| Date | 4 April 1996 |
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| Judgment | Vascroft (Contractors) Ltd -v- Seeboard Plc 10 January 1996; 11 BLISS 7 |
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| The Issue | Appealing arbitrator's decisions under JCT contracts. |
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| Implication |
The JCT standard forms provide effective 'pre-consent' to appeal under the Arbitration Act 1979. |
printArbitration continues to suffer from a bad name. It is considered to be slow and costly and has been described as 'litigation in suits'. Many commentators believe that one reason for this state of affairs is the over-readiness of the courts to interfere. One of the central features of the 1979 Arbitration Act was to severely restrict the manner in which appeals could be raised against awards of arbitrators. The previous 'case stated procedure' had been abused to the extent that many arbitrations rapidly became emasculated with a constant ferrying to and from the court. Some lawyers praised this as providing a benefit in the development of the law applicable to construction contracts, arrogant in their assumption that the law was not so much for the advantage of the parties, but for the intellectual pursuit of lawyers. In any event the 1979 Act provided that appeals on questions of law could only be bought with either the consent of all the parties to the arbitration reference or with the leave of the court. Since consent was unlikely to be forthcoming in the majority of cases, the objective was to place discretion as to whether an appeal should be heard in the hands of the court. The Act went on to provide that the court should not grant leave to appeal unless it considered that, having regard to all the circumstances, the determination of the question of law concerned would substantially affect the rights of one or more of the parties to the arbitration. One of the earliest cases dealing with this matter, Pioneer Shipping Ltd -v- BTP Tioxide Ltd (The Nema) (1982) further restricted the right of appeal by requiring that the court should not grant leave unless the subject matter was of general industry-wide interest. In fact, this has been thought to be such a good idea that the new Arbitration Act is set to enshrine these guidelines with statutory force. It is at this point that the JCT and its other related drafting committees created a mischief which many in the industry saw as contrary to the intentions of the 1979 Act. In amendments to the arbitration agreements contained within all the JCT main and subcontract forms, the drafters provided that in entering into contract the parties effectively agreed and consented to an appeal to the High Court on any question of law. Similar amendments were included in the DOM 1 and 2 forms of subcontract issued by the BEC, FASS and CASEC. Although it had always been assumed that this revised wording granted the consent necessary to bypass the need to obtain leave of the court, the matter had never yet been tested until the case of Seeboard -v- Vascroft heard on 10 November 1995. Having heard arguments from both sides, His Honour Judge Humphrey Lloyd QC decided that the JCT provisions, such as clause 38.7 of DOM 2, satisfied the requirements of the 1979 Act. By entering into an arbitration agreement in this form, the parties have in effect created a 'blanket' consent to appeals on points of law, before they are even aware of the existence of a dispute, far less a disputed arbitrator's award. This is much to be regretted. It renders useless clause 1 (4) of the 1979 Act which provides that leave should not be granted unless the determination of the question of law could substantially effect the rights of one or more of the parties to the arbitration agreement. The restrictive guidance contained in 'the Nema' is also made redundant. Section 2 (2) of the 1979 Act will also be without effect. This requires that the High Court shall not entertain an application for leave to appeal any question of law arising in the course of the arbitration reference, unless it is satisfied that the determination of the application might produce substantial savings in costs to the parties. In short, by preventing the court from exercising its discretion as to which appeals may be granted leave, the JCT have created a charter for frivolous appeals. No better example of this can be found than in this particular case. Having decided that he had no choice but to hear the appeal, Judge Lloyd was forced to decide an issue which in his view did not substantially affect the rights of either of the parties. The appellant, when pressed, was unable to demonstrate to his satisfaction how the point affected any of the issues in the arbitration. What was it all about? Well, for the record, clause 14 of DOM/2 requires the subcontractor to notify completion of its works, and if not dissented from within 14 days practical completion is deemed to have taken place. The point in appeal was 'What if the subcontractor fails to notify? The answer? - subcontract completion is deemed to occur at the date of main contract completion, unless of course the matter is referred to an arbitrator for a finding of fact, which is where the appeal, once heard, will automatically return.
CJ-9612
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