Ahamad Al-Nami v. Islamic Press Agency Inc.
(England and Wales) Supreme Court of Judicature (Court of Appeal),
Waller, Chadwick LJJ., 28th January 2000.
Application to stay proceedings
pending arbitration - s. 9 Arbitration Act 1996 - inherent
jurisdiction to stay proceedings - principles that court should apply
when deciding whether existence of arbitration clause and its ambit
should be determined by the court or by an arbitrator - Birse
Construction Ltd v. St David Ltd [1999] BLR 194 considered.
Facts:
The Claimant was engaged by the Defendant to carry out certain
building works on the terms of the JCT Agreement for Minor Building
Works (1980 edition) ("the Minor Works Agreement"). Article
4 of the Minor Works Agreement provided for the arbitration of
disputes. Subsequently, the Claimant carried out further works (the
second fix) for the Defendant. Disputes arose between the parties. The
Claimant, who was unable to obtain legal aid for arbitration
proceedings, commenced proceedings by action in court, contending that
the second fix works were carried out under a separate oral agreement,
which was not governed by the arbitration clause in the Minor Works
Agreement. The Defendant applied to stay these proceedings pending
arbitration, contending that the second fix works were carried out
under the Minor Works Agreement and the disputes were covered by the
arbitration agreement in article 4.
The judge stayed the proceedings. But, in doing so, he refused to
decide whether the matters which where the subject matter of the
action in court were covered by the arbitration agreement relied on by
the Defendant and left this question to be decided by the arbitrator.
The Plaintiff appealed. It was common ground that, by virtue of s. 31
of the Legal Aid Act 1998, it was the duty of the court to resolve any
issue between the parties without regard to the fact that one of them
was legally aided, this principle having been confirmed, albeit in the
context of the Arbitration Act 1950, now repealed, in Edwin Jones
v. Thyssen (Great Britain) Ltd (1991) 57 BLR 116.
Held:
The appeal would be dismissed.
Subject only to the one point on which his decision was reversed by
the Court of Appeal in Birse Construction Ltd v.
St David Ltd [1999] BLR 194 the correct approach to applications
for a stay under s. 9 of the Arbitration Act 1996 and RSC Order 73
Rule 6 was as stated by the first instance judge in that case.
1. The court could determine, on the basis of the affidavit
evidence filed, that an arbitration agreement had been made between
the parties. If so, the proceedings should be stayed.
2. The court could stay the proceedings on the basis that the
arbitrator should decide, pursuant to s. 30 of the Arbitration Act
1996, whether or not there was an arbitration agreement between the
parties.
3. The court could decide not to determine the question
immediately, but rather order that it be tried as an issue pursuant
to RSC Order 73 Rule 6(2).
4. The court could determine that there was no arbitration
agreement between the parties, and dismiss the application to stay.
If it was clear, on the affidavit evidence, that a contract did or
did not exist, then the court should so decide. In such circumstances,
it would not be right to order an issue under Order 72 Rule 6(2) or
leave that question to be determined by the arbitrator.
Section 30 of the Arbitration Act 1996, was not mandatory and did
not mean that the court always had to refer a dispute about whether an
arbitration agreement existed to the tribunal whose competence was,
itself, disputed. The dominant factors to consider in deciding what to
do were the interest of the parties and the avoidance of unnecessary
delay or expense. There would be cases where it was right to defer the
decision, particularly, for example, if the determination of whether
or not a contract was made also embraced the determination of the
scope of the contract and its ingredients. In some cases, it might be
better for the court to act under Order 73 Rule 6. In other cases, it
might be appropriate to leave the matter to be decided by an
arbitrator. But the latter course was likely to be adopted only where
the court considered that it was virtually certain that there was an
arbitration agreement or if the only dispute was about the ambit and
scope of the arbitration agreement.
A matter that the court also had to consider was the likelihood of
a challenge to the arbitrator's award on jurisdiction under s. 67 or
s. 69 of the Arbitration Act 1996. It could not be in the interests of
the parties to have to return to the court to get a definitive answer
to a question that could and should have been decided by the court
before the arbitrator embarked on the meat of the reference. Azov
Shipping Co v. Baltic Shipping Co [1999] 1 Lloyd's Rep 68
supported the view that the court should decide questions relating to
the existence or terms of the arbitration agreement for, otherwise,
there was a real danger that there would be two hearings. The first
before the arbitrator under s. 30 of the Arbitration Act 1996, the
second before the court on a challenge under s. 67 of the Arbitration
Act 1996.
If the court decided that it should determine whether the matters,
which were the subject of the action, were encompassed by an
arbitration clause and there was a triable issue then, unless the
parties agreed that this should be resolved on affidavit evidence,
directions should be given for trying that issue.
Since the equivalent of Order 72 Rule 6(2) now appeared in CPR Part
49, paragraph 6.2 in almost identical terms, it would seem that the
approach should remain the same although, under the CPR, the court had
a wider discretion to rule what evidence it needed to decide a
particular point. Nevertheless, it was unlikely, in the absence of
agreement between the parties, that issues should be tried on witness
statements alone. A court which (a) formed the view that there were
triable issues relating to facts that were material to the
jurisdiction question, (b) had an application before it to
cross-examine the makers of those statements and (c) had decided that
the court, as opposed to an arbitrator, should resolve the matter,
would be unlikely to do other than direct a trial of the issue.
The other point to be made in respect of the above approach was
that the court had an inherent power to stay proceedings. On a proper
construction of s. 9 of the Arbitration Act 1996 it could be said with
force that a court should be satisfied (a) that there was an
arbitration clause and (b) that the subject of the action was within
in that clause, before it could grant a stay under that section.
Nevertheless, a stay under the court's inherent jurisdiction might be
sensible where the court could not be sure of these matters but could
see that good sense and litigation management made it desirable for an
arbitrator to consider the whole matter first. For example, where the
court thought that it would take a trial with oral evidence to decide
whether matters that were the subject of the action were within the
scope of an arbitration clause, but considered that it was likely they
would, on detailed inquiry, be found to be and an arbitration was
bound to take place in relation to some issues. In such a case, the
risk that the matter might come back to the court under s. 67 of the
Arbitration Act 1996 would often be worth taking.
This was the view that the first instance seemed to have taken in
this case and, but for one factor, his decision would not be
criticised. The one factor was that the parties had agreed that the
question of whether the arbitration clause applied to the matters,
that were the subject of the action, should be determined by the court
on affidavit evidence. If the parties agreed to this, the court should
seek to do so in the interests of effective case management. Moreover,
even if the parties did not agree to the court proceeding in this way,
it could, depending on how important any factual disputes appeared to
be to the resolution of the jurisdiction question, be worth the court
exploring with the parties whether they would agree or, if the
disputes on fact seemed immaterial, using the powers under CPR Rule
32.1.
The Court of Appeal, at the request of both parties, considered the
jurisdictional question on the basis of the affidavit evidence. It
concluded that there was not a separate oral contract for some of the
second fix works, and that the terms of the Minor Works Agreement,
including the arbitration agreement in article 4, applied to both the
first fix and all the second fix works.
For the Claimant/ Appellant: Mr M Black QC and Mr R Higgins
(instructed by Messrs Bowling & Co).
For the Respondent: Mr J Randall QC and Mr P Stansfield(instructed
by Messrs Masons).
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