Building contract–Whether dispute should go to arbitration–If there is a question whether an arbitration term exists, that must be determined on the hearing of the application for a stay–Passage in Russell on Arbitration criticised–On facts, an arbitration term did exist–Order made staying action
This was an
appeal by Limmer & Trinidad Co Ltd, of Croydon, Surrey, defendants in an
action in which Modern Building Wales Ltd, of Caerphilly, Glamorgan, claimed
damages for breach of contract, from an order of Kerr J in chambers on November
20 1974 rejecting an application for a stay of further proceedings in the
action pending arbitration.
Mr P Miller
(instructed by M E Brown) appeared for the appellants, and Mr R Akenhead
(instructed by Freedman & Co) represented the respondents.
Giving
judgment, BUCKLEY LJ said that the court had been told that the ground upon
which the judge made his order was that he considered there was a doubt whether
the contractual document on which the respondents were suing, a written order
dated December 18 1968 for the supply of certain labour, plant and machinery,
imported by reference a form of contract between contractor and subcontractor
which had in it an arbitration clause, and possibly that there was a further
doubt whether, if that form of contract was imported at all, that part of it
which contained the arbitration clause was a part which was so imported. The
court’s attention had been drawn to a passage in Russell on Arbitration,
18th ed, p 153, which stated, ‘Any doubt about the written submission being
quite clearly established is . . . a sufficient reason for the judge’s
exercising his discretion against a stay.’
The respondent
plaintiffs were head contractors under a contract with the Taf Fechan Water
Board for the construction of a building at Nelson, Glamorgan. On September 4
1968 the defendant company, who were nominated subcontractors for the purpose
of putting in some suspended ceilings in the building, delivered a quotation to
the architects for that work in the sum of £5,018. On December 18 1968 the
plaintiff company placed an order, referring to that quotation, for the supply
of ‘adequate labour, plant and machinery to carry out complete the ventilated
and non-ventilated ceilings at the above contract within the period stipulated
in the programme of work and in accordance with the appropriate form for
nominated subcontractors (RIBA 1965 edition).’
It was common ground that the effect of this document was to constitute
a contract between the plaintiff company and the defendant company as
contractors and subcontractors respectively in respect of the work detailed in
the quotation. It transpired, however, that in fact the RIBA did not have a
form of contract between a contractor and a nominated subcontractor, nor indeed
did they have any form of contract which existed in a 1965 edition, so that the
words in brackets in the order were inappropriate language. The head contract
was in a form issued under the sanction of the RIBA and various other bodies.
There was in existence a form of contract intended to be used by contractors
and nominated subcontractors when contracting inter se, but that was a
form which was put out not under the authority of the RIBA but under that of
the National Federation of Building Trades Employers and the Federation of
Associations of Specialists and Subcontractors, also being approved by the
Committee of Associations of Specialist Engineering Contractors. That form of
contract had been referred to in the argument as the ‘green form.’
The plaintiff
company issued a writ claiming damages for breach of contract between
themselves and the defendant company. The endorsement on the writ had been
amended, and the claim for damages was now set out in very considerable detail
and amounted in total to £10,284. It was mainly, if not entirely, based on the
contention that the defendants failed to do the work which they were obliged to
do in due time. The plaintiffs launched an application under order 14 for
summary judgment. That was countered by the defendants with an application for
a stay of the action on the ground that the written order incorporated the
green form of contract and that the green form of contract contained an
arbitration clause. The application was therefore to stay proceedings in the
action pending the dispute being referred to arbitration. The defendants put in
an affidavit in support of that application in which they denied that they were
in breach of contract. The application was further supported by an affidavit of
Mr R C Atkins, contracts administrator of a company which was a wholly-owned
subsidiary of Tarmac Ltd, the parent company of the defendant company. His
evidence could be accepted as that of an expert on the subject. He said that he
had no doubt that anyone in the industry would understand the words ‘in
accordance with the appropriate form for nominated subcontractors (RIBA 1965
edition)’ to refer to what was known as the green form. He drew attention to
the fact that the green form was headed ‘for use where the subcontractor is nominated
under the 1963 RIBA form of main contract,’ and said that it was correct that
there was no 1965 edition; there was only a 1963 edition of the green form, and
he would understand that that was the document intended to be referred to.
The question
the court had to decide was whether this was a case in which there was an
arbitration agreement between the parties, in which event the action should be
stayed pending arbitration, or whether it was not. It had been argued by Mr
Akenhead on behalf of the plaintiffs that there was a doubt as to whether the
green form was or was not imported. Counsel said that where a doubt existed
there was a good ground for the judge exercising his discretion under section 4
of the Arbitration Act 1950 in such a way as to allow the action to go on. He
relied upon the decision of the Court of
[1943] 2 All ER 763. It was clear that what the court was there deciding was
that it was not established that there was any contract containing an
arbitration clause between the two parties to the action. In his (Buckley LJ’s)
judgment, that case was not authority for anything further than this, that in a
dispute in which a party who sought a stay failed to prove that there was an
arbitration agreement in force between the parties he could not get a stay.
That seemed to be a fairly obvious proposition, and he (his Lordship) thought
that the way the matter was stated in Russell on Arbitration was
misleading. It was not sufficient, in his judgment, for a party who resisted a
stay merely to say, ‘Well, there is some doubt as to how the contract between
the parties should be construed, and therefore it is proper for the court in
the exercise of its discretion to refuse a stay.’ On the contrary, in his judgment, when an
application was made by one party on the ground that there was in operation an
arbitration agreement, it was incumbent upon the court to discover whether or
not there was such an agreement in force, and if that involved determining a
question of construction, then such question of construction must be decided
there and then. The question clearly had to be decided at an interlocutory
stage, because it had to be decided before the defendant took any further step
in the action.
In the present
case, therefore, the court had to ask whether on the language of the order of
December 18 the arbitration clause in the green form was or was not imported
into the contract. Mr Akenhead had said that there were various ways in which
that order could be construed which would result in its being held that the
arbitration clause was not so imported. He (counsel) contended first that the
words in brackets, ‘RIBA 1965 edition,’ were really nonsensical, and that the
whole of the importation clause in the order form was therefore of no effect at
all. The words were, however, just an added definition which turned out to be
factually inaccurate, and in accordance with the ordinary procedure where there
was a misdescription of that character, the court disregarded what was
inaccurate and inapplicable and proceeded upon that which was appropriate and
intelligible and on what were evidently intended to be the governing words of
definition. The right way to construe this order form was to ignore the words
in brackets altogether as being a falsa demonstratio and to accept that
the reference to the appropriate form for nominated subcontractors was a
reference to the green form, that being the only form to which it was suggested
those words could apply. Mr Akenhead’s next contention was that reading the
document as a whole, one could not find that the parties had shown a firm
intention that all the terms of the green form should be imported. He (counsel)
submitted that the language was only appropriate to include those clauses of
the green form which could be said to relate to the supply of labour, plant and
machinery. But the words ‘in accordance with the appropriate form for nominated
subcontractors’ appeared to him (his Lordship) to be fully wide enough to introduce
all the terms of the green form. Counsel had suggested that the written
contract bore insufficient indication as to how various matters which were left
in blank in the green form of contract, and in particular in the appendix to
that contract, relating to such matters as the completion period and the
retention money, should be filled in. But where parties by an agreement
imported the terms of some other document as part of their agreement, those
terms must be imported in their entirety, subject only to this, that if any of
the imported terms in any way conflicted with the expressly-agreed terms the
latter must prevail over what would otherwise be imported. It followed that the
court must proceed on the basis that there was here a bona fide dispute
between the parties coming within the terms of the arbitration clause in the
green form.
ORMROD LJ
agreed, and the appeal was allowed with costs. An order was made that further
proceedings in the action be stayed pursuant to section 4 of the Arbitration
Act.
