NOTES OF CASES
| DOI | http://doi.org/10.1111/j.1468-2230.1942.tb02868.x |
| Published date | 01 December 1942 |
| Date | 01 December 1942 |
76
MODERN LAW REVIEW
Dec.,
1942
and it may well be imagined that these will not be passed through the
ordinary books of account of the trader.
S.
35
gives power
to
the Appeal
Commissioners and to the Board of Inland Revenue to require production
of such books, accounts and documents
of
the trader as they shall think
fit-this provision should result in the production of many hitherto con-
cealed bank accounts.
S.
33
enables the Crown to make good duty lost,
and to take proceedings for penalties, as regards any form of fraud or
of
wilful default
at
any time instead
of,
as heretofore, within six years only
of
the commission of the offence.
A.
FARNSWORTH.
NOTES
OF
CASES
Arbitration
Clause-Whether
Applicable
after
‘‘
Repadistion
yy
of
Contract
by
One
parts
Where
a
contract (or simulacum of
a
contract) between A and
B
contains an arbitration clause, and
B
denies that the contract
is
binding
on him, or shows an intention not to perform his part, what
is
the effect
of
B’s
contention or conduct upon the arbitration clause? This important
question, which had given rise to various conflicting decisions of the House
of Lords and Privy Council (not to mention courts of less high authority),
has now received full consideration from the House of Lords in
Heymuff
v.
Darwins,
Lfd.,
[I9421
I
All
E.R.
337.
Their Lordships pointed out that the answer to the question depends
in large part upon the wording of the arbitration clause.
Parties
may
agree to arbitrate anything or almost anything
(per
Lord Wright
at
p.
353
H)-even, it seems, the question whether their contract
is
illegal
(per
Lord Wright
at
pp.
350
C,
353
B).
From this it might seem to follow
that the only matters for consideration are whether the arbitration clause
has been agreed upon, and what it means. However,
as
to the second
question, there must be rules of construction to help in doubtful cases.
We begin, then, by looking
at
the arbitration clause. This may
be
wide or narrow.
A
draftsman who wishes to word his clause in the widest
possible way will refer to arbitration all disputes arising “out of” or
“in relation to” or “concerning” the contract.
It
is not desirable to
use the word “under,” because there is
a
difference of opinion
as
to its
precise meaning. Lord Porter
(at
p.
360
H) assumed that
it
was
a
narrower
cxpression than the others, but Lord Wright
(at
p.
352
H)
seemed to
eonsider that
it
had the same result.
Having read the arbitration clause, we next consider the particular
dispute that has arisen. For present purposes disputes may be categonsed
as follows-
(I)
Cases where
B
denies that he ever entered into the contract, or
claims that the contract was void
ab
initio
(because, for example, the
making of such
a
contract is illegal). According to Viscount-Simon,
L.C.,
Lord Macmillan, and Lord Porter (pp.
343
F,
345
H,
360
D),
the arbitration
clause cannot operate. Obviously, even
if
A
takes the dispute to arbitration
and obtains an award to the effect that the contract was valid, the award
cannot help
A,
hecause it is binding on B only if
A’s
contention
k
correct.
Arbitrators cannot by their award confer
a
jurisdiction upon themselves
NOTES
OF
CASES
77
that they would otherwise not
possess.
Thus A’s proper remedy to deter-
mine the validity
of
the contract
is
by an action in the courts.
Lord Wright’s statement
of
the law was rather different from that of
his colleagues. According to him,
if
B admits that there was the appear-
ance
of
consent, but claims that the consent was vitiated by mistake or
illegality, it would be a question of construction whether the arbitration
clause could be treated
as
severable and could be invoked for settling the
dispute (pp.
350
C.
353
A).
With great respect it
is
submitted that, in
the case of mistake, the nature of the mistake is more important than the
construction of the arbitration clause. For instance,
if
the mistake is as
to the identity of parties
(as
in
Cundy
v.
Lindsay
(1878).
3
App.
Cas.
459).
the mistake would inevitably affect the arbitration clause, whatever
the wording of the clause.
You
cannot both think that you are dealing
with Blenkiron
as
regards the main body of the contract and know that
you are dealing with Blenkarn
as
regards the arbitration clause in the
same contract.
If,
in circumstances like those in
Cundy
v.
Lindsay,
you
think you are dealing with Blenkiron, you surely cannot be compelled
to arbitrate with Blenkam, even though the contract contains a clause
refemng to arbitration disputes
as
to the identity
of
parties.
Where on the other hand the mistake
is
not
in
consensu
but
in
causa
(as
where there is
a
contract for the sale of specific goods, and unknown
to the parties the goods have already perished), there
seems
to be no reason
why the dispute should not
be
treated
as
falling within
a
general arbitration
clause in the same way
as
cases
of
frustration
(group
(6)
below).
It
may
be
that Lord Wright
was
thinking
of
eww
in
causa
rather
than
of
error
in
consensu,
because
he referred (p.
353
B)
to contracts being “voidable”
for mistake, and it
is
clearly settled that
error
in
consensu
makes contracts
void, not voidable.
Reverting to the speeches
of
the other noble lords, a question may
be
raised
as
to what they meant when they said that the arbitration clause
cannot operate.
Does
this
mean that it cannot operate for any dispute
under the disputed contrace or that it operates for all disputes except
that
as
to the existence
of
the contract
(if
the latter dispute
is
decided in
A’s favour)
?
In order
to
answer this question let
us
divide it into two.
Suppose that
B
claims that he never entered into the contract. A brings
an action for
a
declaration that the contract is binding, and succeeds.
(i)
A,
in the same action, claims damages for breach of contract, or
a
sum
that he alleges to be due under the contract, and
B
pleads the arbitration
clause. Is he entitled to do
so?
Alternatively,
(ii)
A initiates arbitration
proceedings, and B claims that he is not bound to submit.
Is
he right?
It
is
obvious that the answer to (ii)
is
that once the validity of the contract
has been determined A can force arbitration upon B, subject to the dis-
cretion of the Court under
s.
4
of
the Act of
1889.
Were it not
so,
a party
to
a
contract containing
a
general arbitration clause could break the
contract and then evade arbitration by the simple process
of
denying
that the contract was made. The answer to (i) is not
$0
obvious. Viscount
Simon said
(at
p.
341
E)
:
“If
the respondents were denying that the
contract
had
ever bound them
at
all, such an attitude would disentitle
them from relying
on
the arbitration clause which
it
contains.” Does
this
mean that they would
be
disentitled from relying on
it
altogether, or
only
disentitled from relying on
it
in the dispute
as
to the existence
of
the
contract
?
It
is
submitted that the answer
is
as
follows.
If
the arbitration
clause
is
not
50
worded
as
to make arbitration
a
condition precedent to
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