England and Wales High Court (Technology and Construction Court) Decisions

HM Secretary of State for Foreign and Commonwealth Affairs v. The Percy Thomas Partnership (a firm), Kier International Ltd [1998] EWHC Technology 348 (19th January, 1998)

IN THE HIGH COURT OF JUSTICE 1997 ORB NO. 634 

OFFICIAL REFEREES' BUSINESS 1997 ORB NO. 635

HIS HONOUR JUDGE BOWSHER Q.C.

 

BETWEEN:

HM SECRETARY OF STATE

FOR FOREIGN AND COMMONWEALTH AFFAIRS

PLAINTIFF

 

and

 

THE PERCY THOMAS PARTNERSHIP (A FIRM)

DEFENDANTS

AND BETWEEN

HM SECRETARY OF STATE

FOR FOREIGN AND COMMONWEALTH AFFAIRS

PLAINTIFF

and

 

KIER INTERNATIONAL LIMITED

DEFENDANTS

JUDGMENT

1. By direction of the Judge, no official shorthand note or tape recording is to be taken of this judgment.

 

 

THE ACTIONS

 

1. The subject matter of these actions is a British Embassy building in Amman, Jordan, designed by the Percy Thomas Partnership (PTP) as architects and built by Kier International Limited (Kier) as main contractors.

 

2. The building was built in 1986 and 1987. There were troublesome leaks in the roof.

 

3. By Originating Summonses brought against PTP and Kier respectively in the Queen's Bench Division issued on 16 April, 1996, Her Majesty's Secretary of State for Foreign and Commonwealth Affairs (FCO) applied for the Court to appoint an arbitrator in each case.

 

4. In the action against PTP, the application was:

 

"that the defendant having failed to concur in the appointment of a sole arbitrator pursuant to the plaintiffs Notice of Arbitration dated 13 April, 1992, an Arbitrator be appointed pursuant to section 10(1) of the Arbitration Act 1950".

 

5. In the action against Kier, the application was:

 

"that the defendant having failed to concur in the appointment of a sole arbitrator pursuant to the plaintiffs Notice of Arbitration dated 2 September, 1993, an Arbitrator be appointed pursuant to section 10(1) of the Arbitration Act 1950".

 

6. In view of the lapse of time between the Notices of Arbitration and the issue of the Originating Summonses, (4 years and 2½ years respectively) it is not surprising that delay has been a matter much canvassed before me.

 

7. By the covering letter enclosing the Originating Summonses, the Treasury Solicitor promised, "My supporting affidavit will be served shortly". Affidavits in support were sworn 18 months later, on 24 October, 1997, notwithstanding that Rules of the Supreme Court, Order 28 rule 1A makes a mandatory requirement that the plaintiff must file with the court the affidavit evidence on which he intends to rely before the expiration of 14 days after the defendant has acknowledged service. Both defendants acknowledged service promptly. No application was made for extension of time for filing of supporting evidence, but no objection was taken to the admissibility of the evidence and it was read at the trial.

 

8. The originating summonses were originally listed for hearing on 7 May, 1996 and adjourned for hearing to 16 July, 1996. On that day, there still being no evidence in support of the summonses, Sir Peter Webster adjourned the summonses to a date to be fixed not before the end of November, 1996. The summonses next came before the court on 2 September, 1997, when the summonses were stood out of the warned list for the week commencing 15 September, 1997 by Keane J.

 

9. On 28 October, 1997, Master Rose gave leave for the Originating Summonses to be amended and transferred both actions to an Official Referee. That was the first occasion on which the summonses came before the court supported by evidence from FCO.

 

10. On 28 November, 1997 both actions were listed before me for directions and I made directions as to the filing of evidence and ordered that the trial of both originating summonses should be heard together on 15 December, 1997.

 

11. Evidence was filed on affidavit as follows:

 

2. FCO Nigel Morris sworn 24 October, 1997

FCO " "

3. PTP Roger Cockle sworn 4 December, 1997

4. Kier Douglas Bennie sworn 8 December, 1997

5. FCO Nigel Morris sworn 10 December, 1997

6. FCO Alexander McColl sworn 10 December, 1997

7. PTP Roger Cockle sworn 16 December, 1997

8. The trials were heard by me on 15 and 16 December, 1997 and 13 January, 1998.

 

12. The amendments made on 10 November, 1997 by leave of Master Rose were for declarations in each case that:

 

9. "(a) The contract between the plaintiff and the defendant contains a valid and enforceable arbitration agreement.

 

10. (b) A difference or dispute arising out of the contract has arisen between the parties.

 

11. (c) The plaintiff has given to the defendant a valid notice to refer such dispute to arbitration."

 

13. Both defendants contend that as matters of fact and law the statements made in the proposed declarations are wrong, and even if they were correct, as a matter of discretion no declaration should be granted. Similarly, both defendants contend that by reason of matters of fact, law, and discretion, no appointment should be made under section 10(1) of the Arbitration Act, 1950.

 

14. Although the Arbitration Act, 1950 has now been repealed, the matters in question in these actions are all governed by the old law of the 1950 Act.

 

15. I am told that whatever my decision in these actions, it is likely that appeals will be lodged with the Court of Appeal. At least one of the points taken by both defendants raises issues on which both practitioners and the courts would welcome a decision from the Court of Appeal. For that reason, although I would decide these actions against the plaintiffs as a matter of discretion in any event on the ground of delay, I shall deal with each of the points raised by the parties.

 

THE ISSUES

 

16. The issues of jurisdiction and discretion are as follows:

 

Jurisdiction:

12. The defendants submit that:

13. (i) There is no arbitration agreement between the parties.

 

14. (ii) At the date of the Plaintiff’s notices to concur in the appointment of an Arbitrator (15 April, 1992 for PTP and 2 September, 1993 for Kier) there was:

 

15. (a) no dispute or difference within the meaning of Section 10(1)(a) of the Act;

16. (b) no "dispute, difference or question" between the parties under clause 61(1) of Kier's agreement and no "difference or dispute" under clause 3.26 of PTP's agreement.

 

17. (iii) The Plaintiff has not followed the prescribed contractual procedure for appointing an Arbitrator set out in clause 61(1) of the agreement with Kier and clause 3.26 of the agreement with PTP.

18. (iv) In default of compliance by FCO with the contractually prescribed procedure, there has been no failure to concur in the appointment of an Arbitrator.

 

19. (v) Kier alone relies on a submission that the final certificate was "final and conclusive" within the meaning of clause 61(1) of the contract with Kier.

 

20. (vi) The Defendants also raise the technical point that the Plaintiff has failed technically to comply with the notice requirements of Section 10 of the Act.

 

Discretion:

 

21. Both defendants submit that:

 

22. (i) The Court should not exercise its discretion following repeated periods of inordinate and inexcusable delay by the Plaintiff;

23. Kier also submits:

24. (ii) Kier has a complete defence in mitigation;

25. (iii) It was unconscionable for the Plaintiff to proceed in breach of its own contractual procedure and intentions notified to Kier;

26. (iv) Kier has a "Final Certificate Defence".

 

FIRST ISSUE

"NO ARBITRATION AGREEMENT"

 

17. Both defendants submit that I have no jurisdiction to make any order at all because neither defendant has entered into an arbitration agreement.

18. Each defendant entered into an agreement with FCO to do work, but those agreements were, of course, in different terms.

 

KIERS' AGREEMENT

 

19. FCO claim that Kier are bound by an arbitration clause contained in a standard form document entitled on the title page:

"Form C4009

HER BRITANNIC MAJESTY'S GOVERNMENT

 

GENERAL CONDITIONS OF CONTRACT

FOR BUILDING AND CIVIL ENGINEERING WORKS

April 1983"

 

20. That form contains no spaces for filling in blanks as might be found in many forms of agreement, it simply contains a number of typed clauses. Of the 66 clauses, many are of a sort to be expected in any building contract, but some derive from the special nature of the work likely to be done for the Government in many places at home and abroad such as secrecy, a ban on photography and provisions concerning corrupt payments and commissions. Many of the terms are very similar to conditions found in Form GC/Works/1 which was the basis for "Conditions of sub-contract for use with main contracts based on General conditions of Government Contracts for building and Civil Engineering Works (Form GC/Works/1)" considered in Aughton v. MF Kent (1991) 57 BLR 6 concerning works at Aldermaston.

 

21. Evidence from FCO stated that the form was in common use by the plaintiffs both at home and abroad from 1983, but evidence from Kier stated that the form was used only once by Kier (on the occasion of this contract) and at no time did Kier address their minds to the question of an arbitration agreement. I understand this evidence to refer to Kier International Limited rather than to any other company in the Kier Group. It was not stated in evidence, and no doubt would have been if it were the case, that Kier were unaware of the existence of the arbitration clause in Form C4009. Since the payment clause, clause 41, expressly refers to the arbitration clause, it would not be credible if Kier claimed that they were unaware of the existence of the arbitration clause. The furthest that Kier goes in evidence in this direction is in the affidavit of Mr. Bennie, the Commercial Director of Kier. He said that, "So far as I have been able to ascertain from the files, there was no negotiation or discussion at all between the FCO and Kier as to the question of arbitration." He then goes on to express an opinion based on the documents.

27. Form C4009 contains the following clauses:

 

28. 1(1) 'the Contract' means the documents forming the tender and acceptance thereof, together with the documents referred to therein including these conditions (except as set out in the Abstract of Particulars) .....

 

29. 41(1) Upon completion of the Works to the satisfaction of the SO [the Superintending Officer] the contractor shall be entitled to be paid .....

 

30. (2) As soon as possible after the completion of the Works to the satisfaction of the SO the Quantity Surveyor shall forward one copy of the Final Account to the Contractor.

 

31. (3) When, after the end of the maintenance period ... the SO has certified that the works are in a satisfactory state, and the Final Sum has been calculated and agreed (or in default of agreement has been determined by an arbitrator appointed under Condition 61) then -

 

32. (i) if the Final Sum exceeds the total amount paid to the contractor, the excess shall be paid to the contractor by the Secretary of State; or

33. (ii) if the total amount paid to the contractor exceeds the Final Sum, the excess shall be paid to the Secretary of State by the Contractor."

 

34. 42(1) The SO shall from time to time certify the sums to which the contractor is entitled under conditions 40 and 41 ....

 

35. (2) Any interim certificate relating to payment for work done or things for incorporation delivered may be modified or corrected by any subsequent interim certificate or by the Final Certificate for payment, and no interim certificate of the SO shall of itself be conclusive evidence that any work or things to which it relates shall be final and conclusive.

.....

 

36. 61(1) All disputes differences or questions between the parties to the contract with respect to any matter or thing arising out of or relating to the contract other than a matter or thing as to which the decision or report of the Secretary of State or of any other person is by the contract expressed to be final and conclusive shall after notice by either party to the contract to the other of them be referred to a single arbitrator agreed for that purpose, or in default of such agreement to a single arbitrator to be selected by the contractor from a list of three architects, engineers or surveyors named by the Secretary of State.

 

37. 61(2) Unless the parties otherwise agree, such reference shall not take place until after the completion, alleged completion or abandonment of the works or the determination of the contract.

......."

 

38. Clauses 61(1) and 61(2) were very similar to an arbitration clause considered in Aughton v. MF Kent.

 

39. In his affidavit sworn in support of the originating summons, Mr. Nigel Morris deposed that the contract

between FCO and Kier:

 

40. "... was contained in, alternatively evidenced by, the following documents:

41. (i) The Plaintiff’s invitation to tender dated 16 December 1985;

42. (ii) The Defendant’s Tender dated 10 February 1986;

43. (iii) The Defendant’s letter to the Plaintiff dated 14 April 1986;

44. (iv) The Defendant’s letter to the Plaintiff dated 17 April 1986;

45. (v) The Plaintiff’s letter of acceptance to the Defendant dated 17 April 1986."

 

46. Clause 61(1) of Form C4009 was not specifically referred to in any of those documents but reference was made to Form C4009.

 

47. FCO sent to Kier an invitation to tender in the form of a letter dated 16 December, 1985. That letter began:

 

"NEW BRITISH EMBASSY OFFICES - AMMAN JORDAN

48. 1. On behalf of the Secretary of State for Foreign and Commonwealth Affairs I invite you to submit a firm price tender for this work on the enclosed Tender form based on the documents and information referred to in the Tender form."

 

22. The copies before me do not disclose it, but it appears from a later letter of 14 April, 1983, that the Tender form was numbered C4009A. The Tender form enclosed included the following:

 

49. "1. We have perused the following documents:

 

50. (1) General Conditions of Contract for Building and Civil Engineering Works, Form C4009 (April 1983) and Amendment Number 1 thereto.

 

51. (2) Abstract of Particulars, Form C4009 Abs (April 1983)

.............

52. 2. We agree that the proper law of the contract shall be English Law.

 

53. 3. We agree that any other terms of conditions of contract or any general reservation which may be printed on any correspondence emanating from us in connection with this tender or with any contract resulting from this tender shall not be applicable to this tender or to the contract.

......

 

54. Subject to and in accordance with paragraphs 2,3,4,5, above and the terms and conditions contained or referred to in the documents listed in paragraph 1, we offer to execute all the Works referred to in the said documents in consideration of payment by the Secretary of State:

of ......."

 

23. Amendment Number 1 enclosed was a list of detailed amendments to Form C4009. To understand those amendments, it would be necessary to check them against individual clauses of Form C4009.

 

24. The Abstract of Particulars referred to in the Tender Form was headed,

 

55. "ABSTRACT OF PARTICULARS which shall be read in conjunction with form C4009"

 

25. That abstract gave certain details, some in manuscript, related to itemised clauses of form C4009. For present purposes, the only relevant details are that the Supervising Officer was defined as the Architect appointed by FCO and the Quantity Surveyor was defined as the Quantity Surveyor appointed by FCO.

 

26. On 10 February, 1986, Kier submitted what they called "our offer" for the Amman project. The offer was contained in a completed Tender form (which had been sent out with the invitation to tender) together with a schedule of rates and "details of clarifications". The completed tender form was signed by a director of Kier.

 

27. By letter dated 14 April, 1986, Kier made a revised offer. The offer comprised the documents previously mentioned, together with an addendum of a number of detailed terms which had clearly been the subject of discussion since 10 February.

28. By letter dated 17 April, 1986, FCO accepted Kier's offer:

 

56. "I accept your tender dated 10 February, 1986 in conjunction with Addenda Nos 2 and 3 to the Tender Form for construction of the new Embassy at Amman, Jordan for the sum to be calculated in accordance with our Schedule of Rates. Your letter of 17 April 1986 is also incorporated.

57. Copies of the contract documents are enclosed. ...."

 

29. By those documents, on 17 April, 1986 a parol contract, not under seal, was created. The contract referred to and included the terms of C4009 and work was done and payment made pursuant to those terms. Kier contend that clause 61 of those terms and the words in brackets in clause 41 referring to clause 61 were not a part of the contract. The result of striking out the words in brackets in clause 41 would be that Kier would be entitled to be paid on the Final Account if the Final Sum were agreed, but there would be no machinery for dealing with payment if there were no agreement on the Final Sum.

 

PTP's AGREEMENT

 

30. FCO contend that PTP are bound by an arbitration clause contained in a document entitled "Architects' Appointment - Royal Institute of British Architects", 1982 edition. That document is printed in book form and contains pages to be filled in with details appropriate for a specific contract. No such details were filled in in this case. It is a very lengthy form. One of three clauses under the title "Settlement of disputes" is as follows:

 

58. "3.26 Any difference or dispute arising out of the appointment which cannot be resolved in accordance with clause 3.25 shall be referred to arbitration by a person to be agreed between the parties or, failing agreement within 14 days after either party has given the other a written request to concur in the appointment of an arbitrator, a person to be nominated at the request of either party by the President of the Chartered Institute of Arbitrators, ......"

 

31. Clause 3.25 is a provision for settling disputes arising on the fees charged. It is not suggested that the dispute or difference alleged to have arisen in this case could have been resolved in accordance with clause 3.25.

 

32. In his affidavit sworn in support of the originating summons, Mr. Nigel Morris deposed that the contract between FCO and Kier:

 

"... was contained in, alternatively evidenced by, the following documents:

 

59. (i) PTP's letter to FCO dated 4 June, 1985;

60. (ii) FCO's letter to PTP dated 26 June, 1985;

61. (iii) PTP's letter to FCO dated 16 July, 1985;

62. (iv) FCO's letter to PTP dated 28 October, 1985;

63. (v) PTP's letter to FCO dated 30 October, 1985;

64. (vi) PTP's letter to FCO dated 12 December, 1985;

65. (vii) FCO's letter to PTP dated 12 December, 1985;

66. (viii)PTP's letter to FCO dated 20 December, 1985.

 

33. Clause 3.26 was not specifically referred to in any of those documents, but reference was made to the document, "Architect's Appointment".

 

34. On 24 May, 1985, Mr. Cockle, a partner in PTP was asked to provide a fee proposal for the project.

 

35. By letter dated 4 June, 1985, PTP put forward their fee proposal. The second paragraph of that letter was as follows:

 

67. "Unless otherwise stated, the terms of this proposal are based on the Architects Appointment RIBA 1982".

 

36. By letter dated, 26 June, 1985 FCO invited PTP to accept a commission for work stage A,B,C,D, and E of the RIBA Architect's Appointment, i.e. all stages up to and including detail design. Various terms were set out in that letter, including,

 

68. "5. Conditions of engagement and payment will be generally in accordance with RIBA - Architect's Appointment."

 

37. By letter dated 16 July, 1985, PTP accepted the commission. That letter included a number of

comments including,

 

69. "2. Our present agreement covers pre-contract work only. I understand that we will subsequently discuss and agree how the post contract construction supervision will be undertaken."

 

38. By letter of 29 July, 1985, FCO wrote that construction supervision can be discussed when the tender approach is finalised.

 

39. By letter dated 28 October, 1985, FCO invited PTP to accept an extension to their commission to provide the further RIBA stages F,G,K (item 1.22 only), and L (item 1.26 only), i.e. prepare production information for Bills of Quantities, and provide various supervisory and other services during construction and after completion. Various terms were set out in that letter, including,

 

70. "2. The conditions of the commission will be as in the letter of 26 June, 1985."

 

40. By letter dated 30 October, 1985 PTP accepted the extension of their commission offered in the letter of 28 October, 1985.

 

41. Following an invitation by telephone, by letter dated 22 November, 1985, PTP made a fee proposal for post contract work, expressed to be an extension to their existing commission. That work was for the balance of stages K and L and also for landscape works and interior design. For expenses and disbursements, PTP said that they proposed charging in accordance with paragraph 4.23 of the RIBA Architects Appointment.

 

42. By letter dated 12 December, 1985, FCO invited PTP to accept an extension to their commission to include the additional work referred to in their letter of 22 November, 1985, on terms that,

 

71. "2. The conditions of the commission will be as in our letters of 28 October, 1985 and 26 June, 1985."

 

43. By letter dated 20 December, 1985, PTP wrote, accepting the commission for the latest extension

and wrote,

72. "We would confirm that the terms of this extension are those outlined in your letter [of 12 December, 1985] and based on our proposal to you dated 22 November."

 

44. It was submitted on behalf of PTP that reference to the RIBA terms was at three removes. Counsel submitted:

 

73. "FCO can only succeed if the parties agreed by reference to be bound by an arbitration clause. The chain of reference is:

 

74. 1. the final form of the contract is a letter dated 12 December 1985 stated that terms were to be as per FCO’s letters of 28 October and 26 June 1985;

 

75. 2. FCO’s initial acceptance on 26 June 1985 stated that the terms and conditions of employment would be "generally in accordance with RIBA - Architect’s Appointment";

 

76. 3. The RIBA terms at clauses 3.25 and 3.26 set out provisions for the settlement of disputes.

 

45. It follows that as far as PTP was concerned:

 

77. 1. There was no direct reference to the arbitration agreement;

 

78. 2. Any reference to the arbitration agreement could only be arrived at by:

 

79. (a) reading the final contract;

80. (b) tracking back through the correspondence to the initial exchanges; and then

81. (c) referring to the RIBA terms.

 

46. Reference at three removes to the general terms of a contract does not constitute an agreement to be bound by the arbitration agreement."

 

47. I do not accept that line of reasoning. If there was any dispute at the relevant time, it is likely to have been in relation to design, that is, in relation to the first stage of the original commission. In relation to that, one does not have to "track through" any letters. The letters of 4 and 26 June, 1985, stand alone. Both letters specifically referred to the RIBA Architect's Appointment, the first reference coming from PTP. If it be the case that a dispute arises as to work done under some extension of the commission, for example supervision of the work of Kier, it is quite plain that the original commission and all extensions were offered and accepted on terms of the RIBA Architect's Appointment and work was done pursuant to those terms. Mr. Cockle did say in paragraph 46 of his affidavit that the arbitration clause was not drawn to his attention and there was no specific reference to arbitration in the discussions. But it is not suggested, and it would be incredible if it were suggested, that PTP did not know that the terms of the RIBA Architect's Appointment contained an arbitration clause. Paragraph 47 of Mr. Cockle's affidavit contains an irrelevant but understandable comment born of exasperation at the attempt to make a claim after long delay.

 

48. The use of the word "generally" in FCO's letter of 26 June, 1985, much stressed by counsel on behalf of PTP, in no way detracts from the force of the agreement that the RIBA Architect's Appointment terms were to be incorporated. If anything, the word "generally" supports FCO's case: it indicates that all of the conditions are to be applied to all circumstances.

 

KIER AND PTP

 

49. Applying an objective test, and ignoring any submission that an arbitration clause cannot be incorporated into a contract by reference (however such a submission may be framed) both Kier and PTP contracted with FCO on the terms of conditions containing arbitration clauses which were incorporated into the agreements.

 

50. It is necessary to examine what is the effect of this state of affairs in relation to the arbitration clause under the current state of the law.

 

THE LAW

 

51. The defendants submit that an arbitration clause cannot be validly incorporated into a contract by reference. On any view of the law, that is too broad a proposition. A precise and specific reference would be accepted by most as a valid incorporation into a contract: for example, there would be a valid incorporation of an arbitration clause into a contract if the contract contained a clause as follows:

 

82. "This contract is subject to arbitration pursuant to the terms of clause 3.26 of the RIBA Architects' Appointment,"

 

provided that clause was relevant to the contract and workable without doing damage to its wording. But some references are in general terms, some are references to clauses inappropriate to the main contract, and some references are implied.

 

52. For present purposes, the defendants' submission might be more tightly framed as follows:

 

83. "An arbitration clause cannot validly be incorporated into an agreement by express reference in that agreement to a written set of conditions which contains the arbitration clause in question, but without express mention of the arbitration clause itself."

 

53. I reject even that narrower submission. Depending always on the words used in the individual transaction under consideration, an arbitration clause can validly be incorporated into an agreement by express reference in that agreement to a set of conditions which contains the arbitration clause in question, but without express mention of the arbitration clause itself.

 

54. If the law is as the defendants submit, then the law is different from what it was understood to be at the time that the parties made their contracts in 1985 and 1986 and those contracts would be construed today to have a different meaning and effect from the meaning and effect accorded to them by lawyers and businessmen in 1986.

 

55. If the law is as the defendants submit, should the contracts in the present case be enforced today with the meaning and effect that they would have had in 1985 and 1986 on the basis that the law has been changed without retrospective effect, or are what were thought to be concrete contracts shown to be merely evanescent in part in the beam of light of a new exposition of the law? Fortunately, I do not have to answer this question, since I do not find the law to be as the defendants submit. The defendants did not consider that difficult question in their submissions.

 

56. The Arbitration Act, 1996, provides at section 6(2):

 

84. "The reference in an agreement to a written form of arbitration clause or to a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the agreement."

 

57. Because it was not in force at the relevant times, that sub-section does not apply to the present summonses. It does in any event leave it to the courts to decide in the individual case what reference validly incorporates an arbitration clause into an agreement. The older law will remain a guide.

 

58. Chapter 6 of the first (1982) edition of Commercial Arbitration by (then) Sir Michael Mustill and Mr.Stewart Boyd Q.C. began as follows:

 

"A. EXISTENCE OF AGREEMENT

 

85. It is unusual to find an agreement to refer future disputes to arbitration completely isolated from any other contractual relationship. The agreement almost always forms part of, or is at least ancillary to, some underlying contract.

86. If the agreement takes this form, three questions must be considered when determining whether there is in existence a binding agreement to arbitrate -

 

87. 1. Did the underlying contract itself come into existence?

 

88. 2. If so, does it incorporate an agreement to submit future disputes to arbitration?

 

89. 3. If so, are the terms of that agreement sufficiently certain to be enforceable?

 

90. These questions are discussed below.

 

1. Existence of underlying contract

.......

2. Incorporation of agreement to arbitrate

 

91. As to the second question, it is well established that the parties need not set out the terms of their arbitration agreement in the contract itself. It is sufficient for the clause to be incorporated by reference either to a standard form of clause or to a set of trade terms which themselves include provisions requiring disputes to be submitted to arbitration. Nor need the contract itself be contained in a single document; an agreement to arbitrate can be spelt out in an exchange of correspondence or telex messages but the documents must be clear enough to show that the parties did indeed intend to incorporate an agreement to arbitrate.

arbitrate.

3. Certainty

......."

59. That was the law stated at the time of the making of the contracts in what had already become by then to be regarded as the leading authority on the subject. The law was also stated to similar effect in the then current edition of Russell on Arbitration, 20th edition 1982.

 

60. In the current, 2nd edition of Mustill and Boyd (1989), the same words are used at the beginning of chapter 6 with the addition of the following:

 

92. "Prima facie, a reference to the rules of a particular arbitral institution is a reference to the rules for the time being, not those in force at the time when the contract was made.

93. In principle an arbitration clause may be incorporated by a reference to a standard form of contract or the particular terms of another contract in which the clause is set out, even without express reference to the clause. But it must be clear that the parties intended the arbitration clause to apply."

 

94. To the last paragraph there is appended note 7:

 

95. "Where the arbitration clause is in terms which are prima facie inapt for the contract in question (e.g. where a clause covering disputes 'under this charterparty' is said to be incorporated into a bill of lading, the Court will not engage in the verbal manipulation necessary to make the clause fit the new context unless it is quite clear that this was what was intended: TW Thomas & Co v. Portsea Co Ltd [1912] AC 1; The Annefield [1971] P 168; The Rena K [1979] QB 377; Skips AS Nordheim v. Syrian Petroleum, The Varenna [1983] 2 Lloyd's Rep 592; Pine Top Insurance v. Unione Italiana Anglo Saxon Reinsurance [1987] 1 Lloyds Rep 476."

 

61. The latest, 27th edition (1994) of Chitty on Contracts, in a section contributed by Professor A.G.Guest Q.C., F.C.I.Arb, contains the following paragraph (15-011):

 

96. "An arbitration clause may be incorporated in a contract by reference, e.g. to the standard terms of a trade association, or by course of dealing between the parties. .. It is a question of construction in each case whether words in a bill of lading which incorporate some or all of the terms of a charter party into the bill will have the effect of incorporating into the bill an arbitration clause contained in the charter party."

 

97. Professor Guest cites the authorities considered by Brandon J. in The Annefield [1971] P 168.

 

62. Both before and after the making of the contracts between the parties, it was generally accepted that an arbitration clause can be incorporated into a contract by reference and it is a question of construction in each case whether that has been done. Many contracts have been agreed and many arbitrations entered into on that footing. It was suggested to me during argument in these cases that by 1995 the law had become settled that arbitration clauses cannot be incorporated by reference. What significance that alleged change in the law has for contracts made nine years earlier is a jurisprudential puzzle for which no solution is offered.

 

63. The arguments of the defendants are based on the judgment of Sir John Megaw in Aughton Limited v. MF Kent Services Limited (1991) 57 BLR 1 and decisions later in time than that decision. The appeal in that case was heard by two judges of the Court of Appeal, Ralph Gibson L.J. and Sir John Megaw. The two judges disagreed with each other and the decision of the judge at first instance refusing to stay an action for arbitration, was allowed to stand.

 

64. Sir John Megaw said (at page 31):

 

98. "There are, in my opinion, three important inter-related factors peculiar to arbitration agreements. First, an arbitration agreement may preclude the parties to it from bringing a dispute before a court of law. That, of course, is something which is not only permissible, but may also be a very desirable way of settling disputes. But, as was said by Lord Gorell in Thomas v. Portsea [1912] AC 1 at 9:

 

99. 'Now I think, broadly speaking, that very clear language should be introduced into any contract which is to have that effect.'

 

100. Secondly, it has been laid down by statute (section 32 of the Arbitration Act, 1950 as re-enacted in section 7(1)(e) of the Arbitration Act, 1979) that an arbitration agreement has to be 'a written agreement'. (There was a corresponding requirement of a 'written agreement' in the Arbitration Act, 1889, in force when Thomas v. Portsea was decided). The object, or the effect, of that statutory requirement must be to emphasise, or seek to ensure, that one is not to be deprived of his right to have his dispute decided by a court of law, unless he has consciously and deliberately agreed that it should be so. Thus, if one party to a dispute under a contract wishes to litigate it in a court of law, it would be no answer for the other party to prove, by the clearest evidence, or even an admission, that there had been an oral agreement to arbitrate, which had not been reduced into writing or specifically evidenced by writing. If, as is the position by statute, an oral agreement will not suffice, it must surely follow that an agreement depending in any essential part, on inference will not suffice.

 

101. Thirdly, the status of a so-called "arbitration clause" included in a contract of any nature is different from other types of clauses because it constitutes a "self-contained contract collateral or ancillary to" the substantive contract. These are the words of Lord Diplock in Bremer Vulkan v South India Shipping [1981] AC 909. It is a self-contained contract, even though it is, by common usage, described as an "arbitration clause". It can, for example, have a different proper law from the proper law of the contract to which it is collateral. This status of "self-contained contract" exists irrespective of the type of substantive contract to which it is collateral. In Bremer Vulkan it was a ship building contract. It appears to me that this consideration (which I believe has not infrequently been overlooked) is another important reason why arbitration clauses are to be treated as being in a category of their own, as was the arbitration clause in the charter party, which the House of Lords declined to permit to be incorporated into the Bill of Lading contract in Thomas v Portsea. If this self-contained contract is to be incorporated, it must be expressly referred to in the document which is relied on as the incorporating writing. It is not incorporated by a mere reference to the terms and conditions of the contract to which the arbitration clause constitutes a collateral contract."

 

65. Those words of Sir John Megaw have been taken by some to have a very general meaning going far beyond the context of the facts of the decision in that case. Particularly by some of the words beginning "Secondly", Sir John Megaw has been taken to require that the test for the formation of an arbitration agreement, contrary to the general rule, shall be a subjective test. The result would be that if two parties signed a written agreement which contained within the body of the agreement an arbitration clause, those parties would be bound by all of the terms, even if they had not read them, save only that the arbitration clause would not be binding on a party unless it could be proved that he had read it and "consciously and deliberately agreed" to be bound by it. That position could perhaps be justified on the footing that the signing parties knew that they were signing one agreement and assented to its terms without reading them all, but did not know they were agreeing to two agreements and therefore the necessary consent to and intention to be bound by the arbitration agreement was not demonstrated by the signature.

 

66. Ralph Gibson LJ held that in the case under consideration,the arbitration clause was incorporated into the contract by reference. He adopted certain propositions stated by Brandon J in The Annefield [1971] P.168 at 173, which he quoted, and said (at page 20):

 

102. "For my part, however, I have no doubt that the propositions stated by Brandon J are authoritative guides to construction in any case where the Court is considering whether an arbitration clause has been incorporated by reference."

 

103. At page 23, Ralph Gibson L.J. said:

 

104. "For my part, I accept that, in order to effect incorporation of an arbitration clause, it is not necessary that the incorporating clause should refer expressly to the arbitration clause and general words may suffice, depending upon the terms of the arbitration clause: see Brandon J.'s second proposition in the Annefield."

 

105. I shall later consider further those propositions of Brandon J.

 

67. Since the two judges of the Court of Appeal were in disagreement, no decision was formed in Aughton which is binding on me. In any event, the problem facing the Court in that case differed from the present case. The problem facing the Court of Appeal in Aughton lay in dealing with the difficulties involved in incorporating a sub-contract arbitration clause into a sub-sub-contract where the arbitration clause required manipulation to make it workable in a contract for which it was not designed. That case therefore was not on all fours with the present case, but the words used by Sir John Megaw are sufficiently wide to refer to this case.

 

68. It was pressed upon me by the defendants that the view of Sir John Megaw, that incorporation by reference is ineffective, has been preferred in four cases and not accepted in one case as follows:-

 

(i) Lexair Limited v Edgar W. Taylor Limited [1993] 65 BLR 87 where His Honour Judge James Fox-Andrews QC reviewed the facts and some authorities and said (at page 102):

 

106. "In any event I prefer to follow the judgment of Sir John Megaw."

 

In Lexair the judge tried a complex issue of fact to determine what documents were incorporated into the contract.

 

(ii) Co-operative Wholesale Society Limited v Saunders & Taylor Limited (1995) 39 Con LR 77, where His Honour Judge Gilliland QC said (at page 84):

 

107. "Faced with this difference in approach between the two members of the Court of Appeal in Aughton the proper course for me to adopt in my judgment is to follow and apply the principle laid down by the trial Judge in Aughton. That is a decision of a Court of co-ordinate Jurisdiction and the reasoning of the trial Judge on this point was in substance upheld on appeal by one of the two members of the Court of Appeal and accordingly while Aughton may not technically be binding upon this Court nevertheless in my judgment I should follow that decision on this point unless I am convinced that it was wrong. I am not so convinced and indeed if I had to choose between the approach of Sir John Megaw and that of Ralph Gibson LJ I should with respect prefer the reasoning and conclusion of Sir John Megaw."

 

108. This was a case where it was sought to incorporate a sub-contract clause into a sub-sub-contract, and on its facts is very different from the present case.

 

(iii) Ben Barrett & Son (Brickwork) Limited v Henry Boot Management Limited [1995] CILL 1026, where His Honour Judge John Loyd QC said (at page 1028):

 

109. "I have to say that I unhesitatingly prefer the approach of Sir John Megaw."

 

110. Importantly the Judge followed the dictum of Sir John Megaw having held that the arbitration clause in the case was "entirely apposite to the contract ...". Judge Loyd did not accept counsel's reliance upon Modern Building v Limmer [1975] 1WLR 1281. While I have the highest respect for Judge Loyd's judgments, in this instance I have to say that I disagree with his judgment. The report does not purport to be a full report, but I have obtained a full copy of his judgment, and the full text does not differ in material respects from the extracts reported in Construction Industry Law Reports. I will give the reasons for my disagreement with that decision later when discussing the decision in Modern Building v. Limmer.

 

(iv) Alfred McAlpine Construction Limited v. RMG Electrical Ltd, unreported, His Honour Judge Hedley, 11 January, 1995. In this case the judge preferred the judgment of Sir John Megaw to that of Ralph Gibson LJ.

 

69. The Plaintiff relies on Roche v Freeman (1996) 80 BLR 102. In that case, the plaintiffs contended that in order to be effective to incorporate an arbitration clause in a document other than "the main contract" the words used in that document must refer explicitly to the arbitration clause itself; incorporation of the document in which it is contained, however clear, is not enough. His Honour Judge Hicks QC, faced with apparently conflicting authorities took as his starting point a statement of first principles and from that statement concluded that it would not be right to accept the proposition advanced by the plaintiffs unless he was constrained by authority to do so. He then examined the authorities to see whether there was any authority against the result which he drew from first principle.

 

70. In the course of that examination of the authorities, he said of Aughton:

 

111. "On the law the two members of the Court expressed irreconcilable views, for neither of which, therefore, can the decision as such be binding, or even persuasive, authority."

 

71. Having examined the authorities, Judge Hicks, at page 123 concluded that none of the authorities required him to abandon or modify his statement of first principles. He also found that no authority bound him to accept the proposition advanced by the plaintiffs "and indeed Modern Building Wales is to the contrary". He also found that there was no settled line of decisions and long standing commercial practice, such as there was in the bills of lading and charterparty cases, which should cause principle to be displaced in the interests of certainty.

 

72. I agree with Judge Hicks, and I have been much helped by his masterly examination of the authorities which reduces the need for citation in this judgment. But I go further than him and, to that extent only, I disagree with him and by that disagreement am bound to take a shorter route. I hold that I am bound by both authority and long standing commercial practice to find in favour of the plaintiffs in this case on this point and to reject the submissions of the defendants.

 

73. There are some authorities concerning difficult cases where there have been attempts to incorporate an arbitration clause from a charterparty into a bill of lading, see for example T.W. Thomas v. Portsea Steamship Company [1911] AC 1), and others where, even outside the realm of bills of lading and charters party, inapposite clauses have been sought to be adapted to circumstances for which they were not drafted. Those difficulties do not arise here.

 

74. This is a straightforward case where the clauses in question were designed for the situations to which it is now sought to apply them. Once one has set aside the decisions dealing with the special difficulties to which I have referred, it becomes plain that I am bound by authority to find in favour of the plaintiffs on this point. That authority is to be found in Modern Building Wales.

 

75. In Modern Building Wales v. Limmer, the Court of Appeal, in granting a stay of proceedings, firmly rejected the submission that an arbitration agreement was not incorporated into the agreement by reference to a standard printed form agreement.

 

76. Buckley and Ormrod LJJ overruled the decision of Kerr J but they both made clear that they did not have a clear note or other record of what Kerr J. actually said. Having decided that in the circumstances of that case the words "the appropriate form for nominated sub-contractors " meant "the Green Form", both judges held, in words used by Ormrod LJ at p 1291:

 

112. "So I conclude without much difficulty that the terms of the Green Form are incorporated into this contract. It would be wholly artificial to adopt another of Mr. Akenhead's suggestions, that all that is incorporated are those clauses which deal with how the work is to be carried out, while the arbitration clause is excluded. I see no reason whatever for excluding clause 24, and I therefore conclude that the defendants have established that there is here a submission in writing under section 4 of the Act of 1950."

 

77. There is no note of Mr. Akenhead's submissions. While there is no note that Mr. Akenhead bluntly suggested that an arbitration agreement could not be incorporated into an agreement by reference to a standard form of agreement, it is clear that if made in that form, the Court of Appeal would have rejected the submission and that is the sense of the judgment.

 

78. It appears from a report of extracts from the judgment of His Honour Judge Loyd Q.C. in Ben Barrett & Son (Brickwork) Limited v Henry Boot Management Limited [1995] CILL 1026 that his reason for not following Modern Building Wales was as follows:

 

113. "...it has to be borne in mind that Modern Building Wales was decided some five years before the decision of the House of Lords in Bremer Vulcan. It is the speech of Lord Diplock in that case which formed a substantial part of the reasoning for Sir John Megaw in Aughton."

 

79. Because of his disagreement with Ralph Gibson LJ, Sir John Megaw's judgment in Aughton cannot be considered binding authority. So was the decision in Modern Building Wales overruled by the House of Lords in Bremer Vulcan v. South India Shipping [1981] AC 909? Clearly not. The issue in Bremer Vulcan was not whether an arbitration clause was incorporated into a contract but what were the powers of an arbitrator or the court to strike out or enjoin arbitration proceedings for want of prosecution. The speech of Lord Diplock formed a part of Sir John Megaw's reasoning, but only because he relied on Lord Diplock's statement:

 

114. "The arbitration clause constitutes a self-contained contract collateral to the shipbuilding agreement itself."

 

80. That, as Sir John stressed, was not new but was a restatement of law which was well known even at the time of the decision of Heyman v. Darwins [1942] AC 356. Heyman v. Darwins was cited to the Court of Appeal in Modern Building Wales. Modern Building Wales was not cited to the House of Lords in Bremer Vulcan, no doubt because it was not relevant to the decision of the House of Lords.

 

81. It was also urged upon me by counsel for the plaintiffs that I am bound by The Annefield [1971] P 168. That was a decision of the Court of Appeal in which the Court of Appeal (Lord Denning M.R., Phillimore and Cairns LJJ.) approved the judgment of Brandon J. The decision was not on all fours with the present case. The question was whether an arbitration clause set out in a particular form of charterparty was incorporated into a contract evidenced by bills of lading. The decision of the Court of Appeal was principally based on TW Thomas v. Portsea. The decision of the Court of Appeal, and also of Brandon J. was not directly applicable to these present cases and so that case might be said to be not a binding authority upon me in deciding these summonses, but in that case it was decided that an arbitration clause can be incorporated by reference in a case where incorporation was not straightforward, and the cases before me are straightforward. The Annefield is therefore binding on me as an a fortiori case. The judgment of Brandon J., with which Lord Denning expressly agreed, included a consideration of the authorities and a statement of principles which do assist in consideration of the present case and which I take to be a distillation of the authority considered by Brandon J and accordingly I look to those principles for help and apply them.

 

82. After reviewing the authorities, Brandon J. Said:

 

115. "Those cases seem to me to establish the following propositions. First, in order to decide whether a clause under a bill of lading incorporates an arbitration clause in a charterparty it is necessary to look at both the precise words in the bill of lading alleged to do the incorporating, and also the precise terms of the arbitration clause in the charterparty alleged to be incorporated. Secondly, it is not necessary, in order to effect incorporation, that the incorporating clause should refer expressly to the arbitration clause. General words may suffice, depending on the terms of the latter clause. Thirdly, when the arbitration clause is, by its terms, applicable only to disputes under the charter party, general words will not incorporate it into the bill of lading so as to make it applicable to disputes under the contract contained in or evidenced by that document. Fourthly, where the arbitration clause by its terms applies both to disputes under the charterparty and to disputes under the bill of lading, general words of incorporation will bring the clause into the bill of lading so as to make it applicable to disputes under that document."

 

83. I would add, echoing Brandon J's second proposition, Fifthly, a fortiori, where the arbitration clause is one of a set of standard conditions written especially for the purpose of incorporation in contracts of a certain type, general words in a contract of that type incorporating those terms as a whole will usually bring the clause into that contract so as to make the arbitration clause applicable to disputes under that contract.

 

84. I am bound by the decisions of the Court of Appeal in Modern Building Wales The Annefield and I follow those decisions and follow them gladly because to do so is consistent with commercial practice and common sense. It would be difficult to persuade a sub-contractor of the good sense of refined legal arguments which, for example, made him subject to the financial restriction of a "pay when paid" clause which he had not read while leaving him not bound by and unable to rely on an arbitration clause in the same standard form conditions, whether or not he had happened to read that arbitration clause.

 

85. As to commercial practice, I have already cited at length from the leading work by Mustill and Boyd which I take to reflect as well as lead current commercial practice. Moreover, in a multitude of cases parties opposing arbitration have not taken the point that an arbitration clause cannot be incorporated by general reference when it would have been open to them to take that point. Those cases are generally not reported, but they are common in my experience. One such case that is reported is Sidney Kaye v. Bronesky (1973) 4 BLR 1. In that case, architects sued their client for damages for breach of contract. The architects had been engaged by letter which provided that "The RIBA Conditions of Engagement so far as consistent with the foregoing shall apply". Those were the same conditions as are under consideration in one of the cases before me and they contained an arbitration clause. The defendants obtained a stay of the action from the judge. The plaintiffs contended that the dispute was outside the terms of the arbitration agreement. The Court of Appeal upheld the decision of the judge below and continued the stay. It is evidence of the understanding of the law and of commercial practice in 1973 that counsel for the plaintiffs, Mr. Kenneth Bagnall instructed by Kenneth Brown Baker Baker, did not suggest that the employers' letter of appointment did not incorporate the arbitration clause nor did counsel for the defendant, Mr. Thomas Bingham Q.C. and Mr. Stephen Desch instructed by Richards Butler & Co, feel it incumbent on them to bring such a point to the attention of the court, nor did the court (Cairns, Lawton and Scarman LJJ) take the point of its own motion. Dealing with those arguments which were raised, at page 6, Cairns LJ (with whose judgment Scarman LJ agreed) said that the arbitration clause "undoubtedly was incorporated into the contract".

 

86. In the present case, when served with a Notice, neither party said, "There is no arbitration agreement". Both responded, "There is no dispute": see the letter of 24 April, 1992 from Rowe and Mawe and the letter of 14 September, 1993 from Kier. The first time that Rowe and Mawe on behalf of PTP alleged that there was no agreement was in their letter dated 22 April, 1996 in response to a letter enclosing the Originating Summons.

 

87. I hold that Kier and PTP each entered into a contract with FCO on terms of written conditions which included an arbitration clause and the arbitration clause was incorporated into the contract along with all the other written conditions. I so hold whether or not Kier and PTP knew that the respective conditions contained an arbitration clause, but I do find that they did in fact so know.

SECOND ISSUE

 

"NO DISPUTE"

 

88. This issue turns on the terms of both section 10(1) of the Arbitration Act, 1950 and the terms of the arbitration clauses. The issue arises out of the defendants' submissions as follows:

 

116. "At the date of the Plaintiff’s notices to concur in the appointment of an Arbitrator (15 April, 1992 for PTP and 2 September, 1993 for Kier) there was:

 

117. (a) no dispute or difference within the meaning of Section 10(1)(a) of the Act;

 

118. (b) no "dispute, difference or question" between the parties under clause 61(1) of Kier's agreement and no "difference or dispute" under clause 3.26 of PTP's agreement."

119. I have already set out the terms of the arbitration clauses. The relevant words of section 10 are as follows:

 

120. "(1) In any of the following cases -

 

121. (a) where an arbitration agreement provides that the reference shall be to a single arbitrator, and all the parties do not, after differences have arisen, concur in the appointment of an arbitrator;

122. .....any party may serve the other parties.....with a written notice to.... concur in appointing, an arbitrator, ...and if the appointment is not made within seven clear days after the service of the notice, the High Court of a judge thereof may, on application by the party who gave the notice, appoint an arbitrator ...."

 

89. The Act requires that "differences" shall have arisen. The arbitration clauses require in the one case a "dispute, difference or question" and in the other a "difference or dispute". In practice, it is usually assumed that a "difference" is much the same as a "dispute": see per Saville J. in Hayter v. Nelson [1990] 2 Lloyds Rep 265 at 267, though in Sykes v. Fine Fare [1967] 1 Lloyds Rep 53 at 60, Danckwerts LJ said:

 

123. "The word 'differences' seems to me to be particularly apt for a case where the parties have not agreed: Viscount Dunedin said, in ...May and Butcher v. The King [1934] 2 KB 17: '... a failure to agree ... is a very different thing from a dispute.' But it seems to me that the word 'difference' is particularly apt to describe that situation."

 

90. A "question" may be broader in scope. It seems to me that "a question" may arise where the parties are actually agreed as when they are agreed that neither is certain what is the correct construction of their contract and how it should be applied to a situation in which they find themselves. In such circumstances it may be very helpful to have an arbitration in the course of the contract work, but that is not what happened in the cases before me.

 

91. The burden is on the party claiming submission to arbitration to prove that there is a dispute, difference, or question as the case may be.

 

92. Very often, the issue whether there is a dispute has been debated in circumstances where the plaintiff in litigation claims summary judgment under Rules of the Supreme Court Order 14, the defendant applies for a stay for arbitration and the plaintiff counters by arguing that there should be no stay because, there being no defence, there is no dispute. Such situations have raised refined philosophical arguments: see for example Hayter v. Nelson. That is not the point taken in this case.

 

93. The defendants submit that the correspondence between the parties referring to defects in the roof all reflected a spirit of co-operation between them and a mutual desire to put matters right, and in any event, in the period leading up to each Notice to Concur, there had been a long period of silence in each case so that at the date of the Notice above all there was no dispute.

 

94. The defendants submit that to found a dispute there must be (as a minimum):

 

a) a claim by FCO;

 

124. b) comprised in that claim, an allegation that PTP or Kier is liable for some or part of that claim;

 

125. c) a denial by PTP or Kier that it is so liable or a refusal or failure to answer the allegations made by FCO.

 

95. The defendants rely on Monmouthshire CC -v- Costelloe & Kemple Ltd (1965) 5 BLR 83 at 89; Cruden Construction Ltd -v- Commission for the New Towns (1994) 46 Con LR 25 at 35-6). Monmouthshire CC -v- Costelloe & Kemple Ltd was a decision of the Court of Appeal (Lord Denning MR, Harman and Winn LJJ) which is only an authority on the facts of the particular civil engineering contract under consideration by the court. The contract provided machinery for any dispute or difference to be referred to the engineer and further provided for arbitration within 3 months after the engineer gave notice of a decision in writing. At page 89 Lord Denning said:

 

126. "The first point is this: Was there any dispute or difference arising between the contractors and the engineer? It is accepted that, in order that a dispute or difference can arise on this contract [my emphasis], there must in the first place be a claim by the contractor."

 

96. The Court of Appeal was far from deciding that in all cases for there to be a dispute there must in the first place be a claim. I will not go into a detailed discussion of that case: it is enough to observe that what Lord Denning said was accepted to be necessary in that case was a claim by the party alleging a right to payment for work done. That is quite different from the present cases where what is sought to be put in issue is an alleged right to damages for work or design or supervision allegedly done badly. In Monmouthshire CC -v- Costelloe & Kemple Ltd a claim was necessary for there to be a dispute or difference, in other cases there is no such necessity. Every case has to be considered on its own facts and on the terms of the specific contract in question.

 

97. In Cruden Construction Limited v Commission for The New Towns [1995] 2 Lloyd’s Rep 387 His Honour Judge Gilliland QC considered an application for a declaration that there was no dispute prior to notice of arbitration served purportedly under a contract on terms of the JCT Standard Form of Building Contract for use with quantities Local Authorities edition 1963 (July, 1977) revision. The defendants rely on the judge's conclusion at page 394:

 

127. "In my judgment it cannot properly be said as a matter of ordinary English that the Plaintiff and Defendant were in dispute or that a dispute had arisen between them when the notice of arbitration was served. The Plaintiff had not denied any liability. It had not ignored the letter of Oct. 7. No details had been given by the Defendant to enable the Plaintiff to make any kind of informed decision in relation to any of the matters which were being alleged by the Housing Association let alone how those allegations affected the Plaintiff. I accordingly hold that no dispute or difference existed between the Plaintiff and the Defendant within the meaning of Cl.35 when the notice of arbitration was served and accordingly that notice was in my judgment ineffective to commence a valid arbitration."

 

128. But much more to the point was what he said at page 393:

 

129. "The words dispute or difference" are ordinary English words and unless some binding rule of construction has been established in relation to the construction of those words in clause 35 of the JCT contract I am of the opinion that the words should be given their ordinary every day meaning."

 

98. Those words of Judge Gilliland are in my view the beginning and end of the right approach to be adopted when considering in individual cases whether there is a dispute or difference. In the same case he demonstrated the sort of error which can be committed by lifting one statement out of a judgment construing one contract in relation to one set of facts and seeking to make out of an isolated statement on the facts a statement of law of general application.

 

99. Counsel for the plaintiffs in the cases before me cited Ellerine Brothers v. Klinger [1982] 1 WLR 1375 at 1381 B-D, 1382G-1383H for the proposition that where one party makes a claim there is a dispute until silence is broken by an admission. In Cruden, Judge Gilliland dealt with a similar submission:

 

130. "The decisions in Tradax International v. Cerrahagullari and Ellerine show that a dispute can be said to exist where a claim in respect of some identified or specific matter has been made and either ignored as in Tradax or met with by prevarication as in Ellerine. Neither of those cases however in my judgment lays down any general principle of construction applicable to all arbitration clauses which contain a reference to disputes or to disputes or differences. In Ellerine, Lord Justice Templeman at page 1383 of the report did say -

 

131. '...there is a dispute until the defendant admits that a sum is due and payable, as Kerr J. said in the Tradax case.'

 

132. The learned Lord Justice was not in my judgment in using those words laying down a general principle of construction and those words do in my judgment have to be read subject to what the learned Lord Justice had said earlier at page 1381 where he said:

 

133. 'If on analysis what the plaintiff is asking or demanding involves a matter on which agreement has not been reached and which falls fairly and squarely within the terms of the arbitration agreement then the applicant is entitled to insist on arbitration instead of litigation'"

 

100. When considering whether there is a dispute, every case must be heavily dependent on its facts. Whatever law can be derived from the reported cases is well summarised in Mustill and Boyd, 2nd edition, at pages 127, 128.

 

101. As appears from Mustill and Boyd, and contrary to the submissions of the defendants, it is not necessary for there to be a dispute that a claim should have been made, nor does the making of a claim necessarily mean that there is a dispute.

 

102. As Mustill and Boyd say, it is becoming increasingly common for the parties to arbitrate precisely in order to avoid the making of a claim. Mustill and Boyd continue, at page 128:

 

134. "On the other hand, even if a claim is not essential, there must be something in the nature of an assertion by one party: for a situation in which the parties neither agree nor disagree about the true situation is not one in which there is a dispute. For example, if the parties agree that a reasonable person shall enquire into the matter and decide what is reasonable without the parties themselves putting forward any view, there is no dispute between them. Just as a claim is not necessary to the creation of a dispute, neither is it sufficient in itself. If a debtor agrees that money is due, but simply fails to pay it, there is no dispute; the creditor can and must proceed by action, rather than by arbitration. Equally, silence in the face of a claim does not raise a dispute for it may simply indicate that the recipient is considering whether or not to deny the claim. What is required is a rebuttal or denial of the claim."

 

135. The last two sentences are qualified by a footnote:

 

136. "It will usually be possible to infer from the circumstances whether silence indicates a denial of liability."

 

103. It is fortunate that that footnote was included, because in Ellerine at page 1383, Templeman LJ showed that in some cases silence does not mean consent.

 

104. I turn to consider the facts to see whether at the relevant dates there was a dispute between FCO and either PTP or Kier.

 

105. Contrary to Mr. Cockle's evidence, the documents do show that in 1989 there were suggestions that the design of the roof was at fault and PTP defended themselves against those suggestions.

 

106. Mr. Cockle contends that throughout there was no dispute between FCO and PTP because, until the service of the Notice on PTP on 15 April, 1992 the leaks were all the time blamed upon Kier as a matter of construction. The documents produced in evidence show that not to be correct.

 

107. In early 1989, FCO caused a Crown employee, Mr. Keith Lilley, to go to Amman to investigate the leaks. In a telexed report of 11 April, 1989, he said that he did not believe that the design would have required a floating surface membrane. By letter dated 19 April, 1989, PTP said that the design by roof specialists Korrigan did require a floating membrane. In a detailed and lengthy report, Mr. Lilley wrote:

 

137. "If the design concept was for a floating membrane then it simply has not worked."

 

108. PTP wrote a letter dated 21 April, 1989 dealing with Mr. Lilley's report point by point. That letter included the following:

 

138. "We do not accept that the failure of the membrane is due to the floating design."

 

139. There was at that time a dispute about the design requiring a floating surface membrane.

 

109. In August, 1989, a Statement of Final Account and Certificate for Balance Due was prepared by the Quantity Surveyor. That document had a typed endorsement in the following terms:

 

"ENDORSEMENT: SUBJECT TO ALTERATIONS TO DESIGN OF ROOF".

 

110. By letter dated 22 August, 1989, addressed to FCO, PTP contested that endorsement which they described as "an unacceptable endorsement". They said that they understood it to relate directly to a letter from Kier to FCO dated 5 July, 1989. In his affidavit, Mr. Cockle made the point that that letter was not copied to PTP, but he was able to quote from it in his letter of 22 August, 1989:

 

140. "Kier International has serious reservations about the overall design of the roof. We do not believe that the design is appropriate for a building in the Middle East

141. and we think that the Post will incur higher roof maintenance costs than would normally be expected......"

 

142. It is not clear from the evidence precisely what happened to the form of the certificate.

 

111. There were the first beginnings of a dispute between FCO and PTP in 1989. Although there was no formal claim, no claim was required for there to be a dispute. However, although one or two internal FCO documents in 1989 suggested a desire to take the matter further and indicated that there might be a dispute in the future, that was all internal to FCO and nothing more was said between the parties despite their continuing relationship on cordial terms. PTP continued to monitor the works and spend time and money in trying to get what they saw as Kier's defects put right. Nothing was said to PTP to indicate that their design was no longer a matter of dispute.

 

112. By letter of 26 June, 1991, FCO wrote to PTP stating that they intended "to appoint another party to conduct an in depth, without prejudice investigation of the building elements. The investigation will cover design, detailing and constructional aspects. We anticipate that a conclusive report will be furnished by April, 1992." [i.e. by the date when the notice was in fact given]. The letter mentioned an enquiry into, amongst other things, the design aspects of the building. The letter ended with a mention of PTP's "exemplary spirit of co-operation". On 2 July, 1991 PTP made a courteous reply to that letter. On 12 July, 1991, FCO warned Kier also of the impending enquiry, and referred also to their "exemplary co-operative spirit". FCO appointed Bickerdike Allen and Partners to enquire. On 20 December, 1991, Bickerdike Allen, as a professional courtesy, informed PTP of their involvement and on 31 December, 1991, FCO gave PTP formal notice of the involvement of Bickerdike Allen,"to determine the causes and the best method of repair".

 

113. The courtesies were preserved between the parties, and PTP continued to try to help their clients but there was nonetheless a dispute. There can be a dispute without acrimony as there was in this case.

 

114. I hold that at the time of the service of the Notice by FCO on PTP on 15 April, 1992, there was a dispute between FCO and PTP.

 

115. There was a dispute as to the admissibility of certain evidence which FCO and PTP agreed should be held over to be decided by me in this judgment. After the Notice to Concur had been served, there was some correspondence and other documents evidencing discussions between the parties. The plaintiffs rely on those documents as showing that there was a dispute at the time of the service of the notice. All of the documents were marked "without prejudice" and PTP object that they are not admissible in evidence.

 

116. Mr. Williamson on behalf of FCO submits that while the "without prejudice" cover prevents him from relying on the documents on the issue of liability, he is entitled to rely on them to show that there was a dispute. For that purpose, Mr. Williamson relies on authority to the effect that without prejudice material can be relied on in relation to applications to dismiss proceedings for want of prosecution: Family Housing Association v. Michael Hyde and Partners [1993] 1 WLR 354. In that case, the Court of Appeal held that the fact that without prejudice communications have taken place may be relevant as explaining delay, and also that the content of those discussions may be admissible in proceedings to dismiss for want of prosecution, though neither would be admissible on liability. What was said in such communications might, for example, show who was trying to delay and who was trying to push on with proceedings. I accept that by analogy such without prejudice communications may be admitted in evidence in proceedings such as the present to determine whether there was a dispute at the relevant time, but not when, if at all, there is a trial on liability.

 

117. Having looked at the without prejudice communications, I do not find them very helpful one way or the other with regard to the proposition that there was a dispute before the notice was given, though on balance they favour FCO. PTP contend that the communications show that after the notice PTP sought to come to a settlement of the matter which had then arisen. FCO contends that the communications show that there was a dispute before the notice.

 

118. There was a without prejudice meeting on 7 May, 1992. PTP contend that the minute of that meeting shows that FCO was raising for the first time with PTP the results of Bickerdike Allen's investigations. There was express reference to allegations being "put to" PTP. This was the first such reference in the evidence. It is said that the only inference to be drawn is that before 7 May 1992, the allegations had not been put to PTP. That must be correct. The results of Bickerdike Allen's investigations had not been aired between the parties earlier, and Bickerdike Allen did not formally report until later. But it does not follow that there was not a dispute earlier in existence before the details of the Bickerdike Allen Report were known. In the minute of the meeting, it is recorded that someone on behalf of PTP (either Mr. Cockle or Mr. Coombs)said that it seemed to PTP that it was only after they had approached Kier for a third time and Kier had been uncooperative that the present problem had arisen. That I take to refer to a letter dated 12 April, 1991 from PTP to Kier resulting in a letter from Kier dated 20 June, 1991 in which Kier said that they would only return to site on an agreed payment basis. In other words, PTP were saying at the meeting that the dispute only began in June, 1991. That is enough for FCO's purpose. Before the Notice to Concur there was a dispute without much detail. After the Notice, more detail was added to the dispute.

 

119. As regards Kier, FCO stress that in their case an arbitration may be commenced in case of a question as well as of a dispute or difference. The notice served on them refers to workmanship defects including a number of matters giving rise to water ingress. On behalf of FCO it is said that FCO and PTP on their behalf in a number of communications asserted that Kier's workmanship was defective and Kier eventually responded that their responsibilities were at an end, in whole or in part. Moreover, FCO, they say, had made it clear that they were investigating Kier's performance with the assistance of Bickerdike Allen, and, they ask rhetorically, for what purpose would they do that other than to pursue a dispute, difference or question?

 

120. As to the latter point, (the proposal to investigate with an independent expert), it is notable that while the letter to PTP of 31 December, 1991 stated that the investigation was "to determine the causes and the best method of repair", the letter to Kier some months earlier, on 12 July, 1991 warning them of the investigation was rather different. That letter said that the building still was not watertight and continued:

 

143. "We note your reservations expressed regarding the adequacy of the design. This point has been clouded however by the fact that the initial construction was later revealed to be substandard in many areas. It is therefore difficult to impartially apportion the root cause of the problem either to poor design or poor workmanship.

 

144. We consider another round of site visits, repairs and reappraisal to be inappropriate at this juncture but that the best way forward is to commission a specialist to appraise the design and construction and produce a "Without Prejudice Report". We should thus be in a better position to determine the most appropriate action plan.

 

145. We are presently investigating a couple of consultancies whom we feel may have the right expertise to conduct such audit. When we make our final decision we will inform PTP and yourself. We trust that your exemplary co-operative spirit will prevail through what we hope will be a mutually beneficial exercise."

 

121. That letter was saying in polite terms what might be more bluntly expressed as, "Our roof leaks: there is either a design fault or bad workmanship or both: we do not know which at present but we are going to find out: there is a question whether you are responsible".

 

122. It is clear from the opening paragraph of FCO's letter of 12 July, 1991 that PTP had passed to them a letter dated 20 June, 1991 from Kier to PTP. In that letter, Kier referred to two visits made by them to Amman when Kier carried out at their own expense works to repair the roof to an agreed method statement. Kier pointed out that it was four years since completion of the project and asserted that some leaks from wear and tear were to be expected. Kier again questioned the design and ended by saying:

 

146. "We are reluctant to involve ourselves in further visits to site particularly when there is no specific information as to the precise cause of the latest leaks. We feel that we have already fulfilled our obligations towards the client but would only be prepared to return to site to carry out specified items of work on an agreed payment basis."

 

123. When FCO responded to that letter by saying that they were going to find out the root cause of the problem it was plain that FCO were not accepting the contention of Kier that they were no longer responsible. What existed at that time, in July, 1991, was not merely a question but a dispute. The dispute was a culmination of a number of letters complaining of leaks which up to July, 1991 had been dealt with by Kiew as part of their obligations under the contract. The dispute existed though it was plain that something was expected which would bring matters to a head, namely an investigation and a notification of the result.

 

124. The letter of 12 July, 1991, was the last communication from FCO to Kier before the Notice dated 2 September, 1993. If there was a dispute at 2 September, 1993 it had been conducted in silence for over two years. FCO submit that once a dispute has arisen it remains a dispute unless and until something happens to indicate that the dispute is either resolved or abandoned. I agree. Kier say that during those two years between July, 1991 and September, 1993 there was a significant event, namely the service on PTP only of a notice to concur on 15 April, 1992, in the month when Kier had been warned that a report from an independent expert was expected. It is suggested that that was sufficient to indicate that FCO's complaint was now wholly limited to complaints about design and that there was no longer a dispute about workmanship. That suggestion reads far too much into the event. I do not accept that it was indicated to Kier that the dispute had been resolved or abandoned.

 

125. There was a dispute between FCO and Kier at the time of the service of the notice on Kier on 2 September, 1993.

 

126. Despite my finding that there was a dispute between FCO and Kier and PTP at the relevant date, before deciding whether I have jurisdiction to appoint an arbitrator under section 10 of the Act of 1950 or to make either of the declarations prayed, I have to resolve some other points raised by Kier and PTP.

 

THIRD ISSUE

 

NON-COMPLIANCE WITH PRESCRIBED PROCEDURES FOR NOTICES

 

127. The defendants say that the requirements of both the Act and the agreements have not been complied with.

 

128. The defendants first complain that the notices are defective for want of particularity. I do not accept that complaint. At most, a Notice of this sort needs to contain no more than would be contained in a generally indorsed writ. These notices contained sufficient particularity for the recipients of them to know what was the subject of the notice.

 

129. The defendants argue that the jurisdiction of the court to appoint an arbitrator under section 10 of the 1950 Act only arises if, in the words of section 10(a) "the parties do not ... concur in the appointment of an arbitrator" and, say the defendants, this presupposes that before a notice is served there must have been an attempt to obtain concurrence which has failed. No authority was cited to me either for or against this proposition. It is a matter of impression on construction of the statute. As a matter of impression, I reject the submission, and I take comfort from the fact that that is the view expressed in Mustill and Boyd, 2nd edition, page 178. Nor do I accept the submissions of the defendants that the Notices to Concur which were served were not sufficient notices for the purpose of section 10 of the Act of 1950.

 

130. Kier submits that FCO has not followed the contractual procedure prescribed by clause 61(1) of their agreement with FCO.

 

131. It is correct that if the parties have agreed a procedure for the appointment of an arbitrator that contractual procedure must be followed. An arbitration agreement is a contract between the parties. The procedure is an express contractual term which limits a party's right to go before the courts for redress and if it is to be enforced it must be strictly complied with.

 

132. Clause 61(1) provides a contractual machinery for appointment of an arbitrator. That machinery provides as follows:

 

147. (i) There must have been a dispute, difference or question in existence.

 

148. (ii) There must not have been a "final and conclusive" decision or report of the Secretary of State or other person.

 

149. (Iii) One party to the contract must have given notice.

 

150. (iv) There must be either agreement on the identity of a single arbitrator or in default of agreement the Plaintiff had to provide a list of three architects, engineers or surveyors.

 

151. (v) The contractor had to select one name from the list of three architects, engineers or surveyors.

 

133. Kier contended that the contractual procedure was not followed in that the plaintiff failed to comply with step (iv). Kier contend that in the absence of agreement as to the identity of a single arbitrator the plaintiff was obliged to provide a list of three architects engineers or surveyors which it failed to do. I do not read clause 61 in that way. In my view the notice complied with the requirements of clause 61. The Notice was in the correct form and the procedure required by clause 61 was adequately followed.

 

134. Kier submits that the failure to comply with the machinery required by clause 61(1), that is the submission of a list of three names, before coming to court is fatal to all of FCO's applications in respect of Kier. Kier through its solicitors responded to the Notice by saying that it was inappropriate because there was no dispute, so it was plain that Kier would not have selected one of three names if they had been provided. Kier submit that they should have been given the opportunity for a change of mind. I do not accept those submissions made on behalf of Kier. A party requiring a matter to be submitted to arbitration must comply with the contractual procedure, but the law does not require him to take steps which the other party to the dispute has already indicated would be pointless. There was no reason to believe that Kier might change their mind if three names were submitted to them and they have not changed their mind.

 

135. However, the machinery required by the arbitration clause in PTP's agreement, clause 3.26, was not followed. The Notice to Concur addressed to PTP correctly recited the terms of the agreement and stated that in default of agreement upon an arbitrator a request for nomination would be made to the President of the Chartered Institute of Arbitrators. In a spirit of helpfulness, FCO put forward in the notice three names for possible agreement. The staleness of this matter is highlighted by the fact that the first of those named is now a judge, the second has since retired from active practice at the Bar but still practises as an arbitrator, and the third has sadly died. PTP did not agree an arbitrator within 14 days and FCO failed to follow the contractual procedure by applying to the President of the Chartered Institute of Arbitrators for appointment of an arbitrator. FCO now asks for Declarations from the court to assist in making a stale application to the President of the Chartered Institute. We do not know what would have been the response of the President if a request had been made to him either timeously or late. We do know from a letter from Rowe and Mawe on behalf of PTP dated 22 April, 1996 after the originating summons was issued, that if an application had been made to the President of the Chartered Institute that application would have been opposed. For FCO it is submitted that an application to the President would have been pointless. I do not accept that submission. Because the application was not made, we do not know what would have been the decision of the President. FCO is not entitled to come to court for assistance before exhausting the contractual machinery. That procedural defect is in my view fatal to the claims made by FCO against PTP. I should add that it was suggested that the letter of 22 April, 1996 from Rowe and Mawe invited the present proceedings. I do not agree. In the letter, Rowe and Mawe set out various contentions, and then wrote:

 

152. "It follows from the above that, if the FCO still wish to pursue our clients, such pursuit would appear to have to be attempted by court proceedings."

 

136. It is clear from the context that the court proceedings there referred to were court proceedings initiated by writ claiming damages from PTP on the grounds which would otherwise have been advanced in arbitration. In any event, the letter could not have been an invitation to bring the present proceeding because the originating summonses had already been issued before that letter was sent.

 

137. The contractual machinery not having been followed, it cannot be said that PTP have failed to concur in the appointment of an arbitrator within the meaning of section 10 of the Act of 1950.

 

138. Failure to follow the contractual machinery in the case of PTP is a bar against granting the relief claimed against PTP either under section 10 of the Act or by way of declaration.

 

139. Kier further take a point that the claim is barred by a Final Certificate and that that is a bar to the court's jurisdiction. I do not accept that submission. The contract makes no provision for a Final Certificate and on the evidence before me none was in fact given. I will not go into the evidence, which on this point is probably incomplete and it may be that on full investigation a different view might be formed. This submission raises a number of sub-issues and disputes which go to liability on the claims made by FCO which should be decided within the arbitration or litigation as appropriate. The point is not relevant to the originating summonses before me.

 

140. For all these reasons, I have no jurisdiction to grant any relief prayed against PTP but I do have discretion to grant relief against Kier both under section 10 of the Arbitration Act, 1950 and by way of declarations.

 

FOURTH ISSUE

 

DISCRETION

 

141. Because I have no jurisdiction to grant any of the relief prayed against PTP, the question of discretion does not arise against PTP. However, I must make it plain that if I did have jurisdiction to grant the relief prayed, because of the appalling delays, I would not exercise my discretion to grant any relief against PTP. On the ground of delay also, I do not exercise my discretion to grant any relief against Kier.

 

142. FCO accept that both the relief under section 10 of the Act and declaratory relief are discretionary remedies. FCO further accept that inordinate delay may be taken into account as a ground for refusing relief under section 10 but say that it should not be taken into account for refusing declaratory relief.

 

143. The grounds put forward on behalf of FCO for submitting that inordinate delay is not a ground for refusing declaratory relief are as follows:

 

153. "(a) neither KIL nor PTP have cited any case where a declaration has been refused on the grounds of inordinate delay. Of course, the passage of time might have made a declaratory claim academic but that is not this case.

 

154. (b) This is the trial of the declaratory action. It would be very unusual to refuse the Plaintiff relief at trial on the basis of delay (where the action has been allowed to proceed to trial).

 

: Compare (i)Gibson v. USDAW [1968] 2 AER 252, 254

 

155. (ii) An ordinary damages claim.

 

156. (c) If the only basis for refusing the declarations is delay, an arbitrary result would follow.

157. Suppose FCO had issued the Originating Summons in 1993, but taken until now to get it ready for trial. For the Defendants to strike out, prejudice would have to be shown : see White Book note 15 p.465. It would be arbitrary to hold that the week before trial prejudice must be shown to secure dismissal of the action, but that at the trial the Defendants can secure dismissal on the grounds of delay alone. Equally, the Defendants could not get the Originating Summons dismissed for lateness in issue."

 

144. I am not impressed by the submission that no case has been cited where declaratory relief has been refused on the ground of inordinate delay. No authority has been cited for the remarkable proposition that of all the circumstances that may be taken into account when considering whether to grant the discretionary remedy of declaration, the one circumstance which may not be taken into account is delay. Delay whether inordinate or not must always be one of the matters to be taken into account along with all other circumstances when deciding whether or not to grant a discretionary remedy. It would be an extraordinary situation to refuse to appoint an arbitrator on the ground of delay and then to grant declaratory relief whose only object would be to assist the plaintiff in seeking to obtain the appointment of an arbitrator by other means. If the court refuses as a matter of discretion to appoint an arbitrator it can only be because the court considers that the court should not assist the applicant for relief to go to arbitration. It would be totally illogical then to grant other relief the only object of which is to assist the applicant in proceeding to arbitration.

 

145. As to the submission at (b), the case of Gibson v. USDAW was very different from the present case. In Gibson, the relief which the plaintiff sought would have been far more important had it not been delayed in coming on for trial due to the pressure on the business of the court. In the present cases, it has not been suggested that there has been any delay due to pressure of court business. Once FCO had complied with its obligation to file evidence in support of its summonses, the applications were brought swiftly to trial. FCO's reference to a damages claim is not to the point because the grant of an award of damages has never been discretionary. Moreover, an important part of the delay lies in the failure of the plaintiffs to progress the matter to trial, so that this argument depends on praying in aid the default of FCO.

 

146. As to the submission at (c), the defect in that argument has been clearly and concisely demonstrated by Lord Oliver in Donovan v. Gwentoys [1990] 1 All ER 1018. That case concerned the exercise by the court of the discretion under section 33(1) of the Limitation Act, 1980 to allow a personal injury action to proceed despite the expiry of the limitation period. The House of Lords held that delay before the expiry of the limitation period should be taken into account when exercising the discretion. At page 1025, Lord Oliver said:

 

158. "The argument in favour of the proposition that dilatoriness on the part of the plaintiff in issuing his writ is irrelevant until the period of limitation has expired rests on the proposition that, since a defendant has no legal ground for complaint if the plaintiff issues his writ one day before the expiry of the period, it follows that he suffers no prejudice if the writ is not issued until two days later, save to the extent that, if the section is disapplied, he is deprived of his vested right to defeat the plaintiff's claim on that ground alone. In my opinion this is a false point. A defendant is always likely to be prejudiced by the dilatoriness of a plaintiff in pursuing his claim. Witness' memories may fade, records may be lost or destroyed, opportunities for inspection and report may be lost. The fact that the law permits a plaintiff within prescribed limits to disadvantage a defendant in this way does not mean that the defendant is not prejudiced. It merely means that he is not in a position to complain of whatever prejudice he suffers. Once a plaintiff permits the permitted time to elapse, the defendant is no longer subject to that disability, and in a situation in which the court is directed to consider all the circumstances of the case, and to balance the prejudice to the parties, the fact that the claim has, as a result of the plaintiff's failure to use the time allowed to him, become a thoroughly stale claim cannot, in my judgment, be irrelevant."

 

147. Counsel for FCO submits that the relevant period for delay cannot begin until the notices were served, that is until April, 1992 in the case of PTP and until September, 1993 in the case of Kier. That submission is founded on the proposition that FCO are quite entitled to wait until the end of the limitation period before giving notice to arbitrate and therefore any delay before giving that notice is irrelevant. I do not accept those submissions. Those submissions are not even correct in the light of the decisions relating to applications to dismiss for want of prosecution. For the reasons given by Lord Oliver in the passage I have cited, the submissions are not correct where a general discretion is exercised taking account of all the circumstances, whether that discretion arises under statute as in the case before Lord Oliver, or partly under statute and partly at common law as here.

 

148. It is accepted by FCO that an application for the appointment of an arbitrator may be refused on the ground of delay even where the respondent to the application cannot show prejudice caused by the delay. I do not accept that it would be necessary to show prejudice in order to found an application to strike out such an application on the ground of delay so that the incongruity suggested by counsel for FCO in paragraph 126 (c) above does not arise.

 

149. In argument it has been submitted on behalf of the plaintiffs that the question of delay is governed by the decision of Allen v. McAlpine [1968] 2 QB 229 with all its refinements and with all of the refinements added by later decisions on dismissal for want of prosecution. In my view, that submission is wrong. In relation both to the applications under section 10 of the Act of 1950 and to the applications for declarations the court has a general and unfettered discretion in relation to delay.

 

150. In The Frotanorte [1966] 2 Lloyds Rep 461, the Court of Appeal considered the approach to the question of delay in an application under section 10. The judge below, Longmore J. held that the court was not shackled by the requirement for prejudice to be shown. The Court of Appeal agreed with him. The Court of Appeal considered the decision of Allen v. McAlpine and comments made upon that decision. At page 468, Hirst LJ said,

 

159. "Starting with the words of section 10 itself, there is nothing to suggest that the discretion is other than completely unfettered, and this is unequivocally confirmed by The Bjornstad [1924] 2 KB 673 .... There is thus in my judgment no obligation to read across into section 10 the requirement of proof of prejudice stipulated in the cases on striking out for want of prosecution."

 

151. The Court of Appeal was not deciding that just one of the restrictions of Allen v.McAlpine was not applicable. The Court was deciding that the court had an unfettered discretion free of all the artificialities following the Allen v. McAlpine decision. Obviously, the presence or absence of prejudice must be a matter to be taken into account in exercising that discretion, but its absence is not an automatic bar to the exercise of discretion. Equally, the minute totting up of individual periods of delay with arguments that some can be disregarded and other refinements are to be discouraged. A much broader approach is to be encouraged. The same is true of the discretion whether or not to grant declarations.

 

152. It was up to the plaintiff to pursue the claim with vigour. The plaintiff had a right to pursue its contractual right to arbitration by contractual means at any time within the period set by the Limitation Acts. But the plaintiff does not have the same right to be granted a discretionary remedy at any time within the period set by the Limitation Acts. That is an important distinction between these summonses and the case where a plaintiff is pursuing a damages claim in the courts.

 

153. FCO has not pursued its application to the courts with vigour. The delay of 18 months during which FCO failed to comply with a mandatory Rule of Court requiring filing of evidence is, by itself and without any other feature, a substantial matter to be taken into account in the exercise of discretion.

 

154. I asked counsel for FCO for an explanation of the delay since the issue of the originating summonses, thinking that he would be able to give me an explanation in the course of his closing speech, no explanation having been tendered up until then. Counsel was unable to give me a full explanation immediately, and by arrangement, each of the three solicitors involved has provided me with an explanation by letter.

 

155. There are two explanations for delay in serving evidence and in bringing the matter before the court. The first explanation is that the averment that there was no contractual agreement to an arbitration clause was first made by Rowe and Mawe on behalf of PTP by letter dated 22 April, 1996, after service of the Originating Summons. To meet that new point, FCO might reasonably have asked for and been granted an extension of time for two or three weeks to deal with it in evidence. The more substantial matter was that there were prolonged without prejudice negotiations in particular between FCO and Kier. Without prejudice discussions with Kier began on 31 April, 1996 and while they continued, FCO and Kier agreed that proceedings should be put off eventually to not before November, 1996, which was done. In October, 1996, for the purpose of negotiation, the Treasury Solicitor sent to representatives of both defendants some accounting documents. Kier criticise the adequacy of those documents. So far as I can see, little if anything was done for about six months until in March, 1997 the Treasury Solicitor wrote to Rowe and Mawe inviting PTP to join in negotiations. There was no response to that invitation. The Treasury Solicitor then in April, 1997 proposed having the summons against PTP listed separately from the summons against Kier, and Rowe and Mawe resisted that suggestion. Then on 1 May, 1997, Kier asked for more delay in listing of the hearing so that there might be more without prejudice discussions. On 14 May, 1997, the Treasury Solicitor wrote to both defendants as a result of which they agreed to talk with each other and submit a joint settlement proposal. Three months later, in mid-August, a joint proposal was submitted to the Treasury Solicitor and rejected. At the end of August, the Treasury Solicitor decided to proceed with both summonses. Meanwhile, the parties had been informed by the Court that the summonses would enter the Warned List for the week commencing 8 September, 1997. On 28 September, 1997 the Treasury Solicitor asked for agreement that the summonses should be taken out of the Warned List and relisted to give time for filing of evidence. Fenwick Elliott protested about the failure to file evidence in the time required by the rules and after some procedural wrangles, the matter came before me for directions on 28 November, 1997, the first evidence in support having been sworn on 24 October, 1997.

 

156. There was no excuse for failing to file and serve evidence in support at the outset of the proceedings in accordance with the rules with possibly only a very short extension. If that had been done, some greater urgency might have been given to the following negotiations. The negotiations with Kier (but not with PTP) did account for substantial delay with the consent of Kier. The negotiations in which PTP joined accounted for three months delay between May and August, 1997.

 

157. By no means all of the 18 months delay in bringing these summonses to hearing is inexcusable, but a substantial part of that delay is inexcusable. In relation to that delay in what is supposed to be a speedy process, I do not accept that prejudice to the defendants is an issue.

 

158. The defendants have made Allen v. McAlpine type analyses of delays during the period of 10 years since practical completion in November, 1987, making due allowance for a period when there were without prejudice discussions.

 

159. There was a period of 4½ years between Practical Completion and the service of the Notice to Concur on PTP on 15 April, 1992. There were then another 16½ months before the Notice to Concur served on Kier on 2 September, 1993, so that latter Notice was served nearly 6 years after practical completion of the building. There was then a brief exchange of letters between the Managing Director of Kier and Mr. Sean Martin for the Treasury Solicitor. That exchange ended with a letter of 29 October, 1993 in which the Managing Director repeated a request to Mr. Martin for details of any instructions which Kier were alleged to have disobeyed and clarification of the alleged dispute. It was not until after the passage of 20½ months that Mr. Martin replied on 17 July, 1995 with a letter beginning, "I write further to our previous correspondence ..." There was then some further correspondence ending with a letter dated 7 September, 1995 from Kier asking again for clarification of the alleged dispute. A gap of 7 Months then followed, broken by the service of the Originating Summonses. PTP gave a history similar in nature though different in detail. I have already set out in some detail an account of what happened between the issue of the Originating Summonses and now. Some of the delay was taken up by without prejudice negotiations. Some time was taken up in investigating defects.

 

160. As one would expect, there was some prejudice to Kier in that some key employees/witnesses have left their employment and are not easily traceable. 10 years have already passed since the work was done, and if an arbitration were to go ahead, it would be at least another year before the matter could have been prepared for trial. Mr. Bennie deposes that there are very few people still with the company who worked on the project. The Project Manager left several years ago. The Contracts Director for the Middle East retired some 20 months ago. None of the site staff, including the foreman and the project quantity surveyor is still with Kier. The nominated roofing sub-contractor, Korrigan, has undergone several voluntary liquidations, and although there is a Korrigan still trading, it has no legal ties to the 1986 company. Virtually all of the work was sub-let and the sub-contractors' final accounts have been agreed and paid and there would be no effective legal redress for Kier against them. Kier no longer has any contact with any of those sub-contractors. Any claims over against the sub-contractors must now be statute barred. The position regarding Korrigan is relevant to prejudice suffered by PTP since PTP have said that Korrigan was responsible for at least one of the criticised aspects of design.

 

161. It is fair to say that such prejudice would probably not be greater than would have been suffered if FCO had waited until almost the end of the limitation period before serving a Notice to Concur: however, as I have already indicated, the Limitation period is not a vital watershed. The delays were inordinate and the only excuses put forward are that:

 

160. (a) the rain falls in Amman only between November and March and it is difficult to trace leaks outside those periods;

 

161. (b) the Gulf War made inspection difficult between January and March, 1991;

 

162. (c) up to 1991, Kier were trying to cure the leaks;

 

163. (d) there were some without prejudice negotiations.

 

164. Those excuses only account for a very small part of the delay.

 

162. In his affidavit sworn in the action against PTP, Mr. Morris deposed that there were without prejudice negotiations during 1994 and 1995. That affidavit is similar in layout to his affidavit sworn in the Kier action. There is no mention of without prejudice negotiations in the affidavit in the Kier action, nor are there any without prejudice letters or other documents in the documents produced showing without prejudice negotiations with Kier. Counsel for Kier rightly stresses that there is no evidence of without prejudice negotiations with Kier. So far as PTP is concerned, delay in 1994 and 1995 is to some extent explained by without prejudice negotiations, and I do bear in mind that negotiations with PTP, even if there were no negotiations with Kier at the same time, must have some bearing on the progress of matters against Kier so that there is some explanation regarding Kier also with regard to that period.

 

163. For FCO it is submitted that trial of issues concerning defects will turn largely on expert evidence. That may be so to some extent, but there is reason to believe that factual evidence will be required. For example, in correspondence at the time, Kier alleged that some leaks were due to the activities of maintenance workers and that and similar allegations will require investigations and possibly evidence of fact. Counsel for FCO also says that Kier have not identified witnesses who have become uncontactable in what he asserts is the relevant period of delay. For reasons which I have already given, that submission is irrelevant.

 

164. I do not think it appropriate on an application of this sort to consider possible defences on liability and I therefore say nothing about the "Defence in Mitigation" and the "Final Certificate Defence" which Kier and PTP ask me to consider in relation to the exercise of discretion. For similar reasons, I shall not consider Kier's submission that it is unconscionable for FCO to proceed in breach of its own procedure.

 

165. FCO wishes to make substantial claims against the defendants. If I do not grant the relief prayed, FCO will almost certainly be unable to proceed with those claims. If I do grant any of the relief claimed, and if that relief leads to the appointment of an arbitrator, the arbitrator or arbitrators will at the outset of their task be faced with applications to dismiss the claims for want of prosecution. These are now stale claims. If an arbitration proceeds, the defendants will be unable to pass on any damages claims to sub-contractors. FCO has delayed inexcusably in bringing the matters on, though the defendants have done little to shake them into activity. On behalf of FCO it is said that the defendants have delayed matters by taking false points. I do not regard that as a fair criticism of the defendants. Most of the objections they have taken have raised difficult points of law, and those points of law could have been resolved long ago if FCO had pressed the matter forward.

 

166. Bearing all these matters in mind and balancing the interests of each of the three parties and the court, I refuse to exercise my discretion in favour of FCO against Kier and I would refuse to exercise my discretion in favour of FCO against PTP if I had jurisdiction to grant the relief claimed against PTP.

 

CONCLUSION

 

167. Both Originating summonses are dismissed with costs to be taxed and paid by FCO.

 

 

 

 

HIS HONOUR JUDGE BOWSHER Q.C.

 

165. Trial: 15, 16, December, 1997, 13 January, 1998

166. Judgment: 19, January, 1998

 

Plaintiffs:

167. Counsel: Adrian Williamson

168. Solicitor: The Treasury Solicitor

 

PERCY THOMAS PARTNERSHIP:

169. Counsel: Sean Wilken

170. Solicitors: Rowe and Mawe

 

KIER INTERNATIONAL LIMITED:

171. Counsel: Bruce Mauleverer Q.C.

Adrian Hughes

172. Solicitor: Fenwick Elliott

Index of Judgments