Anderson v G H Michell and Sons Ltd [1941] HCA 30

Anderson v G H Michell and Sons Ltd [1941] HCA 30 - HCA 1941 case summary — Zoe

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the suit. The party may by suing expose himself to an action for © oF A. breach of his contract to refer but, having regard to the measure of cae damages, that is a risk which he could lightly encounter. TEE Apart from the statutory power of staying an action, the most ne: express agreement to refer to arbitration and not to litigate could oe not prevent recourse to the courts or exclude their jurisdiction ; & Soxs Lrv. that is, where the liabilities in question are absolute: Cf. Re Smith Rich ACJ. & Service and Nelson & Sons (1), per Bowen L.J.; Doleman & Sons Mee v. Ossett Corporation (2), per Fletcher Moulton U..J. But that assumes the existence of a complete cause of action, of a liability ripe for enforcement. A contract so framed that it would produce no unconditional liabilities, no liabilities which did not depend upon the award or determination of arbitrators, referees or other third parties gives, unless renounced, no complete cause of action until an award or determination has been obtained. Such a contract is considered not as attempting either to impose a restraint upon the enforcement by legal process of actionable rights or to exclude the jurisdiction of competent courts, things bad on grounds either of repugnancy or of public policy, but as doing no more, and no less, than deferring the conditions under which a contractual right shall arise, a matter governed by the intention of the parties. The obligation undertaken by a contracting party may be to pay a sum ascertained or fixed by a specified person or upon his certificate that certain events have happened or certain conditions have been fulfilled, or it may be to pay only when, if there be a' dispute, it has been settled in some appointed manner, as by arbitration. In all such cases, since the jurisdiction of the courts is to enforce rights and obligations according to their tenor, and since without a complete "cause of action no action will lie, the intention of the parties is carried into full effect, and no question is regarded as arising as to the prin- ciple that the jurisdiction of the courts may not be ousted by agree- ment or the principle that an agreement to refer to arbitration is not enforced specifically but only by an action of damages for breach. The basal distinction is between, on the one hand, the constituent facts and conditions forming the title to substantive rights and, on the other hand, the jurisdictions and remedies provided by law for the enforcement of those rights. Where contract is the source whence substantive rights arise it would be to go beyond the agreement of the parties if a liability, which according to their expressed intention is to be inchoate until arbitration, were treated as unconditional and actionable, though no arbitration had taken

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, on application of either party. Any reference to arbitra- tion to be demanded within fourteen days of final landing of the jute." It is to be noticed that the action was brought not for damages as for breach, but for a "fair allowance " as stipulated, and that the "fair allowance" had not been agreed or fixed. Further, the contract required that the inferiority should be found on final landing, and it required that arbitration should be demanded within fourteen days of final landing. Arbitration had not been demanded until after the expiration of that time. What, as we understand it, the Court decided is that the " fair allowance " must in case of dispute be fixed by arbitrators, that is to say, it was a contract to pay what the arbitrators considered a fair allowance and not what, according to the findings of a judge or a jury, was a fair allowance. Cockburn C.J., whose judgment alone is reported, said :

"Tt appears to me that there is here no separate agreement to refer to arbitration, but the whole contract must be read together. One term of the contract is that a fair allowance is to be made for inferior quality, but no complaint about quality is to be entertained, and no allowance to be made, unless the reference to arbitration, which is the remedy provided for the settlement of such a complaint, be demanded within fourteen days of the landing of the jute" (1). It will be seen that (a) it is the combination of the provision as to a fair allowance with the arbitration clause and the time limit that led to the conclusion that no allowance for inferior quality was recoverable unless settled by arbitration, and (6) the conclusion is confined to complaints of inferior quality, and does not extend to disputes about other matters. In Pinnock Bros. v. Lewis & Peat Ltd. (2) Roche J., as he then was, expressed the view that the decision was based upon terms in the contract which are not set out in the reported statement of the facts. + It is true that at least two para- graphs of the defence which might be expected to refer to the contract are omitted from the report, and apparently Roche J. thought that the statement of Cockburn C.J., that no complaint about quality was to be entertained and no allowance made unless &c., was founded upon some express term of the contract. But, however this may be, the case does no more than provide a further

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must fail because ae dicks had not claimed arbitration or & Sons Lrp. appointed an arbitrator within three months of the final discharge of pin aca, the vessel. The charter contained an arbitration clause which con- 2383. cluded as follows : - " Any claim must be made in writing and claimants' arbitrator appointed within three months of final discharge and where this provision is not complied with the claim shall be deemed to be waived and absolutely barred.' In the House of Lords this was construed as meaning that a "cause of action shall not be complete . . . unless the specified conditions have first been satisfied " (per Lord Swmmner (2), in whose opinion Lords Buck- master, Atkinson and Carson concurred). But because of the restric- tion of liability which would result from the time bar the clause was construed as not operating upon the underlying condition of sea- worthiness, The Court of Appeal (3) had regarded the provision that non-compliance meant waiver as against public policy, because, as Lord Sumner explains, they regarded it as meaning that the charterer was to have no access to His Majesty's courts for raising his claim. . Thus the question was not between arbitration as a condition precedent and a collateral agreement for arbitration; but between an invalid attempt actually to exclude jurisdiction or, at all events, recourse to the courts, and arbitration as a condition precedent. Plainly the case turned entirely on the express statement that the claim should be deemed to be waived and absolutely barred. Lord Dunedin's opinion contains some expressions which ought not, perhaps, to be read too literally - See per Scrutton L.J. in Czarnikow v. Roth, Schnudt & Co. (4) - but they do not affect the present case. In Ayscough v. Sheed Thomson & Co. Ltd. (5) no question arose, or was referred to, with respect to the distinction between arbitration as a condition precedent and a collateral agreement for arbitration, but incidentally the meaning was considered of a provision that a refer- ence with respect to the quality of goods should be claimed within three days after the landing of the goods sold or after the sighting of the draft or of the received invoice. The three days had expired, but afterwards the parties signed submissions referring the dispute to arbitrators, and they dismissed the claim on the ground that it

At a glance

Court

Decision date

Before

Source

Judgment (88 paragraphs)

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