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All England Law Reports/1983/Volume 1 /Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal; The
Hannah Blumenthal - [1983] 1 All ER 34

[1983] 1 All ER 34

Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal; The Hannah Blumenthal
HOUSE OF LORDS

LORD DIPLOCK, LORD KEITH OF KINKEL, LORD ROSKILL, LORD BRANDON OF OAKBROOK AND
LORD BRIGHTMAN

27, 28 OCTOBER, 2 DECEMBER 1982

Arbitration – Practice – Want of prosecution – Inordinate and inexcusable delay – Delay making satisfactory
arbitration impossible – Rescission – Frustration – Repudiation – Whether implied agreement to abandon
arbitration agreement – Whether mutual delay can constitute repudiation by one party of arbitration
agreement – Whether agreement frustrated because delay making satisfactory arbitration impossible –
Whether one party can rely on frustration when there is mutual delay.

In 1969 the sellers agreed to sell a vessel to the buyers under a contract which provided that any dispute
arising out of the sale was to be settled by arbitration in London by a single arbitrator or, if the parties could
not agree on a single arbitrator, by three arbitrators, one appointed by each party and one appointed by an
outside body. In 1972 the buyers informed the sellers that they had a number of complaints about the vessel
and some months later commenced arbitration proceedings by appointing an arbitrator. The sellers also
appointed an arbitrator, but a third arbitrator was never appointed. In 1974 the buyers delivered their points of
claim alleging that the sellers had made a false representation or warranty prior to the execution of the
contract regarding the vessel's speed and engine performance. Four months later the sellers delivered their
defence in which they denied the claim. In the period from the delivery of the defence in 1974 until July 1980
when the buyers proposed that a date of hearing be fixed there was a lengthy delay in the process of
discovery and in the progress of the arbitration generally. However, throughout that period there was an
intermittent exchange of letters between the two sides in which each side pressed the other for production of
the relevant log books. Nevertheless by July 1980, some 11 years after the sale, there had occurred over 7
years' delay in the arbitration. When the buyers proposed, in July 1980, that a date of hearing be fixed for the
arbitration, the sellers issued a writ seeking, inter alia, a declaration that the arbitration agreement had been
discharged by the buyers' repudiation of it or by frustration or by mutual rescission arising out of an
agreement by the parties to abandon the agreement. The judge held (i) that on the evidence there was no
agreement to abandon the agreement and (ii) that he was bound by House of Lords authority to hold that
because both parties were under a mutual obligation to prevent delay and to keep the arbitration moving it
was not open to the sellers to do nothing themselves and then rely on the buyers' delay as being a
repudiation of the arbitration agreement. The judge went on, however, to hold that the length of delay was
such that the arbitration agreement had been frustrated because a fair trial of the issues was no longer
possible, and he granted a declaration to that effect. The buyers appealed to the Court of Appeal, which held
(i) that the judge had been right to hold that there had been no abandonment of the arbitration agreement, (ii)
that since the buyers had never taken any initiative to bring the delay to an end so as to bring any duty of
mutual co-operation into play the sellers were entitled to rely on the buyers' delay as amounting to
repudiation, and (iii) that since the delay was such as to make a fair trial impossible and the sellers had not
been responsible for the delay the agreement to arbitrate had been frustrated. The Court of Appeal
accordingly dismissed the buyers' appeal. The buyers appealed to the
[1983] 1 All ER 34 at 35
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House of Lords on the repudiation and frustration issues and the sellers cross-appealed on the abandonment
issue.

Held – The appeal would be allowed and the cross-appeal dismissed for the following reasons—

(1) Where delay in proceeding with an arbitration was caused by breaches by both claimant and respondent
of the mutual obligations to one another to avoid delay, it was not open to either party to rely on the other's
conduct as amounting to repudiation. Furthermore, the fact that the parties were under a mutual obligation to
keep the arbitration moving meant that neither party could claim that delay by the other party had frustrated
the agreement to arbitrate (see p 43 j, p 44 b c, p 48 a to c, p 50 b c, p 52 d e, p 54 f j and p 55 c, post);
Bremer Vulkan Schiffbau Und Maschinenfabrik v South India Shipping Corp [1981] 1 All ER 289 explained.

(2) In any event, the two essential prerequisites for a contract to be held to be frustrated were (a) that there
was some outside event or extraneous change of situation which was not foreseen or provided for by the
parties at the time of making the contract and which either made it impossible for the contract to be
performed at all or rendered its performance radically different from that which the parties contemplated
when entering into the contract and (b) that the outside event or extraneous change of situation and the
consequences thereof occurred without the fault or default of either party. On the facts, there had been no
outside event or external change of situation affecting the performance of the agreement to refer disputes to
arbitration, and, since both parties were under a mutual obligation to keep the arbitration moving and both
were in breach of that obligation, the delay could not be said to have arisen without the fault or default of
either party. Accordingly, the mutual obligation on both parties to apply to the arbitrators for directions to put
an end to any delay effectively prevented the sellers from relying on the buyers' delay to assert that the
arbitration agreement was either repudiated or frustrated, even though a satisfactory trial of the issues was
no longer possible (see p 44 e f, p 45 a to d, p 47 b c, p 48 a to c, p 51 d e and j to p 52 e and p 54 f j, post);
Bremer Vulkan Schiffbau Und Maschinenfabrik v South India Shipping Corp [1981] 1 All ER 289 applied.

(3) Since the doctrine of abandonment depended on the formation of a contract of abandonment (to which
the normal rules of contract applied, including the necessity for consensus ad idem between the parties), the
sellers had to show either (a) that an implied agreement to abandon the contract to arbitrate was to be
inferred from the parties' conduct or (b) that the buyers' conduct as envinced to the sellers was such as to
lead the sellers reasonably to believe that the buyers had abandoned the contract to arbitrate (even though
that may not have been the buyers' actual intention) and that the sellers had significantly altered their
position in reliance on that belief. Furthermore (per Lord Brightman), in the latter case the sellers were
required to produce evidence not only of what the buyers did or omitted to do, to the knowledge of the
sellers, which entitled the sellers to assume that the contract was agreed to be abandoned, but also of what
the sellers themselves did or omitted to do, whether or not to the knowledge of the buyers, which showed
that the sellers had assumed that the contract was agreed to be abandoned. Since there had been
intermittent exchanges between the parties during the period of delay from 1974 onwards the sellers were
unable to show that the buyers' conduct was such as to induce in the minds of the sellers a reasonable belief
that the buyers had abandoned the arbitration agreement or that the sellers had acted on any such belief
(see p 47 d e and g to p 48 c and f to p 49 c and g to p 50 a, p 52 d e, p 54 f j and p 55 g to p 56 b, post);
André & Cie SA v Marine Transocean Ltd, The Splendid Sun [1981] 2 All ER 993 considered.

Per curiam. The mutual obligation on both parties to an arbitration to keep the arbitration moving is not
merely a matter of each party co-operating with any initiative taken by the other but a positive obligation
imposed on each party to take the initiative himself, with or without the co-operation of the other party (see p
45 g h, p 48 a to c, p 52 d e and p 54 f j, post).

Decision of the Court of Appeal [1982] 3 All ER 394 reversed.

Notes

For termination of an arbitration agreement, see 2 Halsbury's Laws (4th edn) paras 547–554, and for cases
on the subject, see 3 Digest (Reissue) 104–118, 545–646.

For the doctrine of frustration, see 9 Halsbury's Laws (4th edn) paras 450–453, and for cases on the subject,
see 12 Digest (Reissue) 482–511, 3426–3535.

For repudiation of contract, see 9 Halsbury's Laws (4th edn) paras 546–549, and for cases on the subject,
see 12 Digest (Reissue) 411–416, 3032–3049.

Cases referred to in opinions

Allen v Sir Alfred McAlpine & Sons Ltd, Bostic v Bermondsey and Southwark Group Hospital Management
Committee, Sternberg v Hammond [1968] 1 All ER 543, [1968] 2 QB 229, [1968] 2 WLR 336, CA, Digest
(Cont Vol C) 1091, 2262b.

André & Cie SA v Marine Transocean Ltd, The Splendid Sun [1981] 2 All ER 993, [1981] QB 694, [1981] 3
WLR 43, CA.

Bell v Lever Bros Ltd [1932] AC 161, [1931] All ER Rep 1, HL, 35 Digest (Repl) 23, 140.

Birkett v James [1977] 2 All ER 801, [1978] AC 297, [1977] 3 WLR 38, HL, Digest (Cont Vol E) 666, 2698b.

Bremer Vulkan Schiffbau Und Maschinenfabrik v South India Shipping Corp [1981] 1 All ER 289, [1981] AC
909, [1981] 2 WLR 14, HL; rvsg [1980] 1 All ER 420, [1981] AC 909, [1980] 2 WLR 905, CA; on appeal from
[1979] 3 All ER 194, [1981] AC 909, [1979] 3 WLR 471.

Central London Property Trust Ltd v High Trees House Ltd (1946) [1956] 1 All ER 256, [1947] KB 130, 21
Digest (Reissue) 9, 53.

Chancery Lane Safe Deposit and Offices Co Ltd v IRC [1966] 1 All ER 1, [1966] AC 5, [1966] 2 WLR 251,
HL, 28(1) Digest (Reissue) 278, 924.

Constantine (Joseph) Steamship Line Ltd v Imperial Smelting Corp Ltd, The Kingswood [1941] 2 All ER 165,
[1942] AC 154, HL, 12 Digest (Reissue) 482, 3428.

Crawford v A E A Prowting Ltd [1972] 1 All ER 1199, [1973] 1 QB 1, [1972] 2 WLR 749, 3 Digest (Reissue)
116, 637.

Davis Contractors Ltd v Fareham UDC [1956] 2 All ER 145, [1956] AC 696, [1956] 3 WLR 37, HL, 12 Digest
(Reissue) 507, 3518.
 Page 4

Donoghue (or M'Alister) v Stevenson [1932] AC 562, [1932] All ER Rep 1, HL, 36(1) Digest (Reissue) 144,
562.

Fitzleet Estates Ltd v Cherry (Inspector of Taxes) [1977] 3 All ER 996, [1977] 1 WLR 1345, HL, Digest (Cont
Vol E) 291, 923a.

Heyman v Darwins Ltd [1942] 1 All ER 337, [1942] AC 356, HL, 3 Digest (Reissue) 88, 453.

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 1 All ER 474, [1962] 2 QB 26, [1962] 2
WLR 474, CA, 41 Digest (Repl) 363, 1553.

Johanna Oldendorff, The, E L Oldendorff & Co GbmH v Tradax Export SA [1973] 3 All ER 148, [1974] AC
479, [1973] 3 WLR 382, HL, Digest (Cont Vol D) 828, 2543a.

Jones v Secretary of State for Social Services, Hudson v Secretary of State for Social Services [1972] 1 All
ER 145, [1972] AC 944, [1972] 2 WLR 210, HL, Digest (Cont Vol D) 683, 4585b.

Knuller (Publishing, Printing and Promotions) Ltd v DPP [1972] 2 All ER 898, [1973] AC 435, [1972] 3 WLR
143, HL, 14(1) Digest (Reissue) 140, 966.

Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524, [1935] All ER Rep 86, 12 Digest (Reissue)
428, 3100.

Pearl Mill Co v Ivy Tannery Co [1919] 1 KB 78, [1918–19] All ER Rep 702, DC, 12 Digest (Reissue) 435,
3132.

Photo Production Ltd v Securicor Transport Ltd [1980] 1 All ER 556, [1980] AC 827, [1980] 2 WLR 283, HL.

R v Cunningham [1981] 2 All ER 863, [1982] AC 566, [1981] 3 WLR 223, HL.

Shaw v DPP [1961] 2 All ER 446, [1962] AC 220, [1961] 2 WLR 897, HL, 14(1) Digest (Reissue) 139, 965.
[1983] 1 All ER 34 at 37

Sociedad Financiera de Bienes Raices SA v Agrimpex Hungarian Trading Co for Agricultural Products, The
Aello [1960] 2 All ER 578, [1961] AC 135, [1960] 3 WLR 145, HL, 41 Digest (Repl) 333, 1304.

Appeal

The defendants, Partenreederei Hannah Blumenthal (the buyers), appealed by leave of the Court
of Appeal against the decision of the Court of Appeal (Lord Denning MR and Kerr LJ, Griffiths LJ
dissenting) ([1982] 3 All ER 394, [1982] 3 WLR 49) on 26 March 1982 dismissing their appeal
against the decision of Staughton J ([1982] 1 All ER 197, [1981] 3 WLR 823) on 7 July 1981
granting the plaintiffs, Paal Wilson & Co A/S (the sellers), a declaration that an arbitration
agreement contained in a contract dated 23 September 1969 between the buyers and the sellers
for sale of the vessel Pinto (later renamed the Hannah Blumenthal) was discharged by frustration.
The sellers, by their cross-appeal sought to uphold the decision of the Court of Appeal on the
alternative ground that the contract had been abandoned by mutual consent. The facts are set out
in the opinion of Lord Brandon.
 Page 5

Mark Saville QC and Timothy Wormington for the buyers.

David Johnson QC and Jonathan Sumption for the sellers.

Their Lordships took time for consideration.

2 December 1982. The following opinions were delivered.

LORD DIPLOCK.

My Lords, since the speech to be delivered by my noble and learned friend Lord Brandon will be the principal
speech in this appeal, I have asked him, with the agreement of all your Lordships, that it should be delivered
first. Such observations as I shall myself be making are intended to be supplementary to and in amplification
of some parts of it; and I understand that those to be made by my noble and learned friends Lord Roskill and
Lord Brightman are intended by them to be regarded in the same light.

LORD BRANDON OF OAKBROOK.

My Lords, your Lordships have before you an appeal from a judgment of the Court of Appeal (Lord Denning
MR and Kerr LJ, Griffiths LJ dissenting) ([1982] 3 All ER 394, [1982] 3 WLR 49) affirming a judgment of
Staughton J in an action in the Commercial Court ([1982] 1 All ER 197, [1981] 3 WLR 823). The question
raised by the appeal is of a general character and of great importance to arbitrators and commercial
practitioners. It can be formulated in this way. Suppose that two parties to a contract have agreed to refer a
dispute arising out of it to arbitration, and subsequently there is such prolonged delay by either or both
parties in preparing for the arbitration and bringing it to a hearing that it becomes no longer possible for the
arbitrator or arbitrators concerned to decide the case satisfactorily. In those circumstances, is the result in
law that the agreement to refer is frustrated, so that neither party has either the duty or the right to proceed
further with the reference, and that, if either should wish to do so, he should be restrained by injunction from
so acting? Both Staughton J at first instance and the Court of Appeal by a majority on appeal from him have
given an affirmative answer to that question, have held that the agreement to refer which is the subject
matter of the present action has been frustrated by the delay of one or both the parties and have granted an
injunction against the claimants restraining them from proceeding further with the reference. The original
appellants, with the leave of the Court of Appeal, now appeal to your Lordships' House against that decision.

Your Lordships also have before you a cross-appeal by the original respondents. That cross-appeal raises a
further question, which is not of a general character but which depends on the particular facts of the present
case. The further question is this: on the assumption that the decision of the courts below on the first
question referred to above was wrong, so that, on a true view of the law, the agreement to refer in the
present case was not frustrated, was the conduct of the parties nevertheless of such a character as to
[1983] 1 All ER 34 at 38

lead to the inference that they impliedly consented with each other to abandon that agreement? It was held
by Staughton J, and unanimously by the Court of Appeal, that no such mutual consent to abandon the
agreement to refer could properly be inferred from the conduct of the parties. The original respondents cross-
appeal against that further decision.
 Page 6

The original appellants and cross-respondents are Partenreederei Hannah Blumenthal, a West German
concern, whom I shall call 'the buyers'. The original respondents and cross-appellants are Paal Wilson & Co
A/S, a Norwegian company, whom I shall call 'the sellers'. The matter arises out of a written contract, entitled
'Memorandum of Agreement' and dated 23 September 1969, for the sale of a ship by the sellers to the
buyers. The ship's name before the sale was Pinto; she was renamed after the sale Hannah Blumenthal.

The contract of sale of the ship contained the following, among other, provisions:

'Section 4. The Sellers shall provide for inspection of the Vessel … about 27th September 1969
and the Buyers shall undertake the inspection without undue delay to the Vessel …

Section 8 … The Sellers shall, at the time of delivery, hand to the Buyers all classification
certificates … as well as all plans which may be in Sellers' possession. The same applies to log
books, unless otherwise agreed.

Section 11 … the Vessel with everything belonging to her shall be delivered and taken over as
she is at the time of delivery, after which the Sellers shall have no responsibility for possible
faults or deficiencies of any description …

Section 15. If any dispute should arise in connection with the interpretation and fulfilment of this
contract, same shall be decided by arbitration in the city of LONDON and shall be referred to a
single Arbitrator to be appointed by the parties hereto. If the parties cannot agree upon the
appointment of the single Arbitrator, the dispute shall be settled by three Arbitrators, each party
appointing one Arbitrator, the third being appointed by The Baltic and International Maritime
Conference in Copenhagen … '

The contract of sale contained no provision of any kind relating to the rpm or speed of the ship in service. It
was duly carried out and the property in the ship was transferred from the sellers to the buyers, who
proceeded to operate her with the new name referred to above.

On 28 January 1972 Messrs Holman Fenwick & Willan (Holmans), London solicitors acting for the buyers,
wrote to the sellers asking them for delivery of the ship's deck and engine log books in accordance with
section 8 of the contract of sale. By letter dated 15 March 1972 the sellers informed Holmans that the log
books were with their Protection and Indemnity Associations, the London Steam-Ship Owners' Mutual
Insurance Association Ltd and Assuranceforeningen Skuld. On 5 April 1972 A Bilbrough & Co Ltd
(Bilbroughs), the managers of the former association, wrote to the West of England Ship Owners Mutual
Insurance Association (London) Ltd, in their capacity as insurers of the buyers, saying that Skuld had sent
such log books of the ship as they had in their possession to Bilbroughs.

In the following months the buyers notified the sellers, either directly or through agents, that they had a claim
against them in respect of the speed of the ship, and the sellers, again directly or through agents, rejected
such claim, with the result that a dispute between the parties in connection with the contract of sale had
come into being.

During the course of August 1972, after the parties had been unable to agree on a single arbitrator for the
settlement of the dispute, the buyers appointed Mr Ralph Kingsley as their arbitrator, and notice of such
appointment was given to Bilbroughs as agents for the sellers. At the same time Bilbroughs were asked to
give inspection of the ship's predelivery log books. On 1 September 1972 Bilbroughs wrote refusing to
comply with this request on the ground that the buyers were not entitled to such inspection until discovery in
the arbitration.
 Page 7

Between December 1972 and February 1973 Messrs Sinclair Roche & Temperley (Sinclairs), London
solicitors acting for the sellers, appointed Mr Cedric Barclay as the
[1983] 1 All ER 34 at 39

sellers' arbitrator, and gave notice of such appointment to Holmans. No steps, however, were taken by either
party separately, or both parties together, then or at any later time, to effect the appointment of a third
arbitrator by the Baltic and International Maritime Conference in Copenhagen, as provided for in section 15 of
the contract of sale.

Between February 1973 and February 1974 Holmans and Sinclairs exchanged a considerable number of
letters relating to the nature of the buyers' claim and the production for inspection of the ship's predelivery log
books. This correspondence proved inconclusive and on 22 February 1974 Holmans served on Sinclairs the
buyers' points of claim in the arbitration. These made it clear that the buyers founded their case on alleged
representations, both oral and written, made by the buyers or their agents before the conclusion of the
written contract of sale, and not on any express or implied terms of that contract. On 26 June 1974 Sinclairs
served on Holmans the sellers' points of defence in the arbitration, which consisted substantially of a denial
of all the relevant averments in the buyers' points of claim. In September 1974 Sinclairs sought and obtained
from Holmans consent to amendment of the points of defence.

By November 1974 the pleadings in the arbitration could reasonably be regarded as closed. A suggestion
had earlier been made by Holmans that it might be necessary for the buyers to serve points of reply, but no
such further pleadings had by then been served. The stage was accordingly set for discovery of documents
by both parties. In fact, however, there was a lengthy delay in the process of discovery, so much so that it
was not until 15 September 1977 that Holmans served on Sinclairs the buyers' list of documents.
Subsequently there was a further prolonged exchange of letters between the solicitors on either side, in the
course of which Holmans pressed Sinclairs to serve the sellers' list of documents, and to agree a timetable
for the further conduct of the arbitration. There was much delay on the sellers' side during this period, and it
was not until 12 May 1978 that Sinclairs ultimately served on Holmans the sellers' list of documents, subject
to a reservation about other documents not so far translated into English.

The documents set out in the sellers' list did not, extraordinary as it may seem having regard to the nature of
the buyers' claim and the history of the matter, include any of the ship's predelivery log books, and not
surprisingly Holmans immediately wrote to Sinclairs complaining of this vital omission. Between 17 May 1978
and 15 November 1978 a further exchange of letters took place between Holmans and Sinclairs in the
course of which Holmans were pressing their request for discovery of the ship's predelivery log books and of
other documents which Sinclairs had informed them should be added to the sellers' list, and Sinclairs, in
addition to stalling on those requests, themselves pressed Holmans for discovery of the ship's post-delivery
log books. On 14 September 1978 Holmans supplied to Sinclairs copies of translations of the ship's post-
delivery log books, and repeated once again their request for production of the ship's predelivery log books.
On 16 November 1978 Holmans at long last received these log books from Sinclairs.

Between December 1978 and February 1979 Holmans were in correspondence with a marine expert with a
view to his examining and reporting on the ship's log books in relation to the buyers' claim for
mispresentation by the sellers of the ship's service speed. In February 1980 Holmans received their expert's
first report and in June 1980 his second report. On 30 July 1980 Holmans sent to Sinclairs the two reports
prepared by their expert, saying that they strongly supported the buyers' case and invited them to agree a
date for the hearing of the arbitration.

On 5 August 1980 Sinclairs, galvanised into action no doubt by the receipt of the expert's reports, and
Holmans' assertion that they strongly supported the buyers' case, wrote to Holmans saying that they were
going to apply to the court for an order that the buyers' claim should be struck out for want of prosecution. On
 Page 8

14 August 1980 Sinclairs wrote a further letter to Holmans in which they purported to accept the buyers'
conduct in connection with the arbitration as amounting to a repudiation by the buyers of the agreement to
refer the dispute between the parties to arbitration, and claimed that that agreement had thereby been
discharged.

On 19 August 1980 Sinclairs issued a writ on behalf of the sellers against the buyers in the Commercial
Court. The writ was indorsed on the reverse with points of claim, by
[1983] 1 All ER 34 at 40

which the sellers claimed against the buyers the following items of relief: (1) a declaration that the arbitration
agreement in the contract of sale had been discharged by reason of repudiation of it by the buyers accepted
as such by the sellers; (2) an injunction restraining the buyers from taking any further action in pursuance of
that agreement; (3) an order dismissing the buyers' claim for want of prosecution; (4) damages limited to the
sellers' costs in the reference; alternatively (5) a declaration that, if the arbitration agreement was still
subsisting, the arbitrators had power to strike out the buyers' claims for want of prosecution.

So far as those points of claim are concerned, I think it right to make two observations in passing. First, even
on the most favourable view of the sellers' case, it could not be contended that the whole of the arbitration
agreement contained in s 15 of the contract of sale had been discharged; at best, from the sellers' point of
view, it could only be contended that the agreement to refer the particular dispute between the parties which
had arisen had been discharged in the manner alleged. Second, since no third arbitrator had been appointed
as required by s 15, it is difficult to see how the court could possibly have made the alternative declaration
asked for in (5) above.

Following the service of the writ various interlocutory applications were made by both parties. The buyers
applied twice to have the sellers' claims struck out as disclosing no cause of action. The sellers also applied
twice to amend their points of claim. Directions were given for trial of the action on affidavit evidence alone,
any further pleadings and discovery of documents to be dispensed with. It was further decided that the
various interlocutory applications referred to above should be dealt with immediately before the trial of the
action, the date for which was then or later fixed as 6 June 1981. In the result, before the trial, which
occupied both 6 and 7 July 1981, was begun, the buyers' applications to have the sellers' claims struck out
were dismissed, and the sellers were given leave to amend item (1) of their claim by adding to the existing
contention that the arbitration agreement had been discharged by the sellers' acceptance of the buyers'
repudiation of it the further contentions that it had in the alternative been discharged either by frustration or
by an agreement between the parties to abandon it.

My Lords, Staughton J at first instance and all three members of the Court of Appeal on appeal from him
were of the opinion that there had been such inordinate delay by the buyers and the sellers in their
preparation for the arbitration and the bringing of it to a hearing that a fair trial of the dispute between the
parties was no longer possible. There was, in my view, ample material on which the two courts below could
properly reach this conclusion, and it would, I apprehend, only be in very rare cases that your Lordships'
House would see fit to disturb a concurrent conclusion of that kind. Even if that consideration were to be
disregarded, however, I think it right to say, after a careful examination of the extensive delays which
admittedly occurred in this case, that I should have no hesitation in reaching the same conclusion on the
matter concerned as was reached in the two courts below. I would only say that I should prefer to substitute,
for the concept that a fair trial would be impossible, the similar, but as it seems to me more accurate, concept
that a satisfactory trial would be impossible, and I approach the primary question raised by the original
appeal on that basis.

My Lords, it is not possible to explain and understand the manner in which the present case was dealt with in
the two courts below without first referring in some detail to the history and outcome of an earlier case in
which attempts were made by respondents in an arbitration to bring the reference of a dispute to a summary
 Page 9

end on the ground of inordinate and inexcusable delay by the claimants in prosecuting their claim. That
earlier case is Bremer Vulkan Schiffbau Und Maschinenfabrik v South India Shipping Corp [1981] 1 All ER
289, [1981] AC 909, and the present case is in a number of senses a sequel to it.

Bremer Vulkan was tried at first instance by Donaldson J (see [1979] 3 All ER 194, [1981] AC 909). He found
that the claimants in an arbitration between the parties (the defendants in the action) had been guilty of
inordinate and inexcusable delay in prosecuting their claim to the serious detriment of the respondents (the
plaintiffs in the action), and that, if the claim had been brought in an action instead of an arbitration and
[1983] 1 All ER 34 at 41

the same delays had occurred, the court would have exercised its undoubted jurisdiction to dismiss the
action for want of prosecution in accordance with the principles laid down in Allen v Sir Alfred McAlpine &
Sons Ltd [1968] 1 All ER 543, [1968] 2 QB 229. The judge further held that, in these circumstances, it was
open to the plaintiffs to bring the reference to arbitration concerned to a summary end in one or other of two
different ways. First, the plaintiffs could apply to the arbitrator himself to dismiss the claim for want of
prosecution, and the arbitrator would then have the same power as the court to do so. Second, there was to
be implied in the agreement to refer a term that each party would use his best endeavours to bring the matter
to a speedy conclusion; the inordinate and inexcusable delay of the defendants in prosecuting their claim
was so serious a breach of that implied term as to amount to a repudiation of the agreement to refer; and the
plaintiffs, by accepting that repudiation as such, were entitled to treat that agreement as discharged by
breach. The court could then protect the plaintiffs' position by granting an injunction against the defendants
restraining them from taking any further step in the arbitration. It is to be observed that, in so far as
Donaldson J held that an arbitrator himself has the power to dismiss a claim for want of prosecution, he was
disagreeing with and declining to follow an earlier decision to the contrary effect of Bridge J, in Crawford v A
E A Prowting Ltd [1972] 1 All ER 1199, [1973] QB 1.

The judgment of Donaldson J in Bremer Vulkan was substantially upheld by the Court of Appeal (Lord
Denning MR, Roskill and Cumming-Bruce LJJ) (see [1980] 1 All ER 420, [1981] AC 909), although with
some variations in the precise grounds of decision. Lord Denning MR held, contrary to the view of Donaldson
J, and in accordance with the earlier decision of Bridge J referred to above, that an arbitrator himself had no
power to dismiss a claim for want of prosecution. He took the view, however, that the court, in the exercise of
its jurisdiction to supervise arbitrations, did have such power. He also supported the view of Donaldson J that
a claimant in an arbitration was under an implied obligation to use reasonable dispatch, that if a claimant
failed to comply with that obligation to such an extent as to make a fair hearing of the dispute impossible, and
thereby to frustrate the whole purpose of the arbitration, the respondent was entitled to accept such conduct
as a repudiation of the agreement to refer and to treat such agreement as at an end, and, further, that the
court could protect a claimant's position in such a case by the grant of an injunction.

Roskill LJ also held that an arbitrator himself has no power to strike out a claim for want of prosecution. As
regards the issue of accepted repudiation, he did not agree with the view of Donaldson J about the term to
be implied in an agreement to refer. He agreed that some term was to be implied, but formulated it as an
obligation on a claimant not to be guilty of such delay as would frustrate the whole purpose of the arbitration.
He found that the claimant in that case had been guilty of such delay, so that the respondent was entitled to
treat the agreement to refer as discharged by breach and have the protection of an injunction from the court.

Cumming-Bruce LJ agreed with both Lord Denning MR and Roskill LJ that the appeal should be dismissed
on the grounds given by them. He went on to state in express terms his view that the principles laid down in
Allen v Sir Alfred McAlpine & Sons Ltd were as relevant to arbitrations as to actions.

The defendants brought a further appeal from the judgment of the Court of Appeal to your Lordships' House,
which by a majority allowed the appeal. The reasoning on which the majority founded their decision was fully
expounded in the speech of Lord Diplock. He laid much stress on the contractual nature of an agreement to
 Page 10

refer a dispute to arbitration and disagreed strongly with the view much relied on by the two courts below
that, because actions and arbitrations were alike adversarial in character, the same principles which applied
to the summary dismissal of an action on the ground of inordinate and inexcusable delay in its prosecution by
the plaintiff applied equally to the summary dismissal of a claim in an arbitration on the ground of similar
delay in its prosecution by a claimant.

It is not possible, in a short compass, to summarise the whole effect of the speech of
[1983] 1 All ER 34 at 42

Lord Diplock in Bremer Vulkan. Nor do I think it is necessary for me to do so, for it seems to me that it is
sufficient to quote two important passages from it, which afford powerful guidance in the decision of the
present appeal.

In the first passage Lord Diplock said ([1981] 1 All ER 289 at 301, [1981] AC 909 at 985–986):
'I turn then to consider what the mutual obligations of the parties are in a private arbitration. By
appointing a sole arbitrator pursuant to a private arbitration agreement which does not specify
expressly or by reference any particular procedural rules, the parties make the arbitrator the
master of the procedure to be followed in the arbitration. Apart from a few statutory
requirements under the Arbitration Act 1950, which are not relevant to the instant case, he has
a complete discretion to determine how the arbitration is to be conducted from the time of his
appointment to the time of his award, so long as the procedure he adopts does not offend the
rules of natural justice. The contractual obligation which the parties assume to one another in
relation to the procedure to be followed in the arbitration unless a contrary intention is
expressed in the arbitration agreement is that which is stated in s 12(1) of the Act, viz: “ …
parties to the reference, and all persons claiming through them respectively, shall, subject to
any legal objection, submit to be examined by the arbitrator or umpire, on oath or affirmation, in
relation to the matters in dispute, and shall, subject as aforesaid, produce before the arbitrator
or umpire all documents within their possession or power respectively which may be required
or called for, and do all other things which during the proceedings on the reference the
arbitrator or umpire may require.” No doubt in some arbitrations of a kind with which those who
act on behalf of the parties in the conduct of the arbitration are familiar both claimant and
respondent may carry out voluntarily some of all of the preliminary steps needed to prepare the
matter for the hearing by the arbitrator, and do so without seeking and obtaining any prior
direction from him; but, if what is done voluntarily by way of preparation is done so tardily that it
threatens to delay the hearing to a date when there will be a substantial risk that justice cannot
be done, it is in my view a necessary implication from their having agreed that the arbitrator
shall resolve their dispute that both parties, respondent as well as claimant, are under a mutual
obligation to one another to join in applying to the arbitrator for appropriate directions to put an
end to the delay. Even if an application to the arbitrator for directions in such circumstances
were a matter of right only and not, as I think it is, a mutual obligation, it provides a remedy to
the party which thinks that the proceedings are not progressing fast enough voluntarily, which
renders unnecessary the implication in the arbitration agreement of any such term as was
suggested by Donaldson J or Roskill LJ.' (Lord Diplock's emphasis.)

In the second passage Lord Diplock said ([1981] 1 All ER 289 at 302, [1981] AC 909 at 987–988):
'In the instant case, however, as in Crawford v A E A Prowting Ltd [1972] 1 All ER 1199, [1973]
QB 1, the respondents, Bremer Vulkan, were content to allow the claimants, South India, to
carry out voluntarily the preparation of detailed points of claim. They never made an application
for directions to the arbitrator and none were made by him. For failure to apply for such
directions before so much time had elapsed that there was a risk that a fair trial of the dispute
would not be possible, both claimant and respondent were in my view in breach of their
 Page 11

contractual obligations to one another; and neither can rely on the other's breach as giving him
a right to treat the primary obligations of each to continue with the reference as brought to an
end. Respondents in private arbitrations are not entitled to let sleeping dogs lie and then
complain that they did not bark.'

I have described the history and outcome of Bremer Vulkan in some detail for this reason. The members of
both the courts below made no secret of the fact that they regretted the decision of your Lordships' House in
that case. Being of that mind the trial
[1983] 1 All ER 34 at 43

judge and the majority in the Court of Appeal were at pains to reach a conclusion on the present case which
their deeply held convictions led them to believe that both justice and good sense demanded, despite the
obstacles which they recognised at first sight that the Bremer Vulkan decision put in their way.

The conclusion which they reached was, as I indicated earlier, that, because there had been such inordinate
delay by one or both of the parties to the arbitration in preparing for it and bringing it to a hearing that a fair
trial of the issues raised in it was no longer possible, the agreement of the parties to refer the dispute which
has arisen between them to arbitration had been frustrated, and that the claimants should accordingly be
restrained by injunction from proceeding with it further. Griffiths LJ on the other hand, in his dissenting
judgment, while making it abundantly clear that his distaste for the decision of your Lordships' House in
Bremer Vulkan was no less than that of the other judges concerned, reached what was for him the unhappy
conclusion that to hold that the agreement to refer had been frustrated for the reasons given by the majority
could not be reconciled with the reasoning on which that decision was founded.

The reasoning of Lord Denning MR can be summarised as follows. First, he held that the views expressed by
Lord Diplock in Bremer Vulkan, that the parties to an agreement to refer a dispute between them to
arbitration owed to one another a mutual obligation to apply to the arbitrator for directions to prevent
inordinate delay (the mutual obligation concept), did not form part of the ratio decidendi in that case, and
were wrong. Second, that, since this was so, the Bremer Vulkan case did not form an obstacle to holding that
an agreement to refer a dispute to arbitration could be repudiated by inordinate and inexcusable delay by the
claimant. Third, and alternatively, inordinate delay by a claimant could frustrate, and in the present case in
fact had frustrated, the agreement to refer.

The reasoning of Kerr LJ went like this. First, he accepted, unlike Lord Denning MR, that Lord Diplock's
mutual obligation concept did form part of the ratio decidendi in Bremer Vulkan. Second, he recognised that,
since that was so, inordinate and inexcusable delay by a claimant could not, without some additional factor or
factors, amount to a repudiation by such claimant of an agreement to refer. But, third, he said that there was
nothing in the decision of your Lordships' House in Bremer Vulkan to prevent the court from treating delay, of
such a length as to make the fair trial of an arbitration no longer possible, as causing frustration of an
agreement to refer, and that, on the facts of the present case, such frustration had occurred.

Griffiths LJ, in his dissenting judgment, expressed views which accorded substantially with the first two steps
in the reasoning of Kerr LJ set out above. He went on, however, to express his further view that it was not
open to the Court of Appeal, in the light of your Lordships' decision in Bremer Vulkan, to hold that an
agreement to refer a dispute to arbitration could be frustrated by delay alone, and in particular by delay which
was caused, not by an external event or circumstances outside the control of the parties, but solely by their
own conduct of the reference.

In the light of this necessarily compressed analysis of the reasoning of the three members of the Court of
Appeal, two issues emerge for your Lordships' decision in relation to the first and general question raised by
this appeal. The first issue is whether Lord Diplock's mutual obligation concept in Bremer Vulkan formed part
 Page 12

of the ratio decidendi of that case. The second issue is whether, if it did, it was open to the majority of the
Court of Appeal to hold that, on the facts of the present case, the agreement to refer the dispute between the
parties to arbitration had been discharged by frustration, so as to entitle the sellers to an injunction
restraining the buyers from taking any further step in that reference.

So far as the first question is concerned, I entertain no doubt whatever that Lord Diplock's mutual obligation
concept formed an essential part of the ratio decidendi of Bremer Vulkan in your Lordship's House. That this
is so is, in my opinion, made crystal clear by the words used by him in the second of the two passages from
his speech which I quoted earlier, and which I shall now, in order to make good my opinion, venture to quote
once again.
[1983] 1 All ER 34 at 44
'For failure to apply for such directions before so much time had elapsed that there was a risk
that a fair trial of the dispute would not be possible, both claimant and respondent were in my
view in breach of their contractual obligations to one another; and neither can rely on the
other's breach as giving him a right to treat the primary obligation of each to continue with the
reference as brought to an end.'

The Court of Appeal in Bremer Vulkan had held that the claimant had been guilty of such inordinate and
inexcusable delay in proceeding with the reference there concerned as to amount to a repudiation of the
agreement to refer, that the respondents were entitled to accept, and had accepted, that repudiation as such,
and that the agreement to refer had accordingly been discharged by breach. What Lord Diplock was saying
was that, since the delay concerned was the consequence of breaches on the part of both the claimant and
the respondent of their mutual obligation owed to one another, neither could rely on the other's conduct as
amounting to repudiation. It necessarily follows that Lord Diplock's mutual obligation concept was an
essential part of the ratio decidendi of the Bremer Vulkan case in your Lordships' House.

So far as the second issue is concerned there can be no doubt that an agreement to refer a dispute to
arbitration can in theory, like any other contract, be discharged by frustration. Lord Diplock expressly
recognised this in his speech in Bremer Vulkan [1981] 1 All ER 289 at 297, [1981] AC 909 at 980. Before this
can happen, however, the usual requirements necessary to give rise to frustration of a contract must be
present. What those requirements are appears clearly from the various pronouncements of high authority on
the doctrine of frustration of contract conveniently gathered together by Griffiths LJ in his dissenting judgment
in this case (see [1982] 3 All ER 394 at 406–407, [1982] 3 WLR 49 at 64–65).

Those pronouncements, which I do not consider that it is necessary for me to quote again myself, show that
there are two essential factors which must be present in order to frustrate a contract. The first essential factor
is that there must be some outside event or extraneous change of situation, not foreseen or provided for by
the parties at the time of contracting, which either makes it impossible for the contract to be performed at all,
or at least renders its performance something radically different from what the parties contemplated when
they entered into it. The second essential factor is that the outside event or extraneous change of situation
concerned, and the consequences of either in relation to the performance of the contract, must have
occurred without either the fault or the default of either party to the contract.

It was contended for the sellers that the courts have never defined with precision the meaning of the
expression 'default' in this context. In this connection reliance was placed on the observations of Viscount
Simon LC in Joseph Constantine Steamship Line Ltd v Imperial Smelting Corp Ltd, The Kingswood [1941] 2
All ER 165 at 173, [1942] AC 154 at 166, where he said:
'… I do not think that the ambit of “default” as an element disabling the plea of frustration to
prevail has as yet been precisely and finally determined. “Self-induced” frustration, as illustrated
by the two decided cases already quoted, involves deliberate choice, and those cases amount
to saying that a man cannot ask to be excused by reason of frustration if he has purposely so
 Page 13

acted as to bring it about. “Default” is a much wider term, and in many commercial cases
dealing with frustration is treated as equivalent to negligence. Yet in cases of frustration of
another class, arising in connection with a contract for personal performance, it has not, I think,
been laid down that, if the personal incapacity is due to want of care, the plea fails. Some day it
may have to be finally determined whether a prima donna is excused by complete loss of voice
from an executory contract to sing if it is proved that her condition was caused by her
carelessness in not changing her wet clothes after being out in the rain. The implied term in
such a case may turn out to be that the fact of supervening physical incapacity dissolves the
contract without inquiring further into its cause, provided, of course, that it has not been
deliberately induced in order to get out of the engagement.'

[1983] 1 All ER 34 at 45

I turn now to consider whether what I have described as being, on the authorities, the two factors essential to
the frustration of a contract are present in this case. As to that, I agree with Griffiths LJ that neither such
factor is present. In the first place there has been in this case no outside event or external change of situation
affecting the performance of the agreement to refer at all, and no one, as far as I can see, has been able to
put forward an argument that there has. In the second place the state of affairs relied on as causing
frustration is delay by one or both of the parties of such a length as to make a fair, or as I prefer to call it
satisfactory, trial of the dispute between the parties no longer possible. That delay, however, on the facts as I
have stated them earlier, was clearly itself caused by the failure of both parties to comply with what your
Lordships' House in Bremer Vulkan decided was their mutual contractual obligation owed to one another,
namely (after taking the necessary steps to have a third arbitrator appointed) to apply to the full arbitral
tribunal as then constituted for directions to prevent the very delay which is now sought to be relied on by the
sellers as having frustrated the agreement to refer.

Whatever may be the precise ambit of the expression 'default' in this context, and whether it would or would
not apply to the case of the prima donna postulated by Viscount Simon LC in the part of his speech in
Joseph Constantine Steamship Line Ltd v Imperial Smelting Corp Ltd, which I quoted above, it is not, in my
view, necessary to determine. It is not necessary because I entertain no doubt whatever that the conduct of
the parties in the present case, in failing to comply with what this House has held to be their mutual
contractual obligation to one another, comes fairly and squarely within such expression.

Kerr LJ avoided this last conclusion by interpreting Lord Diplock's mutual obligation concept in a special
manner, as explained by him in his judgment (see [1982] 3 All ER 394 at 410–411, [1982] 3 WLR 49 at 69–
70). He said, in effect, that the only obligation of the parties under the decision of your Lordships' House in
Bremer Vulkan was to co-operate with each other, that no question of co-operating or failing to co-operate
could arise unless and until one or other of the parties took the initiative, that the only party obliged to take
the initiative was the one by whom, at any given stage of the proceedings, the next step fell to be taken, that,
while it was open to the other party to take the initiative, he was not in breach of his obligation to co-operate
by not doing so, and that, on that analysis of the obligations imposed on the parties, the sellers could not be
regarded as having broken theirs. In my opinion, this analysis of the parties' obligations under the decision of
your Lordships' House in Bremer Vulkan is, with all respect to Kerr LJ, based on far too narrow and restricted
an interpretation of the relevant passages in the speech of Lord Diplock in Bremer Vulkan which I quoted
earlier. The whole thrust of Lord Diplock's speech in those passages is, to my mind, that, whenever there is a
possibility of such delay by either side occurring as would create a risk of a fair or satisfactory trial becoming
no longer possible, both parties are under a joint and several obligation to apply to the arbitrator or arbitrators
for directions to put an end to such delay. On this interpretation of what Lord Diplock said the question of its
being the obligation of the one party or the other to take the initiative does not arise: each party is obliged to
take the initiative, with the co-operation of the other if it is forthcoming, without it if it is not.

It was contended for the sellers that this was a case in which it would be right for your Lordships' House to
exercise the freedom conferred on it by the practice statement (see Note [1966] 3 All ER 77, [1966] 1 WLR
 Page 14

1234) to depart from its previous decision in Bremer Vulkan. In support of this contention four main points
were put forward. The first point was the obvious regret of the two lower courts at the decision, and the
consequent efforts of the trial judge and the majority of the Court of Appeal in the present case to find a way
round it if they could possibly do so. The second point concerned the observations of Griffiths LJ (see [1982]
3 All ER 394 at 404, [1982] 3 WLR 49 at 61). He there said that, if he had not had the advantage of reading
Lord Diplock's speech in Bremer Vulkan, he would have fallen into the same error as the judge of first
instance, the Court of Appeal and the two of their Lordships who dissented in this House in that case. It
would, he continued, have appeared to him to be wholly divorced from
[1983] 1 All ER 34 at 46

reality and the expectation of commercial men that those facing claims should be under the same obligation
to keep such claims moving against them as was imposed on those making them. The third point was that
the decision, if carried to its logical conclusion, would lead to situations arising in which, although a
satisfactory trial of a reference was no longer possible, that reference must nevertheless still proceed to trial.
The fourth point was that, since actions and arbitrations were alike adversarial in character, the same
principles with regard to inordinate and inexcusable delay were expected by commercial men to apply, and
should as a matter of justice and common sense apply, equally to both.

Guidance on the circumstances in which it would or would not be right for this House to depart from a
previous decision, albeit a majority one, is to be found in the speech of Lord Wilberforce in Fitzleet Estates
Ltd v Cherry (Inspector of Taxes) [1977] 3 All ER 996 at 999, [1977] 1 WLR 1345 at 1349:
'There is therefore nothing left to the taxpayer but to contend, as it frankly does, that the 1966
decision [Chancery Lane Safe Deposit and Offices Co Ltd v IRC [1966] 1 All ER 1, [1966] AC
85] is wrong. This contention means, when interpreted, that three or more of your Lordships
ought to take the view which appealed then to the minority. My Lords, in my firm opinion, the
1966 Practice Statement (Note [1966] 3 All ER 77, [1966] 1 WLR 1234) was never intended to
allow and should not be considered to allow such a course. Nothing could be more undesirable,
in fact, than to permit litigants, after a decision has been given by this House with all
appearance of finality, to return to this House in the hope that a differently constituted
committee might be persuaded to take the view which its predecessors rejected. True that the
earlier decision was by a majority: I say nothing as to its correctness or as to the validity of the
reasoning by which it was supported. That there were two eminently possible views is shown
by the support for each by at any rate two members of the House. But doubtful issues have to
be resolved and the law knows no better way of resolving them than by the considered majority
opinion of the ultimate tribunal. It requires much more than doubts as to the correctness of such
opinion to justify departing from it.'

My Lords, that guidance should, in my view, be followed and acted on in the present case. I express no
opinion one way or another as to the conclusion which I might have reached if I had been a member of the
committee which decided the Bremer Vulkan case. It is sufficient to say that that decision was reached by
what Lord Wilberforce described as the best way of resolving doubtful issues known to the law, and that no
special or unusual circumstances have been put forward as justifying a departure from it.

Dealing specifically with the four points put forward by the sellers to which I referred above, I would say this.
With regard to the first point, the fact that a decision of your Lordships' House is so unpopular with members
of courts below that they are led to seek a way to get round it if they can reflects greater credit on their
independence of mind than on their loyalty to the established and indispensable principle of judicial
precedent. With regard to the second point, it is not difficult to understand the reaction of Griffiths LJ, and of
solicitors and others concerned in arbitrations, that it seems hard on a party against whom a claim is being
made to be obliged himself to ensure that his opponent proceeds with it with proper dispatch. Against that it
is to be remembered that the primary object sought to be achieved by parties who have agreed to refer a
dispute between them to arbitration is that the dispute should be decided on its merits by the arbitral process
 Page 15

which they have chosen with reasonable speed, and not that it shall end up, after inordinate and inexcusable
delay, by not being decided on its merits by that process at all. With regard to the third point, I do not
consider that the consequence flows from the premise. If a claimant is guilty of inordinate and inexcusable
delay in the prosecution of a reference to arbitration, the respondent can and should apply to the arbitrator to
give peremptory directions to the claimant to end the delay; then, if the claimant fails to comply with such
directions, the arbitrator can apply to the court under s 5 of the Arbitration Act 1979 for power to dismiss the
claim for want of prosecution.
[1983] 1 All ER 34 at 47

With regard to the fourth point, that illustrates very well the situation, described by Lord Wilberforce in the
passage from his speech in Fitzleet Estates Ltd v Cherry (Inspector of Taxes) which I quoted above, where
two eminently possible views of a question may be taken, where a decision between them has to be made by
the best method known to the law, and where, once such decision has been made, it must for the future be
followed and acted on without the risk of its being later held to have been wrong and departed from on that
account. In this connection I would lay stress on what is generally accepted to be the special need for
certainty, consistency and continuity in the field of commercial law.

For the reasons which I have given, my opinion on the first and general question raised by the appeal is this:
that neither of the two factors essential for the frustration of the agreement to refer are present in this case;
that the decision of the judge of first instance and of the majority of the Court of Appeal that such frustration
occurred should be reversed; and that the dissenting judgment of Griffiths LJ that no such frustration took
place should be upheld.

I pass now to the further question raised by the cross-appeal. That question is, as I indicated earlier, whether,
assuming (contrary to the decisions of the courts below) that the agreement to refer in the present case was
not frustrated, the conduct of the parties was nevertheless of such a character as to lead to the inference that
they impliedly consented with each other to abandon that agreement.

The question whether a contract has been abandoned or not is one of fact. That being so, it would, I think, be
sufficient, for the purposes of the present case, to say that there are concurrent findings of fact by both the
courts below against the sellers on that question, that it is not the practice of your Lordships' House to
interfere with such concurrent findings of fact save in exceptional circumstances which are not here present,
and that the cross-appeal fails on that ground alone.

Because the question of the abandonment of a contract is, however, of some general importance, I consider
that it may be helpful to examine the matter, as it arises in the present case, somewhat further. For this
purpose it is, I think, necessary to make some additions to the history of the parties' conduct in relation to the
reference which I set out earlier. The additional facts which I regard, for reasons which will become apparent
later, as necessary to state are these. According to the affidavit of Mr Fitzpatrick, a solicitor employed by
Sinclairs, sworn on 16 December 1980, that firm was still seeking to trace, and obtain evidence from,
witnesses whom it might be necessary to call on the hearing of the arbitration as late as November 1979,
February 1980 and November 1980.

The concept of the implied abandonment of a contract as a result of the conduct of the parties to it is well
established in law: see Chitty on Contracts (23rd edn, 1968) vol 1, para 1231 and cases there cited. Where A
seeks to prove that he and B have abandoned a contract in this way, there are two ways in which A can put
his case. The first way is by showing that the conduct of each party, as evinced to the other party and acted
on by him, leads necessarily to the inference of an implied agreement between them to abandon the
contract. The second method is by showing that the conduct of B, as evinced towards A, has been such as to
lead A reasonably to believe that B has abandoned the contract, even though it has not in fact been B's
intention to do so, and that A has significantly altered his position in reliance on that belief. The first method
involves actual abandonment by both A and B. The second method involves the creation by B of a situation
 Page 16

in which he is estopped from asserting, as against A, that he, B, has not abandoned the contract (see Pearl
Mill Co Ltd v Ivy Tannery Co Ltd [1919] 1 KB 78, [1918–19] All ER Rep 702).

On whichever of the two bases of abandonment discussed above the sellers seek to reply in the present
case, it seems to me that they are bound to fail. As I indicated above, Sinclairs, as the sellers' solicitors, were
still, in November 1979, February 1980 and even as late as November 1980, trying to trace, and obtain
evidence from, witnesses who might be called at the hearing of the arbitration. Even if it could fairly be said
(which I do not think that it can) that the buyers' prolonged delays from 1974 onwards were such
[1983] 1 All ER 34 at 48

as to induce in the minds of the sellers or their solicitors a reasonable belief that the buyers had abandoned
the agreement to refer, Sinclairs' continuing conduct with regard to tracing, and obtaining evidence from,
witnesses referred to above makes it impossible for the sellers to say that they acted on any such belief, or
that they altered their position significantly in reliance on it.

For the reasons which I have given I would allow the buyers' original appeal and dismiss the sellers' cross-
appeal, with costs against the sellers in either case.

LORD DIPLOCK.

My Lords, the facts in this appeal and cross-appeal (in which I shall refer to the parties as 'the buyers' and
'the sellers' respectively) are sufficiently stated in the speech of my noble and learned friend Lord Brandon. I
agree with and adopt his reasons for allowing this appeal; but, as author of the speech which constitutes the
ratio decidendi of this House in Bremer Vulkan Schiffbau Und Maschinenfabrik v South India Shipping Corp
[1981] 1 All ER 289, [1981] AC 909, it may not be inappropriate for me, in support of his reasoning, to add
my own somewhat more detailed analysis of the concept of rescission of contract by abandonment and of
the legal nature of the obligations assumed by the parties to a commercial contract under an arbitration
clause contained in it.

In my view the decision of the majority of the Court of Appeal in the instant case, from which Griffiths LJ
dissented, can only be upheld either (a) by holding that the agreement resulting from the submission of
particular disputes that had arisen between the buyers and the sellers to arbitration under the arbitration
clause in the sale agreement (which I will call 'the arbitration agreement') had been abandoned or (b) by
overruling the decision of this House in Bremer Vulkan.

I will deal first with abandonment and in doing so, and later in dealing with the obligations assumed by the
parties under an arbitration clause in a commercial contract, I shall use the expressions 'primary and
secondary obligations' under a contract in the sense that I used them in Photo Production Ltd v Securicor
Transport Ltd [1980] 1 All ER 556, [1980] AC 827 and in Bremer Vulkan itself. Since I shall be dealing with
bipartite synallagmatic contracts only, I will leave the adjectives to be understood whenever I speak of
'contract'.

Abandonment of a contract (the former contract) which is still executory, ie one in which at least one primary
obligation of one or other of the parties remains unperformed, is effected by the parties entering into a new
contract (the contract of abandonment) by which each party promises the other to release that other party
from further performance of any primary obligations on his part under the former contract then remaining
unperformed, without such non-performance giving rise to any substituted secondary obligation under the
former contract to pay damages.
 Page 17

It is the latter part of the promise by each party, ie the release of the other party from all further secondary as
well as primary obligations, that distinguishes the legal concept of abandonment of the former contract from
the extinction of unperformed primary obligations of both parties under the former contract by fundamental
breach of a primary obligation (or breach of condition) by one of them, followed by the election of the party
not in breach to put an end to all primary obligations of both parties under the former contract remaining
unperformed. Unlike the contract of abandonment, this leaves the secondary obligations under the former
contract of the party who committed the breach enforceable against him by the other party.

To the formation of the contract of abandonment, the ordinary principles of the English law of contract apply.
To create a contract by exchange of promises between two parties where the promise of each party
constitutes the consideration for the promise of the other what is necessary is that the intention of each as it
has been communicated to and understood by the other (even though that which has been communicated
does not represent the actual state of mind of the communicator) should coincide. That is what English
lawyers mean when they resort to the latin phrase consensus ad idem and the words that
[1983] 1 All ER 34 at 49

I have italicised are essential to the concept of consensus ad idem, the lack of which prevents the formation
of a binding contract in English law.

Thus if A (the offeror) makes a communication to B (the offeree), whether in writing, orally or by conduct,
which, in the circumstances at the time the communication was received, (1) B, if he were a reasonable man,
would understand as stating A's intention to act or refrain from acting in some specified manner if B will
promise on his part to act or refrain from acting in some manner also specified in the offer, and (2) B does in
fact understand A's communication to mean this, and in his turn makes to A a communication conveying his
willingness so to act or to refrain from acting which mutatis mutandis satisfies the same two conditions as
respects A, the consensus ad idem essential to the formation of a contract in English law is complete.

The rule that neither party can rely on his own failure to communicate accurately to the other party his own
real intention by what he wrote or said or did, as negativing the consensus ad idem, is an example of a
general principle of English law that injurious reliance on what another person did may be a source of legal
rights against him. I use the broader expression 'injurious reliance' in preference to 'estoppel' so as to
embrace all circumstances in which A can say to B, 'You led me reasonably to believe that you were
assuming particular legally enforceable obligations to me', of which promissory or High Trees estoppel (see
Central London Property Trust Ltd v High Trees House Ltd (1946) [1956] 1 All ER 256, [1947] KB 130)
affords another example, whereas 'estoppel', in the strict sense of the term, is an exclusionary rule of
evidence, though it may operate so as to affect substantive legal rights inter partes.

In the instant case, as in most cases where abandonment of a former contract is relied on, the contract of
abandonment of the arbitration agreement is said by the sellers to have been created by the conduct of the
parties, consisting of their common inaction, after the buyers' letter of 12 December 1979. Where the
inference that a reasonable man would draw from the prolonged failure by the claimant in an arbitration
procedure is that the claimant is willing to consent to the abandonment of the agreement to submit the
dispute to arbitration and the respondent did in fact draw such inference and by his own inaction thereafter
indicated his own consent to its abandonment in similar fashion to the claimant and was so understood by
the claimant, the court would be right in treating the arbitration agreement as having been terminated by
abandonment. In André & Cie SA v Marine Transocean Ltd, The Splendid Sun [1981] 2 All ER 993, [1981] 1
QB 694 all three members of the Court of Appeal drew such an inference from the conduct of both parties in
the arbitration. That case was, in my view, rightly decided, though not for reasons other than those which
were given by Eveleigh and Fox LJJ.

The facts in the instant case, however, are very different from those of The Splendid Sun. As my noble and
learned friends Lord Brandon and Lord Brightman both point out, they are inconsistent with any actual belief
 Page 18

on the part of the sellers that the buyers had agreed to abandon the arbitration before their letter of 30 July
1980, which stated their intention of continuing with it.

Your Lordships were urged to hold that the absence of any actual belief on the part of the sellers did not
matter so long as someone in the sellers' position could not unreasonably have drawn the inference from the
apparent inaction of the buyers that they had abandoned the arbitration at some date between their letter of
12 December 1979, when they were manifestly treating the arbitration as being still alive, and 30 July 1980,
when they wrote to the sellers forwarding their expert's report and asking for a hearing date for the arbitration
to be fixed. The absence of actual belief on the sellers' part that the buyers had abandoned the arbitration,
however, would mean that there had in fact been no injurious reliance by the sellers; and to treat that
ingredient of consensus ad idem as unnecessary would introduce into the law of contract a novel heresy
which your Lordships should, in my view, be vigilant to reject.

Applying the orthodox concept of termination of contract by abandonment, neither the trial judge nor any
member of the Court of Appeal was prepared to hold that the sellers were entitled to succeed on this ground;
and even if your Lordships yourselves felt
[1983] 1 All ER 34 at 50

some doubt on this issue, which I myself do not, I agree with my noble and learned friends that your
Lordships would hesitate long before upsetting the unanimous decision of the judges in the lower courts on
what, on a proper application of the law of contract, is essentially a question of fact.

In considering the question of abandonment, I found of great assistance the tabulated chronology of events
which the parties agreed and tendered to your Lordships after the cases had been prepared. Your Lordships
may feel that such a chronology would be welcome and time saving in many other appeals, particularly if
lodged before the start of the hearing.

My Lords, as respect the propriety of this House declining to follow its own recent decision in Bremer Vulkan
I have nothing to add to what is said on this topic by my noble and learned friends Lord Roskill, Lord Brandon
and Lord Brightman. Even if I had been persuaded, as unrepentantly I have not, that of the two eminently
possible views in Bremer Vulkan the majority of the House, speaking through me, made the worse and not
the better choice, I would none the less agree with my Lords that in the interests of legal certainty we should
abide by it.

I turn finally to the question whether it is possible to escape the consequences of the decision in Bremer
Vulkan by resorting to the doctrine of frustration of the arbitration agreement as Staughton J and the majority
of the Court of Appeal (Lord Denning MR and Kerr LJ) thought that they could do; and on this aspect of the
case I think it helpful to start by analysing the legal characteristics of an arbitration clause in a commercial
contract.

The first characteristic is that which was established by this House in Heyman v Darwins Ltd [1942] 1 All ER
337, [1942] AC 356. An arbitration clause is collateral to the main contract in which it is incorporated and it
gives rise to collateral primary and secondary obligations of its own. Those collateral obligations survive the
termination (whether by fundamental breach, breach of condition or frustration) of all primary obligations
assumed by the parties under the other clauses in the main contract. In saying this I do no more than
paraphrase, in the nomenclature I adopted in Photo Production Ltd v Securicor Transport Ltd [1980] 1 All ER
556, [1980] AC 827, what was said by Lord Macmillan in Heyman v Darwins Ltd [1942] 1 All ER 337 at 347,
[1942] AC 356 at 374.

The second characteristic of an arbitration clause is that the primary obligations that it creates are subject to
conditions subsequent. The clause comes into operation so as to impose primary obligations on the parties
 Page 19

to the contract only on the occurrence of a combination of future events which may or may not occur, viz (1)
the coming into existence of a dispute between the parties as to their primary or secondary obligations under
the main contract and (2) the invoking of the arbitration clause by a party to the contract (the claimant) who
desires to obtain the resolution of that dispute by the procedure for which the arbitration clause provides. It
follows from this latter condition subsequent that the arbitration clause may be brought into operation by the
claimant at any time before the expiry of the limitation period applicable to the breach of primary obligation
under the main contract by the other party (the respondent) of which he complains.

The third characteristic is that the subject matter of an arbitration agreement is not a thing that is susceptible
of physical destruction. It is an agreement by the parties (1) to embark on and follow a joint course of action
(viz the procedure for which the arbitration clause provides), for the purpose of obtaining from a third party,
the arbitrator or arbitral tribunal, a decision of the dispute, and (2) to abide by that decision.

In order to determine whether the primary obligations of the parties under an arbitration clause, once it has
been brought into operation, have been terminated by frustration, one must first consider whether the
occurrence of the event relied on as the frustrating event has rendered the further performance by both
parties of their primary obligations under the arbitration clause 'a thing radically different from that which was
undertaken' by each when the arbitration clause was brought into operation, as Lord Radcliffe put it in Davis
Contractors Ltd v Fareham UDC [1956] 2 All ER 145 at 160, [1956]
[1983] 1 All ER 34 at 51

AC 696 at 729, or as I ventured to put it myself in Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha
Ltd [1962] 1 All ER 474 at 485, [1962] 2 QB 26 at 66:

'… does the occurrence of the event deprive the party who has further undertakings [sc primary
obligations] still to perform of substantially the whole benefit which it was the intention of the
parties as expressed in the contract that he should obtain as the consideration for performing
those undertakings?'

My Lords, I accept, as I understand all your Lordships do in common with Staughton J and all three
members of the Court of Appeal, that, during the parties' delay in proceeding with the arbitration, events have
occurred which would involve so substantial a risk that a 'fair trial' of the issues in the arbitration could not be
had, if the arbitration proceedings had been an action in a court of law, that the court in the exercise of its
inherent power to prevent abuse of its own process by procrastination would be justified in striking out the
action for want of prosecution, on the principles approved by the Court of Appeal in Allen v Sir Alfred
McAlpine & Sons Ltd [1968] 1 All ER 543, [1968] 2 QB 229. What puts what in that case was described as
the 'fairness' of the trial in jeopardy by procrastination is the difficulty that the decider of fact, in the instant
case the arbitral tribunal and in the McAlpine case the judge, would encounter in ascertaining with any
reasonable degree of certainty what actually happened many years before. Like my noble and learned friend
Lord Brandon, I would substitute 'satisfactory trial' for the expression 'fair trial' which I myself used in the
McAlpine case.

There seem to me to be two reasons, each of them decisive, why inability to obtain a 'satisfactory trial'
because of the difficulty which the arbitral tribunal will encounter in ascertaining the true facts, even if caused
by delay in the proceedings, is not capable in law of bringing an arbitration agreement to an end by
frustration.

In the first place, it is the nature of the event that determines whether its occurrence deprives the party who
has further primary obligations to perform under the arbitration agreement of substantially the whole benefit
which it was the intention of the parties that he should obtain as consideration for performing those further
primary obligations. As my noble and learned friend Lord Roskill points out, events creating difficulty in
 Page 20

ascertaining what were the true facts may, without default by either party to the arbitration agreement, occur
at any time after those facts came into existence. Witnesses may die or disappear, documents or physical
evidence may be lost or be destroyed even before and at any time, however short, after the arbitration clause
has been brought into operation; and that this is a possibility is well known to the parties when the contract
containing the arbitration clause is entered into. In particular, events making it virtually impossible for the
arbitrator to be confident that he had been able at the hearing to ascertain the true facts might well occur
before the expiry of the limitation period. If the mere fact that because important evidence has become
unavailable it has become virtually impossible for the arbitrator to be confident that he has been able to
ascertain the true facts relevant in the dispute were sufficient to terminate the arbitration agreement by
frustration, the termination would take place by operation of law independently of the wishes of the parties as
soon as that evidence became unavailable. If this took place, as well it might, before the expiry of the
limitation period, the claimant in the frustrated arbitration would then be at liberty to make the same claim in
an action in a court of law, despite the fact that, at the hearing of the action, the judge would experience the
same difficulty in ascertaining the true facts as the arbitrator would have experienced (see Birkett v James
[1977] 2 All ER 801, [1978] AC 297).

My Lords, these considerations make it, in my view, quite impossible to say that the continuance of
arbitration proceedings after it has become virtually impossible that at the hearing the arbitrator can be
confident that he has been able to ascertain the true facts, is a thing radically different from that which was
undertaken by the parties when they incorporated the arbitration clause in the main contract or when the
submission of the particular dispute to arbitration was made. Such virtual impossibility would for this reason
be incapable of qualifying as a frustrating event, even if it had come about without default by either party.
[1983] 1 All ER 34 at 52

My Lords, as regards the second decisive reason why in the instant case frustration cannot be relied on by
the sellers as having put an end to the arbitration agreement, I have little to add to what is said on this matter
in the speech by my noble and learned friend Lord Brandon, and also in the dissenting judgment of Griffiths
LJ where there can be found a judicious selection of the most pertinent citations from the numerous
authorities in this well-ploughed field of law. Of these citations, that which applies most aptly to the
circumstances of the instant case is the statement of Lord Wright in Maritime National Fish Ltd v Ocean
Trawlers Ltd [1935] AC 524 at 530, [1935] All ER Rep 86 at 89: 'The essence of “frustration” is that it should
not be due to the act or election of the party.' In the instant case the continuing deterioration, during the
period of delay, in the amount and quality of evidence which could be made available to the arbitral tribunal
when the hearing eventually takes place constitutes the events of which the cumulative effect by August
1980 is relied on as amounting to frustration of the arbitration agreement. The delay, so far as it was not
justified to enable proper preparation for the hearing to be made by both parties, could have been put to an
end by the sellers by taking steps available to them in the arbitration proceedings. That they elected not to do
so would, in my view, be sufficient in itself to debar them from relying on frustration; a fortiori when their
election not to do so was a breach of a primary obligation on their part under the arbitrating agreement.

So for the reasons given by Lord Brandon supplemented by what is said by others of your Lordships and by
what I myself have said above, I would allow this appeal.

LORD KEITH OF KINKEL.

My Lords, I have had the advantage of reading in draft the speech to be delivered by my noble and learned
friend Lord Brandon. I agree with it, and for the reasons he gives I too would allow the appeal and dismiss
the cross-appeal.

LORD ROSKILL.
 Page 21

My Lords, counsel for the sellers contended, as an alternative to his main submission that the majority
judgments in the Court of Appeal were correct and should be upheld, that this House should not follow the
decision given less than two years ago in Bremer Vulkan Schiffbau Und Maschinenfabrik v South India
Shipping Corp [1981] 1 All ER 289, [1981] AC 909. Your Lordships may think that logically this submission
should precede the other since, were the House now to accept as correct not the view which then prevailed
but the view of the Court of Appeal and of two of your Lordships, my noble and learned friends Lord Fraser
and Lord Scarman, in the Bremer Vulkan case, there can be little doubt that, on the concurrent findings both
of Staughton J and of all the members of the Court of Appeal in the present case, had these proceedings
been by way of action and not of arbitration, they would have been struck out for want of prosecution, and an
injunction would issue to stay the progress of this arbitration.

In support of this submission it was urged that this House should avail itself of the 1966 practice direction
(Note [1966] 3 All ER 77, [1966] 1 WLR 1234). The principal reasons were said to be two. First, reliance was
placed on the unanimity of the criticisms of the Bremer Vulkan decision in the lower courts and in particular
the criticism of the rejection by this House of the view that such delay as would justify the dismissal of an
action for want of prosecution could amount to repudiation of the agreement to arbitrate. Second, it was said
that to impose on a respondent to an arbitration a duty to proceed diligently with that arbitration, parallel with
a similar duty on a claimant, 'flew in the face of the practice and understanding of lawyers and commercial
men' (I quote the actual words used by counsel) and resulted in arbitrations proceeding to hearing even
though the issues could not be determined 'fairly'.

My Lords, it will be convenient to dispose of this last point at once. The adverb 'fairly' has been frequently
used in the context of what is called a 'fair hearing'. It is said that a hearing cannot be 'fair' if witnesses or
documents who or which might have been available at an earlier date are no longer available. But this risk is
inherent in all litigation and all arbitrations. Even at an early date a witness may die or become unavailable
for some other reason and documents may be destroyed. Sometimes witnesses are available
[1983] 1 All ER 34 at 53

to parties but not to the court since, for what is thought to be good reason under our adversarial system, they
are not called and available documents may not be put in evidence. To say that in those circumstances the
trial or the hearing of the arbitration is 'not fair' is, with respect, a misuse of that word. I agree with my noble
and learned friend Lord Brandon that the better phrase is 'not satisfactory'. Every tribunal must do its best
with the material placed before it. But no tribunal can add to that material however much it may wish to do so;
and if in the end the result is 'not satisfactory' the blame lies not with the tribunal but with the parties. In such
an event I do not think the result can be said to be 'unfair'.

My Lords, the contention that the result of the decision in the Bremer Vulkan case 'flew in the face of the
practice and understanding of lawyers and commercial men' requires consideration. Kerr LJ spoke of the
Bremer Vulkan case as having been 'received with the greatest concern, not only in the City and the Temple,
but also abroad … ' (see [1982] 3 All ER 394 at 409, [1982] 3 WLR 49 at 67).

My Lords, it would no doubt have been convenient to many had the contrary view prevailed. But, with all
respect, the language both of the submission and of the learned Lord Justice is difficult to accept in its
entirety since it was not until the decision of Donaldson J at first instance in the Bremer Vulkan case [1979] 3
All ER 194, [1981] AC 909 on 10 April 1979 that it had been held, or, it seems, previously suggested, that
stale arbitrations could be stopped by injunction. It had, it seems, not occurred to anyone to advance this
submission, notwithstanding that some six years earlier Bridge J had held in Crawford v A E A Prowting Ltd
[1972] 1 All ER 1199, [1973] QB 1 that an arbitrator had no power to dismiss an arbitration for want of
prosecution. Indeed, my recollection is that in the Court of Appeal in the Bremer Vulkan case [1980] 1 All ER
420, [1981] AC 909 (I was a member of that court) one of the main arguments against the view which there
found favour was the novelty of the procedure which the plaintiffs in that action had adopted.
 Page 22

If the language which I have ventured to criticise means no more than that until the decision in the Bremer
Vulkan case in this House it was the practice of lawyers and of commercial men to allow arbitrations, and in
particular arbitrations where a claimant's prospects of success seemed slight, to drift lethargically along with
the respondent hoping that in consequence the claim might be dropped, this is no doubt true. Some solicitors
and especially those acting for plaintiffs had been accustomed to similar inaction in personal injury cases.
The decision of the Court of Appeal in Allen v Sir Alfred McAlpine & Sons Ltd [1968] 1 All ER 543, [1968] 2
QB 229 put an end to that practice, much to the alarm of those who had previously been guilty of adopting it.
If the decision in this House in the Bremer Vulkan case, if not now departed from, stops arbitrations being
allowed to drift into inactivity I do not think that the decision is to be criticised on that ground alone.

My Lords, I turn to consider the first reason which was advanced for urging that the decision in the Bremer
Vulkan case should now be departed from. This submission when analysed amounts to no more than that
this House, which by a majority rejected the conclusion of Donaldson J and the Court of Appeal, should now,
less than two years later, say that the reasoning which led to that conclusion was wrong and that the reasons
which appealed to the Court of Appeal and two of my noble and learned friends in this House should now be
held to be the law.

I have reread all the judgments and speeches in the Bremer Vulkan case. It is apparent from their perusal
that there were two possible views of the correct analysis of the nature of an arbitration agreement. One
commanded the greater numerical support. The other commanded the support of the majority in this House.
The law of this country is determined in this way and it was the latter view which prevailed. There are many
cases where the common law of this country has been similarly determined. Two well-known examples are
Donoghue v Stevenson [1932] AC 562, [1932] All ER Rep 1 and Bell v Lever Bros Ltd [1932] AC 161, [1931]
All ER Rep 1. Each decision was subjected to considerable contemporary criticism. Each has stood the test
of time and the former has been widely regarded as a milestone in the development of the law of negligence.
[1983] 1 All ER 34 at 54

Naturally, counsel for the respondents drew your Lordships' attention to a number of cases where the
possible review of an earlier decision of this House has been considered. In The Johanna Oldendorff, E L
Oldendorff & Co GmbH v Tradax Export SA [1973] 3 All ER 148, [1974] AC 479 this House departed from its
earlier decision by a majority in Sociedad Financiera de Bienes Raices SA v Agrimpex Hungarian Trading Co
for Agricultural Products, The Aello [1960] 2 All ER 578, [1961] AC 135. But that departure took place
because of the practical difficulties to which the earlier decision had given rise: see the observations of Lord
Reid and of Lord Diplock ([1973] 3 All ER 148 at 156, 179, [1974] AC 479 at 535, 561). On the other hand, in
Knuller (Publishing, Printing and Promotions) Ltd v DPP [1972] 2 All ER 898, [1973] AC 435 this House by a
majority declined to review the earlier decision in Shaw v DPP [1961] 2 All ER 446, [1962] AC 220. Lord Reid
who had dissented in Shaw's case and 12 years later still thought that the decision of the majority wrong (see
[1972] 2 All ER 898 at 903, [1973] AC 435 at 455) firmly refused to permit the majority decision to be
reconsidered even though Lord Diplock dissented on two grounds, first, that Shaw's case was wrongly
decided and, second, that in a criminal case where the liberty of the subject was involved the House should
be vigilant to correct what Lord Diplock regarded as an earlier mistake.

None of these considerations presently arise. No useful purpose will be served by reviewing other decisions
where the House has or has not departed from earlier decisions. I see nothing in the present case which
would bring it within Lord Reid's statement of principle in Jones v Secretary of State for Social Services
[1972] 1 All ER 145 at 149, [1972] AC 944 at 966. I respectfully echo what Lord Reid there said, that cases
where the 1966 practice direction ([1966] 3 All ER 77, [1966] 1 WLR 1234) should or should not apply
cannot be categorised.

In commercial law it is essential that the law should be certain. Your Lordships have recently reasserted this
principle on a number of occasions, notably in cases arising from the alleged wrongful withdrawal of time
chartered ships for supposedly unpunctual payment of hire. To review the Bremer Vulkan decision would
create not certainty but uncertainty. Were your Lordships to yield to the sellers' submissions a few years have
 Page 23

only to elapse and other litigants might hope to persuade a differently constituted appellate committee once
again to reconsider the position and to restore the Bremer Vulkan decision to its present role.

My Lords, it follows that, since I agree with all your Lordships on the critical issue in this appeal, namely that
the majority judgments in the Court of Appeal, in seeking to distinguish the Bremer Vulkan decision, depart
from fundamental principles regarding the law of frustration and thus cannot be supported, this appeal must
be allowed. I would only add that, if it be said that the refusal of your Lordships' House to reconsider the
Bremer Vulkan decision weakens the abilities of arbitrators or of the courts to dispose of stale arbitrations, I
question whether that is in truth so. In the first place there may well be cases such as André & Cie SA v
Marine Transocean Ltd, The Splendid Sun [1981] 2 All ER 993, [1981] 1 QB 694 where the conduct of the
parties is such that the only possible inference is that the agreement to arbitrate has been rescinded by
mutual consent. On that ground The Splendid Sun was in my view plainly rightly decided, though I agree with
Fox LJ that the doctrine of frustration was not available in that case. It was sought to advance the same
argument in the instant case, but in my view both courts below were right in rejecting it. There is no evidence
of implied mutual recission. Second, s 5 of the Arbitration Act 1979 confers drastic powers which can and no
doubt will from time to time be properly used by arbitrators and umpires to avoid delay and to dispose of stale
arbitrations.

LORD BRIGHTMAN.

My Lords, I am in agreement with your Lordships, and I wish to add only a few words of emphasis of my own.

I turn first to the sellers' invitation that this House should depart from the conclusion which it reached less
than two years ago in Bremer Vulkan Schiffbau Und Maschinenfabrik v South India Shipping Corp [1981] 1
All ER 289, [1981] AC 909. That is an invitation which I would unhesitatingly decline. Nothing has occurred
since January 1981 in the field of
[1983] 1 All ER 34 at 55

arbitration to warrant such an inroad into the principle of stare decisis, described in R v Cunningham [1981] 2
All ER 863 at 870, [1982] AC 566 at 581 as 'the indispensable foundation of the use by your Lordships of the
appellate jurisdiction of the House and its normal practice'. I appreciate that the decision in the Bremer
Vulkan case may have caused alarm and despondency to respondents in moribund arbitration cases, by
encouraging the attempted resuscitation of stale claims. But that is a transitory consequence of the decision.
So far as the future is concerned, the decision introduces a sense of urgency into arbitration proceedings
which is just as commendable there as it is in court proceedings. I would have thought that the parties
themselves would welcome the incentive for speed which the Bremer Vulkan decision injects into their cases.
I appreciate that some busy professional people may find this irksome, because speed tends to increase the
weight of an overload of work, while deferment may sometimes ease the burden. This is a disadvantage to
professional people which must be accepted. I cannot see that it is remotely unjust or unfair to tell
respondents that, if they suffer claimants to delay, they will lose the right to complain of that delay.

I turn to the alleged abandonment of the arbitration. Although the claimant's delay does not of itself confer
any right on the respondent to call a halt to the arbitration, it may lead to an inference that the submission of
the dispute to arbitration has been abandoned by mutual agreement and thus prevent the claimant reviving
the proceedings. André & Cie SA v Marine Transocean Ltd, The Splendid Sun [1981] 2 All ER 993, [1981]
QB 694 is an example. In the instant case the sellers' submission that the arbitration agreement ought to be
treated as abandoned by mutual consent was, in my opinion, rightly rejected by the trial judge and by the
Court of Appeal. Your Lordships may feel that it would not be appropriate to reconsider this aspect of the
case, which depends on the inference to be drawn from the admitted primary facts, and on which both the
lower courts were in agreement. I wish, however, to touch briefly on this topic to correct what I believe is a
fallacy in the sellers' case. Under the heading 'Rescission by mutual agreement—“abandonment”' the sellers
make this submission:
 Page 24

'An agreement may be discharged by its being tacitly abandoned by both parties. Tacit
abandonment may be inferred from a sufficient delay. The question is whether “the proper
inference to be drawn was that each party was justified in assuming that the matter was off
altogether” … Since the test is an objective one the question is what inferences would a
reasonable person in the position of the [sellers] draw from the delay which had occurred
[between October 1978 and the end of July 1980].'

The statement with which I quarrel, because it is incomplete, is 'the test is an objective one'. The test in my
opinion is not wholly objective.

The basis of 'tacit abandonment by both parties', to use the phraseology of the sellers' case, is that the
primary facts are such that it ought to be inferred that the contract to arbitrate the particular dispute was
rescinded by the mutual agreement of the parties. To entitle the sellers to rely on abandonment, they must
show that the buyers so conducted themselves as to entitle the sellers to assume, and that the sellers did
assume, that the contract was agreed to be abandoned sub silentio. The evidence which is relevant to that
inquiry will consist of or include: (1) what the buyers did or omitted to do to the knowledge of the sellers.
Excluded from consideration will be the acts of the buyers of which the sellers were ignorant, because those
acts will have signalled nothing to the sellers and cannot have founded or fortified any assumption on the
part of the sellers; (2) what the sellers did or omitted to do, whether or not to the knowledge of the buyers.
These facts evidence the state of mind of the sellers, and therefore the validity of the assertion by the sellers
that they assumed that the contract was agreed to be abandoned. The state of mind of the buyers is
irrelevant to a consideration of what the sellers were entitled to assume. The state of mind of the sellers is
vital to what the sellers in fact assumed.

In the instant case there is a period of 21 months which contains the acts and omissions relied on by the
sellers. During that period there were five communications from buyers to sellers. Those communications
can be relied on by the buyers to counter the submission that the sellers were entitled to assume that the
contract to arbitrate had been abandoned
[1983] 1 All ER 34 at 56

by the buyers. There were during the same period four additional acts on the part of the buyers inconsistent
with an intention on their part to rescind the arbitration agreement, of which the sellers were ignorant. The
buyers cannot rely on those acts. Per contra, there were two important steps taken by the sellers, without the
knowledge of the buyers, inconsistent with the proposition that the sellers assumed the arbitration was
abandoned. This evidence, though going to the state of mind of the sellers and signalling nothing to the
buyers, is admissible and in the instant case decisive.

I also found of great assistance the tabulated chronology of events which the parties agreed and tendered to
your Lordships after the cases had been prepared.

Appeal allowed; cross-appeal dismissed.

Solicitors: Holman Fenwick & Willan (for the buyers); Sinclair Roche & Temperley (for the sellers).

Mary Rose Plummer Barrister.