Pioneer Shipping Ltd v B.T.P. Tioxide Ltd (Nema)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Diplock,Lord Fraser of Tullybelton,Lord Russell of Killowen,Lord Keith of Kinkel,Lord Roskill
Judgment Date16 Jul 1981
Judgment citation (vLex)[1981] UKHL J0716-1

[1981] UKHL J0716-1

House of Lords

Lord Diplock

Lord Fraser of Tullybelton

Lord Russell of Killowen

Lord Keith of Kinkel

Lord Roskill

Pioneer Shipping Limited and Others
(Respondents)
and
B.T.P. Tioxide Limited
(Appellants)
Lord Diplock

My Lords,

1

This is the first case to come before this House under the new procedure for judicial review of arbitrators' awards that was instituted by the Arbitration Act 1979. Leave to appeal was given by an Appeal Committee of the House itself. This was not because of any intrinsic general importance of the points of law involved in the arbitrators' award. If ever there were a case which under the new procedure ought never have been allowed to get any further than the arbitrator's award, this was one. The reason why leave was given to bring the matter before this House was because the proceedings in the instant case and in cases that have come before the Commercial Court since the judgment of the Court of Appeal was given, show that there exist significant differences of opinion between the individual judges themselves who sit in the Commercial Court, and between one of them at least and the guide-lines laid down in the instant case, by the Master of the Rolls (with whom Watkins L.J. agreed) as to the considerations which should influence the judge in deciding how to exercise his discretion under section 1 of the Arbitration Act 1979 to grant or to refuse leave to appeal to the High Court on a question of law arising out of an arbitrator's award.

2

The dispute submitted to the arbitration of a London maritime arbitrator of great experience arose between charterers and owners under a consecutive voyage charterparty. The relevant terms of the charterparty, the dispute between the parties to it and the circumstances in which that dispute was submitted to arbitration will be dealt with in the speech of my noble and learned friend Lord Roskill with whose reasons for dismissing the appeal and upholding the award of the arbitrator I find myself in such unqualified agreement that I am able to confine my own speech to the question of the discretion to grant leave to appeal under section 1 of the new Act which has given rise to divergences of opinion between those judges called upon to exercise it. These, if permitted to continue, may well endanger the maintenance of the reputation of London arbitration as a forum for the resolution of commercial disputes.

3

It is sufficient for my purpose to mention that the reason why the parties submitted the dispute to speedy arbitration was that they wanted to know, not later than the end of September 1979, how they then stood as respects the employment of the chartered vessel, theNema, during the remainder of the 1979 Saint Lawrence River open water season at the loading port under the charter, Sorel, in the Province of Quebec. Was she, as the charterers claimed, bound to proceed forthwith from Spain, where she then lay, to Sorel and wait there at the owners' expense until either the strike at Sorel ended and she could be loaded or the end of the open water season had made loading impossible, whichever should first occur? Or, as the owners claimed, had their contractual obligation to perform any further voyages in the 1979 open water season been dissolved by frustration?

4

My Lords, as mentioned by my noble and learned friend, there had been three contested interlocutory applications in this matter before the application for leave to appeal from the arbitrator's award was made. At the first two, before Mars-Jones J. and Donaldson J., undertakings were given by the owners not to fix theNema for any further voyage otherwise than in accordance with the charterparty, pending arbitration. The third interlocutory application came before Mocatta J. after the arbitrator had telexed to the parties that his award was in favour of the owners, but before he had had time to set out in writing the reasons for his decision. Mocatta J. discharged the owners unconditionally from their undertaking; but, what for my purposes is significant in the reasons that he gave for doing so (of which a note was taken), was the expression of his opinion that in the circumstances in which the arbitration had arisen the way in which any judge would exercise his discretion would be to refuse leave to appeal from the arbitrator's award when his reasons had been given, even though the judge might have doubts as to the correctness of the arbitrator's reasons for his conclusions on any question of law involved. According to Mocatta J. a similar view that the arbitration award would be treated by the court as final and not one in which leave to appeal to the court would be granted under section 1 of the Act had also been expressed by Mars-Jones J. and Donaldson J. on the two earlier interlocutory applications.

5

My Lords, the particular circumstance in which the parties wanted a quick decision as to where they stood as respects the future employment of theNema are, no doubt, exceptional. … In my view, they are in themselves sufficient to make a grant of leave to appeal from the arbitrator's award under section 1 of the Arbitration Act 1979 an unjudicial exercise of the discretion conferred upon the judge by that section. Such was the view of those who were then the two most senior judges of the Commercial Court and such (on second thoughts) was the view of the Master of the Rolls; but the dispute had other characteristics that are likely to recur in other cases and have caused those divergencies of views as to the weight that should be given to them in deciding how to exercise that discretion.

6

As will appear from Lord Roskill's speech, the terms of the charterparty and its addenda that are relevant to the disputed issue of frustration are unique; it is almost inconceivable that they will be found again in any other charter. The same may be said of the events that preceded and led up to the dispute between the parties. If one were seeking to exemplify what is meant by the convenient neologism "a one-off case" it would be hard to find a better exemplar than the case that is now before your Lordships.

7

Of course the dispute involves some question of law. It is difficult to conceive of a dispute under a charterparty that does not do so. The dispute is likely to be about what the parties have agreed shall be their respective legal rights and obligations in events that have actually happened or, it may occasionally be, in events that it is anticipated may happen. The answer must depend upon the true construction of the agreement between the parties; and in English jurisprudence, as a legacy of the system of trial by juries who might not all be literate, the construction of a written agreement, even between private parties, became classified as a question of law. The object sought to be achieved in construing any commercial contract is to ascertain what were the mutual intentions of the parties as to the legal obligations each assumed by the contractual words in which they (or brokers acting on their behalf) chose to express them; or, perhaps more accurately, what each would have led the other reasonably to assume were the acts that he was promising to do or to refrain from doing by the words in which the promises on his part were expressed. In the case of a "one-off contract" where the exact combination of words and phrases that fall to be construed has not only never been used before and so did not possess an already established meaning of which each party was entitled to assume the other knew when he entered into the contract, but is also unlikely to be used in future by any other parties, it is not self-evident that an arbitrator or arbitral tribunal chosen by the parties for his or their experience and knowledge of the commercial background and usages of the trade in which the dispute arises, is less competent to ascertain the mutual intentions of the parties than a judge of the Commercial Court, a Court of Appeal of three Lords Justices or even an Appellate Committee of five Lords of Appeal in Ordinary. A lawyer nurtured in a jurisdiction that did not owe its origin to the common law of England would not regard it as a question of law at all. This, I believe, was all that the Master of the Rolls meant to convey by his vivid, if somewhat less than tactful, phrase:

"On such a clause, the arbitrator is just as likely to be right as the judge—probably more likely".

8

Nevertheless, despite the disappearance of juries, literate or illiterate, in civil cases in England, it is far too late to change the technical classification of the ascertainment of the meaning of a written contract between private parties as being "a question of law" for the purposes of judicial review of awards of arbitrators or decisions of administrative tribunals from which an appeal to a court of justice is restricted by statute to an appeal upon a question of law.

9

My Lords, the great majority of international maritime and commercial contracts which contain a London arbitration clause, and typically those falling within the categories of disputes in respect of which it is, at least for the time being, forbidden by section 4 of the Arbitration Act 1979 to enter into an "Exclusion Agreement" covering disputes that have not already arisen are made on standard printed forms on which the particulars appropriate to the contract between the actual parties are inserted, and any amendments needed for reasons special to the particular contract are either made to the printed clauses or dealt with in added clauses, which sometimes may themselves be classified as standard. Business on the Baltic, the insurance market and the commodity markets would be impracticable without the use of standard terms to deal with what are to be the legal rights and obligations of the parties upon the happening of a whole variety of events which experience has...

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