Barrier Ltd v Redhall Marine Ltd

For pre-action disclosure, the court must first determine whether the anticipated dispute is subject to an effective arbitration agreement. Contractual terms may be incorporated by reference under ordinary principles of construction. Where the arbitration clause comes from a contract between different parties, clear words are required, particularly if substantial verbal modification would be needed to make it operate. A broadly worded incorporation clause did not incorporate the arbitration provision in the main contract, but it did incorporate the subcontractor’s own standard terms. Where the agreements for later work were evidenced in writing, or made orally by reference to written terms, the arbitration agreement was also effective. Pre-action disclosure was therefore unavailable or inappropriate.

Barrier sought pre-action disclosure from Redhall under CPR 31.16 concerning deductions from sums allegedly due under subcontracting arrangements for painting work on Astute Class submarines. The written subcontract expressly covered Boats 1 to 3 and incorporated Redhall’s standard terms and, subject to inconsistency, the main contract between Redhall and BAE.

The court considered whether the subcontract incorporated arbitration clauses in the standard terms or main contract, whether arrangements for Boats 4 to 6 were agreements in writing under the Arbitration Act 1996, and whether disclosure was desirable and proportionate. The central issue was whether the anticipated claims were subject to arbitration and, if so, whether pre-action disclosure could be ordered.

1. Boats 1–3. The standard terms were incorporated by clause 10 of the subcontract. A reasonable person reading that clause would have understood that the standard terms were incorporated, even though Barrier had received a carbon copy of the purchase order without the terms printed on its reverse. The arbitration clause in those terms was therefore effective.
2. The arbitration clause in the main contract was not incorporated. Clause 9 required clear words because it attempted to incorporate terms from a contract between different parties. Further, substantial modification would have been needed, especially to make the provision concerning disputes involving subcontractors operate coherently. Clause 9 was insufficiently clear.
3. Following the approach in Habas Sinai v Sometal [2010] EWHC 29 (Comm), as followed in TTMI SARL v Statoil [2011] EWHC 1150 (Comm), the court applied ordinary contractual construction while requiring particular clarity for incorporation of an arbitration clause from another parties’ contract. In light of Travelers Insurance Company Ltd v Countrywide Surveyors Ltd [2010] EWHC 2455 (TCC), the application for Boats 1–3 had to fail.
4. Boats 4–6. The agreement for Boats 4 and 5 was evidenced in writing by the meeting minute incorporating the work into the subcontract. The agreement for Boat 6 was made otherwise than in writing by reference to written subcontract terms and therefore fell within section 5(3) of the Arbitration Act 1996. The arbitration clause consequently applied to Boat 6 as well.
5. Even if Boat 6 had not been subject to arbitration, pre-action disclosure would not have been ordered. Disclosure concerning only Boat 6 would be unlikely to assist resolution of the overall dispute or produce a significant saving of costs, and the court would have declined it in any event as a matter of discretion.
6. The application for pre-action disclosure was dismissed.