Inco Europe Ltd v First Choice Distribution

A court may correct an obvious drafting error by adding, omitting or substituting words only when it is abundantly sure of the provision’s intended purpose, the inadvertent failure to give effect to that purpose, and the substance of the provision Parliament would otherwise have enacted. The correction must remain within the judicial function of interpretation.

Accordingly, section 18(1)(g) of the Supreme Court Act 1981, as amended, applies only to decisions under provisions of Part I of the Arbitration Act 1996 which themselves make provision about an appeal. Silence in section 9 does not remove the ordinary right to seek permission to appeal from a decision on an arbitration stay application.

In Inco Europe Ltd v First Choice Distribution, the plaintiffs claimed damages for the loss of nickel cathodes during carriage from Rotterdam to Hereford. One defendant, Steinweg, sought a stay under section 9 of the Arbitration Act 1996, relying on an agreement for arbitration in the Netherlands. Judge Hegarty QC dismissed the application because he considered the arbitration agreement null and void or inoperative, and he refused permission to appeal.

The Court of Appeal, in a decision reported at [1999] 1 All E.R. 820, held that it had jurisdiction, granted permission to appeal, allowed the substantive appeal and stayed the proceedings against Steinweg. The plaintiffs appealed only on jurisdiction. The question for the House was whether section 18(1)(g) of the Supreme Court Act 1981 excluded an appeal from a High Court decision under section 9.

1. Appeal dismissed unanimously. Lord Nicholls of Birkenhead delivered the leading speech. Lord Jauncey of Tullichettle, Lord Steyn, Lord Clyde and Lord Millett agreed with his reasons. The Court of Appeal had jurisdiction to entertain the appeal from the decision under section 9 of the Arbitration Act 1996.

2. Per Lord Nicholls, section 16(1) of the Supreme Court Act 1981 was the source of the Court of Appeal’s jurisdiction over High Court decisions. Section 18(1)(g), in its original form, merely brought forward the restrictions already imposed by the Arbitration Act 1979. The phrase “except as provided” meant except as envisaged or permitted by that Act; it did not create the right of appeal.

   Part I of the Arbitration Act 1996 followed the same scheme. Where Parliament intended to restrict appeals, it did so expressly, as in section 12(6). Silence about appeals, including the silence in section 9, indicated that no restriction was intended and that appeal rights arising outside the Act remained available.

3. Per Lord Nicholls, section 107 and Schedule 3 of the Arbitration Act 1996 were expressly concerned with consequential amendments. Read literally, paragraph 37(2) would have made a major and non-consequential change by abolishing appeals from all Part I decisions except those made under sections expressly addressing appeals. That result was an obvious drafting error.

   Section 18(1)(g) therefore had to be read as confined to High Court decisions under sections of Part I which make provision concerning an appeal. Section 1(c) did not alter that conclusion. It concerns whether the court should intervene at all, whereas a section 9 application concerns whether existing legal proceedings should continue.

4. Per Lord Nicholls, courts may correct an obvious drafting mistake by adding, omitting or substituting words. They must be abundantly sure of the provision’s intended purpose, the inadvertent failure to implement it, and the substance of the provision Parliament would have enacted. The last condition preserves the boundary between interpretation and legislation identified in Jones v. Wrotham Park Settled Estates [1980] A.C. 74.

   A correction may still be impermissible if it is too extensive or too much at variance with the enacted language, consistently with Western Bank Ltd. v. Schindler [1977] Ch 1. Those inhibitions did not arise here, and all three conditions were fulfilled.

1. House of Lords — Dismissed the plaintiffs’ jurisdictional appeal unanimously and affirmed that the Court of Appeal could entertain the appeal from the section 9 decision.
2. Court of Appeal — In the decision reported at [1999] 1 All E.R. 820, rejected the jurisdictional objection, granted permission to appeal, allowed Steinweg’s substantive appeal and stayed the proceedings against it.
3. High Court — Judge Hegarty QC dismissed Steinweg’s application for a stay under section 9 of the Arbitration Act 1996 and refused permission to appeal.