Bea Hotels NV v Bellway Llc

A breach of an arbitration agreement is repudiatory only where the breaching party’s conduct clearly and unequivocally shows an intention no longer to be bound. Commencing related court proceedings is not, by itself, repudiatory, even where the proceedings overlap with matters within the arbitration agreement. The court must assess the surrounding circumstances and the objective meaning of the conduct. An express statement in pleadings that arbitrable claims will be pursued in arbitration may prevent the proceedings from constituting either a breach or repudiation. Any ambiguity is insufficient to establish repudiation.

BEA challenged the substantive jurisdiction of the arbitrator appointed under the arbitration agreement in the parties’ Term Sheet. It alleged that Bellway repudiated the agreement by commencing proceedings in Tel Aviv against BEA and others, and that BEA accepted the repudiation.

The court considered the wording of Bellway’s Israeli Particulars of Claim, including statements that Bellway’s claims against BEA would be investigated in the LCIA arbitration. The central issue was whether the Israeli proceedings objectively demonstrated an intention not to pursue the arbitrable claims in arbitration.

1. Application dismissed. BEA’s challenge under section 67 of the Arbitration Act 1996 failed. The arbitrator retained jurisdiction.
2. The applicable test was whether Bellway had objectively evinced an intention no longer to be bound by the agreement to refer the relevant dispute to arbitration. The conduct had to be such that a reasonable person in BEA’s position would understand Bellway to be saying that it was not prepared to continue with the reference. The intention had to be clear and unequivocal.
3. Commencing proceedings in breach of an arbitration agreement is not automatically repudiatory. Nor is it repudiatory where the party intends to continue with the arbitration while pursuing related litigation. The authorities discussed by Lloyd J in The Mercanaut [1980] 2 Lloyds Reports 183 and The Golden Anne [1984] 2 Lloyds Reports 489 illustrated that an explanation for the court proceedings may prevent an inference of repudiation.
4. Bellway’s Particulars of Claim expressly stated that Bellway’s claims against BEA were to be investigated in the LCIA arbitration. Those paragraphs formed part of the preamble and governed the reading of the pleading as a whole. They disavowed the pursuit in Tel Aviv of claims by Bellway against BEA falling within the arbitration agreement.
5. The inclusion of BEA as a defendant, and the possibility that other claims might affect BEA or create issues of res judicata or issue estoppel, did not override that express disavowal. Bellway was entitled to litigate against persons who were not parties to the arbitration agreement while arbitrating its claims against BEA.
6. At most, any apparent inconsistency elsewhere in the pleading created ambiguity. That could not establish the unequivocal intention required for renunciation or repudiation. There had therefore been no breach, still less a repudiatory breach, of the arbitration agreement. Costs were to follow the event unless special circumstances were raised.