Bond v Mackay & Ors [2018] EWHC 2475 (TCC)

The TCC found that an arbitrator was wrong to decline jurisdiction in the recent case of Bond v Mackay & Ors [2018] EWHC 2475 (TCC).

Background

The third Defendant entered into a deed in June 1994 (“the Deed”) so as to be permitted to run a gas pipeline under the Claimant’s land. Then on 12^th October 2011, the Claimant obtained planning to extract ball clay, sand and gravel on his land.

The presence of the pipelines caused nearby minerals to be sterilised and a dispute arose over the compensation payable to the Claimant. The Claimant’s case was that the Third Defendant was in breach of Clause 2(i) of the Deed.

Clause 2(i) provides that in exercising the easement the Third Defendant had to take all reasonable precautions to avoid obstruction or interference to the Claimant’s land and ‘damage and injury thereto.’

The Claimant outlined its allegations in its correspondence to the Third Defendant. There, it made clear that it was making claims for compensation under Clauses 5 and 6 of the Deed.

The Deed provided for arbitration as a means of resolving the above disputes. There were, however, separate regimes:

(i) Clause 4 provided that a dispute arising under Clause 2 was determined by a single arbitrator to be agreed or appointed by the RICS.

(ii) Clauses 5 and 6 on the other hand provided for disputes arising under those clauses to be referred to a single arbitrator to be agreed or in default of such agreement to the Lands Tribunal.

The parties did not come to an agreement on an arbitrator and the Claimant subsequently applied for an appointment by the RICS. The Defendants disputed jurisdiction on the basis that this was not the correct regime for claims under Clauses 5 and 6. However, Mr Mackay was subsequently appointed by RICS and the Defendants took part in the arbitration.

In that arbitration, Mr Mackay dismissed the claims under Clauses 5 and 6 of the Deed. However, a dispute subsequently arose between the parties in relation to Clause 2(i).

Clause 2(i) provided that in exercising the easement the Third Defendant had to take all reasonable precautions to avoid obstruction or interference to the Claimant’s land and ‘damage and injury thereto’. The Claimant’s case was that the Third Defendant was in breach of Clause 2(i) of the Deed, and it subsequently invited Mr Mackay to determine the dispute under Clause 2(i) on the basis that it could be joined to the arbitration. This was because, ‘there was only in effect only one dispute, the failure of [the Defendants] either to move their pipelines or to pay compensation…’

In Mr Mackay’s second award he found that the dispute over Clause 2(i) was not within the scope of reference for the arbitration. The present case concerns an application from the Claimant under Section 67 of the Arbitration Act 1996 to vary that award on the basis that the dispute over Clause 2(i) did fall within jurisdiction.

It was the Claimant’s case that the Court had to look at the big picture of what the dispute was about: namely liability to pay compensation for the sterilisation of minerals. This was the single dispute between the parties, whether the compensation be under Clause 5, 6 or Clause 2(i).

The Defendant argued that any dispute under Clause 2(i) could not have been referred to arbitration because no reference had been made of a claim under Clause 2(i) in the statements of case for the arbitration. Moreover, no mention of a claim under Clause 2(i) had been made in previous correspondence between the parties prior to the appointment of Mr Mackay. Therefore there was no dispute under Clause 2(i) when matters had been referred to arbitration.

Decision

Mr Jonathan Acton Davis QC, sitting as Deputy High Court Judge, held that the claim for compensation under Clause 2(i) of the Deed fell within the Arbitrator’s jurisdiction and accordingly varied the award.

In coming to his decision, he stressed that the circumstances of the case meant that a broad view of the factual matrix had to be taken, stating ‘this is not a case where there were Terms of Reference as required in a number of the Rules which govern international arbitrations.’

Although the statements of case for the arbitration made no reference to a claim under Clause 2(i), this was held to be irrelevant. It was plain from the statement of case that the subject-matter of the claim was compensation for loss caused by the presence of the pipelines.

As Mr Jonathan Acton Davis QC put it, ‘If the claim is part of the matrix, as it was, the Reference to the Arbitration cannot be reduced by the pleadings.’ The claim under Clause 2(i) was already subsumed within the overall dispute for compensation, hence it fell within the scope of reference.

Comment

The decision in Bond v Mackay is a reminder that in construing the scope of reference for arbitration, the Court is willing to look beyond the words of the notice for arbitration and the pleadings by examining the factual matrix of the dispute.

The dispute which constitutes the scope of reference for arbitration is not confined to a narrow legalistic or formalistic meaning. In this case, the dispute was construed to be about compensation for the sterilisation of minerals caused by the presence of the defendant’s pipes, it was not be identified solely by reference to a claim under Clause 5 or a claim under Clause 6.

In Edmund Nuttal Ltd v R G Carter Ltd [2002] EWHC 400 (TCC), HHJ Richard Seymour QC similarly stated, at [36], ‘what constitutes a dispute between the parties is not only a claim which has been rejected, if that is what the dispute is about, but the whole package of arguments advanced and facts relied upon by each side.’

This was precisely the analysis in Bond v Mackay. The claim under Clause 2(i) had not been pleaded, nor explicitly referred to in correspondence at the time. However, it clearly fell within the subject-matter of the dispute, which was unchanged despite the joining of the new claim into the arbitration.