LC Pallot (Tarmac) Ltd v Gechena Ltd

CourtRoyal Court
JudgeBailhache, Bailiff and Jurats Le Ruez and Quérée:
Judgment Date11 July 1996
Date11 July 1996
Bailhache, Bailiff and Jurats Le Ruez and Qure:

R.A. Falle for the plaintiff;

P.S. Landick for the defendant.

Cases cited:

(1) Dallal v. Bank Mellat, [1986] Q.B. 441; [1986] 1 All E.R. 239; (1986), 130 Sol. Jo. 185, dicta of Hobhouse, J. considered.

(2) Farley (Ernest) & Sons Ltd. v. Takilla Ltd., 1992 JLR 54.

(3) Henderson v. Henderson, [1843-60] All E.R. Rep. 378; (1843), 3 Hare 100; 1 L.T.O.S. 410; 67 E.R. 313, dicta of Wigram, V.-C. followed.

(4) Jones (ne Ludlow) v. Jones (No. 2), 1985-86 JLR 40.

(5) Le Gros v. Housing Cttee., 1974 J.J. 77; further proceedings, 1977 J.J. 59, considered.

(6) Preston v. Preston, [1982] Fam. 17; [1982] 1 All E.R. 41; [1981] FLR 331; (1981), 12 Fam. Law 57; 125 Sol. Jo. 496, considered.

(7) Selby v. Romeril, 1996 JLR 210.

Additional cases cited by counsel:

Cleveland Bridge & Engr. Co. Ltd. v. Sogex (Intl.) Ltd., 1982 J.J. 101.

Cooper v. Resch (formely Cooper), 1987-88 JLR 428.

Duquemin v. Kontrol Ltd., 1985-86 JLR N-2.

Picot (T.A.) (C.I.) Ltd. v. Crills, 1993 JLR 348.

Showlag v. Mansour, 1991 JLR 367.

Text cited:

Pothier, Traits de la Procdure Civile et Criminelle, Part II, Ch. 4, art. 2, at 152 (1825 ed.).

Arbitrationagreement of referencelaw applicableJersey arbitration governed by principles of contract law, determined according to customary sources and English and Jersey case lawprinciple la convention fait la loi des parties applicable

Civil Procedurecostsindemnity basismay award indemnity costs if behaviour of unsuccessful party tantamount to abuse of process, e.g. refusal to be bound by arbitration voluntarily agreed, reneging on agreement to pay award and unjustifiably contesting recovery proceedings

The plaintiff sought to enforce an award made against the defendant in arbitration proceedings.

The parties agreed that the plaintiff firm would undertake certain building work for the defendant company at an agreed price. This work was completed but, according to the defendant, not satisfactorily and it refused to pay. The plaintiff brought proceedings in the Royal Court to recover the sum due but the action was subsequently stayed pending the outcome of arbitration proceedings. Although the parties had agreed to the arbitration, the defendant alleged that it had never been intended to be binding and on the arbitrator's finding substantially in favour of the plaintiff, the defendant refused to pay the sum awarded. There was evidence, however, that the defendant had effectively agreed to pay the award but subsequently changed its mind. As a result of this behaviour, the award remained outstanding and the plaintiff incurred considerable legal costs in pursuing the debt.

On the resumption of the Royal Court proceedings, the plaintiff submitted, inter alia, that (a) having agreed to the arbitration procedure (which was based on English legal principles), the defendant was bound to abide by the outcome and since the arbitration had been properly conducted, the defendant was estopped from challenging the award; and (b) since on the evidence the defendant was clearly liable to pay for the work that had been done but had nevertheless occasioned a great deal of unnecessary costs in attempting to avoid payment, costs should be awarded to the plaintiff on an indemnity basis.

The defendant maintained that it was not liable to pay for the sub-standard work and submitted that on the evidence, it had never been agreed that the parties would be bound by the arbitration. It was accordingly not estopped from challenging the award, which had in any case been improperly made and the court should therefore overturn it, on the principles applicable to arbitration under Jersey customary law, which allegedly required the registration of an award by the court.

Held, giving judgment for the plaintiff:

(1) The defendant was estopped from challenging the arbitrator's award. In the absence in Jersey of any statute governing the law and practice of arbitration, it was to be determined according to the principles of contract law, which were to be found both in customary sources and English and Jersey case law. In the present case, the principle la convention fait la loi des parties bound the defendant to accept the outcome of the arbitration and since there was nothing in the manner in which it had been conducted entitling the court to review the award, it was in the public interest that it be upheld (page 252, line 18 - page 253, line 26).

(2) Furthermore, having originally agreed to the arbitration, the defendant not only later failed to abide by the outcome but also broke its promises that it would pay and contested all attempts to enforce the award, resulting in large and unnecessary legal costs. Since this behaviour was tantamount to an abuse of the process of the court, the plaintiff would be awarded costs on a full indemnity basis (page 253, line 29 - page 254, line 8).

BAILHACHE, BAILIFF: At the beginning of this hearing I invited counsel to consider whether there were ways in which the arguments might be marshalled so as to render the passage of justice shorter. It seemed to me that it was in the interests of justice and, indeed, in the interests of the parties that the court should not be called upon to determine issues and to hear argument upon issues which might not in the event require to be argued, having regard to any conclusion at which the court might arrive.

In this case, the plaintiff is suing upon an arbitration award. The defendant has denied that there was any agreement to enter a binding undertaking to accept the consequences of an arbitration and indeed goes on to challenge the conduct of the arbitration and the reasonableness of the decision at which the arbitrator eventually arrived. The plaintiff replies to those last submissions by arguing that the defendant is estopped from contending that the arbitration was not properly conducted and that the arbitrator's award was unreasonable.

It appears to me that it would not cause injustice to either party if I were to rule that there are two issues upon which the court should adjudicate as preliminary issues. First, was there an agreement between the parties to submit to binding arbitration Secondly, if there was an agreement to submit to binding arbitration, is the defendant estopped from challenging the conduct of the arbitration and the award at which the arbitrator ultimately arrived If the answer to those two questions is in the affirmative then judgment will clearly issue for the plaintiff. If the answer to either of those questions is in the negative then the judgment of the court can only be an interlocutory judgment and argument will have to take place upon the matters raised in the defendant's answer challenging both the conduct of the arbitration and the reasonableness of the arbitrator's award. The court therefore proposes to proceed in that way. I now proceed to give the judgment of the court.

Background The background to this action may be shortly stated. On June 14th, 1991, the plaintiff, L.C. Pallot (Tarmac) Ltd., submitted a quotation to Faramus Forster, otherwise known as Kenneth Ancrum Forster, for resurfacing a roadway and a footpath with related works in the sum of 6,580.12. The nature of the job was specified in the quotation. The quotation was accepted and the work was executed. Mr. Forster was not satisfied with the standard of the work and disputed payment of the plaintiff's account. Proceedings were instituted by the plaintiff against Mr. Forster. In his defence, Mr. Forster asserted, inter alia, that he had contracted with the plaintiff as a director or agent of Gechena Ltd., to which we refer as the defendant, a company of which he and his wife are...

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