Comdel Commodities Ltd v Siporex Trade S.A. (No. 2)
| Jurisdiction | England & Wales |
| Judge | Lord Bridge of Harwich,Lord Emslie,Lord Brandon of Oakbrook,Lord Goff of Chieveley,Lord Jauncey of Tullichettle |
| Judgment Date | 07 June 1990 |
| Judgment citation (vLex) | [1990] UKHL J0607-1 |
| Date | 07 June 1990 |
| Court | House of Lords |
[1990] UKHL J0607-1
House of Lords
Lord Bridge of Harwich
Lord Emslie
Lord Brandon of Oakbrook
Lord Goff of Chieveley
Lord Jauncey of Tullichettle
My Lords,
This appeal raises the important question whether the High Court has jurisdiction under section 27 of the Arbitration Act 1950 to extend the time for commencing arbitration proceedings beyond the limit prescribed by the terms of an arbitration agreement when the terms of the agreement also confer discretion on the arbitrator to extend the time limit.
By two contracts dated 19 October 1984 the appellants ("Siporex") agreed to sell and the respondents ("Comdel") agreed to buy a consignment of tallow and a consignment of cottonseed oil c. & f. Alexandria for delivery in January 1985. Under the terms of each contract payment was to be by confirmed, irrevocable, transferable letter of credit to be opened by the end of the first week in December 1984 and Comdel were to provide by 22 October 1984 a performance bond for 10 per cent of the c. & f. value of the consignment to remain in force until the issue of the letter of credit. Each contract incorporated a clause referring disputes to arbitration in accordance with the Rules of Arbitration and Appeal of the Federation of Oils, Seeds and Fats Association Ltd. ("the F.O.S.F.A. Rules").
In the event Comdel duly procured the issue by Banque Indosuez ("the bank") of performance bonds in the aggregate sum of U.S.$1,887,200, but failed to procure the issue of conforming letters of credit in due time. The ensuing disputes between the parties have led to long and tortuous litigation. Siporex claimed and in due course recovered from the bank the amounts due under the performance bonds. In 1985 Comdel instituted arbitration proceedings ("the 1985 arbitration") in which they sought unsuccessfully to establish that they were not in breach of contract in relation to the issue of the letters of credit. In May 1986 Comdel instituted fresh arbitration proceedings ("the 1986 arbitration") claiming restitution of so much of the amounts paid to Siporex under the performance bonds as exceeded the damages, if any, sustained by reason of Comdel's breaches of contract. The disputed issues which arise in the present appeal relate to the 1986 abitration.
Rule 2 of the F.O.S.F.A. Rules headed "Procedure for claiming arbitration and time limits" lays down various time limits within which, according to circumstances, a party wishing to institute arbitration proceedings must give notice of his claim to the other party to the arbitration agreement together with the name of the arbitrator he appoints. It is now no longer in issue that the relevant time limit here applicable was that prescribed by rule 2( b)(i)(3), viz. "not later than 120 consecutive days after the last day of the contractual delivery period." This time limit expired on 31 May 1985. Rule 2( d) provides:
"In the event of non-compliance with any of the preceding provisions of this rule, claims shall be deemed to be waived and absolutely barred unless the arbitrators, umpire or Board of Appeal referred to in these Rules shall, at their absolute discretion, otherwise determine."
On Comdel's application for an extension of time under this rule the arbitrators disagreed; the umpire and, in turn, the Board of Appeal refused to exercise their discretion to allow the 1986 arbitration to proceed out of time. Comdel applied to the High Court under section 27 of the Arbitration Act 1950 for an extension of time. Steyn J. [1988] 2 Lloyd's Rep. 590 held that he had no jurisdiction under the section, but also determined that, if he had had jurisdiction, he would not have exercised his discretion in Comdel's favour. The Court of Appeal (Purchas, Nicholls and Staughton L.JJ.) [1989] 2 Lloyd's Rep. 13 unanimously reversed the judge on both points and granted the extension of time sought. Siporex now appeal by leave of your Lordships' House.
Section 27 of the Act of 1950 provides:
"Where the terms of an agreement to refer future disputes to arbitration provide that any claims to which the agreement applies shall be barred unless notice to appoint an arbitrator is given or an arbitrator is appointed or some other step to commence arbitration proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the High Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may, on such terms, if any, as the justice of the case may require, but without prejudice to the provisions of any enactment limiting the time for the commencement of arbitration proceedings, extend the time for such period as it thinks proper."
The question is whether this section applies whenever an arbitration agreement prescribes a time limit for the commencement of arbitration proceedings notwithstanding that the agreement also enables the arbitrator to extend time or whether it applies only where, under the terms of the agreement, the time limit is absolute and immutable.
In The Cunard Carrier [1977] 2 Lloyd's Rep. 261 [1977] 2 Lloyd's Rep. 261, 265 Kerr J. said of the agreements he was considering:
"These give a discretion to extend the time to the arbitration tribunal itself. It was rightly not suggested that this ousted the jurisdiction of the court under section 27. The powers to extend the time under the section and under the contracts are seperate and cumulative."
In Ets. Soules & Cie v. International Trade Development Co. Ltd [1979] 2 Lloyd's Rep. 122 [1979] 2 Lloyd's Rep. 122, 138, Robert Goff 3., considering a similar agreement, said of section 127:
"In my judgment the section is certainly wide enough to cover the present case, particularly as the effect of putting a narrower construction on the statute would be that parties could readily contract out of it."
But in neither of these cases was the point which arises for your Lordships' decision specifically argued. In two later decisions of first instance, however, where the point was directly raised, conflicting decisions have been given. In Timmerman's Graan-en Maalhandel en Maalderij B.V. v. Sachs [1980] 1 Lloyd's Rep. 194 Parker J. held that he had no jurisdiction to extend time under an arbitration agreement in the same relevant terms as in the instant case. But in European Grain and Shipping Ltd. v. Dansk Landbrugs Grovvareslskab [1986] 1 Lloyds Rep. 163 Leggatt J. reached a contrary conclusion.
What is the effect of the section if the language used is given its natural and ordinary meaning? I think it is apt to apply both to the situation where an arbitration agreement imposes an absolute and immutable time bar and to the situation where the agreement imposes a time bar but gives the arbitrator a discretion to grant a dispensation from it. A bar is not the less a bar because there is a possibility of having it removed. A time limit is not the less a time limit because a discretion is given to extend it. Steyn J., at p. 595, said of the conflicting decisions of Parker and Leggatt JJ. that each could "readily be reconciled with the ordinary meaning of the word 'barred.'" I do not follow this; if the ordinary meaning of the word covers the case where the bar is removable in the arbitrator's discretion, to confine it to the case where the bar is absolute and immutable must be to give the word something less than its ordinary meaning. In my opinion we are not concerned here with an ambiguity in the statutory language in the sense that there is a choice between two different meanings which the language is equally apt to express. We are concerned here with the question whether the language should be given effect according to its natural and ordinary meaning or whether there is something in the context or in the discernible policy of the statute which dictates that the language should be given a restricted or qualified meaning.
Section 27 of the Act of 1950 re-enacted section 16(6) of the Arbitration Act 1934. The Act of 1934 followed upon the Report of the Committee on The Law of Arbitration (1927) (Cmd. 2817) under the chairmanship of MacKinnon J. It is common ground that in the years before the second world war it was the general practice in commercial arbitration agreements to impose short, fixed time limits for the institution of proceedings and that the practice of introducing into such agreements discretion for the arbitrator to extend the time limits began in the years following the second world war. Steyn J. relied largely upon the MacKinnon Report in reaching the conclusion that he should accept the appellants' construction of section 27 and it was the cornerstone of the argument advanced by counsel in support of the appeal. The relevant passages in the Report read as follows:
"33. A good many of those who have submitted memoranda to us have suggested that there should be statutory power given to the courts to relieve people from various kinds of hardships imposed upon them by the terms of submissions to which they have unwittingly or unwillingly agreed… we suggest that, as regards common forms of submission in printed forms, it might be sound policy to create a power to modify unconscionable provisions.
34. As examples of the sort of hardship to which we refer we may instance the following: (a) It seems to be increasingly common for forms of contract for the sale of commodities to stipulate in the arbitration clause that a claim for arbitration must be put forward within a limited time, or it shall be conclusively barred… .
35. As this seems to be a matter of policy, rather than of the amendment or clarification of the existing law, we feel that it is hardly...
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