England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		09/10/2009

Mr Justice Gross :

INTRODUCTION

1. There is before the Court an application of the Claimant ("the Secretary of State"), seeking a declaration under s.72(1)(c) of the Arbitration Act 1996 ("the Act"), that the Revenue Support Dispute ("RSD"), identified by the Respondent ("Stagecoach") in paragraphs 17 – 27 of the Amended Notice of Arbitration, dated 12^th May, 2009 ("the Amended Notice of Arbitration"), has not been submitted to arbitration in accordance with the Franchise Agreement dated 21^st September, 2006 ("the Franchise Agreement").
2. S.72(1)(c) of the Act provides as follows:

" (1) A person alleged to be a party to arbitral proceedings but who takes no part in the proceedings may question –

(c) what matters have been submitted to arbitration in accordance with the arbitration agreement,

by proceedings in the court for a declaration….. "

3. The issue, as will become apparent, involves a single and short point of construction: namely, whether the RSD is within or outwith the arbitration clause contained in paragraph 2.6 of Schedule 8.1 to the Franchise Agreement ("the arbitration clause"), which is in the following terms:

" If either party disputes the amount of a Franchise Payment, the dispute shall be resolved in accordance with the Dispute Resolution Rules but shall not affect the obligation of either party to pay a Franchise Payment notified in accordance with this paragraph 2."

The Secretary of State submits that the RSD falls outside, whereas Stagecoach submits that it comes within, the scope of the arbitration clause.

4. To begin with the Court had been faced with further questions, in summary, as to (1) whether the Secretary of State was precluded from relying on s.72 of the Act and (2) whether Stagecoach was itself precluded from alleging that the Secretary of State was so precluded ("the preclusion issues"). As it seemed to me, there was a high risk that these potentially time consuming and costly issues would, in this case, be pointless. By way of illustration, if Stagecoach succeeded before me on (1) and then before the arbitrator on the question of his jurisdiction, the Secretary of State would, as a matter of right, be entitled to a re-hearing in Court. It therefore appeared to me that it made more sense to get on and deal with the jurisdiction question at once. Fortunately and sensibly if I may say so, after consideration and on instructions, Mr. McCaughran QC for Stagecoach, was in a position to agree not to pursue preclusion issue (1), so that preclusion issue (2) fell away. Any question of costs can be dealt with at a later stage.
5. I return to the issue of construction. The factual background to the present dispute is not, or not seriously, in dispute and can be shortly summarised. The Secretary of State is the franchising authority for the franchising of passenger rail services in England and Wales. Pursuant to the Franchise Agreement, Stagecoach operates the South Western rail franchise, which broadly covers the provision of passenger train services in the South West of England – essentially, services from Waterloo Station and in the Isle of Wight. The Franchise Agreement incorporates the National Rail Franchise Terms ("NRFT").
6. In the event, two disputes arose under the Franchise Agreement and, by a Notice of Arbitration, dated 28^th April, 2009 (subsequently amended, as already noted, on the 12^th May, 2009), Stagecoach sought their determination by arbitration. As they have come to be termed, the two disputes were the "Car Parking Dispute" ("the CPD") and the RSD.
7. The CPD concerns, on any view, an issue of construction - as to whether, for the purpose of calculating the amount of the Franchise Payment for the 13^th Reporting Period for the Franchise Year 2008 – 9, "Revenue" in the Franchise Agreement should include revenue derived from the sale of tickets for car parking at railway station car parks operated by Stagecoach South West Trains. Stagecoach contends that such car parking revenue does not count as "Revenue"; the Secretary of State contends that it does. Initially, the Secretary of State challenged the jurisdiction of the arbitrator to determine the CPD. However, by letter dated 18^th June, 2009, the Secretary of State conceded that the arbitrator did have jurisdiction in respect of the CPD. Accordingly, the CPD as such is not before the Court – but Stagecoach submits that the Secretary of State's concession in respect of the CPD undermines his arguments on the RSD, a matter disputed by the Secretary of State.

THE RSD

8. Turning to the RSD, the Franchise Agreement requires the Secretary of State to pay Revenue Support Adjustments if there is a shortfall to Stagecoach of Revenue as against Target Revenue. The Franchise Agreement contains two distinct regimes for Revenue Support: a regime for the first four years of the Franchise Period and a separate regime thereafter.

i) Under paragraph 4 of Schedule 8.1, Stagecoach is only entitled to Revenue Support before the end of the Fourth Year (i.e., from the Start Date) to mitigate the impact of Revenue decline (against Target Revenue) caused by a force majeure event occurring prior to the fourth anniversary of the Start Date, i.e., 4^th February, 2011 (the Start Date being the 4^th February, 2007). In other words, a force majeure event has to be established to entitle Stagecoach to Revenue Support under this regime. Paragraph 4 goes on to provide that no Revenue Support Adjustment may be claimed pursuant to this regime "…in respect of any Reporting Period starting on or after the fourth anniversary of the Start Date." A "Reporting Period", it may be noted, is defined in the Franchise Agreement as a period of 28 days, with 13 such periods in a Reporting Year.

ii) Under paragraph 5 of Schedule 8.1, Stagecoach is entitled to Revenue support to mitigate the impact on it of Revenue shortfalls against Target Revenue occurring after the first four years of the Franchise Period "in view of the inherent difficulty of accurately forecasting Target Revenue after such first four years"; accordingly, under this regime, there is no requirement to establish force majeure.

9. In essence and put neutrally, the RSD seeks to determine for the future, the proper approach, as a matter of construction, to the calculation of Revenue Support Adjustments (if any) payable for the period 4^th February to 31^st March, 2011.
10. Paragraph 5.2(a) of Schedule 8.1 to the Franchise Agreement is in these terms:

" 5.2 A Revenue Support Adjustment shall be made …..in respect of any Reporting Period which starts on or after the fourth anniversary of the Start Date if:

(a) the Management Accounts for that Reporting Period disclose that the cumulative year-to-date Revenue for the period commencing on the first day of the Franchisee Year within which that Reporting Period starts and ending on the final day of that Reporting Period is less than 98 per cent of Target Revenue for that period…."

11. In the Amended Notice of Arbitration, Stagecoach seeks relief as follows:

" A declaration that paragraph 5 of Schedule 8.1 to the NRFT should be applied in accordance with its terms such that Revenue Support Adjustments for the period 4 February to 31 March 2011 should be calculated by reference to the amount of Revenue generated by the Claimant over the preceding Reporting Periods falling in the Franchisee Year 2010-2011. "

12. As helpfully summarised by the parties in an agreed Note, their respective substantive cases as to the RSD are as follows, beginning with the Stagecoach case:

" Stagecoach contends that, on its true construction, paragraph 5 of Schedule 8.1 of the Franchise Agreement should be applied such that Revenue Support Adjustments for the Reporting Periods starting on or after 4 February 2011, namely the 12^th Reporting Period (6 February to 5 March 2011) and the 13^th Reporting Period (6 March to 31 March 2011), are to be calculated by reference to Revenue generated by Stagecoach during the whole of the Franchisee Year in which those Reporting Periods fall, 2010-2011, up to the end of the relevant Reporting Period, i.e. between 1 April 2010 and 5 March 2011 (in the case of the 12^th Reporting Period) and 1 April 2010 and 31 March 2011 (in the case of the 13^th Reporting Period). Stagecoach contends that its construction gives effect to the plain language of paragraph 5.2, is consistent with the other provisions of Schedule 8.1 and that the Secretary of State is seeking to create a special regime applicable solely to the 12^th and 13^th Reporting Periods of the 2010-2011 Franchisee Year – for which there is no justification. "

Pausing there, it is at once apparent that the Start Date (4^th February, 2007) and the running of Franchisee Years (years from 1^st April to 31^st March) are, for whatever reason/s, not aligned. The Note then continues with the Secretary of State's case:

" The Secretary of State's case is that, on its true construction, Schedule 8.1, paragraph 5 of the Franchise Agreement only entitles Stagecoach to a Revenue Support Adjustment in respect of the 12^th and 13^th Reporting Periods to be calculated by reference to Revenue generated by Stagecoach during the 12^th and 13^th Reporting Periods of the Franchisee Year 2010-2011, i.e., between 6 February 2011 and 31 March 2011. The Secretary of State contends that the effect of Stagecoach's claim is that it is entitled to a balloon payment including revenue shortfalls which occurred prior to the 4^th anniversary of the Start Date (as defined in the Franchise Agreement), without any need to prove force majeure. This is contrary to the whole scheme of the Franchise Agreement. "

THE ISSUE IN THESE PROCEEDINGS

13. With the substantive battle lines of the RSD thus drawn, the question for decision on this occasion is one of jurisdiction, turning (as already foreshadowed) on the true construction of the arbitration clause: is the RSD to be determined in arbitration or by this Court?
14. In terms of its jurisdiction and arbitration provisions, the Franchise Agreement is, to say the least, unusual. It provides, as Mr. Hirst QC, for the Secretary of State rightly submitted, for this Court to have jurisdiction, unless the dispute in question falls within one of no fewer than 7 separate arbitration clauses.
15. By way of elaboration:

i) Paragraph 13 of Schedule 19 to the Franchise Agreement deals with governing law and the jurisdiction of this Court:

" 13. GOVERNING LAW

The Franchise Agreement shall be governed by and construed in accordance with the laws of England and Wales and the parties irrevocably agree that the courts of England and Wales are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with the Franchise Agreement, except as expressly set out in the Franchise Agreement. "

ii) Next, paragraph 4.2 of Schedule 19 to the Franchise Agreement, provides as follows:

" Where either party is entitled, pursuant to the terms of the Franchise Agreement, to refer a dispute arising out of or in connection with the Franchise Agreement for resolution or determination in accordance with the Dispute Resolution Rules, then such dispute shall, unless the parties otherwise agree and subject to any duty of the Secretary of State under Section 55 of the Act, be resolved or determined by arbitration pursuant to the Dispute Resolution Rules."

The reference to the Dispute Resolution Rules is a reference to the Railway Industry Dispute Resolution Rules (the "RIDR Rules"). Paragraph 4.2 did not, however, say anything about which disputes were to be determined by arbitration in accordance with its terms.

iii) As already noted, the arbitration clause (central to the present jurisdictional dispute) is to be found at paragraph 2.6 of Schedule 8.1 to the Franchise Agreement - a Schedule with the title of "Franchise Payments".

iv) For completeness, the remaining arbitration clauses cover disputes about an assortment of topics, including the following: revisions to the Train Plan, local authority Concessionary Travel Schemes, the Season Ticket Bond, a schedule of asset condition and intellectual property. It is unnecessary to set out the terms of these arbitration clauses or to say more of them as such; on any view, no assistance is to be derived from the nature of the matters covered by them – "heterogeneous and diverse" as Mr. Hirst termed them.

16. Before turning to the rival cases as to jurisdiction to determine the RSD, it is convenient to set out a number of further terms of the Franchise Agreement, to which reference was made at the hearing.
17. As has been seen, the arbitration clause (paragraph 2.6 of Schedule 8.1) refers to "a Franchise Payment" - itself a term defined in clause 3 of the NRFT, incorporated into the Franchise Agreement. A "Franchise Payment" means:

" …in relation to any Reporting Period, the amount determined in accordance with paragraph 1.1 of Schedule 8.1 (Franchise Payments). "

In turn, paragraph 1.1 of Schedule 8.1 provides, insofar as material, as follows:

" 1. FRANCHISE PAYMENTS

1.1 The Franchise Payment for any Reporting Period shall be an amount equal to:

£FP = PFP – RShA – RShRA + RSuA + RSuRA + TAA + SCA – COPA

where

£FP means the Franchise Payment for that Reporting Period;

….

RShA means the amount of any Revenue Share Adjustment to be made on that Reporting Period's Payment Date;

…

RSuA means the amount of any Revenue Support Adjustment to be made on that Reporting Period's Payment Date"

18. Reference should also be made to paragraph 2 of Schedule 8.1, in which the arbitration clause (paragraph 2.6) is of course found:

" 2. PAYMENT OF FRANCHISE PAYMENTS

2.1 The Secretary of State shall notify the Franchisee, no less than seven days prior to the end of each Reporting Period, of the amount of the Franchise Payment payable in respect of that Reporting Period.

2.2 Each such notification shall set out in reasonable detail how the Franchise Payment has been calculated.

2.3 The Payment Date for a Reporting Period shall be the last business day of that Reporting Period.

2.4 Each Franchise Payment shall be payable by the Franchisee or, as the case may be, the Secretary of State in the amount notified by the Secretary of State in accordance with paragraph 2.1 on the Payment Date for the Reporting Period to which it relates.

……"

Paragraphs 2.7 and 2.8 go on to make provision for interest to be payable on any shortfall on the "amount" from due date to payment and an obligation to pay the shortfall and to repay any excess payment.

19. For the Secretary of State, Mr. Hirst QC submitted that the "one stop shop" principle of construction, expounded by the House of Lords in Fiona Trust v Privalov [2008] 1 Lloyd's Rep 254, was inapplicable to the Franchise Agreement given its dispute resolution provisions (as already described). It was plain here, that the parties did not intend "one stop" adjudication before an arbitrator; some disputes would be litigated and some arbitrated. There was accordingly no such presumption in this case; the starting point was an agreement as to the primacy of court jurisdiction, save where there was a "carve-out" for arbitration.
20. The arbitration clause (paragraph 2.6 of Schedule 8.1) was only applicable if "either party disputes the amount of a Franchise Payment" (emphasis added). But the dispute currently before the Court did not involve a dispute as to the amount of a Franchise Payment. Instead, it involves:

" …an issue of construction which may, or may not, have an impact on the amount of a Franchise Payment in March 2011."

A dispute as to the method used for calculating Franchise Payments in the future was not a dispute as to the "amount" of any such payment/s. There thus was not and could not be – in advance of the first relevant Reporting Period, beginning on the 6^th February, 2011 – a dispute as to the amount of a Franchise Payment. Accordingly, the RSD did not fall within the arbitration clause.

" The language in paragraph 2.6 of Schedule 8.1 envisages that the reference of any dispute to arbitration will occur after the obligation to pay a Franchise Payment has accrued and not before. "

21. Stagecoach was not, however, without a remedy. The present dispute could be determined by this Court, in accordance with Paragraph 13 of Schedule 19 to the Franchise Agreement.
22. Mr. Hirst accepted that the consequence of his submission was that the same issue of construction as arose here would (1) be subject to the exclusive jurisdiction of this Court for a period of time but, thereafter and if not already decided, (2) it would fall to be determined in arbitration. That, as Mr. Hirst further accepted, was both "not usual" and could (in the case of a dispute a short time in advance of the due date for a Franchise Payment) lead to a "close run thing" as to jurisdiction. Such outcomes were, however, the inevitable consequences of the scheme of the parties' bargain.
23. So far as concerns the CPD, the Secretary of State's concession as to the arbitrator's jurisdiction had followed the amendment of the Notice of Arbitration. The amendments in respect of the CPD had converted it from a "hypothetical" claim to an actual claim concerning the amount of a particular payment said to be due. The amended CPD claim advanced by Stagecoach was to be contrasted with the claim it advanced in the RSD.
24. Finally, Mr. Hirst emphasised, on behalf of the Secretary of State, that the dispute as to the arbitrator's jurisdiction did not arise from any "deep-seated objection to arbitration in principle" or out of any concerns as to the (proposed) arbitrator's qualities. The Secretary of State:

" ….simply considers that this is a dispute of considerable public importance involving potentially very large sums of public money and that Stagecoach's arguments should be exposed and adjudicated in public. "

25. For Stagecoach, Mr. McCaughran QC's submissions proceeded as follows. The Secretary of State's affidavit evidence had included the contention that the arbitration clause did not apply to questions of contractual construction or law; instead it was limited to mathematical disputes or accounting errors in the computation of the amounts of the Franchise Payments. That contention was, however, untenable and had not been pursued in the Secretary of State's skeleton argument or at the hearing. It was in any event belied by the CPD and the Secretary of State's concession in respect of that dispute, the essence of which was and remained, one of contractual construction: namely (if in simplified form) whether Revenue exceeded Target Revenue by a sufficient percentage so as to require a Revenue Share Adjustment (i.e., a payment from Stagecoach to the Secretary of State). Although the CPD was now focussed on a specific payment which had fallen due, the real dispute related to the true construction of "Revenue" in the Franchise Agreement and, in particular, whether it included car parking revenue.
26. With regard to the timing question, the Secretary of State's position was very odd:

" …it is very difficult to see what the commercial rationale would be for the parties agreeing that the same dispute should be resolved either by the court or by an arbitral tribunal, depending solely upon the timing of the issue of proceedings."

27. The language of the Franchise Agreement did not produce so commercially bizarre a result. The construction contended for by Stagecoach did not strain the language and achieved harmony between the language of the contract and commercial good sense. When the arbitration clause spoke of either party disputing "the amount of a Franchise Payment", it meant any Franchise Payment; it was apt to cover future Franchise Payments as well as a Franchise Payment where the obligation to pay had already accrued. This contention was supported by reference back to paragraph 1.1 of Schedule 8.1, which spoke of the "Franchise Payment for any Reporting Period", i.e., so including Reporting Periods covering future dates. In turn, that submission was reinforced by the reference in the definition of "Franchise Payment" (see above) to "any Reporting Period". Paragraph 2.6 of Schedule 8.1 could be seen as a clause divided into two parts by the word "but". The second part, Mr. McCaughran acknowledged, related to a Franchise Payment already notified. However, the first part of paragraph 2.6 was on any view apt to cover disputes as to construction of the Franchise Agreement (as determining the amount may well involve issues of construction) and encompassed disputes as to future amounts in addition to those presently due.
28. In reply, Mr. Hirst, submitted that the fallacy in the Stagecoach argument lay in ignoring the reference, in the definition of Franchise Payment, to the "amount determined". Further, Stagecoach had ignored the scheme of paragraph 2 of Schedule 8.1, read as a whole. For that matter, paragraph 2.6 was to be read as a whole not as two separate parts. In the event, the parties had "clearly agreed" that the arbitration clause would only be applicable to amounts notified under paragraph 2. Necessarily, that excluded disputes as to amounts which may or may not be due in the future. This agreement was not uncommercial; the parties had simply agreed a cut-off.

DISCUSSION

29. At the outset, I can briefly dispose of a number of matters:

i) First, I agree with Mr. Hirst, so far as it goes, that the "one stop shop" principle of adjudication, contained in Fiona Trust (supra), is inapplicable here.

ii) Secondly, I do not think that the Secretary of State's concession in the CPD materially assists in deciding the sole issue now before the Court. What can, however, be said of the CPD is that it furnishes an example of a dispute relating to a specific payment, where the real issue involves the construction of the Franchise Agreement.

iii) Thirdly, although I can of course understand the Secretary of State's courteous explanation of his preference for public adjudication of this dispute, that is not and is not said to be material to the resolution of the issue before me. If the arbitration clause is applicable to this dispute, then under English Law the dispute will be heard and resolved in private. Intriguingly and in passing, somewhat similar views to those expressed by the Secretary of State, appear to have resulted in Australian Law taking a different turn on the question of the duty of confidentiality in the arbitration context: see Esso Australia v Plowman (1995) 183 CLR 10; Russell on Arbitration, 23^rd ed. (2007), at paras. 5-175 and following.

30. I turn to the core of the dispute. Had the Franchise Agreement drawn a distinction between, on the one hand, court jurisdiction for disputes as to the framework of the agreement, construction or law and, on the other hand, arbitration for discrete disputes as to mathematics or accounting errors, it would have been readily intelligible. The insuperable difficulty for such an argument here is that it is untenable on the construction of the arbitration clause and the Franchise Agreement. Realistically, if I may say so, it was not pursued by Mr. Hirst either in his skeleton argument or orally. As already remarked, the CPD serves to indicate why such a contention would be hopeless here; though it is a dispute as to "amount", in reality it is a dispute as to the true construction of the Franchise Agreement.
31. What remains in issue is the cut-off, urged by the Secretary of State, based on timing. To examine this submission of the Secretary of State, I start with the language of the arbitration clause, together with the other provisions of the Franchise Agreement to which cross-reference should be made. The key words must be "amount" and "Franchise Payment". Taking this wording in reverse order:

i) I do not think that the definition of Franchise Payment (set out above) lends support to the contention of the Secretary of State that the arbitration clause is exclusively concerned with the amount of Franchise payments already notified as due pursuant to paragraph 2.1 of Schedule 8.1. It is right, as Mr. Hirst submitted, that the definition does include the word "determined". That, however, is in the context of the "amount determined" in "any" Reporting Period – a pointer, as Mr. McCaughran argued, to language capable of including Reporting Periods in the future. For my part, I agree with Mr. McCaughran and think that the definition embraces both a Franchise Payment already due and one which is or may be payable in the future. I do not read the word "determined", in context, as precluding this conclusion. Moreover, I can see no reason why the parties should have intended the definition to be confined to Franchise Payments already due. Still further, a Franchise Payment falling due at a future date is not a concept or notion without meaning; indeed, as the Secretary of State's case recognises, a dispute as to a future Franchise Payment is capable of resolution – the issue going instead to the proper forum for such determination.

ii) For similar reasons, I can see no basis for suggesting that the natural meaning of paragraph 1.1 of Schedule 8.1 to the Franchise Agreement (set out above) is to be read as confined to Franchise Payments already notified pursuant to paragraph 2.1 of Schedule 8.1 and so as to exclude future Franchise Payments.

iii) As already discussed, in this contract, the wording "…disputes the amount" cannot be read so narrowly as to exclude a dispute going to the construction of the Franchise Agreement. Plainly, disputes as to construction are capable of relating both to Franchise Payments presently due and to those falling or possibly falling due in the future.

32. Pulling the threads together, the wording in the arbitration clause "…disputes the amount of a Franchise Payment…" is capable of encompassing Franchise Payments falling or possibly falling due in the future. I am not persuaded that this wording should be read as confined to Franchise Payments already due; no such restriction is required by the natural meaning and contractual definition of the words used.
33. I turn next to the structure of paragraph 2 of Schedule 8.1 of the Franchise Agreement in which the arbitration clause is located. Here, it must be acknowledged that Mr. Hirst's submissions do have force. It can be seen that paragraph 2 is structured in a manner which commences with the notification of "the amount" for an actual Franchise Payment. Plainly no such notification is to be anticipated until late in the Reporting Period in question, a stage which has not yet been reached. Paragraph 2 then proceeds by a way of a series of successive steps, dealing with the details of notification, the procedure for payment, interest and the repayment of any overpayments. On any view, the arbitration clause, insofar as it deals with a dispute as to an "amount" of an accrued Franchise Payment notified by the Secretary of State, fits comfortably into this structure.
34. Additionally, there is the consideration that the second half of the arbitration clause (following the word "but") is plainly focussed on the time when a Franchise Payment is already due; the scheme of the Franchise Agreement being, as it were, to pay now and dispute later. Building on this platform, Mr. Hirst submits that for the clause to be read as a single whole, the disputes contemplated are and are only those relating to Franchise Payments already due. The alternative is to read the single clause as divided into two distinct parts by the word "but". There is attraction in this submission but perhaps too much should not be made of it. Even on a construction of the "first half" of the clause which extended to disputes as to future Franchise Payments, the clause will still be read as a whole. All that is entailed is that the wording as to disputes is of a sufficient width to embrace future Franchise Payments as well as those already accrued due, whereas the second half deals specifically with a particular situation necessarily confined to Franchise Payments already notified. Nonetheless, overall, it is fair to say that Mr. Hirst's proposed construction has the edge in terms of a tidier structure of paragraph 2 of Schedule 8.1
35. If matters had rested solely with the language of the arbitration clause and the structure of paragraph 2 of Schedule 8.1, in my judgment, the issue may well have been finely balanced. There remains, however, the question of commercial good sense.
36. It is of course not for the Court to rewrite the bargains made by commercial parties. That said and as is by now well settled, it is the task of the Court when undertaking an exercise of construction, to ascertain the meaning which the document would convey to a reasonable person with the relevant background knowledge. With this aim in mind, the commercial sense of a suggested construction is a criterion of obvious relevance and importance in seeking to ascertain the (objective) intentions of parties to a commercial contract. Here, as it seems to me, the strength of the argument lies overwhelmingly in favour of Stagecoach. It is one thing to say that the Franchise Agreement (not embodying the "one stop shop" principle) provides for some disputes to go to court and others to arbitration. It is quite another to say that the parties bargained for the selfsame dispute to go either to court or to arbitration, depending only on its timing. Apart from serving no discernible purpose, that is a recipe for confusion and possible embarrassment. For example, what of the situation where a dispute arises, a short time before notification of a particular Franchise Payment by the Secretary of State is due? If jurisdiction depends on timing, is there to be a race for a court judgment before the jurisdiction of the arbitrator kicks in? Does there come a point in time when the jurisdiction of the court and that of the arbitrator will overlap? These are unnecessary and unattractive complexities. Accordingly and with respect, the construction advocated by the Secretary of State is not one to which I would wish to agree, unless driven to do so. For the reasons already given, I do not think I am. On the construction of the arbitration clause which I prefer, there is or may be a loss of a little tidiness; but, without doing any violence to the language used, there is a gain of much good sense. At all events, I am satisfied that this construction better encapsulates the bargain struck by the parties.
37. In the event therefore, I am unable to accede to the construction of paragraph 2.6 of Schedule 8.1 to the Franchise Agreement, urged by the Secretary of State. It follows that the Secretary of State's application must fail. I shall be grateful to counsel for assistance in drawing up an appropriate order and as to all questions of costs.
38. Postscript: What follows is intended constructively and not by way of criticism, albeit that it may not be irrelevant as to costs. Before the hearing, I was supplied with some 15 bundles plus a bundle of authorities. In the event, it was necessary to refer to 2 bundles, together with the bundle of authorities. Had the preclusion issues remained alive, reference would have been made to 3 bundles, together with the bundle of authorities. Inevitably, costs were incurred in producing the unnecessary bundles. This was, admittedly, a domestic dispute, so there was no question of its resolution in a court in some other jurisdiction. But in the many cases which involve foreign parties, this Court needs to be mindful of the competitiveness of London internationally as a venue for commercial dispute resolution. One factor in such competition is the question of costs. Discipline in avoiding the unnecessary production of materials for court hearings is certainly one way of keeping costs under control, in the interests of all concerned.