King and Another v Thomas McKenna Ltd and Another
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE RALPH GIBSON,LORD JUSTICE NICHOLLS |
| Judgment Date | 20 December 1991 |
| Judgment citation (vLex) | [1990] EWCA Civ J1220-1 |
| Docket Number | 90/1065 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 December 1991 |
[1990] EWCA Civ J1220-1
The Master of the Rolls
(Lord Donaldson)
Lord Justice Ralph Gibson
Lord Justice Nicholls
90/1065
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 HOBHOUSE)
Royal Courts of Justice
MR. RICHARD FERNYHOUGH Q.C. (instructed by Messrs. Hawkins, King's Lynn, Norfolk) appeared for the Appellants.
MR. DAVID GARDAM Q.C. and MR. S. LOFTHOUSE (instructed by Messrs. Greenwoods, Peterborough) appeared for the Respondents.
We were asked by the parties to this appeal to hear it together with, or at least consecutively to, another appeal Indian Oil Corporation Ltd. v. Coastal Bermuda Ltd., "the Indian Oil Appeal". This was arranged and with the assistance of counsel appearing in the Indian Oil Appeal, which was the first to be heard, we explored the general background to the power of the court to remit arbitration awards pursuant to section 22 of the Arbitration Act 1950. There was then an interval before we heard argument in this appeal.
After the argument in both appeals had been concluded and we were on the brink of handing down our judgments, we were told that the parties to the Indian Oil Appeal had composed their differences. This was in many ways welcome news, but it has created a problem.
In the Indian Oil Appeal it was contended strongly that the jurisdiction to remit an award under section 22 was very limited. By contrast in M.F. King (Holdings) Ltd.. v. Thomas McKenna Ltd.. ("this appeal") it was common ground that there was no such strict limitation. But for the settlement, we should have delivered a combined judgment disposing of both appeals. In the first part, which would have dealt with the Indian Oil Appeal, we should have considered the general scope of the jurisdiction and then applied the law as we found it to the situation disclosed in that appeal. In the second part of the judgment, which would have dealt with this appeal, we would have considered the additional submissions on the law which were made in this appeal and applied them to the facts of this appeal.
This combined judgment was in an advanced state of preparation when we learnt of the settlement. In the changed circumstances it would clearly be inappropriate for us to express any conclusions which we have reached as to the rights of the parties to the Indian Oil Appeal. However, in fairness to the arbitrators in that case, we wish to make it clear that we would not have upheld the finding of any element of "mishandling" or "technical misconduct" on their part.
This leaves the argument that the scope of section 22 is very limited. If this had not gone to jurisdiction, it would have sufficed to say that neither party in this appeal wished to take the point. However once serious doubt had been cast upon the width of our jurisdiction in a context which could have affected this appeal, albeit it was only raised in the other appeal, it became our duty to consider and rule upon it. I therefore propose first to consider the jurisdictional arguments canvassed in the Indian Oil Appeal, so far as they are of general application and relevant to this appeal, and then consider the arguments specifically referable to this appeal.
The scope of the power to remit
Prior to the passing of the Common Law Procedure Act 1854, control over arbitrations by the High Court was largely undertaken by the use of writs of certiorari. Apart altogether from the technicalities which surrounded the use of this remedy, it had the undoubted disadvantage that it was an "all or nothing" remedy. The Court either quashed the award and sent the parties back to square one or it did nothing. The only exception was where the parties had incorporated a "Richards' clause" in the arbitration agreement. This clause, whose author was "Mr Richards, the average stater", gave the High Court consensual authority to remit the matters in question, or any of them, to the arbitrators instead of setting the whole award aside. One hundred and fifty years later the Richards family are still prominent in the profession of average stating, or "average adjusting" as it is now known, Mr. William Richards having been chairman of the Average Adjusters' Association in 1983 and my own deputy chairman in 1982.
The legislative history of section 22 of the 1950 Act is as follows. Basing itself upon Mr. Richards' clause, Parliament provided in section 8 of the Common Law Procedure Act 1854, that:
"In any case where reference shall be made to arbitration as aforesaid the Court or a Judge shall have power at any time, and from time to time, to remit the matters referred, or any or either of them, to the re-consideration and re-determination of the said arbitrator, upon such terms, as to costs and otherwise, as to the said Court or Judge may seem proper."
Parliament also provided in section 5 that an arbitrator could, if he thought fit and if the arbitration agreement did not otherwise provide, state his award or any part of it in the form of a special case for the opinion of the court.
The Arbitration Act 1889, re-enacted the substance of these sections as follows:
"10(1) In all cases of reference to arbitration the Court or judge may from time to time remit the matters referred or any of them, to the reconsideration of the arbitrators or umpires.
19. Any referee, arbitrator or umpire may at any stage of the proceedings under a reference, and shall, if so directed by the court or a judge, state in the form of a special case for the opinion of the Court any question of law arising in the course of the reference."
Section 10 of the 1889 Act has survived virtually unchanged as section 22 of the Arbitration Act 1950, which reads:
"22. Power to remit award. (1) In all cases of reference to arbitration the High Court or a judge thereof may from time to time remit the matters referred, or any of them, to the reconsideration of the arbitrator or umpire."
The substance of section 19 in a more elaborate form survived as section 9 of the Arbitration Act 1934 and as section 21 of the 1950 Act until that section was repealed by section 8(3)(b) of the Arbitration Act 1979.
The first, and most fundamental, of the submissions made in the Indian Oil Appeal was that section 22 did not authorise the court to remit an award to arbitrators for reconsideration on any ground except such as before the passing of the Common Law Procedure Act 1854 would have induced it to set the award aside or to treat it as a nullity in an action brought upon it. These grounds were (1) where the award was bad on its face, (2) where there had been misconduct on the part of the arbitrator, (3) where there had been an admitted mistake and the arbitrator had asked that the matter be remitted and (4) where additional evidence had been discovered after the making of the award.
This submission is somewhat startling in the light of the plain words of the section, but it is not unsupported by authority (see, for example, Mills v. The Society of Bowyers (1856) 3 K.& J., Hodkinson v. Fernie (1857) 3 C.B.(N.S). 189 and Hodge v. Burgess (1858) 3 H.& N. 293). Indeed the learned editors of Mustill & Boyd on Commercial Arbitration (2nd edition, 1989 at page 550) take the view that the weight of authority supports this view, at least if one adds two categories relating to the statement of a special case, which are no longer relevant, and a category which they describe as "a misunderstanding leading to injustice, even though the arbitrator has not committed misconduct". However they concede that the reported cases go beyond this. Their conclusion is that the matter is open in the House of Lords and that the opportunity might there be taken to restore to section 22(1) the full literal effect of its wording.
On our inquiring why we should not clarify the matter, we were referred to this court's decisions in Keighley Maxted & Co. v. Bryan Durrant & Co. (1893) 1 Q.B. 405 and Montgomery Jones v. Liebenthal & Co. (1898) 78 L.T. 406 as being the only two authorities binding upon us, although counsel rightly conceded that they might not be decisive.
Keighley Maxted & Co. v. Bryan Durrant & Co . The issue was whether there was power to remit an award for reconsideration by the arbitrators, material fresh evidence having been discovered after the award was published. Lord Esher M.R., Lopes and Kay L.JJ. all expressed the view that section 10 of the Arbitration Act 1889 was far more limited in its scope than the literal words would suggest, but the only issue which the court had to decide was whether there was power to remit on the basis of the discovery of fresh evidence. It is no doubt powerful persuasive authority, but it binds us only to hold that the scope of the section is sufficiently wide to cover a remission on the grounds there in issue.
Montgomery Jones v. Liebenthal & Co . Here Mr. Sanderson of counsel, appearing for the respondents, put forward the argument that the jurisdiction was limited to remission on four defined grounds. The applicants' case was based upon a complaint that the arbitrators had gone wrong on a point of law. Smith L.J. accepted the argument of the respondents. But Chitty L.J., having referred to Keighley Maxted, said:
"It is not, however, now necessary to limit the operation of section 10 to those four grounds, for we are asked to remit the matter to the arbitrators solely upon the ground that they have gone wrong on a point of law. That, if it came within any...
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