Heyman v Darwins Ltd

Court:House of Lords
Judge:The Lord Chancellor, Lord Macmillan, Lord Porter, Lord Wright
Judgment Date:20 Feb 1942
Jurisdiction:England & Wales

[1942] UKHL J0220-1

House of Lords

Lord Chancellor

Lord Russell of Killowen

Lord Macmillan

Lord Wright.

Lord Porter

Heyman and Another
and
Darwins Ltd.

After hearing Counsel, as well on Tuesday the 28th, Thursday the 30th and Friday the 31st, days of October last, as on Tuesday the 4th and Thursday the 6th, days of November last upon the Petition and Appeal of John Moritz Heyman and Robert Charles Thye Heimann, both of Pascask Road, Spring Valley, in the State of New York, U.S.A., praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of His Majesty's Court of Appeal, of the 15th of October 1940, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Order might be reversed, varied, or altered, or that the Petitioners might have such other relief in the premises as to His Majesty the King, in His Court of Parliament, might seem meet; as also upon the printed Case of Darwins Limited, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of His Majesty the King assembled, That the said Order of His Majesty's Court of Appeal of the 15th day of October 1940, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellants do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.

1

The Lord Chancellor (READ BY LORD MACMILLAN)

My Lords,

2

By a written contract dated 19th February, 1938, the Respondents, who are manufacturers of steel in Sheffield, as Principals, appointed the Appellants, whose business address is in New York, to be sole selling Agents of their tool steels in a wide area of territories including the Western Hemisphere (excluding U.S.A. and Argentine), Australia, New Zealand and India. The Appellants were to sell in the name of the Respondents, the Respondents fixing f.o.b. prices and the Appellants charging the purchaser with such excess price over f.o.b. prices as they could obtain. Any excess price over the f.o.b. price was for the credit of the Agents and the Principals were to account to the Agents in respect of such excess price after the Principals had received payment in full from the purchaser. The duration of the agreement was to be for three years from April 1st, 1938, as a minimum. The agreement contained an arbitration clause in the following terms:

"If any dispute shall arise between the parties hereto in respect of this agreement or any of the provisions herein contained or anything arising hereout the same shall be referred for arbitration in accordance with the provisions of the Arbitration Act, 1889, or any then subsisting statutory modification thereof."

3

The question to be decided in this Appeal is whether an action started in the King's Bench Division of the High Court by the Appellants against the Respondents should, on the application of the latter, be stayed pursuant to section 4 of the Arbitration Act, 1889, in order that the matters in dispute between the parties may be dealt with under the arbitration clause.

4

The Appellants contend that the dispute does not fall within the arbitration clause at all, and, alternatively, that, if it does, the Judge in Chambers, Mr. Justice Cassels, rightly exercised his discretion in refusing to stay the action. The Court of Appeal (Scott, MacKinnon, and Luxmoore, L.J.J.) took a contrary view and held that the arbitration clause clearly applied, and that the learned Judge made a wrong use of his discretion in refusing the stay. The Court of Appeal refused leave to appeal further, considering that the case was "a very simple one", but the Appeal Committee of the House, largely I think because of the uncertainty said to result from certain pronouncements in previous cases decided in the House of Lords and the Judicial Committee, gave leave.

5

The answer to the question whether a dispute falls within an arbitration clause in a contract must depend on ( a) what is the dispute and ( b) what disputes the arbitration clause covers. To take ( b) first, the language of the arbitration clause in this agreement is as broad as can well be imagined. It embraces any dispute between the parties "in respect of" the agreement or in respect of any provision in the Agreement or in respect of anything arising out of it. If the parties are at one on the point that they did enter into a binding agreement in terms which are not in dispute, and the difference that has arisen between them is as to their respective rights under the admitted agreement in the events that have happened—for example, as to whether the agreement has been broken by either of them; or as to the damage resulting from such breach; or as to whether the breach by one of them goes to the root of the contract and entitles the other party to claim to be discharged from further performance; or as to whether events supervening since the agreement was made have brought the contract to an end so that neither party is required to perform further—in all such cases it seems to me that the difference is within such an arbitration clause as this. In view, however, of phrases to be found in the report of some earlier decisions, the availability of the arbitration clause when "frustration" is alleged to have occurred will require closer consideration.

6

Turning now to the other question which I have called ( a), what is the present dispute about? The answer has to be gathered from the affidavits filed in the application to stay, from the correspondence before writ exhibited to these affidavits and from the endorsement on the writ itself. The letters show that the Respondents, rightly or wrongly, were complaining that the Appellants were selling the Respondents' steels for purposes for which the purchasers found they were not suitable, and that in consequence they (the Respondents) were faced with the risk of having to meet claims from dissatisfied buyers. Thus, the Respondents wrote from Sheffield on the 18th July, 1939, "under our contract with you these claims are your responsibility and we therefore cannot make any further remittances to you until we are satisfied that no such claims will be made, or alternatively that any that have been made have been settled." The Appellants, who first heard by cable from their representative in England of this attitude of the Respondents, wrote from Australia on July 24th to protest:

"I do not know by what right you pretend to hold any of our money as guarantee against possible claims."

7

Each party maintained its position, the Appellants reporting their success in obtaining further orders in Australasia, and the Respondents writing on August 24th, "we can only accept further orders on the strict understanding that from the amounts due to you a certain percentage must be retained to build up a reserve for the reasons already stated." On September 8th the Appellants replied from California that this seemed to them to be a breach of contract on the Respondents' part and they refused to give any such understanding. The anxiety of the Appellants to get their profits promptly transferred from London to New York would naturally be intensified by Treasury control established at the outbreak of the War. On November 7th the Respondents wrote to express their dissatisfaction at the way in which the agreement was working out and added, "in the circumstances we would either suggest cancelling this agreement altogether or entering into negotiations with the view to drawing up another arrangement which would have to be such that satisfaction would be assured for all parties concerned."

8

The controversy now entered its final stage. The Appellants' solicitors wrote on December 21st, 1939, referring to the above letters of July 18th, August 24th, and November 7th, and alleging that these letters show that the Respondents "have repudiated and/or evinced an intention not to perform" the agreement (an allegation which the Respondents deny), and a writ was issued on January 27th, asking the Court to make a Declaration that the Defendants "have repudiated and/or evinced an intention not to perform" the agreement, and also claiming damages under various heads.

9

The first head of claim in the writ appears to be advanced on the view that an agreement is automatically terminated if one party "repudiates" it. That is not so. "I have never been able to understand," said Lord Justice Scrutton, in Golding v. London & Edinburgh Insurance Co. Ltd. 43 Lloyds List Rep. 487, at p. 488, "what effect repudiation by one party has unless the other accepts it." If one party so acts or so expresses himself, as to show that he does not mean to accept and discharge the obligations of a contract any further, the other party has an option as to the attitude he may take up. He may, notwithstanding the so-called repudiation, insist on holding his co-contractor to the bargain and continue to tender due performance on his part. In that event, the co-contractor has the opportunity of withdrawing from his false position, and even if he does not, may escape ultimate liability because of some supervening event not due to his own fault which excuses or puts an end to further performance. (A classic example of this is to be found in Avery v. Bowden, 5 E. & B. 714.) Alternatively, the other party may rescind the contract, or (as it is sometimes expressed) "accept the repudiation", by so acting as to make plain that in view of the wrongful action of the party who has repudiated, he claims to treat the contract as at an end, in which case he can...

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