremer Vulkan, by agreeing to an English arbitration clause the parties to the contract are, in practical reality, doing no more than to make a choice between one trier of fact, the arbitrator, and another trier of fact, the commercial judge, by whom, in the absence of such clause, the case would fall to be decided. There is no reason, they submit, why the consequences of delay in prosecuting the claim before one trier of fact should not be the same as before the other; what is good for English High Court actions is good for English arbitrations.

My Lords, in the instant case that was not the choice between the parties when they decided to adopt the English arbitration clause. Their contract was governed by German law; it was made between an Indian corporation and a German company; it was to be performed in Germany; the English courts would have no jurisdiction to entertain an action brought by South India for breaches of that contract. What the parties have done is to substitute a remedy by English arbitration not for a remedy by action in the English courts but for a remedy by action in a German court or, possibly, some other foreign court. So this superficially attractive way of putting the argument breaks down on the facts of the instant case. In my view, it also fails upon a broader ground. There is a whole variety of procedures used in arbitrations for the resolution of disputes between the parties. Most of them do not reflect at all closely the pattern of procedure in an action in the High Court. In many there is no oral hearing or oral evidence; in some physical inspection by the arbitrator of the subject matter of the dispute is substituted for any other kind of hearing. If the analogy between the court’s jurisdiction to dismiss an action for want of prosecution and its jurisdiction to grant an injunction to restrain a claimant from proceeding with a reference under an English arbitration clause is sound in law, it must be applicable to all arbitrations under such a clause and not merely to those in which the actual dispute between the parties that is referred to arbitration is of a kind where it is likely (although not certain, for this will lie within the arbitrator’s discretion) that the proceedings will

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follow much the same pattern as they would in an action in the High Court.

Donaldson J. recognised that the analogy between action and arbitration which he regarded as justifying the court in granting an injunction to restrain further proceedings in an arbitration by reason of the claimant’s delay, applied to all kinds of arbitration with the possible exception of quality arbitrations of what he called the “look-sniff” variety (ante, p. 919 E-F). He based his analogy between English action and English arbitration upon the broad ground that the procedures in both were “adversarial” in character. The Court of Appeal accepted that analogy and there is nothing in their judgments to suggest that it called for any restriction upon the kind of arbitration in which the court had power to intervene by injunction.

My Lords, to test the soundness of this analogy in my view calls for a closer legal analysis than this (1) of the respective sources of the jurisdiction of the High Court (a) to dismiss for want of prosecution an action that is pending before it and (b) to prohibit further proceedings in an arbitration pending before a duly qualified arbitrator; and (2) of the differences between action at law and arbitration as ways of resolving disputes between private parties as to their contractual rights.

The High Court’s power to dismiss a pending action for want of prosecution is but an instance of a general power to control its own procedure so as to prevent its being used to achieve injustice. Such a power is inherent in its constitutional function as a court of justice. Every civilised system of government requires that the state should make available to all its citizens a means for the just and peaceful settlement of disputes between them as to their respective legal rights. The means provided are courts of justice to which every citizen has a constitutional right of access in the role of plaintiff to obtain the remedy to which he claims to be entitled in consequence of an alleged breach of his legal or equitable rights by some other citizen, the defendant. Whether or not to avail himself of this right of access to the court lies exclusively within the plaintiff’s choice; if he chooses to do so, the defendant has no option in the matter; his subjection to the jurisdiction of the court is compulsory. So, it would stultify the constitutional role of the High Court as a court of justice if it were not armed with power to prevent its process being misused in such a way as to diminish its capability of arriving at a just decision of the dispute.

The power to dismiss a pending action for want of prosecution in cases where to allow the action to continue would involve a substantial risk that justice could not be done is thus properly described as an “inherent power” the exercise of which is within the “inherent jurisdiction” of the High Court. It would I think be conducive to legal clarity if the use of these two expressions were confined to the doing by the court of acts which it needs must have power to do in order to maintain its character as a court of justice.

The supervisory jurisdiction that the High Court exercises over the way in which inferior courts and tribunals conduct their proceedings upon which Lord Denning M.R. and Cumming-Bruce L.J. relied as one

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source of its jurisdiction to prohibit further proceedings in an arbitration is not inherent in its character as a court of justice; it is statutory. True it is that, in typical English fashion, the supervisory jurisdiction over inferior tribunals that is vested in the High Court by statute is that which was vested in or capable of being exercised by the superior courts of common law, principally the Court of Queen’s Bench, before the Supreme Court of Judicature Act 1873; so one must look to see over what inferior courts or tribunals the Court of Queen’s Bench did assert a supervisory jurisdiction. The procedure by which it exercised this jurisdiction until the very recent change in the Rules of the Supreme Court was by the issue of the prerogative writs (certiorari, prohibition, mandamus, etc.) or the making of orders of the like nature, although there existed too at common law the confessedly anomalous jurisdiction to set aside an award of private arbitrators for error of law upon its face: Kent v. Elstob (1802) 3 East 18, and see Rex v. Northumberland Compensation Appeal Tribunal, Ex parte Shaw [1952] 1 K.B. 338, 351 per Denning L.J. This jurisdiction, however, was not directed to controlling the procedure followed in the arbitration but was concerned only with the written award resulting from it. So one must start by inquiring whether during the centuries-long history of English arbitration, there are any instances of the Court of Queen’s Bench before 1873 or the High Court thereafter asserting a jurisdiction to control the conduct of a consensual private arbitration by the issue of prerogative writs or orders.

My Lords, in Reg. v. National Joint Council for the Craft of Dental Technicians (Disputes Committee), Ex parte Neate [1953] 1 Q.B. 704 it was stated by Lord Goddard C.J., whose knowledge of the history of the common law was profound, that there were no such instances; and none has been drawn to the attention of this House. In that case it was held by the Divisional Court that the general supervisory jurisdiction of the High Court over the proceedings of inferior courts and tribunals extended only to “bodies on whom Parliament has conferred statutory powers and duties which, when exercised, may lead to the detriment of subjects who may have to submit to their jurisdiction.” (p. 708). These bodies would include arbitrators appointed to conduct a statutory arbitration to whose jurisdiction parties to a particular kind of dispute are compelled to refer it for determination, but they do not include arbitrators appointed pursuant to private arbitration agreement. In relation to private arbitrations the jurisdiction of the High Court to supervise the conduct of the arbitration is confined to exercising the powers conferred upon it by the Arbitration Acts 1950 and 1979 (though the latter Act does not apply to the arbitration in the instant case). The reason for this distinction is that the jurisdiction of an inferior court or statutory tribunal or arbitrator over the person who wishes to resist the claim is compulsory whereas the jurisdiction of an arbitrator over both parties to a private arbitration agreement is consensual only. As Lord Goddard C.J., in the case that I have cited, said of such an arbitrator. at p. 708:

“… in one sense he is the antithesis of a court. A person goes to arbitration because he does not want to go to the court. Therefore

he sets up his own private judge to decide the case, but the arbitrator is not deciding it as a judge, he is deciding it as an arbitrator, and procedural rights and all matters relating to procedure are to be found in the Arbitration Act 1950.” (Now the Arbitration Acts 1950 and 1979).

I find myself unable to accept as well-founded the general proposition by Lord Denning M.R. that “the High Court has an inherent jurisdiction to supervise the conduct of arbitrators. It is not confined to the statutory powers.” That such a general supervisory power was vested in the High Court had never been asserted until the judgment of the Court of Appeal delivered in June 1979 in Japan Line Ltd. v. Aggeliki Charis Compania Maritima S.A. (The Angelic Grace) [1980] 1 Lloyd’s Rep. 288, 292, where, although in the result it was not acted upon, the claim that it exists is to be found in the judgment of Lord Denning M.R. himself. It does not appear that Reg. v. National Joint Council for the Craft of Dental Technicians (Disputes Committee), Ex parte Neate [1953] 1 Q.B. 704 had been cited to the court in The Angelic Grace and the authorities relied upon as for the proposition were statements made obiter by Lord Denning’s predecessor, Sir George Jessel M.R., in two judgments at first instance delivered shortly after the passing of the Supreme Court of Judicature Act 1873 and before the passing of the Arbitration Act 1889. These were Malmesbury Railway Co. v. Budd (1876) 2 Ch.D. 113 and Beddow v. Beddow (1878) 9 Ch.D. 89. Both were about the jurisdiction of the newly-created High Court to grant an injunction to restrain an arbitrator, who was disqualified by bias, from proceedings with the arbitration. I shall revert to these two cases when I come, as I shall do shortly, to consider the extent to which the statutory jurisdiction under section 45 of the Supreme Court of Judicature (Consolidation) Act 1925 to grant injunctions empowers the court to intervene by injunction in the conduct of arbitrations. For the moment I confine myself to rejecting the notion that the High Court has a general supervisory power over the conduct of arbitrations more extensive than those that are conferred upon it by the Arbitration Acts, nor do I suppose that the assertion of such an open-ended power of intervention in the conduct of consensual private arbitration would be likely to encourage resort to London arbitration under contracts between foreigners which have no other connection with this country than the arbitration clause itself.

I turn next to the general jurisdiction of the High Court to grant injunctions as an alternative source of its power to control the conduct in an arbitration of the parties to it or the arbitrator. As recently as 1977, this House in Siskina (Owners of cargo lately laden on board) v. Distos Compania Naviera S.A. [1979] A.C. 210, had occasion to confirm as a matter of ratio decidendi the well-established law that the jurisdiction of the High Court to grant injunctions, whether interlocutory or final, was confined to injunctions granted for the enforcement or protection of some legal or equitable right. In doing so, this House expressly approved the judgment of Cotton L.J. in North London Railway Co. v. Great Northern Railway Co. (1883) 11 Q.B.D. 30. That was a case in which both Cotton and Brett L.JJ. discussed several

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pronouncements, made by Sir George Jessel M.R. in earlier cases at first instance, which to an ingenuous reader might suggest that a judge had an almost unfettered discretion to grant injunctions whenever he thought it would be convenient to do so. The Court of Appeal, however. found themselves able to explain away those statements by putting on them a somewhat strained gloss to the effect that they meant no more than that the court had jurisdiction to grant an injunction for the enforcement or protection of a legal or equitable right when it was just and convenient so to do. The pronouncements of Sir George Jessel, the generality of which was cut down in this way, included those to be found in Malmesbury Railway Co. v. Budd, 2 Ch.D. 113 and Beddow v. Beddow, 9 Ch.D. 89, and those cases thereafter ceased to be authority for the existence of any wider jurisdiction than that.

So in the instant case one must look for some legal or equitable right of Bremer Vulkan to be enforced or protected; and the only sources of this right that there can be are the arbitration clause included in the shipbuilding agreement of August 6, 1964, and appointment in January 1972 of Sir Gordon Willmer as arbitrator in respect of all disputes under and concerning that agreement that existed between the parties at that date.

The arbitration clause constitutes a self-contained contract collateral or ancillary to the shipbuilding agreement itself: Heyman v. Darwins Ltd. [1942] A.C. 356. It expressly incorporates, by reference, “the rules, regulations, etc., of the [Arbitration Act 1950],” many of whose sections deal with various provisions that are deemed to be contained or included in every arbitration agreement unless a contrary intention is expressed therein. Of these the most important for present purposes is section 12 (1) which deals with the duties of the parties during the course of the reference. This statutory incorporation into all English arbitration agreements of so many implied terms unless they have been expressly excluded, does not rule out the possibility that terms additional to these are to be read into the arbitration agreement by necessary implication, though it makes somewhat less likely the need to do so. For example, in addition to those terms that are spelt out expressly, the Act itself in section 24 (1) recognises by implication the right of each party to an arbitration agreement to have the dispute decided by an arbitrator who is impartial, and, for the protection of that right, to obtain an injunction to restrain the other party from proceeding with the reference before an arbitrator who has been shown to be biased. The concept of “arbitration” as a method of settling disputes carries with it by necessary implication that the person appointed as arbitrator to decide the dispute shall be and remain throughout free from all bias for or against any of the parties; and it was in enforcement of this right that injunctions had been sought in Malmesbury Railway Co. v. Budd, 2 Ch.D. 113, and Beddow v. Beddow, 9 Ch.D. 89.

I would accept that the unperformed primary obligations of the parties under an arbitration agreement, like other contracts, may be brought to an end by frustration, or at the election of one party where there has been a repudiatory breach of that agreement by the other party. (I speak of repudiatory breach as covering both what I described in Photo Production

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Ltd. v. Securicor Transport Ltd. [1980] A.C. 827 as “fundamental breach” and “breach of condition”). I would also accept that when, upon the commission of such a breach, the party to an arbitration agreement who is not in default has lawfully elected to bring to an end the unperformed primary obligations of both parties to continue with the arbitration up to the issue of an award, the High Court has jurisdiction, in protection of that party’s legal right to do so, to grant him an injunction to restrain the other party from proceeding further with the arbitration. The reason for such an injunction is to prevent his being harassed by the making of a purported award against him which on the face of it will be enforceable against him in England and many foreign countries, thus forcing him to incur the costs of resisting its enforcement.

This is the reason for those injunctions which have hitherto been granted in two types of cases. The first is where one party claims that the arbitration agreement relied upon was void or voidable ab initio (e.g. for fraud, mistake, ultra vires, or want of authority). The leading case is Kitts v. Moore [1895] 1 Q.B. 253. This type of case is to be distinguished from cases where the arbitration agreement itself is not impeached but one party claims that no dispute has arisen under it. Whether there is a dispute or not is a matter to be decided by the arbitrator, and no injunction will be granted. North London Railway Co. v. Great Northern Railway Co., 11 Q.B.D. 30 was such a case; so was Reg. v. National Joint Council for the Craft of Dental Technicians (Disputes Committee), Ex parte Neate [1953] 1 Q.B. 704. The second type of case in which injunctions have been granted is where the arbitrator is or has become disqualified by reason of bias. Here if the arbitration agreement is restricted to the submission of an identified existing dispute to a named arbitrator, the agreement is frustrated if the arbitrator turns out not to be impartial; while if the arbitration agreement is contained in a clause that forms part of a wider contract and provides for all future disputes arising under that contract to be referred to arbitration the reference of any such dispute to a biased arbitrator is a breach of the contractual obligation to refer the dispute to arbitration. Malmesbury Railway Co. v. Budd, 2 Ch.D. 113 and Beddow v. Beddow, 9 Ch.D. 89 provide examples of the former kind of arbitration agreement; in the instant case we are concerned with the latter; the arbitration agreement was contained in a clause of a wider contract, the shipbuilding agreement. But there is no previous reported case in which the court has granted an injunction to restrain a party from proceeding with an arbitration under either type of arbitration agreement on the ground that he has committed a repudiatory breach of the arbitration agreement in the course of those proceedings before they have been terminated by the issue of an award.

My Lords, in the instant case the shipbuilding agreement, apart from the arbitration clause, had ceased to be executory; the time for performance of the parties’ primary obligations under it was past. The arbitration clause on the other hand would continue to remain executory so long

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as there were outstanding any disputes between the parties as to the existence or extent of their secondary obligations under the other clauses of the shipbuilding agreement. The collateral agreement contained in the arbitration clause does not fit readily into a classification of contracts that are synallagmatic on the one hand or unilateral or “if” contracts on the other. It is an agreement between the parties as to what each of them will do if and whenever there occurs an event of a particular kind.

The event is one that either party can initiate by asserting against the other a claim under or concerning the shipbuilding agreement which they have not been able to settle by agreement. In that event, each is obliged to join with the other in referring the claim to arbitration and to abide by the arbitrator’s award. The arbitration clause itself creates no obligation upon either party to do or refrain from doing anything unless and until the event occurs, and even then the mutual obligations that arise are in relation to the particular claim that constitutes the event. The primary obligations of both parties that arise then are contractual, whether express, or implied by statute or included by necessary implication in the arbitration clause. Breach of any of them would give rise to a general secondary obligation to pay compensation (damages), though this may well be nominal, but if the breach were such as to deprive the other party of substantially the whole benefit which it was the intention of the parties he should obtain from the mutual performance by both parties of their primary obligations in relation to the reference of the particular dispute to arbitration, i.e., what in an ordinary synallagmatic contract would be a repudiatory breach, I see no ground in principle why the party not in breach should not be entitled to elect to put an end to all primary obligations to proceed with the reference then remaining unperformed on his part and on the part of the party in default, and, in appropriate cases, to obtain an injunction to restrain the party in default from continuing with the reference to arbitration of that particular dispute.

It was this principle that Donaldson J. and Roskill L.J. (with whom Cumming-Bruce L.J. also agreed) purported to invoke in the instant case. They held that the arbitration agreement, indeed all arbitration agreements, were subjected to an implied term of which they held that South India was in repudiatory breach. They stated the implied term in somewhat different ways, but when applied to the facts of the instant case the effect of both was the same: viz. the claimant in an arbitration who is guilty of such delay in proceeding with the arbitration as would justify the High Court in dismissing the proceedings for want of prosecution if the arbitration were an action, commits a repudiatory breach of the contract to refer the disputes to arbitration. Donaldson J. was inclined to treat it as a fundamental breach of an innominate implied term “that each party will use reasonable endeavours to bring the matter to a speedy conclusion” (ante, p. 924G-H); whereas the implied term dealing with claimants proceeding timeously that was favoured by Roskill L.J. required them only to avoid such delay as would justify the High Court in dismissing the proceedings for want of prosecution if it had occurred

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in an action; and the breach of this implied term would be repudiatory because it was a breach of condition.

Common to both ways of putting it is an assumption that an obligation to bring the arbitration to a conclusion with reasonable dispatch is incumbent on the claimant only, except where the next step in the procedure to be taken by either party is one which no one but the respondent is capable of taking. Even though there are available to the respondent effective means of requiring the claimant to put an end to any delay that is detrimental to the respondent, and sanctions for the claimant’s non-compliance, the assumption is that the respondent is entitled to remain entirely passive and wait until the detriment is so great as to amount to a repudiatory breach of the agreement to refer.

This notable departure from the maxim vigilantibus non dormientibus jura subveniunt is introduced into the implied term as a consequence of the decision of the Court of Appeal in Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229, which was treated by Donaldson J. and Roskill L.J. as applicable by analogy to arbitrations; but in my view, the differences both conceptual and procedural between actions and private arbitrations make any such analogy fallacious.

My Lords, I have already drawn attention to a fundamental difference between action at law and arbitration. The submission of the defendant to the jurisdiction of the High Court to determine a dispute that has arisen between him and the plaintiff is compulsory. If he wants to resist the claim he has no other choice. The plaintiff has a choice whether or not to bring an action in a court of law to enforce a disputed claim against the defendant, but if he does want to enforce it, the only forum in which he can do so is a court of law, unless he and the defendant mutually agree to submit their dispute about the plaintiff’s claim for determination in some other way. As plaintiff and defendant in an action the parties assume no contractual obligations to one another as to what each must do in the course of the proceedings: their respective obligations as to procedure are imposed upon them by the rules and practice of the court. In contrast to this, the submission of a dispute to arbitration under a private arbitration agreement is purely voluntary by both claimant and respondent. Where the arbitration agreement is in a clause forming part of a wider contract and provides for the reference to arbitration of all future disputes arising under or concerning the contract, neither party knows when the agreement is entered into whether he will be claimant or respondent in disputes to which the arbitration agreement will apply. If it creates any contractual obligation to proceed with reasonable dispatch in all future arbitrations held pursuant to the clause – and I will consider later what that obligation is – the obligation is, in my view, mutual; it obliges each party to cooperate with the other in taking appropriate steps to keep the procedure in the arbitration moving, whether he happens to be the claimant or the respondent in the particular dispute.

Another fundamental difference between an action and an arbitration where, as in the instant case, the arbitration agreement does not expressly contain or incorporate by reference specific procedural rules, is that in

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an action the successive steps to be taken by each party and the time-table for taking them are prescribed by the rules and practice of the court and, as was pointed out in Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229, 254, it is an underlying principle of civil litigation in the English courts that the court takes no action in it of its own motion but only on the application of one or other of the parties to the litigation. Whereas in an arbitration there is no fixed pattern of procedure; what steps are to be taken by each party in a particular arbitration and the time-table which each party must observe are matters to be determined by the arbitrator. In requiring particular steps to be taken by any party he is entitled to act not only on the application of a party to the arbitration but also on his own initiative; but he is not under any duty to do the latter, for in the absence of any application he is justified in assuming that both parties are satisfied with the way in which the proceedings leading up to his making an award are progressing.

My Lords, up to the 1960s, the High Court had applied the maxim vigilantibus non dormientibus, jura subveniunt to applications by defendants to dismiss an action for want of prosecution. The practice was that an action would not be dismissed for this reason upon the application of a defendant, unless he had previously obtained from the court a peremptory order requiring the plaintiff to take within a specified time the next step in the procedure that was incumbent upon him under the rules of court and the plaintiff had not complied with the order; or had given reasonable notice to the plaintiff of his intention to apply for the dismissal of the action if the plaintiff did not take that step within a limited time. In the 1960’s, however, largely as a result of legal aid, this practice had proved inadequate to prevent such inordinate delay by solicitors acting for plaintiffs in bringing actions on for trial, that, because memories would have faded and witnesses would have become unavailable, there was substantial risk that at the hearing the court would be unable to do justice. The mischief which the Court of Appeal sought to cure by the abandonment of the maxim about vigilantes in the case of applications for dismissal for want of prosecution is described in the judgments in Allen v. Sir Alfred McAlpine & Sons Ltd. The change in practice was instituted primarily to protect the interests of plaintiffs who had the misfortune to be represented by negligent solicitors, rather than in the interests of defendants, who already had adequate powers under the rules and practice of the court to compel the plaintiff to proceed (through his solicitors) with reasonable dispatch. But, for the reasons given in Allen v. Sir Alfred McAlpine & Sons Ltd., it was seldom in the defendant’s interest to have resort to those powers, since long delay was more likely to operate to the detriment of the plaintiff upon whom the onus of proof would lie at a belated trial, and any interlocutory proceeding initiated by the defendant would add to his costs, which would be irrecoverable against an unsuccessful legally-aided plaintiff. It was generally in the defendant’s interest to let sleeping dogs lie. So the Court of Appeal, of which I was then a member, had to devise some other sanction against negligent dilatoriness on the part of solicitors for plaintiffs. This it did by dismissing the action for want of prosecution,

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notwithstanding that the defendant had let sleeping dogs lie, if the delay had become so inordinate and inexcusable that there was a substantial risk that justice between the parties could not be done at the trial and as was later decided by this House in Birkett v. James [1978] A.C. 297, the delay had also extended beyond the end of the limitation period for the cause of action. Upon the dismissal of the action against the defendant, a right of action by the plaintiff in negligence against his dilatory solicitor would be substituted for his former right of action against the defendant. That the change in practice was introduced mainly for the protection of plaintiffs against the negligence of their own solicitors is underlined by the fact that in Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229 both Salmon L.J. and I expressed the opinion that a likelihood that the plaintiff’s solicitor would not be in a financial position to satisfy a judgment for damages for negligence was a matter to be taken into consideration by the court in deciding whether or not to dismiss the action; and although I myself upon further consideration in Birkett v. James [1978] A.C. 297 felt compelled to recant on this point, this does not affect the identification of the mischief which the Court of Appeal in Allen v. Sir Alfred McAlpine & Sons Ltd. was seeking to cure.

The mischief which was the cause of the change in the practice of the High Court brought about by the guidelines laid down by the Court of Appeal in Allen v. Sir Alfred McAlpine & Sons Ltd. arose because the Rules of the Supreme Court by leaving the initiative to the defendant to take steps to compel a dilatory plaintiff to get on with the preparations for trial had proved inadequate to prevent the risk of injustice being caused by neglect by solicitors for plaintiffs of their duty to their clients to bring actions on for trial with reasonable promptitude. These rules do not apply to private arbitrations, nor does the resulting mischief for which the Court of Appeal, by departing from the principle expressed in the maxim about vigilantes, intended to provide a remedy. Like Bridge J. in Crawford v. A. E. A. Prowting Ltd. [1973] Q.B. 1, I see no justification for extending to private arbitrations a similar exception to that principle.

I turn then to consider what the mutual obligation of the parties are in a private arbitration. By appointing a sole arbitrator pursuant to a private arbitration agreement which does not specify expressly or by reference any particular procedural rules, the parties make the arbitrator the master of the procedure to be followed in the arbitration. Apart from a few statutory requirements under the Arbitration Act 1950, which are not relevant to the instant case, he has a complete discretion to determine how the arbitration is to be conducted from the time of his appointment to the time of his award, so long as the procedure he adopts does not offend the rules of natural justice. The contractual obligation which the parties assume to one another in relation to the procedure to be followed in the arbitration unless a contrary intention is expressed in the arbitration agreement, is that which is stated in section 12 (1) of the Act, viz.:

“parties to the reference, and all persons claiming through them respectively, shall, subject to any legal objection. submit to be

examined by the arbitrator or umpire, on oath or affirmation, in relation to the matters in dispute, and shall, subject as aforesaid, produce before the arbitrator or umpire all documents within their possession or power respectively which may be required or called for, and do all other things which during the proceedings on the reference the arbitrator or umpire may require.”

No doubt in some arbitrations of a kind with which those who act on behalf of the parties in the conduct of the arbitration are familiar, both claimant and respondent may carry out voluntarily some or all of the preliminary steps needed to prepare the matter for the hearing by the arbitrator, and do so without seeking and obtaining any prior direction from him; but if what is done voluntarily by way of preparation is done so tardily that it threatens to delay the hearing to a date when there will be a substantial risk that justice cannot be done, it is in my view a necessary implication from their having agreed that the arbitrator shall resolve their dispute, that both parties, respondent as well as claimant, are under a mutual obligation to one another to join in applying to the arbitrator for appropriate directions to put an end to the delay. Even if an application to the arbitrator for directions in such circumstances were a matter of right only and not, as I think it is, a mutual obligation, it provides a remedy to the party which thinks that the proceedings are not progressing fast enough voluntarily, which renders unnecessary the implication in the arbitration agreement of any such term as was suggested by Donaldson J. or Roskill L.J.

My Lords, it was objected on behalf of Bremer Vulkan that this remedy was ineffectual in arbitrations started before August 1, 1979, to which section 5 of the Arbitration Act 1979 did not apply, because before that Act there were no sanctions that could be imposed for failure to comply with the arbitrator’s directions as to the time within which a party must take a step preparatory to the hearing – such as delivering points of claim or defence or giving discovery. Your Lordships were invited to imagine a claimant who defied the arbitrator’s direction putting a time limt within which points of claim must be delivered.

My first comment upon this, is that in the instant case it did not happen. If Bremer Vulkan had applied at any time to the arbitrator for directions as to the various steps to be taken and fixing what he regarded as a reasonable time within which each step was to be taken, there is no reason to suppose that South India would not have complied with his directions.

In any event, however, I do not accept that the arbitrator would be wholly impotent in the face of such defiance. In Crawford v. A. E. A. Prowting Ltd. [1973] Q.B. 1, there had been no disobedience to any direction made by the arbitrator. Bridge J. held that in those circumstances the arbitrator had no power to strike out the arbitration proceedings and dismiss the claim for want of prosecution; but that learned judge did go on to indicate, though only obiter, that if the arbitrator were to give a peremptory direction requiring the claimant to give proper particulars of his claims within a limited time failing which the arbitrator would proceed to a hearing at which the claimant, if he appeared, would

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be debarred from tendering evidence of any claim of which he had not given the required particulars, the arbitrator would have jurisdiction at such hearing to make an award in favour of the respondent dismissing the claimant’s claims in the dispute referred to him. In the instant case, Donaldson J. was of opinion that an arbitrator had power, before the Act of 1979, to dismiss a claim for want of prosecution without having given any previous directions as to steps to be taken by the claimant and without the need to make an award in favour of the respondent. The Court of Appeal did not agree with him; neither do I in so far as he was of opinion that an arbitrator could dismiss a claim for want of prosecution instead of carrying out the procedure leading to an award in favour of the respondent that had been suggested by Bridge J. Section 5 of the Arbitration Act 1979, which enables an arbitrator to obtain from the High Court a power inter alia to dismiss a claim for want of prosecution in the event of non-compliance with an order made by him, even where the exercise of such a power would be contrary to an express term of the arbitration agreement, does not “derogate from any powers conferred on an arbitrator or umpire, whether by an arbitration agreement or otherwise.” So the section does not take away any pre-existing power of an arbitrator; although, no doubt, in arbitrations to which the new Act does apply it will avoid all risk of any possible charge of misconduct being made against him in the future, if he proceeds under section 5.

My Lords, arbitrators have in the past often exercised the power to make an award ex parte against a respondent who failed to appear at the time and place fixed for the hearing; and, if he did appear, to debar him from raising a defence of which, in breach of the arbitrator’s directions, he had failed to give to the claimant adequate and timely notice The power of arbitrators to refuse to allow a new defence to be raised for the first time at the hearing where they thought that it would not be fair to allow this to be done was recently upheld by the Court of Appeal in Congimex S.A.R.L. v. Continental Grain Export Corporation [1979] 2 Lloyd’s Rep. 346. In agreement with Bridge J. I see no reason why an arbitrator should not have the like power to fix a date for the hearing and to make an award ex parte in favour of the respondent when the claimant failed to appear at the time and place so fixed, and likewise, if he did appear, to debar the claimant from raising any claim of which, in breach of the arbitrator’s directions, he had failed to give the respondent adequate and timely notice.

In the instant case, however, as in Crawford v. A. E. A. Prowting Ltd. [1973] Q.B. 1, the respondents were content to allow the claimant to carry out voluntarily the preparation of detailed points of claim. They never made an application for directions to the arbitrator and none were made by him. For failure to apply for such directions before so much time had elapsed that there was a risk that a fair trial of the dispute would not be possible, both claimant and respondent were in my view in breach of their contractual obligations to one another; and neither can rely upon the other’s breach as giving him a right to treat the primary obligations of each to continue with the reference as brought

[1981] A.C. 909 Page 988

to an end. Respondents in private arbitrations are not entitled to let sleeping dogs lie and then complain that they did not bark.

I would allow this appeal.

LORD EDMUND-DAVIES. My Lords, I have had the advantage of reading in draft the seminal speech of my noble and learned friend, Lord Diplock. For the reasons he gives I am for allowing this appeal. I desire to add that I have found it irksome that the appeal has been conducted on the basis that, were we here concerned not with arbitration proceedings but with a civil action, it is beyond doubt that the court would have been justified in dismissing the action on the ground that the plaintiff’s inordinate and inexcusable delay had rendered a fair trial impossible. The nonchalant behaviour of the respondent shipbuilders over the years, despite intimations from the shipowner of fresh complaints (their quiescence obviously deriving from complete reliance on what they regarded as an irrefragable time-bar) creates a substantial doubt in my mind that it would follow as night does the day that an order dismissing the claim for want of prosecution would be the defendants’ for the mere asking. The notion that a defendant may always safely indulge in “letting sleeping dogs lie” is not wholly without its dangers, not the least being that prolonged and complete inactivity may cast doubt upon the acceptability of his assertion of prejudice occasioned by the plaintiff’s delay. But we are enjoined to have no regard to any such considerations in the present case, and, having given expression to my doubts, I have naturally (albeit reluctantly) proceeded on the basis of the prescribed assumption in arriving at my conclusion that the appeal should be allowed.

LORD FRASER OF TULLYBELTON. My Lords, this appeal is concerned with the question whether the court has jurisdiction to restrain a claimant, by injunction, from pursuing a claim in an arbitration after he has been guilty of such inordinate and inexcusable delay that a fair hearing is no longer possible. The facts are summarised by my noble and learned friends, Lord Diplock and Lord Scarman, and I need not repeat them.

In April 1977 the respondents served the writ in the present proceedings alleging that they had been prejudiced by the appellants’ delay in lodging their claim and claiming an injunction restraining the appellants from proceeding with the arbitration, or alternatively, a declaration that the arbitrator had power to make a final award dismissing the claim on the ground that the appellants had been guilty of gross and inexcusable delay causing serious prejudice to the respondents. Donaldson J., in the Commercial Court, concluded, ante, p. 927H, that “the delay in delivering the points of claim was both inordinate and inexcusable and, further, that no significant part of the delay was induced by the conduct of the plaintiffs” (respondents in the appeal.) He went on to find that the plaintiffs had thereby suffered serious prejudice in two ways and he granted the injunction claimed. He also held that an arbitrator had the power referred to in the alternative claim. The Court of Appeal (Lord Denning M.R. and Roskill and Cumming-Bruce L.JJ.), ante, p. 961,

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dismissed an appeal from Donaldson J.’s grant of an injunction but they held that arbitrators did not have the power referred to in the alternative claim. We must, I think, accept the concurring findings of the Commercial Court and the Court of Appeal that the delay was such as to prevent a fair hearing, and that if the claim had been made in an action it would have been dismissed for want of prosecution. That, of course, leaves open the question of whether the court has jurisdiction to grant an injunction, and if so, whether it ought to grant one in the circumstances.

It is convenient to consider first whether an arbitrator himself has power to dismiss a claim for want of prosecution and to make an award to that effect. Before the proceedings in the action now under appeal, that question appears to have been decided in only one reported case – Crawford v. A. E. A. Prowting Ltd. [1973] 1 Q.B. 1, where Bridge J. held that an arbitrator had no power to dismiss on this ground. When the present case was before Donaldson J. he took the opposite view and held that the arbitrator did have such power, but the Court of Appeal held that his view was erroneous. In the Court of Appeal, some reliance was placed on the decision of the Divisional Court in In re Unione Stearinerie Lanza and Wiener [1917] 2 K.B. 558, to the effect that an arbitrator had no power to order security for costs. In that case, which had not been cited to Donaldson J., Lord Reading C.J. said at p. 561 that the provisions of the Arbitration Act 1889 obliging parties to a reference to “do all other things which during the proceedings on the reference the arbitrators or umpire may require” did not invest arbitrators with the powers of a judge, such as power to commit for contempt and to issue a writ of attachment for default in compliance with an order made by him. Roskill L.J. examined the history of arbitrations in England and I gratefully adopt his reasoning and agree with the conclusion of all the members of the Court of Appeal that arbitrators do not have power to dismiss for want of prosecution.

I do not think it can make any difference whether an arbitrator purports to dismiss a claim for want of prosecution in so many words, or leaches the same result indirectly, by making a peremptory order for the plaintiff to lodge his claim by a certain day, and then, if the claimant fails to obey the order, refusing to hear him. There seems to be no authority as to the arbitrator’s power in these circumstances. Subsection (1) of section 12 of the Arbitration Act 1950 imposes an obligation on the parties to a reference to obey the arbitrator’s orders, in terms virtually identical with those of the Act of 1889 mentioned above, but it does not expressly confer any power upon the arbitrator to apply sanctions for disobedience, and, having regard to the decision in Unione Stearinerie, I do not think they can be implied. Moreover subsection (6) of section 12 of the Act of 1950 provides that the High Court shall have power for the purpose of a reference to make orders in respect of inter alia discovery of documents, and it seems to me that notwithstanding the proviso to subsection (6), the reason for conferring the power on the High Court must be that it is not already vested in the arbitrator. An even stronger implication to the same effect emerges from section 5 of the Arbitration Act 1979, although that Act does not apply to the arbitration in the

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present case which began in 1972. I consider therefore than an arbitrator does not have power to refuse to hear a party who has failed to obey a peremptory order for lodging a claim.

In fact no peremptory order was sought or made in this case, and part of the argument for the appellants was that it would have been essential for such an order to have been made by the arbitrator and disobeyed by the claimant, before the claim could be dismissed by the court. If that is right, it would mean that the respondent in an arbitration, who believes that the claimant’s delay had been such as to prevent the possibility of a fair trial, would have to ask the arbitrator to make an order upon the claimant for lodging his claim by a specified date, while hoping that the order would be disobeyed so as to leave the way open for sanctions to be imposed. Why should the respondent be obliged to seek an order for something which would be directly contrary to his interests? It seems unreasonable. The argument in favour of requiring some such procedure depends, as I understand it, upon the view that a reference to arbitration, because it is contractual, differs fundamentally from litigation, particularly in respect that both parties to an arbitration have an obligation to avoid unreasonable delay. The result is said to be that, if the respondent in an arbitration remains inactive while the claimant delays to make his formal claim, he, the respondent, is not entitled to found on the delay as a reason for asking for dismissal of the claim. I recognise that an argument on these lines is acceptable to the majority of my noble and learned friends who heard this appeal, but I regret that I cannot agree with it. The contractual element in an arbitration such as the present, which depends upon an agreement made before any dispute had arisen, consists, in my opinion, of the choice of the tribunal which is to come in place of the court that would otherwise have had jurisdiction, in this case presumably a German court. The choice of an English arbitration as the tribunal would probably imply that the rules of the English Arbitration Act 1950 would apply to the procedure, but in this case the matter is put beyond doubt by a provision to that effect in the arbitration clause. Once the tribunal has been chosen, I agree with Donaldson J. and with Roskill L.J. that proceedings in the arbitration, like those in litigation, are in most cases, and certainly in the present case, adversarial in character. It is therefore for each party to act in what he conceives to be his own interest, subject of course to any agreement on procedure that may have been made between them, and to the relevant statutory provisions including the obligation to obey orders made by the arbitrator. But if no order is made, the respondent in an arbitration, like the defendant in an action, is in my opinion entitled to sit back and await a formal claim. In the words used by Donaldson J. he is entitled to let sleeping dogs lie. If the sleep lasts long enough and he is prejudiced thereby, he may seek a remedy for the delay.

The fact that, but for the arbitration clause, the court which would have had jurisdiction in this case would have been a foreign court, seems to me immaterial. If, by English law, an injunction may be granted by the English court against proceeding with an English arbitration in which there has been inordinate and inexcusable delay in presenting the claim resulting in serious prejudice to the respondent, then it must be for the

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English court to decide in any particular case whether that sort of delay and that result has occurred. In reaching its decision, the court will naturally have regard to its own practice as a guide, when the arbitration is analogous to a litigation, but I agree with my noble and learned friend, Lord Scarman, that the analogy must not be taken too far. The decision will ultimately depend upon whether the party who is not responsible for the delay has suffered, or is likely to suffer, such serious prejudice that a fair trial is not possible. The same principle will apply to all types of arbitration. In the present case both parties were represented in the arbitration proceedings by solicitors and counsel, and both assumed that a formal statement of claim and answers analogous to pleadings in court would be required. The analogy of proceedings in court was therefore appropriate. But in a simple case, which might be dealt with by the arbitrator’s inspecting goods without any formal hearing, the analogy would not be appropriate and a much shorter delay might prevent the possibility of a fair trial (for instance if perishable goods were involved).

If the arbitrator does not have power to dismiss for want of prosecution then, unless the court has power to restrain the arbitration by injunction, there is no means of preventing its proceeding even if the delay has been such as to preclude the possibility of a fair trial. If that were indeed the position I would agree with Roskill L.J. that it would reveal a lamentable gap in English jurisprudence. But I do not think that such a gap exists. It is well established, and is not disputed by the appellants, that the court has jurisdiction to grant injunctions against proceeding with arbitrations in two cases. One is where the arbitrator has been guilty of misconduct, or has become unqualified – see Beddow v. Beddow, 9 Ch.D. 89. The other is where the validity or the application of the contract of arbitration is denied or “impeached” by one party – see Kitts v. Moore[1895] 1 Q.B. 253. The real question is whether these two types of case are unique in being the only types in which an injunction can be pronounced, or, as I think, are examples of the application of a more general principle. The principle which underlay the decision in Beddow was explained in North London Railway Co. v. Great Northern Railway Co., 11 Q.B.D. 30 by Cotton L.J. who said at p. 40:

“In Beddow v. Beddow [Jessel M.R.] granted an injunction to restrain an arbitrator from going on, and he uses there this language: ‘In my opinion, having regard to those two Acts of Parliament, I have unlimited power to grant an injunction in any case where it would be right or just to do so; and what is right or just must be decided, not by the caprice of the judge, but according to sufficient legal reasons or on settled legal principles.’ He means that if there is either a legal or an equitable right which is being interfered with, or which the court is called upon to protect, and the circumstances do not render it inconvenient or unadvisable to interfere, but render it convenient and advisable to interfere, the court may protect that right by giving the remedy which previously would not have been given, namely, an injunction, and in that case what he did was to interfere where an arbitrator was acting corruptly in the exercise of his jurisdiction under the reference.”

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That shows that Cotton L.J. regarded the injunction granted against an arbitration proceeding in Beddow not as something unique or very special, but as an ordinary exercise of the court’s power and duty to protect legal rights. Cotton L.J. did not define the right which was being interfered with, but he must have had in mind the right to a fair trial, which includes the right to have the reference determined by an impartial arbitrator; or more accurately, the right not to be harassed by an arbitration before a tribunal that was not impartial. I regard the latter formulation of the right as more accurate, and more relevant, because it is only a right so formulated that would be directly protected by an injunction.

In the North London Railway case itself, 11 Q.B.D. 30, an injunction was refused because the Court of Appeal (Brett and Cotton L.JJ.) held that no legal right of the plaintiff would be interfered with if the defendant went on with an arbitration before an arbitrator who had no jurisdiction in the matter, so that any award would be futile. Whether that view of the facts be right or wrong, and I am bound to say that I doubt whether it would be accepted in similar circumstances today, the principle is clear and is still applicable to the power of the court under the Judicature Act 1925. The North London Railway case has been recently referred to with approval in Siskina (Owners of cargo lately laden on board) v. Distos Compania Naviera S.A. [1979] A.C. 210, 256, by my noble and learned friend, Lord Diplock, who said that

“the High Court has no power to grant an interlocutory injunction except in protection or assertion of some legal or equitable right which it has jurisdiction to enforce by final judgment.”

I fully accept that principle as applying in the present case and I will return to it.

Before doing so I wish to mention a decision which, if it is good law in England, demonstrates that misconduct and impeachment are not the only grounds for an injunction. It is a decision of this House in Glasgow and South-Western Railway Co. v. Boyd & Forrest, 1918 S.C. (H.L.) 14, where the House upheld the grant of an interdict against proceeding with an arbitration on matters which, as they held, were res judicata. The appeal came from Scotland, and there was no argument on the question of jurisdiction to grant an interdict, but it seems unlikely that the English Law Lords who were present, Lord Finlay L.C., Lord Parmoor and Lord Atkinson, would not have raised a question if they had entertained a ny doubt about the jurisdiction of the English court in similar circumstances. I think therefore that the case may be regarded as giving some support to the view that the English courts have jurisdiction to grant injunctions to protect the right of a party not to be harassed by an arbitration that would in the end be futile. Before parting with the case I observe that the House discriminated between those issues which were res judicata and those which were not; interdict was pronounced only in respect of the former. That would dispose of the suggestion made in argument before us that an injunction must relate to the whole reference.

It follows that the decision in the instant appeal depends upon whether, if the arbitration were now allowed to proceed, it would infringe a legal or equitable right of the respondents. In my opinion it would. It would

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infringe their right to a fair trial, just as an arbitration before an arbitrator who was not impartial would do; more accurately, it would infringe their right not to be harassed by arbitration proceedings which cannot lead to a fair trial. The source of this right may be contractual, arising from the contract to refer, or it may be imposed by law as a rule of natural justice. The former view was taken by Donaldson J. and it was also, I think, the preferred view of Roskill L.J. But Lord Denning M.R. regarded the right as correlative to a duty which was imposed by law, and not by any application of The Moorcock (1889) 14 P.D. 64 principle of implied terms, and Roskill L.J. thought that there was “also” such a right in addition to the contractual right. Cumming-Bruce L.J. agreed with both Lord Denning M.R. and Roskill L.J. so he cannot have regarded the difference between them as important. For my part, I would rest my opinion in favour of the respondents in this appeal on the principle that they have an equitable right not to be harassed by arbitration proceedings which cannot result in a fair trial. I do not think it is necessary to rely on any implied term in the arbitration contract.

In my opinion the court, in granting an injunction to restrain an arbitrator from proceeding, is not exercising a supervisory jurisdiction of the same sort as it exercises over inferior tribunals by the issue of prerogative writs. The contrast between the prerogative writs and an injunction was referred to in Pickering v. Cape Town Railway Co. (1865) L.R. 1 Eq. 84 by Page Wood V.-C. when he said at p. 87:

“We have nothing in this court in the nature of a writ of prohibition authorising the court to proceed against an arbitrator, and the only jurisdiction that exists to stop the proceedings before arbitration is founded upon the conduct of the parties.”

The same contrast was drawn by Lord Goddard C.J. in the course of argument in Reg. v. National Joint Council for the Craft of Dental Technicians (Disputes Committee), Ex parte Neate [1953] 1 Q.B. 704, 706 when he said:

“It would be revolutionary if this court were to grant an application for these writs [certiorari and prohibition] to issue to a private arbitrator. These writs issue from a superior court to an inferior court. These gentlemen are not entrusted by law with any functions at all. They have simply been given certain rights by the parties to the indenture. The proper course to take would be to move for an injunction.”

My Lords, for these reasons as well as for the reasons explained by my noble and learned friend, Lord Scarman, with which I agree, I would dismiss this appeal.

LORD RUSSELL OF KILLOWEN. My Lords, this appeal has been very fully discussed in the speech of my noble and learned friend, Lord Diplock. I find it convincing, and I also would allow this appeal.

LORD SCARMAN. My Lords, the specific question raised by the appeal is whether the High Court may properly grant an injunction to restrain

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a party from proceeding with an arbitration, notwithstanding that there has been a valid agreement to refer and no misconduct, unfitness, or other disqualification of the arbitrator. The ground upon which the respondents seek relief by injunction is excessive and prejudicial delay in the conduct of the proceedings by the appellants, who are the claimants in the arbitration. The delay, it is said, has denied the respondents their right to a fair arbitration – a right which it is accepted that the law recognises. The trial judge granted the injunction, and the Court of Appeal upheld his decision. The appeal to the House is by leave of the Court of Appeal.

There is no earlier case like this in the books. There are cases, but not many, in which the court has by injunction restrained arbitration proceedings. They were cases in which either the agreement to refer was, or could in the circumstances be treated as, invalid or there was misconduct, unfitness, or incompetence displayed by the arbitrator. The present case falls to be decided under the law as it was before the coming into force of the Arbitration Act 1979: but your Lordships’ decision is not thereby rendered of merely academic interest.

The Act does not, save perhaps incidentally by excluding some rights which previously existed, limit the injunctive power of the High Court, though its provisions, of which section 5 is of particular relevance, are bound to have a marked effect on the exercise of the court’s discretion. For, if an arbitrator has power, or may be given power by the court, to remedy or prevent injustice occurring in the arbitration proceedings, it will be less likely that the grant of an injunction by a court would be a just or convenient course.

There is also a cross-appeal, whereby the respondents seek to restore the ruling of the trial judge, Donaldson J., that an arbitrator has power to dismiss a claim for want of prosecution.

Their basic case, of course, is to resist the appeal, submitting that, whether or not an arbitrator had (under the pre-1979 law) this power, the High Court certainly had power to restrain an arbitration on the ground of excessive and prejudicial delay. It is obvious that, if an arbitrator did have the power to dismiss, the occasions for the exercise of the court’s power to restrain would be few. The respondents, if need be, are, however, prepared to contend that, in the present case where neither party went near the arbitrator after his appointment and where (as they submit) responsibility for delay was upon the claimants, the court may, and should, intervene to restrain the arbitration without prior recourse to the arbitrator, if the delay be excessive and destructive of the possibility of a fair arbitration. It will be convenient, therefore, to consider the powers of an arbitrator in the course of dealing with the appeal.

It will be convenient to consider first the jurisdiction of the High Court to grant an injunction. There is no distinction to be drawn, so far as jurisdiction is concerned, between an interlocutory and a final injunction. A recent re-statement of principle is to be found in the speech of my noble and learned friend, Lord Diplock, in Siskina (Owners of cargo lately laden on board) v. Distos Compania Naviera S.A. [1979] A.C. 210, 256 where he said that:

[1981] A.C. 909 Page 995

“the High Court has no power to grant an interlocutory injunction except in protection or assertion of some legal or equitable right which it has jurisdiction to enforce by final judgment.”

This formulation was based on the decision of the Court of Appeal in North London Railway Co. v. Great Northern Railway Co., 11 Q.B.D. 30, which, on this point, is now to be treated as having been approved by the House.

The North London Railway case was one in which an order of the Queen’s Bench granting an injunction to restrain a party from proceeding with an arbitration was discharged by the Court of Appeal. There was a valid arbitration agreement between the parties but the party seeking the injunction contended that the subject matter of the dispute was not within it. If he were right, the continuance of the arbitration would have been futile and vexatious. But the Court of Appeal considered that, as Brett L.J. put it at p. 36, “the fact of the appellants going on with that futile arbitration is no legal injury.”

Like my noble and learned friend, Lord Fraser of Tullybelton, and the Master of the Rolls, I do not believe that the proposition that no legal injury can arise from the futility and vexation of the arbitration process would be accepted to-day and I do not accept it. But the ratio decidendi of the case is certainly accepted law. The case resolved a doubt, which had arisen in the years following the Judicature Act 1873, as to the extent of the power conferred on the High Court by section 25 (8) of that Act, now re-enacted in section 45 of the Judicature Act 1925. In short, the Court of Appeal decided that the section was to be construed as procedural in its purpose and effect. The section does not extend the power of the court to cases where there is no legal or equitable right to be protected. It enables the court, where there is a legal right, to “grant an injunction where it is just or convenient to do so for the purpose of protecting or asserting the legal rights of the parties”: Cotton L.J. at p. 39.

It is necessary, therefore, to discover whether, if the arbitration proceedings in the present case continue, the respondents will suffer a legal injury, and then to determine whether the judge erred in exercising his discretion to grant an injunction protecting them from such injury.

First, the facts. The appellants are shipowners. The respondents are shipbuilders, and in August 1964 agreed to build five bulk carriers for the appellants. The contract was governed by German law but disputes were to be referred to arbitration in London. The contract included a guarantee clause whereby the respondents agreed to rectify defects appearing within 12 months of delivery. The last of the five ships was delivered on December 3, 1966. The last guarantee period, therefore, expired on December 3, 1967.

The appellants claim that very serious defects have appeared in the ships. The claim is resisted on the facts and in law, the principal legal defence being the contention that under German law the claim became time barred six months after the end of the guarantee period, i.e. on May 3, 1967.

I now take up the story in the words of the trial judge (ante, p. 925F-G):

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“The arbitration proceedings in fact began in January 1972, over five years after the last vessel was delivered. Points of claim were served in April 1976, over 9 years after that delivery. These proceedings, which were begun a year later in April 1977 have only been heard in March 1979, over 12 years from the delivery of the last vessel and nearly 15 years from the time when the contract was concluded. Clearly some explanation is called for, not only from the parties, but also from the court.”

After a full investigation of the facts which included the correspondence between the parties’ solicitors he concluded (ante, p. 927G) “that the delay [by the appellants] in delivering the points of claim was both inordinate and inexcusable and, further, that no significant part of the delay was induced by the conduct of the [respondents].” He further found that the delay had caused the respondents serious prejudice in two ways: first, in the loss of witnesses by reason of death, retirement, or having left the respondents’ employment: and secondly, in the effect of the delay upon the ability of the respondents to collect the necessary evidence to ensure that justice is done. The learned judge concluded (ante, p. 928F-G): “I am satisfied that if the proceedings had been pursued by action, I should have dismissed them for want of prosecution.” The Court of Appeal concurred in his findings of fact and also accepted as relevant the analogy of litigation. The analogy is, of course, open to challenge in this House. But I do not think that the findings of fact can properly be challenged. Even if I were disposed to differ, which I am not, I would not disturb them. I accept, therefore, that the appellants have been guilty of delay which has made it impossible for the respondents to collect the evidence necessary to ensure that justice can be done at the hearing of the arbitration. I also accept that the respondents were not guilty of any acts which contributed to the delay: but I treat as open to decision by your Lordships’ House the question whether the respondents could and should, by seeking the directions of the arbitrator, have ended the delay before it became excessive and prejudicial.

The appellants’ case can be summarised in two sentences. No relevant comparison is to be made between litigation and arbitration. And, where parties agree to refer their dispute (or disputes) to arbitration, they mutually bind themselves by contract ta use the arbitration process to prevent the mischief of delay. Clearly the submission assumes the existence of effective powers in the arbitrator to overcome or prevent delay. It also raises a question as to the scope of the principle, which has been slowly gaining strength in English law ever since the enactment of the Common Law Procedure Act 1854 and has been dramatically extended by the Act of 1979, that, where the parties have agreed upon arbitration, they take it with all its faults.

My Lords, I will deal at once with the scope of this principle. Though it has been extended in the modern law, it is not of universal application. It has not yet achieved such supremacy as totally to oust the power of the High Court to remedy or prevent injustice in the arbitration process.

The principle yielded in the past to a measure of judicial control and review of the arbitration process: and this remains true of most arbitrations

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even after the coming into force of the Act of 1979. This power of the court has been exercised in many ways: for example, review of awards (limited, changed, regulated, but not discarded by the new Act), removal of arbitrators where their impartiality, fitness, or competence is impugned, the grant of injunctions to restrain arbitration proceedings where the arbitrator has been shown to be unfit or incompetent. Such landmarks in the law as the Act of 1854, Scott v. Avery (1856) 5 H.L.Cas. 811, Beddow v. Beddow, 9 Ch.D. 89, where an injunction to restrain an arbitration was granted, Czarnikow v. Roth, Schmidt & Co. [1922] 2 K.B. 478, and the Act of 1979 itself bear witness to the importance attached in the various branches of our arbitration law to a measure of judicial control and review. Though the jurisdiction of the courts may now be ousted in those international arbitrations where the new Act allows an exclusion agreement, it remains a vital, if no longer universal, principle of the law that the courts will act to prevent injustice arising in arbitration proceedings where it is necessary so to do.

I therefore agree with my noble and learned friend, Lord Fraser of Tullybelton, and with Lord Denning M.R. that the courts retain such a power save where excluded by statute and that parties to arbitration have a right to a fair arbitration. If the right can be protected within the arbitral process, as in most cases under the Act of 1979 it will be, the courts will not intervene; for neither justice nor convenience will require so drastic a step. If the right be excluded by statute, as well it may be under an exclusion agreement rendered lawful by the new Act, there will be no legal right for the court to protect.

What then is the nature of the right? In practice, I do not think it matters whether it be treated as one of natural justice which the courts in the exercise of a supervisory power will enforce, if need be, or as arising from an implied term of the arbitration contract. Whether the agreed process be a “look-sniff” commodity arbitration, or an award upon documents submitted without a hearing, or an award reached after a full-dress hearing with pleadings, discovery, and evidence, the right is fundamental. But since the question has arisen and differing answers have been given, I will state my view. The right does not depend upon contract, and cannot be excluded by contract, save where statute allows its exclusion, as it may be that the Act of 1979 does in certain cases (though I reserve my opinion on the point). The right arises from the judicial element inherent in the arbitration process which is a process for reaching a decision where parties have not themselves resolved their difference. Nevertheless in most cases, and this is such a case, the right is implicit in the contract, and, if infringed, may be enforced as a right given by the contract. And, with respect, I do not see the case of Reg. v. National Joint Council for the Craft of Dental Technicians (Disputes Committee) Ex parte Neate [1953] 1 Q.B. 704 as an authority inconsistent with such a supervisory power. In that case the Divisional Court, though holding that the prerogative writs (or orders) would not go to a private arbitrator, did not rule out the possibility of injunction (see Lord Goddard’s intervention at p. 206). Since, however, I accept the analysis which enabled the judges below to deal with this case as one of

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contractual rights and duties, I say no more as to the general power of the High Court to prevent injustice in this field, save to express agreement with Lord Denning M.R. and my noble and learned friend, Lord Fraser of Tullybelton. The existence of such a power, associated as it is with the requirements of natural justice in any adversarial process, remains, subject to the statutory law regulating arbitrations, a powerful weapon for justice in the armoury of the law, even though the occasions for its use will be few and far between.

I turn now to consider the contractual position. Where parties agree to refer present or future differences to arbitration, they enter into a contract, an implied term of which is that each has a right to a fair arbitration. The implication arises necessarily from the nature and purpose of their agreement, which is to submit their dispute (or disputes) to the arbitrament of an independent and impartial arbitrator of their choice. I do not understand the appellants to challenge the existence of the term. Such a contract is often to be found as an arbitration clause in a commercial, industrial, or other type of contract. Where so found it is, in strict analysis, a separate contract, ancillary to the main contract: see Heyman v. Darwins Ltd. [1942] A.C. 356. It follows that obstruction of the right will be a breach of contract and may be a repudiatory breach; and that frustration of the right, i.e. conduct of a party making the fair arbitration of a dispute impossible, will be a repudiatory breach at least of the agreement to refer that dispute to arbitration.

These general propositions were, as I understand their judgments, accepted by the judge and the Court of Appeal, notwithstanding that in the refinement of their reasons by way of response to the detailed arguments addressed to them by counsel they expressed themselves in different ways. After all, they were considering a specific case in which it was alleged that the claimant’s delay had made a fair arbitration impossible. It was natural therefore to formulate the term by reference to delay. But it matters not whether in the context of delay it be formulated as an obligation implicitly accepted by a party, if he finds himself the claimant in the proceedings, to use his best endeavours to move the arbitration along, which was the view of Donaldson J.: or whether it be formulated as a term imposing a duty upon parties not to be guilty of frustrating delay, as Roskill L.J. accepted: or whether there are mutual obligations, as Lord Denning M.R. thought, namely a duty upon the claimant to proceed with reasonable despatch and a duty upon the respondent not to baulk the claimant by devious manoeuvres. Cumming-Bruce L.J. found it possible to agree with the formulations of both Lord Denning M.R. and Roskill L.J. I think he was right to perceive and accept their basic consistency. In a contract of arbitration I accept that there are mutual obligations to be implied into the parties’ agreement not to obstruct or frustrate the purpose of the agreement, i.e. a fair arbitration to be conducted in accordance with the terms of their agreement.

Unless, therefore, the breach is by the terms of the parties’ contract itself to be referred to arbitration, a remedy for its breach may be sought in the courts. In the case of a non-repudiatory breach this will depend upon the true construction of the arbitration clause. But if, as is alleged

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in the present case, the breach consists of a frustrating delay, it discharges the aggrieved party from further performance of his agreement to refer. If he chooses then to sue in the courts, he will be able to show the infringement of a legal right entitling him to damages: and, if he can show that the defendant is persisting in a course of action, i.e. proceeding with the arbitration, which is a continuing infringement of the right, the court may grant him an injunction restraining the claimant from pursuing this course of conduct, if it thinks it just and convenient so to do. The injunction will be issued to avert legal injury and to protect a legal right.

My Lords, I believe these propositions constitute the basis of principle upon which the present case is to be decided. As I understand it, this was the view of the very experienced judges below. And I would add that, on their findings, justice and convenience would appear to require that the respondents, their contractual right having been infringed, be granted the injunction if they are to be protected from the harassment of a vexatious, expensive, time-consuming, and futile arbitration.

But, before reaching a conclusion, the formidable submissions of the appellants have to be considered. The first is that no relevant comparison is to be made between litigation and arbitration. It was argued, and, as I understand it, a majority of your Lordships accept, that the analogy is misleading. Litigation, it is submitted, is a compulsory process available as of right to anyone who issues a writ: it is not to be compared with the process of arbitration, which arises from consent and is conducted according to terms agreed, expressly or impliedly by the parties. Arbitration is, of course, subject to a measure of statutory control: but this control in no way detracts from the essentially contractual nature of arbitration. My Lords, all this is true. But arbitration, while consensual, is also an adversarial process. There is a dispute, the parties having failed to settle their difference by negotiation. Though they choose a tribunal, agree its procedure and agree to accept its award as final, the process is adversarial. Embedded in the adversarial process is a right that each party shall have a fair hearing, that each should have a fair opportunity of presenting and developing his case. In this respect, there is a comparability between litigation and arbitration. In each delay can mean justice denied. And the analogy is not falsified because of the wide variation of types of arbitration. Whether the arbitration be “look-sniff” or a full-scale hearing with counsel and solicitors, the right to a fair arbitration remains. An unfair arbitral process makes no sense either in law or in fact. It is a contradiction which it is inconceivable that the law would tolerate or the parties select.

But the analogy must not be taken too far. It does not follow that, because a court may protect a party from abuse of its own process in a lawsuit, it has the same power in connection with arbitration proceedings. I do not understand the judges below to have fallen into this trap. They used the analogy not to introduce the decision of Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229 into the law of arbitration but as a strong indication that arbitrators or the court (or, as Donaldson J. was disposed to hold, both) have a power to prevent injustice arising from a party’s delays in the proceedings. Though

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arbitration is consensual and litigation compulsory in so far as the respondent (or defendant) is concerned, both are judicial processes of an adversarial character. The analogy, taken thus far, is therefore helpful: and I reject the submission that the judges erred in making use of it for the purpose of showing the need for such a power to reside either in the arbitrator or the court.

I pass now to the most powerful submission made by the appellants – that the respondents should have sought to prevent delay by applying to the arbitrator for directions. The judges below considered very carefully the pre-1979 powers of an arbitrator to deal with delay, and concluded that, though he could exercise influence, he had no sanction other than to make a final award on the merits of the dispute. I respectfully adopt the analysis of the law on this point to be found in the judgment of Roskill L.J. Like him, I attach importance to paragraph 57 of the Report of the Commercial Court Committee on Arbitration (1978) (Cmnd. 7284) as correct description of the mischief which section 5 of the Act of 1979 was enacted to remove. I think, therefore, that the judge and the Court of Appeal were justified in their conclusion that, the arbitrator having in the circumstances no effective power to protect the respondents from the legal injury of an unfair arbitration, the mere fact of his appointment did not exclude the power of the court.

But the point remains that the respondents, pursuant to section 12 (1) of the Arbitration Act 1950, could have applied to the arbitrator for directions, and that an order by him for the delivery of points of claim within a time limit, though backed by no sanction, might have galvanised the appellants into action before their dilatoriness had caused the respondents serious prejudice. This is, I think, the most formidable argument available to the appellants. I reject it because of the adversarial nature of the arbitration process. I accept that parties to an agreement to refer may expressly agree that each, whether he be claimant or respondent, will use his best endeavours, by application to the arbitrator or otherwise, to move the arbitration along. But in the absence of express agreement to do so it can hardly be said that a party who finds himself a respondent in an adversarial process has implicitly agreed to move along the claim being made against him. Certainly a term might well be implied – as suggested by Lord Denning M.R. – that, if a party to the agreement finds himself respondent to a claim, he will not by devious manoeuvres seek to baulk the claim: but no more.

I reject, therefore, the appellants’ submissions. The respondents have been denied by the appellants’s delay be viewed as a denial of natural justice can be done. Whether the denial be viewed as a denial of natural justice or a fundamental breach of contract, it constitutes a legal injury from which the court may grant relief by injunction to restrain the appellants from proceeding with the arbitration. I would, therefore, dismiss the appeal. In doing so, I wish at the same time to express my concurrence with the speech delivered by my noble and learned friend, Lord Fraser of Tullybelton.

As I understand that the majority of your Lordships take a different view, it is incumbent upon me to express an opinion on the respondents’

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cross-appeal. Under the law as it was before the Act of 1979 I can find no justification for the view that an arbitrator had power to dismiss an arbitration for want of prosecution. His power was limited to making an award upon the merits. The nearest he could get to a dismissal on grounds of delay would have been to fix a day for hearing and make an award upon the merits based upon whatever evidential material was then available to him. I agree with Roskill L.J. on this point and do not think it necessary to elaborate further my reasons. I would dismiss the cross-appeal.

Solicitors: Richards, Butler & Co.; Norton Rose Botterell & Roche.

F. C.

[Damages – Loss of Opportunity – Remoteness] Chaplin v Hicks

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