Law Report: Arbitration appeal can be struck out despite lack of prejudice: Secretary of State for the Environment v Euston Centre Investments Ltd - Court of Appeal (Lord Justice Dillon, Lord Justice Steyn and Lord Justice Waite), 24 June 1994

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An application under section 1 of the Arbitration Act 1979, for leave to appeal to the High Court against an arbitration decision, could be struck out for want of prosecution notwithstanding that the delay involved had neither caused nor was likely to cause serious prejudice to the other party.

The Court of Appeal so ruled, as a matter of principle, while deciding in the present case that it would be inappropriate to strike out an application by the tenant, the Secretary of State for the Environment, for leave to appeal on a point of law against a rent review arbitration decision of 28 May 1992 in favour of the landlord, Euston Centre Investments Ltd. Their Lordships accordingly allowed the tenant's appeal against the decision of Mr John Cherryman QC, sitting as a deputy High Court judge ((1994) 1 WLR 563) who had struck out their application for want of prosecution.

Arbitration matters are usually assigned to the Commercial Court. But an application for leave to appeal in a rent review arbitration is normally transferred to the Chancery Division. In this case, there was a lapse in Commercial Court management. The question of transfer was left in abeyance for some nine months. The matter was transferred on 19 March 1993, the tenant's solicitor was only informed on 29 April, and, following discussions between solicitors in June and July, a hearing date was eventually fixed, on 19 August, for 2 December 1993. But on 24 November 1993 the landlord's solicitor applied for, and on 2 December the judge granted, an application to dismiss the tenant's application for want of prosecution.

Jonathan Gaunt QC and Erica Foggin (Treasury Solicitor) for the Secretary of State; Michael Barnes QC and John Male (SJ Berwin & Co) for Euston.

LORD JUSTICE STEYN said it was manifest the High Court had inherent power to strike out for want of prosecution an application for leave to appeal under section 1 of the 1979 Act or an appeal under that section. The question was whether the principles to be applied were those set out in Birkett v James (1978) AC 297, (1977) 2 All ER 801, and in particular the requirements as to prejudice to the other party.

Following Birkett v James, the court should only strike out proceedings on the ground of inordinate and inexcusable delay by the plaintiff if such delay gave rise to a substantial risk of unfairness or serious prejudice to the defendant. Mr Gaunt submitted that this applied to civil litigation generally and the only question was whether the Arbitration Act 1979 displaced it by implication.

That was the wrong approach. Birkett v James should not be read like a statute. The objective of the 1979 Act was to reduce the scope of the supervisory jurisdiction of the English courts. It aimed to promote speedy finality in the enforcement of arbitration awards.

It was of supreme importance to the proper working of the system that there be an effective procedure to ensure that applications for leave were promptly made. That was the policy of the 1979 Act. If Birkett v James were applied to applications under section 1 of the Act it would seriously undermine the ability of the Commercial Court to carry out the policy of the Act to ensure prompt action by applicants. But like the judge, his Lordship rejected that submission.

That left the question of discretion. In the present case there were substantial and culpable delays. On a proper reading of para 7.2 of the Guide to Commercial Court Practice (annexed to Order 72 of the Rules of the Supreme Court), the applicant should have applied for a hearing date within days rather than weeks. That would have triggered the transfer to the Chancery Division.

But there were several factors which persuaded his Lordship that the judge exercised his discretion wrongly. Given the wording of para 7.2 there might have been scope for misunderstanding in cases where the question of transfer might arise. There had until now been no clear authority that Birkett v James was inapplicable. It would be unjust in a case where such uncertainties existed and where the delay was partly caused by administrative error by Commercial Court staff, to strike out the application, though no such indulgence would be appropriate in future. Paragraph 7.2 ought now clearly to spell out that the duty to apply promptly for a hearing date existed even if the case might be transferred. LORD JUSTICE DILLON and LORD JUSTICE WAITE concurred.