E. Pihl and Sons A/S (Denmark) v Brondum A/S (denmark)

• Jurisdiction: Barbados
• Judge: Burgess, J.A
• Judgment Date: 23 October 2013
• Neutral Citation: BB 2013 CA 6
• Docket Number: Civil Appeal 24 of 2012
• Court: Court of Appeal (Barbados)
• Date: 23 October 2013

Court of Appeal

Gibson, C.J.; Burgess, J.A.; Goodridge, J.A.

Civil Appeal 24 of 2012

E. Pihl and Sons A/S (Denmark)

and

Brondum A/S (Denmark)

Appearances:

Mr. Elliott D. Mottley, Q.C. in association with Ms. Andrea Simon of Elliott D. Mottley & Co., Attorneys-at-Law for the Appellant

Mr. Kevin Boyce in association with Ms. Richelle Connell of Clarke, Gittens & Farmer, Attorneys-at-Law for the Respondent.

Contract - Arbitration agreement — Terms — Interpretation.

INTRODUCTION

Burgess, J.A

1 This is an appeal instituted by Notice of Appeal filed 16 April 2012 from the decision of Worrell, J. made on 30 March 2012. The major bone of contention in the appeal is with the order of Worrell, J. that a sole arbitrator be appointed to resolve a dispute between the two parties to a construction contract, E. Pihl & Sons A/S (Denmark), the appellant, and BrØndum A/S (Denmark), the respondent. The appellant maintains that by virtue of the terms of their contract, the Court's order should have been for the appointment of three arbitrators.

2 This appeal is, we suspect, not without interest to commercial lawyers in Barbados for at least one good reason. It is that the appeal involves, apparently for the first time in Barbados, a consideration of Lord Hoffman's well-known restatement of the fundamental principles of contract interpretation in the English House of Lords case of Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 WLR 896 at 912–13 (Investors Compensation Scheme) in the context of an arbitration clause making provision for the appointment of arbitrators under the Arbitration Act, Cap. 110 (Cap. 110).

3 It appears that Investors Compensation Scheme was not cited before Worrell, J. and it was not mentioned or discussed in his judgment. In this Court, however, counsel on both sides accepted that the Investors Compensation Scheme principles represent the gold standard in modern contract interpretation in common law jurisdictions such as ours and the consequent need for guidance from this Court on these principles in our jurisdiction.

FACTUAL BACKGROUND

4 In our judgment, it is advantageous to begin by situating this appeal in its relatively uncomplicated factual background.

5 On 29 November 2002, the appellant and the respondent entered into a sub-contract agreement to carry out certain works relating to the rehabilitation and expansion of the Grantley Adams International Airport. By clause 18 of the sub-contract, the appellant and respondent agreed to settle disputes arising under the sub-contract in accordance with clause 20.6 of the main contract.

6 Clause 20. 6 provided as follows:

• “Unless settled amicably, any dispute shall be finally settled by arbitration. Such arbitration shall be in accordance with the Arbitration Act of Barbados, CAP 110 or the relevant laws for the time being in force in Barbados by one or more arbitrators appointed under such Act.”

7 A dispute arose under the sub-contract between the appellant and the respondent. Let us quickly interpose that the details of this dispute are not relevant to the issue to be determined in this case.

8 By a letter dated 23 September 2009, the respondent gave notice to the appellant requesting and requiring it to concur with the respondent in appointing a single arbitrator since, in the express words of the letter, “[s]ection 8 of the Arbitration Act, Cap. 110 of the Laws of Barbados provides that any such references to arbitration shall be by a single arbitrator”. To this letter, the appellant replied by an email dated 15 October 2009 informing the respondent that it disagreed with the appointment of a single arbitrator and asserting that the “arbitral tribunal should consist of no less than three arbitrators”.

9 The respondent replied to the appellant's email by letter dated 19 February 2010. In this letter, the respondent expressed the opinion that the “reference to ‘one or more arbitrators’ in the contract [was] not a contrary intention” as contemplated by section 8 of Cap. 110. It further stated that that phrase “[a]t its highest…can be no more than an option requiring the agreement of both parties to appoint more than one arbitrator”. For these reasons, it advised that it did not agree with the appointment of a tribunal of three arbitrators. Finally, it informed the appellant that given its “failure to concur in the appointment of an arbitrator…we have now proceeded in accordance with Section 12 of the Arbitration Act, Cap. 110 to apply to the High Court of Barbados to secure the appointment of an arbitrator”.

10 In fact, by an application filed on 19 January 2010, the respondent had sought an order for the appointment of either Mr. Jonathan Douglas or Mr. Steward Kennedy to act as the sole arbitrator for purposes of the arbitration. The application was supported by the affidavit of Knut Haralad Kristiansen, contract manager of the respondent. On 8 October 2010, Jacob Ravn, head of the legal department of the appellant, filed an affidavit in response to the respondent's application objecting to the appointment of a single arbitrator and contending that pursuant to the terms of clause 20.6 of the main contract three arbitrators may be appointed.

WORRELL, J'S JUDGMENT

11 The application was heard on 22 October 2010 before Worrell, J. On 30 March 2012, he delivered his judgment in which he ordered the appointment of a single arbitrator. His reasons for so ordering are at the heart of this appeal and demand a full review.

12 At para [4] of his judgment, Worrell, J. identified the main issue before him as “whether a sole arbitrator or three arbitrators should be appointed”. At paras [5], [6] and [8] of his judgment, he explicated this issue as follows:

• “[5] The clauses under consideration, Clause 18 of the sub-contract and Clause 20.6 of the main contract both provide for arbitration by one or more arbitrators. The claimant contends that such a provision means that there can either be one arbitrator or more. What in essence does the word “more” mean especially since, to the Court's mind, it obviously can mean and also does mean a number greater than one. But this has the effect of creating ambiguity. The(r)e (sic) has been the failure by the parties to provide an alternate number. What then is the Court to do when such ambiguity arises?

• [6] The claimants contend that in such cases of ambiguity the dispute should be referred to a single arbitrator in accordance with the provisions of Section 8 of the Arbitration Act. Cap 11(0)-(sic) of the Laws of Barbados.

• [8] The defendant on the other hand contends that a mode of reference has been provided in Clause 20.6 of the main contract in that it states that any dispute shall be finally settled by arbitration in accordance with the act by one or more Arbitrators. The contention here is that this means either one arbitrator or more than one arbitrator may be appointed to adjudicate any dispute arising between the parties to the contract. In short, the defendant submits that Section 8, of the Arbitration Act does not apply in this case as a contrary intention has been expressed within the meaning of Section 8 of the Act by the provision of a mode of reference for the Arbitration within one sub-contract.”

It may be useful to be reminded here, that Section 8 of Cap. 110 itself provides that:

“Unless a contrary intention is expressed therein, every arbitration agreement shall, where no other mode of reference is provided, be deemed to include a provision that the reference shall be to a single arbitrator.”

13 Plainly, then, following Worrell, J's explication, determination of the main issue identified by him depended upon the proper interpretation of clause 20.6 of the main contract. How did he approach this determination?

14 Paras [10] to [15] of his judgment read together open a convenient window to the answer to this question. He stated there:

• “[10] To this Court what there has been is a provision of a contractual procedure for the appointment of an Arbitral tribunal, that is “one or (sic) more Arbitrators” as set out in Clause 20.6.

• [11] Has that contractual procedure failed? That question can only be answered in the affirmative as clearly these proceedings illustrate this and also the correspondence flowing between the parties.

• [12] Clearly there must follow that there has been ambiguity in the Arbitration Clause…The phrase one or more Arbitrators is clearly ambiguous and fraught with confusion.

• [13] In effect it really cannot be said that the parties have done anything more than to agree to go to arbitration as their procedure for the appointment of the tribunal has failed and they are in disagreement on the steps to be taken now that “contractual procedure for the appointment of an arbitrator has failed”.

• [14] Having perused that (sic) authorities for which I thank counsel on both sides, this Court is of the opinion that the case of ATLANSKA PLOVIDBA v. CONSIGNACIONES AUSTURIANAS SA (2004) EWHC 1273 (COMM.) is extremely helpful. Clearly the parties in the present case have not agreed to the number of Arbitrators. It is at this point that Section 8 of the Arbitration Act comes alive because of the ambiguity created in Clause 20.6 of the main contract.

• [15] Accordingly, I held (sic) that the arbitration agreement can only be considered as having provided for the reference to a single arbitrator. In the circumstances if (sic) this case as evidence (sic) from the correspondence between the parties, the claimant and the defendant do not concur in the appointment of an Arbitrator.”

15 It is manifest from the foregoing that, although he did not expressly say so, two critical principles guided Worrell, J. in approaching the interpretation of clause 20.6. The first is that the words of that sub-clause were to be interpreted literally. Thus, he focused with laser-like...