S.L. Sethia Liners Ltd v State Trading Corporation of India Ltd (Kommuny)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE KERR,LORD JUSTICE RALPH GIBSON,SIR DENYS BUCKLEY |
| Judgment Date | 14 October 1985 |
| Judgment citation (vLex) | [1985] EWCA Civ J1014-2 |
| Docket Number | 85/0576 |
| Court | Court of Appeal (Civil Division) |
| Date | 14 October 1985 |
[1985] EWCA Civ J1014-2
Lord Justice Kerr
Lord Justice Ralph Gibson and
Sir Denys Buckley
85/0576
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
(CIVIL DIVISION)
From: Mr Justice Staughton (Q.B.D., Commercial Court, London).
Royal Courts of Justice,
MR GRAHAM DUNNING (instructed by Messrs Holman Fenwick & Willan) appeared on behalf of the Appellants (Defendants) (Sellers).
MR RICHARD JACOBS (instructed by Messrs Geo. J. Dowse & Co.) appeared on behalf of the Respondents (Plaintiffs) (Buyers).
This is an appeal from a judgment given by Mr Justice Staughton on 19 April 1985. It arises out of a contract dated 18 July 1983 for the sale FOB West Coast of India port of 11,000 tons of sugar by the defendants, the State Trading Corporation of India Ltd., to whom I will refer as the sellers, to the plaintiffs, the buyers, S.L. Sethia Liners Ltd. There was a subsale, on the same terms, save as to price, but the court had not looked at that subcontract by Sethia to Cargill—I do not give their full name because we have not been referred to it—and then a further subsale to Golodetz—and again I do not give the name in full—who were the final buyers in the string.
There arose a dispute between the sellers and the buyers as to whether the sellers were liable for demurrage, since a demurrage provision, to which I will turn in a moment, had been incorporated into the sale contract.
On 13 December 1984 the buyers issued a writ for $38,764.66, claiming that this was the amount of demurrage owed to them by the sellers, under the contract of sale. Alternatively they submitted that there had been a concluded agreement between the parties settling a dispute as to the demurrage, whereby the sellers had agreed to pay this sum.
On 2 January 1985 the buyers issued a summons under Order 14 for summary judgment, and shortly thereafter, on 25 January 1985, the sellers issued a summons to stay the action because the contract contained an arbitration clause. In the circumstances of these parties, this is governed by section 1 of the Arbitration Act 1975.
These summonses came before Mr Justice Staughton on 19 April, and he dealt first with the buyers' application for summary judgment. He concluded that there was no arguable dispute between the parties as to the sellers' liability for demurrage, although he rejected the alternative contention of an agreed settlement. He accordingly gave judgment for the buyers for the amount claimed, and having done so concluded that there was nothing left to refer to arbitration. He accordingly made no order on the summons to stay the action.
I need not refer to the provisions of Order 14, which are well known. But it is important to bear in mind that section 1 of the Arbitration Act 1975 obliges the court to stay an action and to refer the matter to arbitration unless the court is satisfied—and I read the relevant words—"that there is not in fact any dispute between the parties with regard to the matter agreed to be referred".
The submissions of both parties have proceeded on the basis that the summonses under Order 14 and section 1 are the reverse sides of the same coin, and we have been referred to Mustill and Boyd on Commercial Arbitration at pages 90 to 92. Without expressing any concluded view on everything which is stated there, it seems to me that the position can be summarised as follows. If a point of law is raised on behalf of the defendants, which the court feels able to consider without reference to contested facts simply on the submissions of the parties, then it is now settled that in applications for summary judgment under Order 14 the court will do so in order to see whether there is any substance in the proposed defence. If it concludes that, although arguable, the point is bad, then it will give judgment for the plaintiffs. This course will also be adopted where there is a counter-application for a stay of the action. If the contract between the parties contains an arbitration clause to which section 1 of the 1975 Act applies, then the court is not thereby precluded from considering whether there is any arguable defence to the plaintiffs' claim. If the court concludes that the plaintiff is clearly right in law then it will still give judgment for the plaintiffs. In the same breath, as it were, it will then have decided that in reality there was not in fact any dispute between the parties. If the court is satisfied that the plaintiffs are clearly right in law, and that the defendants have no arguable defence, then it will not avail the defendants to have raised a point of law which the court can see is in fact bad. In those circumstances the defendants cannot be heard to say that there was a dispute to be referred to arbitration. But if the court concludes that the plaintiffs are not clearly entitled to judgment because the case raises problems which should be argued and considered fully, then it will give leave to defend, and it is therefore then bound to refer the matter to arbitration under section 1 of the 1975 Act.
I should add, for the sake of completeness, that in relation to applications for summary judgment which raise a bare issue of law, the parties may of course agree to ask the court to decide this as a preliminary, or as the only, issue in the action. But if they do not do so and the court does not consider that the plaintiff is entitled to summary judgment, then the court should not investigate a clearly arguable defence by going further in order to decide whether the defendant's contention is in fact correct, and then give leave to defend. That course was emphatically rejected by this court in the unreported case of Pinemain Ltd. v. Welbeck International Ltd. on 11 October 1984 (transcript No.84 362). The proper course, if the court considers that the plaintiff is or may not be right, is simply to give leave to defend, and accordingly, in cases where there is an arbitration clause, to refer the whole dispute to arbitration. I say that because both counsel before us, without any agreement having been concluded between the parties to abrogate the arbitration clause, told us that they and their clients would wish this court finally to decide the question of construction raised in this case, to which I turn in a moment. That would mean, or could mean, that if the court was not satisfied that the plaintiffs were right, it would give a ruling on the legal position between the parties in favour of the defendants, but would then be bound to refer the remainder of the dispute to the arbitration tribunal in a situation where that tribunal would be bound by what, ex hypothesi, the court...
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