Gola Sports Ltd (Plaintiffs v General Sportcraft Company Ltd (Defendants
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE DUNN,LORD JUSTICE O'CONNOR |
| Judgment Date | 01 April 1981 |
| Judgment citation (vLex) | [1981] EWCA Civ J0401-4 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 81/0224 |
| Date | 01 April 1981 |
[1981] EWCA Civ J0401-4
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR. JUSTICE WOOLF)
Royal Courts of Justice.
The Master of the Rolls
(Lord Denning)
Lord Justice Dunn
and
Lord Justice O'connor
81/0224
1980 G. No. 824
MR. MICHAEL BELOFF (instructed by Messrs. Norton Rose Botterell & Roche) appeared on behalf of the Plaintiffs (Appellants).
MR. COLIN SMITH (instructed by Messrs. Stones Porter & Co.) appeared on behalf of the Defendants (Respondents).
Gola Sports Limited of England are a world-wide organisation. They sell sports shoes of all kinds in many countries. In the United States of America they operate through dealers in New Jersey called General Sportcraft Company Limited. Gola Sports and General Sportcraft made a distributorship agreement as long ago as 1976. That agreement was renewed in 1978. When it was being drafted, there was some uncertainty about the arbitration clause. The draft ran like this:
"This Agreement shall be governed by New Jersey law. In the event of a dispute, an independent arbitrator, committed by the Anglo-American Chamber of Commerce shall arbitrate in the City of New York, State of New York, United States of America".
When that draft was discussed, Gola Sports did not like the provision for New Jersey law. They insisted that it should be governed by English law. Sportcraft agreed to that amendment. But they questioned the second half of the clause about the Anglo-American Chamber of Commerce. In a letter of the 17th July, 1978 they wrote to Gola, saying:
"We suggest change from Anglo American Chamber simply because they are not known to us and the more usual is the American Board".
In response to that suggestion, on the 22nd August, 1978 Gola sent Sportcraft this telex:
"Such small things as Ambrilam Board as against American Chamber of Commerce we would not argue about but our opinion no need to re-write original document".
When the final agreement was drawn up, it contained this clause:
"This agreement is governed by English Law. In the event of a dispute, an independent arbiter nominated by the Anglo-American Chamber of Commerce should, however, arbitrate".
Now comes the point. There is no such body in existence as the Anglo-American Chamber of Commerce. So we have to decide what is the result of an agreement which provides for the nomination of an arbitrator by a body which does not exist at all.
Let us apply the ordinary law of contract. A mistake was made. Both parties thought that there was such a body. In so far as the second part of the clause is meaningless, it can be ignored leaving the rest of the clause valid. That is established by Nicolene Ltd. v. Simmonds (1953) 1 Queen's Bench 543. Whether you describe it as meaningless or whether you describe it as inserted under a mutual mistake, the words "nominated by the Anglo-American Chamber of Commerce" can be struck out.
Mr. Smith submitted that the whole clause should be struck out as meaningless or done under a mistake. I do not agree. It seems to me that the only meaningless part are the words "nominated by the Anglo-American Chamber of Commerce". Those words can be struck out, leaving the rest of the clause intact.
So we have to deal with the clause as if it reads: "This agreement is governed by English Law. In the event of a dispute an independent arbiter should, however, arbitrate".
We have to apply that clause to the dispute that has arisen. Each party claims against the other that the distributorship agreement has come to an end. Proceedings were started in New Jersey by Sportcraft against Gola. Gola—the English company—said that the action should not go on in America. I will not go into all the to-ings and fro-ings: there have been far too many of them. Eventually the matter came for decision before Mr. Justice Woolf in the High Court here. He was asked to appoint an arbitrator under section 10 of the Arbitration Act 1950, which says:
"In any of the following cases—(a) where an arbitration agreement provides that the reference shall be to a single arbitrator, and all the parties do not, after differences have arisen, concur in the appointment of an arbitrator…any party may serve the other parties or the arbitrators, as the case may be, with a written notice to appoint or, as the case may be, concur in appointing, an arbitrator, umpire or third arbitrator, and if the appointment is not made within seven clear days after the service of the notice, the High Court or a judge thereof may, on application by the party who gave the notice, appoint an arbitrator…"
So there it is. In the event of the parties not providing for or agreeing to the appointment of an arbitrator, section 10 gives the High Court in England power to appoint one. So an application was made in England by Gola to Mr. Justice Woolf to appoint an arbitrator. Gola said on the authority of two or three cases, going back to the decision in In re Eyre and The Corporation of Leicester (1892) 1 Queen's Bench 136, that the High Court judge was bound to appoint an arbitrator. He had no discretion at all. It was said that the word "may" in section 10 should be read as "must". Lord Esher, M.R. and Lord Justice Lopes said as much in the case of In re Eyre. But Lord Justice Kay reserved his opinion. He thought that the word "may" in some circumstances might give the court a discretion: and cases might arise where it would be necessary to exercise such a discretion. The same was said by Lord Justice Warrington in In re Bjornstad and The Ouse Shipping Co. Ltd. (1924) 2 King's Bench 673at pages 681–682.
To my mind the High Court is not obliged to appoint an arbitrator. There is no "must" about it. The word used in the section is "may"—giving a discretion. That is the way in which Mr. Justice Woolf looked at the matter. This is a very suitable case for the exercise of that discretion. There is no doubt that the intention of the parties was that there should be an arbitration in the United States of America by an arbitrator nominated by an American body. We should do all we can to implement that intention.
Then I come to the next point. The procedural steps in the arbitration are not necessarily governed by English law. The substantive interpretation of the contract and its effect are governed by English law (because the first part of the clause says "This agreement is governed by English law"). But the procedural steps in the arbitration are quite separate. As the House of Lords pointed out in James Miller & Partners Ltd. v. Whitworth Street Estates (Manchester) Ltd. (1970) Appeal Cases 583, there is a difference between the substantive law (which governs the proper law of the contract) and the procedural law—or the curial law, as it is called (which governs the procedure in the determination of the dispute) and in particular the arbitration procedure.
The arbitration in this case can very well take place in New Jersey. An arbitrator there can apply English law. He can receive evidence about English law so far as necessary. The High Court here should not appoint an arbitrator. We should leave it to the courts in the United States to handle the matter. Application should be made to them to appoint an arbitrator or to nominate an appointing body.
We were told that, after Mr. Justice Woolf's decision, an application was made to Judge Osborne in New Jersey. He ordered that the respective counsel of both parties should have two weeks to agree upon an arbitrator. If the parties failed to agree upon an arbitrator, the court would substitute the American Arbitration Association for the Anglo-American Chamber of Commerce as the nominating body. The court made no ruling on the locus of the application.
If Judge Osborne's decision is correct—if it is upheld on appeal—it seems to me that matters would have been carried through much as the parties originally intended: the only difference being that, instead of the non-existent Anglo-American Chamber of Commerce, you have the American Arbitration Association. That seems to me a very sensible solution in this matter. If Judge Osborne is right, and his decision is upheld on appeal, that is the way it should be dealt with.
In any event, it is much better that all the procedural matters in this case should be dealt with by the United States' courts: because, as we would interpret clause 14, the procedural law is New Jersey law and not English law. The substantive law is English law. An application so far as procedure is concerned should be made to the American courts.
In the circumstances I would agree with Mr. Justice Woolf. This is not a case where the High Court in England should make the appointment. It should be left to the United States' courts. I would dismiss the appeal accordingly.
I agree. Clause 14 of the distributorship agreement between the parties dated the 20th June, 1978 is in the following terms: "This agreement is governed by English Law. In the event of a dispute, an independent arbitrator, appointed by the Anglo-American Chamber of Commerce shall arbitrate". In the event, there was no such body as the Anglo-American Chamber of Commerce; and the first question which arises on this appeal is what is the effect of that upon clause 14.
It was submitted by Mr. Smith on behalf of the defendants that, there being a mutual mistake of fact fundamental to the agreement between the parties, the whole clause, including the agreement to...
To continue reading
Request your trial