Inco Europe Ltd and Others v. First Choice Distribution (A Firm) and Others

The House of Lords held that an appeal to the Court of Appeal does lie from a High Court decision under section 9 of the Arbitration Act 1996 unless the particular provision in Part I under which the decision is made expressly restricts or excludes appeals. The literal wording of the consequential amendment to section 18(1)(g) of the Supreme Court Act 1981 (by paragraph 37(2) of Schedule 3 to the Arbitration Act 1996) was treated as a drafting error. The correct construction confines the amendment to carrying forward only those appeal restrictions expressly contained in Part I of the 1996 Act.

Key legal principles: (1) section 9 of the Arbitration Act 1996 does not itself restrict appeals; (2) where the draftsman expressly restricted appeals elsewhere in Part I, that restriction applies; (3) courts may, in plain cases of obvious drafting mistakes, read words into statutes to give effect to Parliament's intention, subject to established safeguards (intended purpose, inadvertent failure, and clarity about the substantive provision Parliament would have enacted).

Background and facts:

The plaintiffs issued proceedings in the High Court claiming damages for loss of cargo. One defendant applied under section 9 of the Arbitration Act 1996 for a stay of those proceedings on the ground that the parties had agreed to arbitrate the dispute in the Netherlands. The High Court (His Honour Judge Hegarty Q.C.) dismissed the section 9 application, holding the arbitration agreement to be null or inoperative. The defendant sought permission to appeal; permission was refused by the judge. The defendant renewed the application to the Court of Appeal which granted permission and allowed the appeal, staying the proceedings. The plaintiffs appealed to the House of Lords on the jurisdictional point whether an appeal lay to the Court of Appeal from a High Court decision under section 9.

Nature of the application:

• An application for a stay of proceedings under section 9 Arbitration Act 1996, and the subsequent interlocutory appeals concerning jurisdiction to hear an appeal from the High Court's decision.

Issues framed:

• Whether section 18(1)(g) of the Supreme Court Act 1981 as amended by Schedule 3 paragraph 37(2) of the Arbitration Act 1996 removed the right of appeal to the Court of Appeal from all High Court decisions under Part I of the 1996 Act, including decisions under section 9; and
• If the literal wording did effect such abolition, whether the House should correct an obvious drafting error by construing the amendment so as to confine it to decisions made under sections of Part I which themselves provide for appeal.

Court's reasoning:

1. The statute book and materials leading up to the 1996 Act show Parliament did not intend to abolish the pre-existing right of appeal to the Court of Appeal from High Court decisions on stay applications; reports and consultation papers contained no suggestion that such a right should be extinguished.
2. Part I of the 1996 Act contains many express restrictions on appeals where intended; the draftsman knew how to restrict appeals and did so when that was the intention. The silence of section 9 as to appeals is indicative that no restriction was intended for that section.
3. The consequential amendment in Schedule 3 paragraph 37(2), read literally, went further than necessary and produced a result inconsistent with Parliamentary intention. The court may correct plain drafting mistakes and read words into an enactment, but only where three conditions are met: (a) the intended purpose of the provision is plain; (b) by inadvertence the draftsman and Parliament failed to give effect to that purpose; and (c) the substance of the provision Parliament would have enacted is clear. Those conditions were satisfied here.
4. Accordingly the correct reading confines the amended section 18(1)(g) to decisions under those sections of Part I which themselves provide for appeals, leaving decisions under section 9 open to appeal under the existing sources of appeal.

Disposition: The House dismissed the plaintiffs' appeal and agreed with the Court of Appeal that an appeal lay and that the stay should be granted on the substantive merits considered below the jurisdiction point.

Appeal dismissed. The House held that paragraph 37(2) of Schedule 3 to the Arbitration Act 1996, which amended section 18(1)(g) of the Supreme Court Act 1981, should be read as confined to those sections of Part I of the Arbitration Act 1996 which themselves provide for appeals. The literal wording that would abolish appeals from all decisions under Part I was an obvious drafting error and could be corrected because the purpose of the amendment was plain, its inadvertent failure to reflect that purpose was clear, and the substance of what Parliament would have enacted was ascertainable. Thus an appeal lies to the Court of Appeal from a High Court decision under section 9 unless that specific section provides otherwise.

High Court (Manchester District Registry): His Honour Judge Hegarty Q.C. dismissed the section 9 stay application. Court of Appeal: Hobhouse, Thorpe and Mummery L.JJ. granted permission and allowed the appeal, reported at [1999] 1 All E.R. 820. House of Lords: dismissed the plaintiffs' appeal, [2000] UKHL 15.