| Date | 11 March 2008 |
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| Judgment | HM Secretary of State for Foreign and Commonwealth Affairs -v- The Percy Thomas Partnership and Kier International Ltd, ORB 19th January 1998 |
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| The Issue | Whether the Court will exercise its discretion under the 1950 Arbitration Act for the appointment of an arbitrator in the event of inexcusable delay by the Plaintiff. |
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| Implication |
The Court may refuse to appoint an Arbitrator in cases where a Plaintiff has failed to pursue the claim with vigour, notwithstanding that the Defendant may not be able to show prejudice caused by the delay. |
printArbitration and litigation can be extremely lengthy processes, with large cases taking as long as between three to five years to reach judgment. Nevertheless, the Courts are conscious of the need to speed up the process and a number of discretionary powers and procedures are available in the event of delay. In the case of the Foreign and Commonwealth Office -v- Percy Thomas Partnership and Kier International, the Court was asked to assist the Plaintiff in the appointment of an arbitrator following considerable delay. It refused to do so and subject to appeal, has left the Plaintiff in a position where it will be unable to proceed with its claims. The Foreign Commonwealth Office (FCO) engaged the Percy Thomas Partnership (PTP) as architects and Kier as main contractor to build a new British Embassy in Amman, Jordan. The building work was completed in 1987 but shortly thereafter the building was found to have defects including leaking roofs. As always, it was not clear whether the defaults were due to deficiencies in workmanship or design, and the FCO took some time to decide whether it should proceed against architect, contractor, or both. In the event it served a notice of arbitration on PTP in April 1992, and on Kier approximately 1½ years later, but having failed to secure the appointment of an arbitrator in each case, it was not until November 1997 that the FCO issued a summons to the Court for declarations that the matter could properly be heard in arbitration and for the appointment of an arbitrator. The first question to be answered was whether arbitration agreements were incorporated into the relevant contracts. Lawyers acting for both PTP and Kier cited the 1991 case of Aughton Ltd -v- M F Kent. In this case, although the Appeal Court judges had disagreed with each other as to the relevant law, it was held that specific words were required to incorporate an arbitration clause. Mere reference to an arbitration clause found in another contract was insufficient. An arbitration agreement may preclude a party from its right to have a dispute brought before a court. This case appeared to confirm that the Arbitration Act required a written agreement to emphasise and to ensure that a person is not to be deprived of this right, unless he has consciously and deliberately so agreed. Judge Bowsher, however, felt that his decision should be more consistent with commercial practice and common sense. He held that the arbitration agreement would be incorporated by general reference. A more important matter to be dealt with concerned whether the delay in progressing the action by the FCO should be considered sufficient for the Court to refuse to appoint an arbitrator as requested. The Court had first to consider whether it was necessary to show that prejudice had been caused to the defendants as a consequence of the delay. They held that an application for the appointment of an arbitrator may be refused on the ground of delay, even where the respondent to the application could not show prejudice caused by the delay. It was up to the Plaintiff to pursue its claim with vigour. Effectively, the presence or absence of prejudice must be a matter taken into account in exercising the Court's discretion to appoint or refuse to appoint an arbitrator, but its absence was not an automatic bar to the exercise of that discretion. FCO had argued that there had been prolonged "without prejudice" negotiations between themselves and Kier, which had substantially contributed to the delay. The Court considered, however, that this was no excuse for failing to file and serve evidence in support of the proceedings. Indeed Judge Bowsher commented that if that had been done, some greater urgency might have been given to the negotiations. Judge Bowsher recognised that the FCO wished to make substantial claims against the defendants. He acknowledged that if he did not grant the relief sought by the FCO for the appointment of an arbitrator, they would almost certainly be unable to proceed with their claims. In any event, if the court did make the arbitral appointment, it was almost certain that the arbitrator would, at the outset of his or her task, be faced with applications to dismiss the claims for want of prosecution. Perhaps more tellingly, Judge Bowsher acknowledged that if an arbitration proceeded the defendants would now be unable to pass on any damage claims to their sub-contractors. In effect, the FCO had delayed inexcusably the bringing of their case, although it was to be acknowledged that the defendants had done little to shake them into activity. Bearing all these matters in mind, and balancing the interests of each of the parties, the Court refused to exercise its discretion in favour of the FCO, to make an arbitrator's appointment under Section 10 of the 1950 Arbitration Act.
CJ-9809
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