Arbitration -
appeal against order of Royal Court dated 19 September, 2011.Arbitration - appeal against order of Royal Court
dated 19 September, 2011.
[2012]JCA024[2012]JCA
Court of
AppealCourt of
Appeal
27 January 201227 January 2012
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Before : |
Dame Heather Steel, D.B.E., President; |
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Between |
Degano Limited |
Appellant |
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And |
Houzé Construction Limited |
Respondent |
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Appeal against the order made by the Royal Court on 19 September, 2011.
Advocate S. M. Chiddicks for the Appellant.
Advocate S. Franckel for the Respondent.
JUDGMENT
MCNEILL JA:
1. This is an appeal against an order removing an arbitrator, on the grounds of misconduct of the arbitration proceedings, pursuant to Article 26(1) of the Arbitration (Jersey) Law 1998, set out in an Act of Court of 19 September 2011 and judgment dated 27 September 2011. In a separate judgment of the same date leave to appeal was granted by the Royal Court. The learned Deputy Bailiff made it clear that the basis upon which leave was being granted was not that there was any lack of sureness in the Court about its decision but because the issue as to the meaning of "misconduct" in arbitration was not something which previously had come before the Royal Court and the appeal therefore raised an issue on which it would be beneficial to have consideration by the Court of Appeal.
2. The ground of appeal now relied upon by the Appellant is that the Royal Court misdirected itself as to the law, that it erred in fact and that its decision took into account irrelevant factors and failed to take into account relevant factors.
3. The point in this appeal is very sharply focused and it follows that the background facts can be stated shortly. The following summary is gratefully drawn from the principal judgment of the court below.
4. Houzé Construction Limited, the Respondent in the arbitration (the "Respondent"), was the main contractor under a building contract to carry out works to a property in St Brelade. The Appellant, who had been claimant in the arbitration, (the "Claimant") was a sub-contractor, employed by the Respondent to carry out some of those works. A dispute arose as to the quality and finish of some of those works and was not resolved. On 4 October 2010 the Claimant issued a Summons claiming a balance due in respect of the works. On 23 November 2010 the Respondent filed an answer denying that the sums claimed were due as alleged or at all and counterclaimed in the sum of £93,300. On 1 December 2010 proceedings were stayed in order that the dispute could go to arbitration.
5. The parties agreed the terms of the appointment of the arbitrator and the arbitrator accepted appointment on that basis on 17 March 2011. The terms of appointment required the arbitrator to conduct the arbitration in accordance with rules which the parties had specially agreed should govern the arbitration. The arbitrator is a well known Channel Islands advocate.
6. For the purposes of the proceedings before this court it is sufficient to quote the following from those rules:-
"7.2 Unless the arbitrator otherwise directs the arbitration will proceed on the basis of pleadings exchanged as hereafter set out.
7.3 All pleadings should contain all allegations of fact or matters of opinion which it is intended to establish by evidence and set out all items of relief or other remedies sought together with total value of all quantifiable sums claimed, and must be signed by or on behalf of the party advancing it. Where the respondent denies any allegation (a) he must state his reasons for doing so; and (b) if he intends to put forward a different version of events from that given by the claimant he must state his own version.
...
7.6 Unless the arbitrator otherwise directs the parties would exchange pleadings as follows:
(a) within 14 days of the receipt by the claimant of the arbitrator's acceptance of the appointment the claimant shall send to the arbitrator and to the other party particulars of the claim;
(b) within 14 days of the receipt of the particulars of claim the respondent will send to the arbitrator and to the other party a Defence but if no Defence is served within that time limit or such extended time limit as the arbitrator may allow then the respondent will be debarred from serving a Defence and pleadings are deemed to be closed;
(c) if the respondent wishes to make any counter-claim then a counter-claim shall be served with the Defence;
(d) within 14 days of the receipt of the Defence and counter-claim (if any) the claimant may send to the arbitrator and to the other party a reply (and Defence to counter-claim if any), but if no Defence to counter-claim is served within that time limit or such extended time limit as the arbitrator may allow then that claimant will be debarred from serving a Defence to counter-claim and pleadings are deemed to be closed on that issue;
(e) within 14 days of the receipt of a Defence to counter-claim (if any) the respondent may send to the arbitrator and to the other party a reply to the Defence and counter-claim and pleadings are closed on the expiry of that time limit or such extended time limit as the arbitrator may allow or on service of a reply to Defence to counter-claim if sooner;
(f) any further pleadings may only be served with the leave of the arbitrator;
(g) when a party has been debarred from serving a Defence or Defence to counter-claim under 7.6(b) or (d) the other party or parties shall still be required to prove any allegations made in the particulars of claim or counter-claim as the case may be.
7.7 Before or after close of pleadings the arbitrator may give detailed directions with any appropriate time-table for all further procedural steps in the arbitration, including (but not limited to) the following:
(a) any amendment to, expansion of, summary of or reproduction in some other format of, any pleading or any extension or alteration of time limits for pleading; ...
7.8 The Arbitrator may at any time order any of the following to be delivered to him in writing:-
(a) submissions to be advanced by or on behalf of any party;
(b) questions intended to be put to any witnesses;
(c) answers by any witness to identified questions."
7. On 17 March 2011 the arbitrator wrote to the respective advocates for the parties indicating his intention to seek, with their cooperation, to facilitate an orderly and speedy decision. He also indicated that he did not wish to depart from the provisions of Rule 7.6 and made directions in accordance with sub paragraphs (a) and (b). In accordance with paragraph (a), absent any extensions of time, the particulars of claim should have been delivered by close of business on 5 April 2011.
8. On 4 April 2011 the parties communicated by e-mail as to the extent to which the Claimant's pleading should include references to without prejudice correspondence; but they could not agree. On 6 April, after expiry of the time limit, the Claimant applied to the arbitrator for directions as to how the without prejudice correspondence should be dealt with. Although the Claimant did not seek an extension of time, when the arbitrator responded giving directions as to how the without prejudice correspondence should be treated in the pleadings he added: "As a result of my delay in replying to you I give each of you a five day extension to the deadlines". Subsequently it was clarified that the extension ran from 12 April insofar as the Claimant was concerned.
9. The Claimant filed particulars of claim on 13 April and, accordingly, a nineteen day period would expire on Monday 2 May. By reason of Easter, the Royal Wedding and the Bank Holiday, there were in fact nine working days between receipt of the particulars of claim and expiry of time in accordance with the ruling.
10. The Respondent failed to meet that deadline. On 11 May, following the Liberation Day holiday, the Claimant applied to the arbitrator for a ruling that, pursuant to Rule 7.6(b) the Respondent was out of time and, accordingly, debarred from serving a defence and that pleadings were therefore deemed to have been closed. The arbitrator confirmed by e-mail that he had received no word from the then advocate for the Respondent and, that being the case, the arbitrator's understanding was the same as that of the advocate for the Claimant. He added "... but before I take a decision I am asking him by copy of this e-mail, to let me know if he has anything to add. Unless I hear from him within 48 hours I shall proceed as requested."
11. On 11 May the Respondent's then advocate sent to the arbitrator his client's answer and counter-claim. He also immediately e-mailed the arbitrator to indicate that the particulars of claim had been filed later than originally anticipated and that he had believed that it would not be necessary to request formally an extension of time for the Respondent. He indicated that he did make that request if it were necessary to do so.
12. The arbitrator responded stating that the Respondent was amiss in anticipating that additional periods would be provided without its having to raise the issue.
13. After further correspondence in which the Respondent gave its reasons for requesting an extension and the Claimant indicated why that request should be refused, the arbitrator, in a letter to both advocates dated 7 June 2011, gave his reasons for not accepting the late submission of the answer and counter-claim and ruled that under Rule 7.6(b) the Respondent was debarred from serving them and pleadings were deemed to be closed. His reasoning was set out as follows:-
"(1) Clause (14) of the Agreement states that the "Instrument of Appointment is not effective until it is signed and dated on behalf of both Claimant and Respondent and countersigned by the Arbitrator" (you yourselves chose to use those words). I was the last to sign the Agreement and did so on 17th March. I was intending to communicate my acceptance to the parties that day but did not do so as I did not have Advocate Young's email addresses. As under the terms of the Agreement I needed to inform both parties at the same time I posted a letter to the parties that day, which was received by the parties on 22 March. Although the Agreement does not say that the arbitration commences when a hard copy is delivered by mail to the Claimant, Advocate Chiddicks could not have acted on it until it was communicated to him. Advocate Chiddicks wrote an email to Advocate Young on 22 March 2011 stating that he had received my acceptance and that time would run from that date.
(2) Advocate Young on behalf of the Respondent did not complain about the late submission referred to in (1) above but for the reasons set out therein there was nothing to complain about. Advocate Chiddicks had acted reasonably and indeed in the only credible way available to him.
(3) I accept Advocate Young's argument that the Agreement provides for an equivalent time period for pleadings, but that is subject to any extension that I may grant to the parties. I granted an additional five days to Advocate Chiddicks from 12th April. I rule that he adhered to the timetable at that time.
(4) I do not accept Advocate Young's arguments regarding having to deal with persons outside the jurisdiction. If that were to cause a difficulty he should have made an application to me before the expiration of the time period. In any case (1) he appears to have had up to two years to take instructions and (2) in these days of global communications, absence from the island is very rarely an impediment to obtaining instructions.
(5) I do not accept Advocate Young's arguments regarding Bank Holidays having impaired the working time available to the Respondent. He could have applied for an extension prior to the expiration of the time period as Bank Holidays were not unexpected events, except for 29th April, but even that date was known before the Agreement was signed. Advocates regularly have to take account of difficulties caused to legal practice by reason of illness, litigation overrunning time allotted or otherwise. His proper course of action was to make an application before the expiration, not after."
Thereupon the then Representor applied to the Royal Court for the arbitrator's appointment to be terminated.
14. Whilst numerous issues were canvassed in the proceedings below, the decision now being appealed was based upon the use of the powers vested in the Royal Court under Article 26 of the Arbitration Law having regard to the procedural decisions which the arbitrator had taken so far. The Royal Court took the view that Article 26 should be given its natural meaning. If the court was of the view that the arbitrator had misconducted the proceedings, then in the exercise of its discretion, if that misconduct was considered sufficiently serious, the court had power to remove the arbitrator: see paragraph 35 of the decision.
15. The Royal Court noted that the agreed rules were silent as to whether the application for an extension was required to be brought before time had expired, and also that they were silent as to the matters which the arbitrator should take into account for the purpose of considering any application for an extension.
16. The Royal Court further noted that there was little in the Arbitration Law itself which helped in the matter before them. It noted, however, that Article 31(3) required the court not to make an order prohibiting further arbitration proceedings unless satisfied that a claimant's delay had been intentional, inordinate or inexcusable and put at risk the fairness of a trial. The Royal Court observed that those provisions pointed to a requirement that the arbitration proceedings be fair.
17. The Royal Court then concluded:-
"39. It does appear from the final version of the arbitrator's decision to refuse an extension of time that the arbitrator placed considerable reliance upon the fact that the application for an extension was not made prior to the expiration of the time within which the answer and counter-claim should have been filed. If this was the case, there is in our judgment no sufficient basis for such a finding. We consider that the problem, and it is a very serious problem, with the process which has been adopted is that the arbitrator has allowed procedure to become the master of justice such that the real issues would not in fact be ventilated in the arbitration if that decision were to stand. In our view this amounts to a misconduct of the proceedings which goes to the very heart of them. The Representor was late in filing the answer and counter-claim. It may be that some sanction would be, and indeed is, available to visit a costs penalty on the Representor for that default. However that is not a basis in our judgment to prevent the Representor from running in effect the defence which it would otherwise be entitled to run in the course of the arbitration.
40. There are occasions in court proceedings where time limits are ultimately enforced, but the Court is always reluctant to reach that stage unless the defaulting party is given some notice as well as opportunity to rectify his default or there is no other solution which is capable of providing justice to the parties. The Court does not easily drive a party from the judgment seat. The effect of the arbitrator's decision was just that, in relation to the claims which the Representor wished to run in the arbitration. We do not think that was fair and we cannot allow such a decision to stand, particularly given the short period of overrun and the other circumstances which we have described.
41. For these reasons, the Court grants the prayer of the representation that the arbitrator be removed pursuant to Article 26(1) of the Arbitration Law by reason of his unreasonableness in failing to grant to the Representor an extension of time to enable the answer and counter-claim to be filed."
18. Article 26(1) of the Arbitration (Jersey) Law 1998 provides:-
"(1) Where an arbitrator or umpire has misconducted himself or herself or the proceedings, the Court may remove the arbitrator or umpire."
19. It appears to me that, in accordance with the third arm of the test in Glazebrook v Housing Committee [2002] JLR N 43, leave to appeal has been granted because of the importance of the question of the proper construction of Article 26 of the Arbitration Law having regard to the concept of misconduct. That is not to say that all that has been referred to this court is a ruling on the proper construction of that article. Leave to appeal has been granted and what is before us is the appeal against the decision below. In my view, however, properly characterised, the issues before this court are (a) as to the proper construction of the article and (b) whether, on the facts agreed or as found by the Royal Court, there was a proper basis for finding that those facts were of the nature which gave rise to the vesting in the Royal Court of the discretion given by Article 26(1) to remove the arbitrator. If the circumstances give rise to the power, the discretionary decision is one with which, conventionally, this court will be reluctant to interfere except in the clearest circumstances. If, on the other hand, the view of this court is that the factual findings were not sufficient to bring matters within the terms of Article 26, consideration of exercising the discretionary power did not arise and this court would determine accordingly.
20. The issue in this appeal is a narrow one. The arbitrator applied the rules and it must be a rare circumstance for application of the arbitration rules to amount to misconduct. However, in proceeding to the stage of applying those rules, the arbitrator was faced with having to determine an issue for which the relevant rule made specific provision, namely, the possibility of an extension of the specified time limit. The issue therefore seems to me to be whether, upon a proper construction of Article 26(1) of the Arbitration Law, the arbitrator's determination in respect of the application for extension of time resulted in the arbitrator misconducting himself or the proceedings. I therefore turn to the proper construction of the article and to parties' submissions on the issue which I have highlighted.
21. Advocate Chiddicks, for the Claimant, submitted that the Royal Court had misdirected itself as to the law and, in particular, as to the test to be applied in considering whether an arbitrator had misconducted himself or the proceedings. He submitted that this court should have regard to its decision in Olcott Investments Limited v Mark Amy Limited and Another [1998] JLR 62, notwithstanding that the decision in that case predated the introduction of the Arbitration Law. In that decision this court confirmed that it had the right to interfere with the arbitrator's exercise of discretion [in relation to costs] if that decision was wrong in law or so unreasonable that no sensible arbitrator could have reached the decision: see pp 65-66. It was clear, therefore, that the courts in Jersey would not readily interfere with the decision of an arbitrator.
22. Advocate Chiddicks further submitted that, as the provisions of Article 26 provided an identical power to that contained in Section 23 of the Arbitration Act 1950, it was appropriate to look at how the courts in England and Wales had interpreted Section 23 and, in particular, the term "misconduct". In his submission, the approach of the English courts appeared to be, first, to consider whether there had been any mishap or misunderstanding or error in procedure and, secondly, to consider whether such an event might lead to an unjust result (in the sense of leaving a party with a justified sense that he may have been prejudiced by the event).
23. He drew our attention to paragraph 21A-219 of the Supreme Court Rules 1999 where the second paragraph is in the following terms:-
"An arbitrator or umpire does not "misconduct" himself or the proceedings merely because he makes an error of fact or law and inconsistency between one part of an award and another may not itself constitute evidence of such misconduct. Indeed the word "misconduct" can give a wholly misleading impression of the complaint being made against the arbitrator or umpire: Moran v Lloyd's [1983] QB 542; [1983] 2 All E.R. 200, CA."
24. He referred also to the decision of Bingham J, (as he then was) in Shield Properties & Investments Ltd v Anglo Overseas Transport Co Limited [1985] 1 EGLR 7 where, at page 7, the court made clear that the expression "misconduct" was an unhappy expression in the circumstances as it involved no reflection of any kind on the professional character or competence of the arbitrator.
25. In that case there was found to have been a failure to follow agreed procedure, but even so, the learned judge said this (at page 9):-
"... Even allowing for the fact that misconduct denotes no more than procedural irregularity, nonetheless it seems to me that it would be stretching even watered down interpretation of that language to describe what happened here as misconduct because, of course, it is an inescapable fact that misconduct, however technical, does reflect on the way in which an arbitrator has conducted an arbitration. Nonetheless, that does not on current authority conclude the matter and it is necessary to consider whether, even in the absence of misconduct, there has been any mishap or misunderstanding or error in procedure in the course of this arbitration which could lead, or might have led, to an unjust result. By an unjust result, of course, one must include the possibility that the same result has been achieved as would have been achieved but nonetheless in circumstances in which one party has a justified sense that he may have been prejudiced by the procedural course which the arbitration took.".
26. In that case the court determined that there had been a procedural mishap and determined that the appropriate course was to remit the matter to the arbitrator for his further consideration having regard to the terms in which the judgment of the court had been given.
27. Advocate Chiddicks also drew to our attention the terms of the Arbitration Act 1996 where the term "misconduct" had been left out and the old Section 23 replaced with a new Section 24 dealing with the power of the court to remove an arbitrator. Leaving aside specific circumstances not germane to the circumstances of this appeal, the relevant ground would be restricted to a refusal or failure of the arbitrator properly to conduct the proceedings and that substantial injustice had been or would be caused to the applicant.
28. Again referring to the English procedural rules, this time paragraphs 2E - 146 and 2E - 262 of the Civil Procedure Rules 2001, Advocate Chiddicks cited the decision in Petroships Pte Limited v Petec Trading and Investment Corp (the "Petro Ranger") [2001] 2 Lloyd's Rep 348 where, at 251, the learned judge referred to the Department Advisory Committee on Arbitration Law, Report on the Arbitration Bill February 1996 (Chairman, the Rt. Hon. Lord Justice Saville). The passage set out a commentary on Section 68, as it became, of the Act in the following terms:-
"1. Section 68 sets out a closed list of irregularities (which it is not open to the court to extend).
2. Section 68 reflects the internationally accepted view that the court should be able to correct serious failure to comply with the "due process" of arbitral proceedings: cf Article 34 of the Model Law.
3. A serious irregularity has to pass the test of causing "substantial injustice" before the court can act (s.68(2)).
4. The test of "substantial injustice" is intended to be applied by way of support for the arbitral process, not by way of interference with that process. Thus it is only in those cases where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process, that the court will take action.
5. The test is not what would have happened had the matter been litigated. To apply such a test would be to ignore the fact that the parties have agreed to arbitrate not litigate.
6. Having chosen arbitration, the parties cannot complain of substantial injustice, unless what has happened cannot on any view be defended as an acceptable consequence of that choice.
7. Section 68 is designed as a longstop, only available in extreme cases, where the tribunal has gone so wrong in its conduct of the arbitration in one of the respects listed in Section 68, that justice calls out for it to be corrected."
29. In Advocate Chiddicks' submission there was, in the circumstances, no mishap, misunderstanding or error. The arbitrator applied the rules and used his discretion following the opportunity for and filing of submissions in accordance with the parties' agreed wishes. There had been no breach of natural justice. Further, there was no unjust result as it was well within the contemplation of the parties at the outset that the parties should be held to their agreement. The arbitrator's decision was not so unreasonable that no arbitrator could have reached it. The court should not substitute its own view for the arbitrator's decision just because a different result might have been yielded under the Royal Court rules.
30. For the Respondent, Advocate Franckel submitted that the Royal Court had not erred in law. It had correctly considered that the arbitrator was under a duty to conduct the proceedings fairly. The Royal Court had correctly considered that misconduct could include matters of procedural unfairness and, here, the arbitrator had adopted an unsuitable procedure in debarring a party from putting forward its case because of a minor delay.
31. He submitted that it was wrong to cast the test in the manner set out in the decision in Olcott Investments Limited. That decision predated the Arbitration Law, it related to an arbitrator's award in respect of costs and the case law under the 1950 Act had not defined misconduct by means of that test. In the event that this court considered the irrationality test to be appropriate, the arbitrator's refusal to grant an extension of time was in fact so unreasonable that no sensible arbitrator could have reached that decision because (i) the procedure thwarted rather than facilitated resolution of the matters in dispute, (ii) the arbitrator had failed to give any or any due weight to the substantial prejudice suffered by the present Respondent, (iii) that prejudice was out of all proportion to the minor breach involved, (iv) the arbitrator had failed to give any or any due weight to the minimal prejudice which might otherwise be caused to the Respondent and (v) if any sanction was required, it should have been in costs and / or interest.
32. The proper approach to be taken by an arbitrator under such circumstances was demonstrated by the decision in Damond Lock Grabowski and Partners v Laing Investments (Bracknell) Limited [1992] 60 BLR 117, 126 in which Gatehouse J, confirmed that arbitrators must treat both parties fairly and that, in the circumstances of that case, considerations of speed must never override fairness. The principles set out in In Re Esteem Settlement [2000] JLR N 41a, he submitted, were no different.
33. In addressing the case law in respect of "misconduct" under the 1950 Act, Advocate Franckel submitted that it was clear that the English courts had moved away from providing a definitive interpretation of "misconduct". In Bulk Oil (Zug) AG v Sun International Limited (No. 2) [1984] 1 Lloyd's Rep 531, 533 Bingham J, (as he then was) had noted that misconduct in this context was used to denote procedural unfairness, almost always involving no reflection on the competence or integrity of the arbitrator. Similarly, in AT & T Corporation and Another v Saudi Cable Company [2000] CLC 1309 (paragraph 46), Lord Woolf MR had again identified that culpability or blameworthiness on the part of the arbitrator were not essential ingredients but that it "can be sufficient if there is a "procedural mishap"."
34. Further, it was no bar to misconduct if the procedural unfairness had been caused by the fault of a party's representative: Indian Oil Corporation Limited v Coastal (Bermuda) Limited [1990] 2 Lloyd's Rep 407, 415 - 416.
35. The English courts had tended to determine whether misconduct existed by reference to the individual circumstances of each case and there was no universal definition of the level of injustice required. In Advocate Franckel's submission, some guidance was provided by the decision in Williams v Wallace & Cox [1914] 2 KB 478 where Atkin J, (as he then was) indicated, at 485, that the term did not really amount to much more than "such a mishandling of the arbitration as is likely to amount to some substantial miscarriage of justice,". In The Aros [1978] 1 Lloyd's Rep 456, 463 Brandon J, (as he then was) had referred to the expression "procedural mishap" as "one which has come into use comparatively recently to describe a situation where, without any fault of the arbitration tribunal, something has gone wrong with the procedural side of an arbitration, which has or may have caused injustice to one of the parties, and may therefore afford grounds for the Court, in the interests of justice, to remit the award for reconsideration: see GKN Centrax Gears Limited v Matbro Limited [1976] 2 Lloyd's Rep 555, by Lord Justice Bridge at pp. 581-2."
36. Brandon J, had continued:-
"There is no general principle that, because something has gone wrong on the procedural side of an arbitration, whether through misconduct of the arbitrators, or due to a procedural mishap occurring without such misconduct, the award made in the arbitration must be remitted. In either case the applicant for remission must go further and show that the thing which went wrong either has caused him injustice, or at least may well have done so."
37. As to the duty to conduct the proceedings fairly, Advocate Franckel referred us to Section 33 of the Arbitration Act 1996 and also to the judgment of Sir John Donaldson MR in Moran v Lloyds (1983) 2 All ER 200, 205. Each of these sources showed, in the words of the Master of the Rolls, that "any failure to give a party a reasonable and proper opportunity to put forward his own case and to rebut that of the opposite party is undoubtedly capable of constituting "misconduct" of the proceedings.". As far as Section 24 of the 1996 Act was concerned, the decision in Benaim (UK) Limited v Davies Middleton & Davies Limited [2005] EWHC 1370 (TCC) (paragraph 23) showed that a failure properly to conduct the proceedings included a breach of the duty under Section 33 of the 1996 Act.
38. Turning to the concept of "substantial injustice" and the decision in Petroships PTE Limited v Petec, Advocate Franckel submitted that the supervisory powers of the English courts under the 1996 Act were more confined than they were under the 1950 Act and that Jersey had opted not to take the same course. Caution should therefore be applied before adopting definitions of injustice found under the 1996 Act. Further, the 1996 Act did not define a failure properly to conduct proceedings in terms of substantial injustice. Substantial injustice was a separate criterion needed under the 1996 Act to justify the removal of an arbitrator.
39. In the event that this court found that a strict test of "substantial injustice" was a necessary criterion for misconduct to be found, Advocate Franckel submitted that it was appropriate to apply the natural meaning of "substantial" as adopted in Groundshire v VHE Construction [2001] All ER (D) 180 where Judge Bowsher QC, at paragraphs 39 and 40, preferred a construction of "substantial" by reference to such dictionary meanings as "having a real existence", "essential", or "of ample or considerable amount, quantity or dimensions". In his view Parliament, in the 1996 Act, plainly meant to refer to some injustice that had some real effect as opposed to a failure to deal with arguments that causes affront or disquiet without substantial effect.
40. The terms of Article 26.1 of the Arbitration (Jersey) Law 1998 and of Section 23(1) of the Arbitration Act 1950 are in their material aspects identical. Whilst the law of England and Wales has moved on from that of the 1950 Act, insofar as there is relevant judicial guidance in respect of Section 23, this court will have regard to it. In my opinion, this court should adopt the same approach as set out in the decisions in Bulk Oil (ZUG) AG v Sun International Limited, in Shield Properties and Investments Limited v Anglo Overseas Transport Co Limited and in AT & T Corporation and Another v Saudi Cable Company. Accordingly, for there to be the necessary misconduct to enable the court to exercise its powers under Section 23, there need not be any culpable or blameworthy behaviour on the part of the arbitrator and the use of the power involves no reflection of any kind on the professional character or competence of the arbitrator. What is sufficient is for there to have been (a) a technical failure to follow agreed procedure (Shield Properties), (b) a procedural mishap (AT & T), (c) procedural unfairness (Bulk Oil) or (d) a breach of natural justice (Shield Properties). This is not a closed list, but it is sufficient to cover the circumstances before this court.
41. The starting point for consideration of the issue in this case must be the arbitration rules specifically agreed and adopted by the parties for the purposes of their arbitration. When those are considered, it is manifest that the parties had in mind the eventuality that a defence might not be served within the specified time limit and that, if no application for an extension of time was made, or if an application was made and refused, the respondent in the arbitration would be debarred from serving a defence and pleadings would be deemed to be closed. However the claimant would be required to prove his claim. Identical provisions were made in respect of counter-claims. The parties therefore not only made specific provision against the event of failure to adhere to the specified time limits and provided a procedural mechanism for dealing with that, they did so in a process which was entered into after litigation had been commenced and arising out of an order to engage in alternative dispute resolution.
42. The arbitrator followed the stipulated procedure. In the circumstances which arose he granted initial extensions of time to both parties and when the Respondent failed to adhere to the time limit for serving a defence, he asked for submissions as to whether or not there should be an extension of time, allowed the Claimant the opportunity to comment, issued a draft determination, accepted certain of the observations made by the Respondent and issued a determination.
43. There was, therefore, no failure to follow the agreed procedure, technical or otherwise. Nor was there any procedural mishap: the defence not having been served within the time limit, a proper procedure for identifying whether or not there should be an extension of the time limit was gone through. Nor was there procedural unfairness in that both parties had the opportunity to make submissions to the arbitrator in respect of a potential extension of time and to comment upon the draft determination.
44. Notwithstanding the list which I have set out above, it may be thought that there is some residual category where, even in the absence of the arbitration being misconducted and in the absence of any mishap or misunderstanding or error in procedure a party may have a justified sense of having been prejudiced by the procedural course which the arbitration took. (It will be noted that this would be an extension of what was said by Bingham J at page 9 of Shield Properties; but it might be seen as a call to natural justice.)
45. It seems to me very difficult to envisage a justified sense of prejudice, a lack of justice or a failure to be given a reasonable and proper opportunity to put forward a party's case (Moran v Lloyds) where the bespoke arbitration rules set down a time for the service of pleadings, where they make provision for an extension of time under the discretion of the arbitrator, and where the arbitrator considers submissions and makes a determination upon the basis of those submissions. Such bespoke rules, in my view, place parties and the decision maker in a different position from that encountered in court where the rules of court or the judge may provide time-limits and where the consequence of failure to adhere to them will be dealt with by consideration of all facts and circumstances. In my opinion only where the arbitrator has reached a decision in respect of which a court is able to say that no arbitrator, properly informed as to fact and law, could have reached that decision, would a justified sense of prejudice, or case of injustice, arise.
46. The Royal Court did not express the view that this was a decision which no arbitrator, properly informed as to fact and law, could have reached.
47. In paragraphs 39 and 40 of the judgment below, the Royal Court indicated its basis for considering that the proceedings had been misconducted. Firstly it expressed the view that there might have been undue reliance upon the fact that the application for an extension was not made prior to the expiration of time but, implicitly, recognised that it was not clear from the determination that this consideration underpinned the entire determination. In my opinion, on a proper reading of the determination, there was no basis for suggesting that this consideration could have been the overriding reason for the determination. Three separate bases had been put forward by the Respondent in support of the application for an extension of time. Each was separately dealt with by the arbitrator. The potential issue as to undue reliance upon there having been no prior application does not arise in respect of the first. As regards the second and third, the Arbitrator both refuted the contentions by the Respondent and indicated that the application should have been made earlier.
48. Secondly, the Royal Court went on to express the view, again in paragraph 39, that the arbitrator was at fault in that he had "allowed procedure to become the master of justice such that the real issues would not in fact be ventilated in the arbitration if that decision were to stand." With respect to the learned Deputy Bailiff, I must disagree. This was not a case of an arbitrator allowing his own individual considerations of proper procedure to become the master of justice resulting in an event which no reasonable party to that arbitration could have foreseen. The parties themselves envisaged that either the claim or the counter-claim might proceed without a stated defence. The rules which they agreed, put before the arbitrator, and to which the arbitrator was prepared to work, provided for the opportunity for an extension of time (and, by implication, a fair, just and reasonable process by which the granting or refusal of such an extension would be determined). The arbitrator followed that procedure, considered the reasons put forward, and determined that they were inadequate, with the result that the potential residual procedure envisaged by the rules came into operation.
49. Thirdly, in paragraph 40, the Royal Court expressed the view that it considered it unfair that the then Respondent had been driven from the judgment seat. Again I cannot agree. The determination was not merely a discretionary decision of the Arbitrator, it was what had been provided for, quite specifically, by the parties. They had envisaged that justice as between the parties could include being debarred from proceeding with independent answers or with a counterclaim. They had also provided that, notwithstanding the Respondent being so debarred, the claimant would be put to his proof. That is the position which the Arbitrator's decision led to and the Respondent will be entitled to challenge the claim insofar as there are issues which do not appear to be vouched adequately.
50. An arbitration, as has often been said, is not a court of law. The parties choose their arbitrator for the particular qualities which he or she possesses. Often, as here, they agree between themselves and with the arbitrator as to what are the rules to which all should adhere. In my opinion, if the rules are adhered to, if parties are given a fair, impartial and reasonable opportunity of stating their position on the issue to which the rules have to be applied, there is no question of misconduct or of any injustice which would allow the Court to interfere, under Article 26(1) of the Arbitration (Jersey) Law 1998, with the procedure to which the parties have agreed.
Steel JA:
51. I agree and have nothing to add.
Jones JA:
52. I also agree.
Authorities
Arbitration (Jersey) Law 1998.
Glazebrook v Housing Committee [2002] JLR N 43.
Olcott Investments Limited v Mark Amy Limited and Another [1998] JLR 62.
Arbitration Act 1950.
Supreme Court Rules 1999.
Shield Properties & Investments Ltd v Anglo Overseas Transport Co Limited [1985] 1 EGLR 7.
Arbitration Act 1996.
Civil Procedure Rules 2001.
Petroships Pte Limited v Petec Trading and Investment Corp [2001] 2 Lloyd's Rep 348.
Department Advisory Committee on Arbitration Law, Report on the Arbitration Bill February 1996.
Damond Lock Grabowski and Partners v Laing Investments (Bracknell) Limited [1992] 60 BLR 117.
In Re Esteem Settlement [2000] JLR N 41a.
Bulk Oil (Zug) AG v Sun International Limited (No. 2) [1984] 1 Lloyd's Rep 531.
AT & T Corporation and Another v Saudi Cable Company [2000] CLC 1309.
Indian Oil Corporation Limited v Coastal (Bermuda) Limited [1990] 2 Lloyd's Rep 407.
Williams v Wallace & Cox [1914] 2 KB 478.
The Aros [1978] 1 Lloyd's Rep 456.
Moran v Lloyds (1983) 2 All ER 200.
Benaim (UK) Limited v Davies Middleton & Davies Limited [2005] EWHC 1370 (TCC).
Groundshire v VHE Construction [2001] All ER (D) 180.