Page 1

ICLR: Appeal Cases/1982/PIONEER SHIPPING LTD. AND OTHERS RESPONDENTS AND B.T.P.
TIOXIDE LTD. APPELLANTS - [1982] A.C. 724

[1982] A.C. 724

PIONEER SHIPPING LTD. AND OTHERS RESPONDENTS AND B.T.P. TIOXIDE LTD.
APPELLANTS

[HOUSE OF LORDS]

1981 June 15, 16, 17, 18; July 16

Lord Diplock, Lord Fraser of Tullybelton, Lord Russell of Killowen, Lord Keith of Kinkel and Lord
Roskill

Arbitration - Award - Appeal - Effect of strike on charterparty - Arbitrator's decision on frustration - Finding
that charterparty divisible into separate seasons - Whether court to entertain appeal against award -
Arbitration Act 1979 (c. 42), s. 1 (1) (2) (3) (4) (7)

Contract - Frustration - Charterparty - Effect of strike - Whether delay sufficient to constitute frustration -
Whether fact or law

Ships' Names - Nema

On November 2, 1978, owners chartered the Nema to charterers for seven consecutive voyages to Sorel in
Canada there to load titanium slag and carry the cargo back to Europe. For three or four of the winter months
Sorel was only open for ice-reinforced vessels and the Nema was not ice-reinforced. Her voyages were to
start in April and end in December 1979. By clause 5 of the charterparty time lost in, inter alia, strikes was not
to be computed in the loading or discharging time. The Centrocon arbitration clause providing for "final
arbitrament" in London was incorporated in the charter. After one round voyage the Nema arrived back at
Sorel on June 20, 1979. She gave notice of readiness but was unable to load owing to a strike which had
started there on June 6. On June 28, 1979, the parties, in consideration of the strike situation, agreed an
addendum no. 2 to the charterparty by which, inter alia, the owners were permitted to take the Nema for one
intermediate transatlantic voyage thereafter returning to load her next cargo at Sorel, the charterparty was
extended for a further seven cargoes to be lifted between April and December 1980 and, if the strike
continued after the end of the intermediate voyage, the situation was to be "discussed without obligation."
The strike at Sorel continued and by an addendum no. 3 of July 11, 1979, the charterers agreed to pay the
owners compensation at the rate of $2,000 a day until the strike ended or the Nema got an intermediate
voyage. On July 20 the Nema was released to the owners and sailed on an intermediate voyage from which
she finished discharging her cargo at Glasgow on August 10, 1979. The charterers then wanted the Nema to
return to Sorel in case the strike ended but the owners fixed her for a further intermediate voyage.

In mid-August 1979 the parties agreed to early arbitration before a single arbitrator. After an all day arbitration
hearing on September 26, 1979, the arbitrator, who did not know when the strike would end, gave his
decision on September 28, 1979, that "the whole of the charterparty contract of November 2, 1978, is now
frustrated." On October 3 he gave his reasoned award and stated that in arriving at his conclusions he had
disregarded addenda nos. 2 and 3 and that his decision only adverted to the "seven consecutive voyages for
[1982] A.C. 724 Page 725
 Page 2

1979," no consideration having been given "to the seven voyages contemplated for the 1980 season." On
October 5, the strike ended. On November 2, 1979, Robert Goff J. gave leave to appeal under section 1 of
the Arbitration Act 1979 1 and on appeal by the owners the Court of Appeal held that it had jurisdiction to
entertain the appeal and declined to interfere with the judge's grant of leave.

On the hearing of the appeal, Robert Goff J. held that "the charterparty and addenda comprised one
indivisible contract" which was not frustrated and ordered that the award be varied pursuant to section 1 (2)
(a) of the Act of 1979 by substituting a declaration that the charterparty had not been frustrated and/or that
the Nema was and had at all material times since August 10, 1979, been obliged to return to Sorel. On
appeal by the owners the Court of Appeal allowed the appeal.

On appeal by the charterers:-

Held, dismissing the appeal, (1) that under the charterparty of November 2, 1978, and addendum no. 2 the
contemplated voyages for the 1979 and 1980 seasons were distinct, separate and independent adventures
and the arbitrator had rightly considered whether or not the charterparty for the 1979 season had been
frustrated (post, pp. 734E-F, 744H - 745B, 751B-E).

Larrinaga and Co. Ltd. v. Société Franco-Américaine des Phosphates de Medulla, Paris (1923) 29 Com.Cas.
1, H.L.(E.) considered.

(2) That, since the arbitrator had properly directed himself that, because of the strike, performance of the
charterparty for 1979 must be radically different from what had been undertaken under the contract and his
finding was reasonable, his conclusion that on September 26, 1979, the charterparty was frustrated in
respect of the 1979 season should not have been interfered with and should be restored (post, pp. 734E-F,
744H - 745B, 753B-E,754B-E).

Davis Contractors Ltd. v. Fareham Urban District Council [1956] A.C. 696, H.L.(E.) applied.

Trade and Transport Inc. v. Iino Kaiun Kaisha Ltd. (The Angelia) [1973] 1 W.L.R. 210 doubted.

(3) That in the circumstances leave to appeal to the High Court from the arbitrator's award ought not to have
been granted by the judge nor from his decision to the Court of Appeal (post, pp. 735E-F, 740E-F, 744H -
745B, 746A-B).

1     Arbitration Act 1979, s. 1: "(1) In the Arbitration Act 1950 … section 21 (statement of case …) shall cease to have effect
and, without prejudice to the right of appeal conferred by subsection (2) below, the High Court shall not have jurisdiction to set
aside or remit an award on an arbitration agreement on the ground of errors of fact or law on the face of the award. (2) Subject
to subsection (3) below, an appeal shall lie to the High Court on any question of law arising out of an award on an arbitration
agreement; and on the determination of such an appeal the High Court may … (a) confirm, vary or set aside the award … (3)
An appeal under this section may be brought by any of the parties to the reference - (a) with the consent of all the other parties
to the reference; or (b) … with the leave of the court. (4) The High Court shall not grant leave under subsection (3) (b) above
unless it considers that, having regard to all the circumstances, the determination of the question of law concerned could
substantially affect the rights of one or more of the parties to the arbitration agreement … (7) No appeal shall lie to the Court of
Appeal from a decision of the High Court on an appeal under this section unless - (a) the High Court or the Court of Appeal
gives leave; and (b) it is certified by the High Court that the question of law to which its decision relates either is one of general
public importance or is one which for some other special reason should be considered by the Court of Appeal. …"

[1982] A.C. 724 Page 726

Schiffahrtsagentur Hamburg Middle East Line G.m.b.H. Hamburg v. Virtue Shipping Corporation Monrovia
(The Oinoussian Virtue) [1981] 1 Lloyd's Rep. 533 disapproved.
 Page 3

Observations on the granting of leave to appeal under section 1 of the Arbitration Act 1979 (post, pp. 740B-E,
742E - 743A, C-F, 744B-G, H - 745B, D - 746A).

Decision of the Court of Appeal [1980] Q.B. 547; [1980] 3 W.L.R. 326; [1980] 3 All E.R. 117 affirmed.

The following cases are referred to in their Lordships' opinions:

Czarnikow v. Roth, Schmidt & Co. [1922] 2 K.B. 478, C.A.

Davis Contractors Ltd. v. Fareham Urban District Council [1956] A.C. 696; [1956] 3 W.L.R. 37; [1956] 2 All
E.R. 145, H.L.(E.).

Edwards v. Bairstow [1956] A.C. 14; [1955] 3 W.L.R. 410; [1955] 3 All E.R. 48, H.L.(E.).

Halfdan Grieg & Co. A/S v. Sterling Coal & Navigation Corporation (The Lysland) [1973] Q.B. 843; [1973] 2
W.L.R. 904; [1973] 2 All E.R. 1073, C.A.

International Sea Tankers Inc. of Liberia v. Hemisphere Shipping Co. Ltd. of Hong Kong (The Wenjaing)
[1981] 2 Lloyd's Rep. 308.

Larrinaga and Co. Ltd. v. Société Franco-Americaine des Phosphates de Medulla, Paris (1922) 27 Com.Cas.
160; 28 Com.Cas. 1, C.A.; (1923) 29 Com.Cas. 1, H.L.(E.).

National Carriers Ltd. v. Panalpina (Northern) Ltd. [1981] 2 W.L.R. 45; [1981] 1 All E.R. 161, H.L.(E.).

Penelope, The [1928] P. 180.

Schiffahrtsagentur Hamburg Middle East Line G.m.b.H. Hamburg v. Virtue Shipping Corporation Monrovia
(The Oinoussian Virtue) [1981] 1 Lloyd's Rep. 533.

Trade and Transport Inc. v. Iino Kaiun Kaisha Ltd. (The Angelia) [1973] 1 W.L.R. 210; [1973] 2 All E.R. 144.

Tsakiroglou & Co. Ltd. v. Noblee Thorl G.m.b.H. [1962] A.C. 93; [1961] 2 W.L.R. 633; [1961] 2 All E.R. 179,
H.L.(E.).

The following additional cases were cited in argument:

Bank Line Ltd. v. Arthur Capel & Co. [1919] A.C. 435, H.L.(E.).

British Launderers' Research Association v. Borough of Hendon Rating Authority [1949] 1 K.B. 434; [1949] 1
All E.R. 21, C.A.

Comptoir Commercial Anversois and Power, Sons & Co., In re An Arbitration between [1920] 1 K.B. 868,
C.A.
 Page 4

Denny, Mott & Dickson Ltd. v. James B. Fraser & Co. Ltd. [1944] A.C. 265; [1944] 1 All E.R. 678, H.L.(Sc.).

Dominion Coal Co. Ltd. v. Roberts (1920) 4 Ll.L.Rep. 434.

Esmail v. J. Rosenthal & Sons Ltd. [1965] 2 Lloyd's Rep. 171, H.L.(E.).

Hongkong Fir Shipping Co. Ltd. v. Kawasaki Kisen Kaisha Ltd. [1962] 2 Q.B. 26; [1962] 2 W.L.R. 474; [1962]
1 All E.R. 474, C.A.

Intertradex S.A. v. Lesieur-Tourteaux S.A.R.L. [1978] 2 Lloyd's Rep. 509, C.A.

Ismail v. Polish Ocean Lines (The Ciechocinet) [1976] Q.B. 893; [1976] 2 W.L.R. 477; [1976] 1 All E.R. 902,
C.A.

Jackson v. Rotax Motor and Cycle Co. [1910] 2 K.B. 937, C.A.

Jackson v. Union Marine Insurance Co. Ltd. (1874) L.R. 10 C.P. 125.

Mondial Trading Co. G.m.b.H. v. Gill & Duffus Zuckerhandelsgesellschaft m.b.H. [1980] 2 Lloyd's Rep. 376.
[1982] A.C. 724 Page 727

Ocean Tramp Tankers Corporation v. V/O Sovfracht (The Eugenia) [1964] 2 Q.B. 226; [1964] 2 W.L.R. 114,
[1964] 1 All E.R. 161, C.A.

Tersons Ltd. v. Stevenage Development Corporation [1965] 1 Q.B. 37; [1964] 2 W.L.R. 225; [1963] 3 All E.R.
863, C.A.

Universal Cargo Carriers Corporation v. Citati [1957] 2 Q.B. 401; [1957] 2 W.L.R. 713; [1957] 2 All E.R. 70.

APPEAL from the Court of Appeal.

This was an appeal by leave of the House of Lords by the appellants, B.T.P. Tioxide Ltd., from an
order dated May 22, 1980, of the Court of Appeal (Lord Denning M.R., Templeman and Watkins
L.JJ.) allowing an appeal from an order dated December 21, 1979, of Robert Goff J., thereby
restoring the decision of the sole arbitrator, Donald Ashford Davies Esq. given in an award dated
October 3, 1979, whereby he determined a dispute which had arisen between the appellants and
the respondents, Pioneer Shipping Ltd. and Armada Marine S.A., under a charterparty dated
November 2, 1978.

The facts are set out in the opinion of Lord Roskill.

Anthony Hallgarten Q.C. and Bernard Rix Q.C. for the appellants, the charterers. In determining
whether frustration had occurred, the arbitrator took as his yardstick the general principle relating to
frustration set out in Davis Contractors Ltd. v. Fareham Urban District Council [1956] A.C. 696
which he summarised as "… the change of obligation theory; performance because of the
supervening events must be something radically different from that which was undertaken under
the contract; 'it was not this that I promised to do.' "Purporting to apply this test, the arbitrator
 Page 5

reached the conclusion that the whole of the charter was frustrated. As to obligation, he considered
that it was" for seven voyages" during the 1979 season with a last loading to take place in
December 1979. As to performance, both in terms of the number of contractual voyages actually or
prospectively performed and in terms of the impact of delay upon the owners, the arbitrator
concluded that performance was now radically different from that undertaken, and that the
interruption was sufficiently long to destroy the identity of the service to be performed by the
owners. Indeed, it was his view that such would be the case even if the strike had ended on
September 27; at most performance would be four out of seven contractual voyages, something
"radically different from that originally contemplated." In reaching these conclusions, the arbitrator
stated that his decision adverted only to the seven voyages for 1979. He made it clear that, as to
obligation, he had disregarded addenda nos. 2 and 3, and that as to performance, he had
disregarded the movements and employment of the vessel since her presentation for the second
voyage.

The arbitrator used the wrong test in determining whether frustration had occurred. Reliance is
placed on the first world war requisition cases in support of this submission. Frustration operates
automatically independently of the will and intention of the parties: Bank Line Ltd. v. Arthur Capel &
Co. [1919] A.C. 435, 451, per Lord Sumner. Non
[1982] A.C. 724 Page 728

constat that the tribunal should ignore the attitude of the parties in the circumstances that they
found themselves in. The Bank Line Ltd. case is the converse of the present. The arbitrator's
finding that the contract was frustrated even if the strike had ended on September 27 is an extreme
view. But the fact that there could still be further substantial performance is a vital factor in
determining whether a contract has been frustrated: see Hongkong Fir Shipping Co. Ltd. v.
Kawasaki Kisen Kaisha Ltd. [1962] 2 Q.B. 26, 72, 73. Putting it in another way: is there still
consideration moving from both parties under the original bargain and can it be said that it would
not be a travesty of that bargain if it was performed in the new circumstances?

The question whether performance under the new circumstances was performance under the
original bargain or under some different bargain was correctly dealt with by Robert Goff J. [1980] 2
Lloyd's Rep. 83, 93. Up to September 26, it may have been a hard bargain, but it remained the
same bargain. The Court of Appeal should not have reversed the judge on this point. For the
relevant factors to be taken into account in considering this issue see Chitty on Contracts, 24th ed.
(1977), vol. I, paras 1403, 1406. The strike in the present case was within the commercial risk
undertaken by these owners. It is necessary to ascertain whether there was a real chance of further
performance. Most attempts to invoke strikes as a cause of frustration have failed. The Penelope
[1928] P. 180, where such an attempt was successful, is distinguishable.

Robert Goff J.'s assessment of the award was correct, the charter was not dissolved on September
26 and if it had continued it would have been the same bargain. The House is entitled to adopt the
approach of Lord Reid in Davis Contractors Ltd. v. Fareham Urban District Council [1956] A.C. 696,
721, that the court should take from the arbitrator's award all facts which throw light on the nature of
the contract, or which can properly be held to be extrinsic evidence relevant to assist in its
construction and then, as a matter of law, to construe the contract and to determine whether the
ultimate situation, as disclosed by the award, is or is not within the scope of the contract so
construed. The position of an arbitrator is analogous to that of an official referee or county court
judge. The arbitrator, having established the facts, the points of law are subject to review. The
question is: was the basis of the contract seven voyages? This is a pure question of construction. In
the appellants' submission, it was a contract of up to seven voyages. The probable maximum was
five voyages. This contract was, of course, affected by the strike but the composite agreement
contemplated further performance of the contract after the strike. It is only if, as Lord Denning M.R.
states, the court adopts a more liberal approach that the doctrine of frustration could apply. No one
 Page 6

has ever contraverted the observation of Viscount Simonds in Davis Contractors Ltd. v. Fareham
Urban District Council [1956] A.C. 696 that the doctrine should be kept within very narrow limits. It
should not be compartmentalised. The question of delay is merely one of a number of factors which
have to be taken into account in considering whether a contract has been frustrated. Bank Line Ltd.
v. Arthur Capel & Co. [1919] A.C. 435 was a very different case from the present.

Because frustration has such draconian consequences for the parties, the
[1982] A.C. 724 Page 729

question whether there has been frustration should be one that the court cherishes for itself. It is a
question of law for the court paying due deference to the findings of the arbitrator: see Davis
Contractors Ltd. v. Fareham Urban District Council [1956] A.C. 696, 719, 720, 721, 730, and
Tsakiroglou & Co. Ltd. v. Noblee Thorl G.m.b.H. [1962] A.C. 93, 116, 119, 123, 124, 129-130, 134.
This approach was adopted by Lord Denning M.R. in Ocean Tramp Tankers Corporation v. V/O
Sovfracht (The Eugenia) [1964] 2 Q.B. 226, 239, 240, and is now considered to be accepted law:
see [1980] 1 Lloyd's Rep. 519, 520, 521. It was the approach adopted by Kerr J. in Trade and
Transport Inc. v. Iino Kaiun Kaisha Ltd. (The Angelia) [1973] 1 W.L.R. 210, which is strongly relied
on.

It is said by the respondents that the findings of an arbitrator are akin to those of a jury and that,
therefore, they should not be disturbed and reliance is placed on Jackson v. Union Marine
Insurance Co. Ltd. (1874) L.R. 10 C.P. 125. The appellants would support jackson for what it
decided but would not support the manner in which it was decided. For the ambit of that decision:
see the judgment of McCardie J. in Larrinaga & Co. Ltd. v. Société Franco-Americaine des
Phosphates de Medulla, Paris (1922) 27 Com.Cas. 160, 176. See also In re an Arbitration between
Comptoir Commercial Anversois and Power, Sons & Co. [1920] 1 K.B. 868, 890, per Bankes L.J.
Jackson v. Union Marine Insurance Co. Ltd., L.R. 10 C.P. 125 and Universal Cargo Carriers
Corporation v. Citati [1957] 2 Q.B. 401 are both simple cases of the postponement of a single
voyage charter. The present case is the converse of those cases. Delay was the overriding factor in
the Jackson case. In the present case, it is only one of many factors.

The respondents are seeking to raise a new compartmentalisation of the law in relation to
frustration. The difficulties in the respondents' approach are highlighted on an analysis of the
judgment of Templeman L.J. below. This is a most difficult area of the law of contract: see British
Launderers' Research Association v. Borough of Hendon Rating Authority [1949] 1 K.B. 434, 471,
per Denning L.J.

As to whether the Arbitration Act 1979 requires a new approach to be adopted to arbitration awards,
this is an issue of the greatest importance. There are no grounds for thinking that the statements of
Lord Denning M.R. and other members of the Court of Appeal in the present case were welcomed
by the maritime community or came other than as a surprise. If the appellants be correct so far, it
would be surprising if the new Act shut the appellants out from appealing to the court. It is difficult to
think of a case more fitting for judicial review than the present. Very few commercial cases are
concerned with pure questions of law. If Lord Denning M.R.'s view be right, then the new Act has
greatly curtailed judicial review of arbitration awards.

As to whether leave ought ever to have been given to appeal to the High Court in this case, in view
of the circumstances that the parties sought a quick decision, there are cases where legal rights
and wrongs are of secondary importance and where finality is of prime importance. In other cases,
a decision is required promptly, whether right or wrong, because of the circumstances that
commercial certainty is the paramount consideration. It is open to the parties to enter into an
 Page 7

exclusion agreement under section 3 of the Act of 1979. This was not done in the present case. The
award
[1982] A.C. 724 Page 730

has to be approached on its merits or lack of them. Robert Goff J. had the award before him and
was fully aware of the ambiguities in it. The judge dealt with the case in a way that cannot be
faulted.

The Arbitration Act 1979 has not brought about any substantial shift in the method of judicial review
from that to be found in earlier legislation as suggested by the respondents. What was wrong with
the old case stated procedure under section 21 of the Arbitration Act 1950 was the opportunity to
indulge in delaying tactics that it gave to undeserving parties. The Arbitration Act 1979 made
substantial and very beneficial changes in procedure but once the matter - an award - was before
the court, there is nothing in the Act to suggest that there is to be a different approach to the judicial
review of awards. The question posed by section 1 (2) is: is there a question of law arising out of an
award? The question then is: is it a matter that the court will entertain? If the parties consent, then
section 1 (2) operates. If one of the parties does not agree, then under section 1 (4), the court
considers if there is a question of law which substantially affects the rights of one or more of the
parties. As a matter of language, there is nothing to suggest the shift in approach to entertaining
appeals as is suggested by the respondents. Section 1 (5) assists the appellants' argument. The
court may look at all relevant material to reach its own conclusion on the point of law.

On the language of the Act, the considered judgment of Robert Goff J. in giving leave to appeal was
absolutely right. For the established approach of the law on the question of statutory construction,
see Halsbury's Laws of England, 3rd ed. vol. 36 (1961), para. 621. The purpose of the Act of 1979
was to do away with technicalities - to have a reasoned award couched in everyday language.

There is nothing in the Act of 1979 which suggests that Parliament had in mind any change of
approach or indeed that it considered the traditional approach as representing a mischief which it
was desirable to combat. On the contrary, Parliament intended to leave the old approach
undisturbed. The traditional special case procedure had given rise to certain problems. In particular,
it was unsatisfactory because arbitrators and the courts had to consider whether or not a case was
to be stated, on hypothetical facts before issue of the award itself, an award which might show that
the question of law was now peripheral or indeed academic: see The Ciechocinek [1976] I Lloyd's
Rep. 489, 497. This and the matter of delayed enforceability stated above gave undeserving parties
opportunities for delay.

[Counsel sought to refer to the Report on Arbitration by the Commercial Court Committee (1978)
(Cmnd. 7284), which led to the Arbitration Act, 1979, but the House indicated that it was not
prepared to hear submissions in respect of the Report.]

As to how section 21 of the Act of 1950 was understood at the time when the Act of 1979 was
passed, see Halfdan Grieg & Co. A/S v. Sterling Coal and Navigation Corporation (The Lysland)
[1973] Q.B. 843, 862A. The shift of emphasis between section 21 of the Act of 1950 and section 1
(4) of the Act of 1979 is that it is now left to the discretion of the judge whether or not to grant leave.
What the new Act does not do is to lay down a rigorous test as to what constitutes a point of law.
The new conditions, the three tests, to which Lord Denning M.R. addresses himself
[1982] A.C. 724 Page 731

for granting leave to appeal [1980] Q.B. 547, 564, are unwarranted by the language of the Act.
They should not be followed because: (i) an application for leave would turn into a mini trial; (ii) the
manifest wrongness test would be inimical to the proper relationship between the courts and the
 Page 8

commercial community; (iii) to graft onto a perfectly straightforward arbitration law administrative
law conditions will lead to infinitely greater technicalities than those swept away by the Act of 1979;
and (iv) the misdirection test has no part in the arbitration procedure. Lord Denning M.R.'s
observation that the arbitrator is likely to be as right as a judge on the question of frustration flies in
the face of the general development of the law on frustration over the last 50 years.

In Schiffahrtsagentur Hamburg Middle East Line G.m.b.H. Hamburg v. Virtue Shipping Corporation
Monrovia (The Oinoussian Virtue) [1981] 1 Lloyd's Rep. 533, Robert Goff J. refused to follow the
judgment of Lord Denning M.R. in the present case. That refusal should carry great weight coming
from the commercial judge who has the task of carrying out the day to day administration of the
Commercial Court. The decision illustrates admirably the way the procedure under the Act of 1979
operates. See also: International Sea Tankers Inc. of Liberia v. Hemisphere Shipping Co. Ltd. of
Hong Kong (The Wenjaing) [1981] 2 Lloyd's Rep. 308. If Robert Goff J.'s approach be rejected,
then the test should be whether the applicant for leave can show a good arguable case. That test
does not introduce technical hurdles. There is no evidence that the test adopted by Robert Goff J.
has led to any abuse of the appeal procedure.

As to awards which involve a legal assessment to be drawn from certain essential facts, for
example, awards concerning frustration, Lord Denning M.R. cites in support of his argument for a
new approach under the Act of 1979, decisions from other fields in which a system of judicial review
had developed. In particular, reference was made to Edwards v. Bairstow [1956] A.C. 14 which
related to a jurisdiction whereby the determination of tax commissioners could only be upset if it
were "erroneous in point of law." In reversing the commissioners' decision, the House set out
certain tests whereby even pure findings of fact might be capable of review. Thus, when an
inference is to be treated as an inference of fact, nevertheless, the court can intervene with that
conclusion if it was a conclusion that could not reasonably be reached. There is nothing in that case
which bears upon a frustration situation: see Intertradex S.A. v. Lesieur-Tourteaux S.A.R.L. [1978] 2
Lloyd's Rep. 509, 515, and Tersons Ltd. v. Stevenage Development Corporation [1965] 1 Q.B. 37.
The correct application of Edwards v. Bairstow [1956] A.C. 14 is set out in Halsbury's Laws of
England, 4th ed. vol. 1 (1973), para. 63.

If the above tests be wrong and Lord Denning M.R. is correct, nevertheless, the appellants are
entitled to succeed: see de Smith's judicial Review of Administrative Action, 4th ed. (1980), pp. 135-
136.

Rix Q.C., followed on the issue of divisibility, the respondents seek to say that this contract can be
divided into two parts and that both parts are capable of being frustrated. On the facts here, there
has been total frustration of part of the contract or it may be said partial frustration of a single
divisible contract. There are four submissions: (i) the award itself provides no basis for the
conclusion that the charterparty was partially
[1982] A.C. 724 Page 732

frustrated. (ii) Lord Atkinson's dictum in the Larrinaga case (1923) 29 Com.Cas. 1, 14, was not put
forward as a test of severability. (iii) Even accepting the soundness of the doctrine of partial
frustration of a single contract and applying Lord Atkinson's dictum to the facts here it does not
have the effect for which the respondents contend. (iv) The appellants do not accept the theoretical
basis of the respondents' argument. This question, partial frustration of a single contract, is an
heretical conception. It is not supported by any direct authority.

(i) The award itself affords no basis for the conclusion that the charterparty was partially frustrated.
(ii) Lord Atkinson's language on frustration is not put forward in the Larrinaga case as authority for
the severability of contracts. The only question which arose on frustration in that case was whether
 Page 9

the whole contract had been frustrated. There was an alternative argument, one of construction,
that the contract was indivisible - a contract for six shipments - and that as three shipments had
been waived, the owner could not be compelled to perform the other three: see the argument set
out by Scrutton L.J. in the Court of Appeal (1922) 28 Com.Cas 1, 6. This second argument related
only to construction. Lord Atkinson's language, therefore, is an unsound basis for the proposition
that there can be partial frustration of a single contract in view of the fact that in its context it related
to the question of construction. (Reference was made to Chitty on Contracts, 24th ed., vol. I, paras.
1278, 1285; Benjamin's Sale of Goods, 2nd ed. (1981), paras. 644-648.)

There is an important distinction between a contract which is divisible, although on its face it
constitutes one contract, from an agreement which, on its true construction, is really more than one
contract: see Benjamin's Sale of Goods, 2nd ed., paras. 644-647, which shows a threefold division
of contracts albeit it is there stated in the context of sale of goods.

(iii) This argument proceeds on the assumption that there can be partial frustration of a single
contract. It also assumes that Lord Atkinson's language in the Larrinaga case, 29 Com.Cas. 1, 14 is
applicable. This is a question of construction. Reliance is placed on clauses 2, 5 and 8 of
addendum No. 2 to the charterparty. It is difficult to consider a charterparty" to be extended "if it has
been frustrated. The present case is much more akin to Dominion Coal Co. Ltd. v. Roberts (1920)
Ll.L.Rep. 434 than it is to the Larrinaga case, 29 Corn.Cas. 1. The argument raised by the
respondents in the present case was raised in the Dominion Coal case and was rejected by Rowlatt
J. The Dominion Coal case is not inconsistent with the Larrinaga case since (i) the Larrinaga case
raised a different issue and (ii) Rowlatt J. had very much in mind the point raised by the
respondents in the present case on the language of Lord Atkinson in the Larrinaga case. On this
issue, the judgment of Robert Goff J. [1980] 2 Lloyd's Rep. 83, 90, et seq. is to be preferred to the
judgment of the Court of Appeal.

(iv) The doctrine of partial frustration is wrong in principle. Whether there can be partial frustration
of a contract depends on the conduct of the parties. It does not exist as a matter of principle: see
Lord Sumner in the Larrinaga case, 29 Com.Cas. 1, 18, 19. If it is axiomatic that frustration only
applies to a contract and not a part of a contract, then it is not helpful to ask: is there more than one
adventure, unless that question means: is there more than one contract? The authorities establish
that for frustration
[1982] A.C. 724 Page 733

circumstances in which the contract is to be performed. That language is important if there is to be

only excision of part of a contract. It would be like the excision made by the surgeon's knife. It
would lead to anomalies. The Law Reform (Frustrated Contracts) Act 1943 was drafted on the basis
that it applied to a contract and not to part of a contract: see the preamble to section 2 (4) of that
Act. There is no case which decides that part of a contract as distinct from a separate contract can
be frustrated. Denny, Mott and Dickson Ltd. v. James B. Fraser & Co. Ltd. [1944] A.C. 265, 270,
272, 279 and Dominion Coal Co. Ltd. v. Roberts, 4 Ll.L.Rep. 434 decide to the contrary.

[Reference was also made to Jackson v. Rotax Motor and Cycle Co. [1910] 2 K.B. 937 and Esmail
v. J. Rosenthal & Sons Ltd. [1965] 2 Lloyd's Rep. 171.]

[Their Lordships conferred. Lord Diplock said that their Lordships only wished to hear the
respondents on the Arbitration Act 1979.]

Anthony Diamond Q.C. and Bernard Eder for the respondents, the owners. The issue of giving
leave to appeal under section 1 (3) of the Arbitration Act 1979 is one of great importance in the field
of commercial and other arbitrations. The court is given a general discretion in section 1 (3) (b).
 Page 10

Section 1 (4) does not provide guidelines but sets a gateway through which the applicant has to
pass. If he does, then the court has a general discretion to grant leave. The court looks at the
arbitrator's reasons and nothing more. This was what was done under the old procedure.
Donaldson L.J.'s observations on the Act of 1979 are adopted in their entirety. If an applicant gets
through section 1 (4), then the judge must exercise his discretion under section 1 (3). Under this
subsection, he must balance finality against the question whether there should be further
consideration by the court. Section 1 (5) enables the court to ask for further reasons at any stage -
either at the hearing of the application for leave or during the actual hearing if leave has been
granted.

If it be held that the sole or principal criterion for the giving of leave is that there should be a
question of law arising out of the award and "the determination of the question of law concerned
could substantially affect the rights of one or more of the parties to the arbitration agreement"
(section 1 (4)), then as parties will tend to ask for reasons, there will be greater use (and greater
attendant abuse) of the concept of judicial review under the new procedure than ever existed under
the old special case procedure. More awards than ever before will come before the courts. Further,
by a side wind, the Act of 1979 will at one and the same time have abolished and re-introduced the
concept of error of law on the face of the award. If the sole or principal criterion for the giving of
leave is as described above, the pendulum will have swung decisively against finality and in favour
of legality with the added disadvantage that where there is no point "of general public importance"
(section 1 (7)), the tribunal of the parties' choice may be reversed by the Commercial Court without
there being an opportunity for the matter to be tested further. It is in this context that Lord Denning
M.R. suggested a more restricted approach to the giving of leave.

Hallgarten Q.C. in reply on the Arbitration Act 1979. There should

[1982] A.C. 724 Page 734

be no yardstick. Alternatively, what an applicant has to show in order for leave to be given is that he
has a good arguable case. In order for leave to be given, the court has to see whether there is a
question of law and fact arising out of the award. Section 1 (5) is not confined to cases where the
arbitrator's award was unreasonable. As to section 1 (7), it ought to be interpreted liberally. There is
not the slightest evidence that the commercial community would welcome a restrictive approach to
leave to appeal.

Their Lordships took time for consideration.

July 16. LORD DIPLOCK. My Lords, this is the first case to come before this House under the new procedure
for judicial review of arbitrator's awards that was instituted by the Arbitration Act 1979. Leave to appeal was
given by an Appeal Committee of the House itself. This was not because of any intrinsic general importance
of the points of law involved in the arbitrator's award. If ever there were a case which under the new
procedure ought never have been allowed to get any further than the arbitrator's award, this was one. The
reason why leave was given to bring the matter before this House was because the proceedings in the
instant case and in cases that have come before the Commercial Court since the judgment of the Court of
Appeal [1980] Q.B. 547 was given, show that there exist significant differences of opinion between the
individual judges themselves who sit in the Commercial Court, and between one of them at least and the
guidelines laid down in the instant case, by Lord Denning M.R. (with whom Watkins L.J. agreed) as to the
considerations which should influence the judge in deciding how to exercise his discretion under section 1 of
the Arbitration Act 1979 to grant or to refuse leave to appeal to the High Court on a question of law arising
out of an arbitrator's award.
 Page 11

The dispute submitted to the arbitration of a London maritime arbitrator of great experience arose between
charterers and owners under a consecutive voyage charterparty. The relevant terms of the charterparty, the
dispute between the parties to it and the circumstances in which that dispute was submitted to arbitration will
be dealt with in the speech of my noble and learned friend Lord Roskill with whose reasons for dismissing the
appeal and upholding the award of the arbitrator I find myself in such unqualified agreement that I am able to
confine my own speech to the question of the discretion to grant leave to appeal under section I of the new
Act which has given rise to divergences of opinion between those judges called upon to exercise it. These, if
permitted to continue, may well endanger the maintenance of the reputation of London arbitration as a forum
for the resolution of commercial disputes.

It is sufficient for my purpose to mention that the reason why the parties submitted the dispute to speedy
arbitration was that they wanted to know, not later than the end of September 1979, how they then stood as
respects the employment of the chartered vessel, the Nema, during the remainder of the 1979 Saint
Lawrence River open water season at the loading port under the charter, Sorel, in the Province of Quebec.
[1982] A.C. 724 Page 735

Was she, as the charterers claimed, bound to proceed forthwith from Spain, where she then lay, to Sorel and
wait there at the owners' expense until either the strike at Sorel ended and she could be loaded or the end of
the open water season had made loading impossible, whichever should first occur? Or, as the owners
claimed, had their contractual obligation to perform any further voyages in the 1979 open water season been
dissolved by frustration?

My Lords, as mentioned by my noble and learned friend, there had been three contested interlocutory
applications in this matter before the application for leave to appeal from the arbitrator's award was made. At
the first two, before Mars-Jones J. and Donaldson J., undertakings were given by the owners not to fix the
Nema for any further voyage otherwise than in accordance with the charterparty, pending arbitration. The
third interlocutory application came before Mocatta J. after the arbitrator had telexed to the parties that his
award was in favour of the owners, but before he had had time to set out in writing the reasons for his
decision. Mocatta J. discharged the owners unconditionally from their undertaking; but, what for my purposes
is significant in the reasons that he gave for doing so (of which a note was taken), was the expression of his
opinion that in the circumstances in which the arbitration had arisen the way in which any judge would
exercise his discretion would be to refuse leave to appeal from the arbitrator's award when his reasons had
been given, even though the judge might have doubts as to the correctness of the arbitrator's reasons for his
conclusions on any question of law involved. According to Mocatta J. a similar view that the arbitration award
would be treated by the court as final and not one in which leave to appeal to the court would be granted
under section 1 of the Act had also been expressed by Mars-Jones J. and Donaldson J. on the two earlier
interlocutory applications.

My Lords, the particular circumstance in which the parties wanted a quick decision as to where they stood as
respects the future employment of the Nema are, no doubt, exceptional. In my view, they are in themselves
sufficient to make a grant of leave to appeal from the arbitrator's award under section 1 of the Arbitration Act
1979 an unjudicial exercise of the discretion conferred upon the judge by that section. Such was the view of
those who were then the two most senior judges of the Commercial Court and such (on second thoughts)
was the view of Lord Denning M.R.; but the dispute had other characteristics that are likely to recur in other
cases and have caused those divergences of views as to the weight that should be given to them in deciding
how to exercise that discretion.

As will appear from Lord Roskill's speech, the terms of the charterparty and its addenda that are relevant to
the disputed issue of frustration are unique; it is almost inconceivable that they will be found again in any
other charter. The same may be said of the events that preceded and led up to the dispute between the
parties. If one were seeking to exemplify what is meant by the convenient neologism "a one-off case" it would
be hard to find a better exemplar than the case that is now before your Lordships.
[1982] A.C. 724 Page 736
 Page 12

Of course the dispute involves some question of law. It is difficult to conceive of a dispute under a
charterparty that does not do so. The dispute is likely to be about what the parties have agreed shall be their
respective legal rights and obligations in events that have actually happened or, it may occasionally be, in
events that it is anticipated may happen. The answer must depend upon the true construction of the
agreement between the parties; and in English jurisprudence, as a legacy of the system of trial by juries who
might not all be literate, the construction of a written agreement, even between private parties, became
classified as a question of law. The object sought to be achieved in construing any commercial contract is to
ascertain what were the mutual intentions of the parties as to the legal obligations each assumed by the
contractual words in which they (or brokers acting on their behalf) chose to express them; or, perhaps more
accurately, what each would have led the other reasonably to assume were the acts that he was promising to
do or to refrain from doing by the words in which the promises on his part were expressed. In the case of a
"one-off contract" where the exact combination of words and phrases that fall to be construed has not only
never been used before and so did not possess an already established meaning of which each party was
entitled to assume the other knew when he entered into the contract, but is also unlikely to be used in future
by any other parties, it is not self-evident that an arbitrator or arbitral tribunal chosen by the parties for his or
their experience and knowledge of the commercial background and usages of the trade in which the dispute
arises, is less competent to ascertain the mutual intentions of the parties than a judge of the Commercial
Court, a Court of Appeal of three Lords Justices or even an Appellate Committee of five Lords of Appeal in
Ordinary. A lawyer nurtured in a jurisdiction that did not owe its origin to the common law of England would
not regard it as a question of law at all. This, I believe, was all that Lord Denning M.R. meant to convey by
his vivid, if somewhat less than tactful, phrase: "On such a clause, the arbitrator is just as likely to be right as
the judge - probably more likely" ([1980] Q.B. 547, 564G). Nevertheless, despite the disappearance of juries,
literate or illiterate, in civil cases in England, it is far too late to change the technical classification of the
ascertainment of the meaning of a written contract between private parties as being "a question of law" for
the purposes of judicial review of awards of arbitrators or decisions of administrative tribunals from which an
appeal to a court of justice is restricted by statute to an appeal upon a question of law.

My Lords, the great majority of international maritime and commercial contracts which contain a London
arbitration clause, and typically those falling within the categories of disputes in respect of which it is, at least
for the time being, forbidden by section 4 of the Arbitration Act 1979 to enter into an "exclusion agreement"
covering disputes that have not already arisen, are made on standard printed forms on which the particulars
appropriate to the contract between the actual parties are inserted, and any amendments needed for reasons
special to the particular contract are either made to the printed clauses or dealt
[1982] A.C. 724 Page 737

with in added clauses, which sometimes may themselves be classified as standard. Business on the Baltic,
the insurance market and the commodity markets would be impracticable without the use of standard terms
to deal with what are to be the legal rights and obligations of the parties upon the happening of a whole
variety of events which experience has shown are liable to occur, even though it be only rarely, in the course
of the performance of contracts of those kinds.

It was in the context of a standard term agreement that in the classic judgment of the Court of Appeal in
Czarnikow v. Roth, Schmidt and Co. [1922] 2 K.B. 478 Bankes, Scrutton and Atkin L.JJ. stated the reasons
why the inclusion in an agreement to refer future disputes to arbitration of an undertaking by the parties not
to require any case to be stated by the arbitral tribunal upon a question of law for the opinion of the High
Court, was unenforceable as being contrary to public policy at that time. As Atkin L.J. put it, at p. 491:

"The jurisdiction that is ousted is … the special statutory jurisdiction of the court to intervene to
compel arbitrators to submit a point of law for determination by the courts. This appears to me
to be a provision of paramount importance in the interests of the public. If it did not exist
arbitration clauses making an award a condition precedent would leave lay arbitrators at liberty
to adopt any principles of law they pleased. In the case of powerful associations such as the
 Page 13

present," - [sc. the Refined Sugar Association] - "able to impose their own arbitration clauses
upon their members, and, by their uniform contract, conditions upon all non-members
contracting with members, the result might be that in time codes of law would come to be
administered in various trades differing substantially from the English mercantile law."

Bankes and Scrutton L.JJ., too, explained the policy that underlay the statutory jurisdiction of the court as it
existed from 1889 to 1979, as being directed to secure that "the settled principles of law" should be applied
by arbitrators as well as by the courts of law.

My Lords, when contracts are entered into which incorporate standard terms it is in the interests alike of
justice and of the conduct of commercial transactions that those standard terms should be construed and
treated by arbitrators as giving rise to similar legal rights and obligations in all arbitrations in which the events
have given rise to the dispute do not differ from one another in some relevant respect. It is only if parties to
commercial contracts can rely upon a uniform construction being given to standard terms that they can
prudently incorporate them in their contracts without the need for detailed negotiation or discussion. Such
uniform construction of standard terms had been progressively established up to 1979, largely through
decisions of the courts upon special cases stated by arbitrators. In the result English commercial law has
achieved a degree of comprehensiveness and certainty that has made it acceptable for adoption as the
appropriate proper law to be applied to commercial contracts wherever made by parties of whatever
nationality. So, in relation to disputes involving standard terms in commercial contracts an authoritative ruling
of the court as to their construction which
[1982] A.C. 724 Page 738

is binding also upon all arbitrators under the sanction of an appeal from an award of an arbitrator that has
resulted from his departing from that ruling performs a useful function that is lacking in that performed by the
court in substituting for the opinion of an experienced commercial arbitrator its own opinion as to the
application of a "oneoff" clause to the particular facts of a particular case. It was this useful function that it
was the plain intention of the Act of 1979 to preserve by section 4, for at least an experimental period during
which it would be subject to scrutiny by the Commercial Court Users' Committee to see whether the new
provisions of sections 1 and 2 relating to leave to appeal from arbitrators' awards and the determinations of
preliminary points of law would operate in practice to prevent the continuance of abuses that had become
notorious of recent years under the previous system of case stated.

My Lords, in the instant case there arose out of the arbitrator's award the two interdependent questions of
law that are discussed in the speech of my noble and learned friend Lord Roskill. One, which I shall call the
question of divisibility, was a question of construction of the charterparty and in particular the "on-off" clauses
in addendum 2; the other was the question of frustration which, as was held unanimously by this House in
Tsakiroglou & Co. Ltd. v. Noblee Thorl G.m.b.H. [1962] A.C. 93, is never a pure question of fact but does in
the ultimate analysis involve a conclusion of law as to whether the frustrating event or series of events has
made performance of the contract a thing radically different from that which was undertaken by the contract;
however closely that conclusion of law may seem to follow from a commercial arbitrator's findings as to
mercantile usage and the understanding of mercantile men about the significance of the commercial
differences between what was promised and what in the changed circumstances would now fall to be
performed.

Lord Denning M.R., in laying down guidelines as to the proper exercise of the judicial discretion conferred
upon a High Court judge by section 1 of the new Act, which led him to the conclusion that in the instant case
leave to appeal ought not to have been granted, did not find it necessary to embark upon a detailed analysis
of the various provisions of the Act. Where the question of law involved is simply the construction of the
clause he drew the distinction that I have already indicated between a "one-off" clause in a "one-off" contract
and a clause that is a standard term in a particular class of commercial contract. If what he said about the
former was to be understood as meaning that leave should never be given on a question of interpretation of
 Page 14

a "one-off" clause (and I do not think that this was what he intended) I consider that would go rather too far;
and I shall be suggesting later what, in my view, in the absence of exceptional circumstances, the
appropriate criteria should be. What he said on the issue of frustration was that the judge should have
accepted the decision of the arbitrator as final unless it was shown "either (i) that the arbitrator misdirected
himself in point of law or (ii) that the decision was such that no reasonable arbitrator
[1982] A.C. 724 Page 739

could reach." With this I entirely agree and shall explain briefly my reasons for doing so later.

In his vigorous and critical rejection of these guidelines in the subsequent case Schiffahrtsagentur Hamburg
Middle East Line G.m.b.H. Hamburg v. Virtue Shipping Corporation Monrovia (The Oinoussian Virtue) [1981]
1 Lloyd's Rep. 533 Robert Goff J. founded himself upon what in his view was the true construction of the Act
of 1979. He professed himself, at p. 538, unable to find in section 1 anything
"which indicates that, in considering whether or not to give leave to appeal from an arbitrator's
award, any limit should be placed upon 'the question of law,' except that it must be such that its
determination could substantially affect the rights of one or more of the parties."

He accepted that the purpose of the latter part of section 1 (4) was to enable the court to impose conditions
upon the grant of leave to appeal if it considered that the argument which the applicant sought to advance
was flimsy; but he could "find nothing in the Act which, as a matter of construction, suggests that the court
should give leave in the case of some questions of law, but decline to give leave in others." In his subsequent
decision in International Sea Tankers Inc. of Liberia v. Hemisphere Shipping Co. Ltd. of Hong Kong (The
Wenjaing) (unreported), May 21, 1981, he made it clear that in his view whenever any question of
construction of a written contract could be discerned as arising out of an arbitrator's award, then, except
where its determination could not substantially affect the rights of any of the parties, the only proper exercise
of his discretion by the judge was to grant leave to appeal; though if the argument that the arbitrator had
erred in point of law appeared to the judge to be flimsy it was open to him to impose conditions, such as
payment of the whole or part of the amount of the award into court or the provision of security.

My Lords, with great respect, I do not think that the learned judge's reasoning, in concentrating as it appears
to have done, on subsection (4) of section 1, pays sufficient regard to the general discretion of the High Court
to refuse leave absolutely. This is conferred not by subsection (4) but by subsection (3) (b). Nor, as it seems
to me, has he given proper effect to the terms in which the right of appeal is conferred in subsection (1). The
judicial discretion conferred by subsection (3) (b) to refuse leave to appeal from an arbitrator's award in the
face of an objection by any of the parties to the reference is in terms unfettered; but it must be exercised
judicially; and this, in the case of a dispute that parties have agreed to submit to arbitration, involves deciding
between the rival merits of assured finality on the one hand and upon the other the resolution of doubts as to
the accuracy of the legal reasoning followed by the arbitrator in the course of arriving at his award, having
regard in that assessment to the nature and circumstances of the particular dispute.

My Lords, in weighing the rival merits of finality and meticulous legal accuracy there are, in my view, several
indications in the Act itself of a parliamentary intention to give effect to the turn of the tide in favour of finality
in arbitral awards (particularly in non-domestic arbitrations of
[1982] A.C. 724 Page 740

which the instant case is one), at any rate where this does not involve exposing arbitrators to a temptation to
depart from "settled principles of law." Thus section 1 (1) removes a former threat to finality by abolishing
judicial review (formerly certiorari) for error of law on the face of the award. Section 1 (3) withdraws the
previous power of an arbitrator to accede to a request to state his award in the form of a special case if such
request was made by any party to the reference. It is notorious, particularly after the decision of the Court of
 Page 15

Appeal in Halfdan Grieg & Co. A/S v. Sterling Coal & Navigation Corporation (The Lysland) [1973] Q.B. 843,
that, if such request were made it was virtually impracticable for an arbitrator to refuse it.

Except when all parties to the reference consent, the first part of section 1 (4) places an absolute bar upon
the grant of leave to appeal unless the determination of the disputed point of law would substantially affect
the rights of one or more parties to the reference; and this, be it noted, even though the point might have
arisen under a standard form contract and be of outstanding importance to the trade generally. I find it
impossible to infer from the inclusion of a power to impose conditions in the latter part of the same
subsection a parliamentary intention that whenever that absolute bar did not operate leave to appeal should
be granted, albeit that it might be made subject to conditions.

Section 1 (7) is another provision in favour of reaching finality as soon as possible; the stringent conditions
imposed upon a further appeal from the judge to the Court of Appeal are clearly adapted from the provisions
of the Criminal Appeal Act 1968 relating to appeals to the House of Lords in criminal matters - another field of
law in which speedy finality is much to be desired. The subsection also draws a significant distinction
between a question of law which arises in connection with a "one-off" case and a question of law of general
importance to a substantial section of the commercial community, such as may arise under standard term
contracts. I add parenthetically that it is one of the ironies of the instant case that if the judge's initial error in
granting leave to appeal to the High Court had not been compounded by his also giving a certificate and
leave to appeal to the Court of Appeal under this subsection (which a fortiori in such a "one-off" case he
never should have done), the owners would have been left with a decision against them which, although it is
not one of general public importance, both the Court of Appeal and this House have unanimously held to be
wrong.

Section 3 gives effect to a reversal of public policy in relation to arbitration as it had been expounded more
than half a century before in Czarnikow v. Roth, Schmidt & Co. [1922] 2 K.B. 478. Exclusion agreements,
which oust the statutory jurisdiction of the High Court to supervise the way in which arbitrators apply the law
in reaching their decisions in individual cases, are recognised as being no longer contrary to public policy. In
principle they are enforceable, subject only to the special limitations imposed, for the time being, by section 4
in the case of awards made in respect of certain limited classes of contracts which, important as they are to
the role of London as a forum for international
[1982] A.C. 724 Page 741

arbitrations, represent what is numerically only a small fraction of the total arbitrations, large and small, that
take place in England.

The classes of contracts listed in section 4 in respect of which the right to make exclusion agreements is not
unfettered but is subjected to some qualifications, are those in which (i) the use of standard forms of contract,
in the vast majority of transactions, is a commercial necessity; (ii) English law is very widely chosen as the
"proper law" of the contract, even though the parties are foreign nationals and no part of the transaction is to
take place in England, and (iii) provision is very frequently made for London arbitration. I have already drawn
attention to the fact that decisions of the English courts on cases stated by arbitrators under the previous
system had made an important contribution in giving to English commercial law the comprehensiveness and
certainty that makes it a favoured choice as the "proper law" of contracts in the classes listed, and London
arbitration as the favoured curial law for the resolution of disputes arising under them. Even in respect of
contracts falling within these classes, however, exclusion agreement may be made and will be enforceable if
entered into after the dispute arose. What is not enforceable is an exclusion agreement covering possible
future disputes under the contract before they have arisen. Nevertheless, when a dispute under the contract
has arisen and the award of an arbitrator made, an appeal to the High Court on a point of law arising out of it
is not as of right; it is still subject to the discretion of the judge under section 1 (3) (b).
 Page 16

My Lords, it seems to me quite evident that the parliamentary intention evinced by section 4 in maintaining
for the time being a prohibition on pre-dispute exclusion agreements only was to facilitate the continued
performance by the courts of their useful function of preserving, in the light of changes in technology and
commercial practices adopted in various trades, the comprehensiveness and certainty of English law as to
the legal obligations assumed by the parties to commercial contracts of the classes listed, and particularly
those expressed in standard terms; it was not Parliament's intention to encourage appeals from arbitrators'
awards even under those classes of contracts where such appeals would not fulfil this purpose. That
Parliament was alert to the possibility of such abuse in the case of any or all of the listed classes of contracts
appears to me to follow from the provision in subsection (3) that the Secretary of State may at any time
remove the ban upon pre-dispute exclusion agreements in respect of all or any of the classes of contracts
included in the list but he has no power to add any other class of contract to them.

My Lords, I can deal much more briefly with the terms in which the right of appeal to the High Court is
conferred by section 1 (2). The power to require an arbitrator to state an award in the form of a special case
for the opinion of the High Court under the previous Arbitration Acts from 1889 to 1950 was not conferred in
terms that restricted it expressly to cases in which questions stated for the opinion of the High Court were
confined exclusively to points of law. Parliament had been content to allow any such restriction to be implied
from its use of the
[1982] A.C. 724 Page 742

phrase "special case for the opinion of the … court" which, by 1889, had become a term of legal art; and
many and varied (and, if I may be forgiven for saying so, at times confusing) were the authorities as to
findings of arbitrators in particular cases that could or could not be upset by the High Court in the exercise of
this power. The right of appeal to the High Court, on the other hand, under the substituted procedure for
challenging an arbitrator's award which is provided by section 1 (2), viz. "an appeal … to the High Court on
any question of law arising out of" an award, is given in terms which expressly confine the appeal to
questions of law; and, ever since the decision of this House 25 years ago in Edwards v. Bairstow [1956] A.C.
14, have been understood (at least where the tribunal from which such appeal lies is not itself a court of law)
as bearing the precise meaning as to the function of the court to which an appeal on a question of law is
brought that is stated in the classic passage to be found in the speech of Lord Radcliffe, at p. 36:
"If the case contains anything ex facie which is bad law and which bears upon the
determination, it is, obviously, erroneous in point of law. But, without any such misconception
appearing ex facie, it may be that the facts found are such that no person acting judicially and
properly instructed as to the relevant law could have come to the determination under appeal.
In those circumstances, too, the court must intervene. It has no option but to assume that there
has been some misconception of the law and that this has been responsible for the
determination. So there, too, there has been error in point of law."

Or, as Lord Denning M.R. summarised it in dealing with the question of frustration in the instant case: to
justify interference with the arbitrator's award it must be shown (i) that the arbitrator misdirected himself in
law or (ii) that the decision was such that no reasonable arbitrator could reach.

My Lords, in view of the cumulative effect of all these indications of Parliament's intention to promote greater
finality in arbitral awards than was being achieved under the previous procedure as it was applied in practice,
it would, in my view, defeat the main purpose of the first four sections of the Act if judges when determining
whether a case was one in which the new discretion to grant leave to appeal should be exercised in favour of
an applicant against objection by any other party to the reference, did not apply much stricter criteria than
those stated in The Lysland [1973] Q.B. 843 which used to be applied in exercising the former discretion to
require an arbitrator to state a special case for the opinion of the court.
 Page 17

Where, as in the instant case, a question of law involved is the construction of a "on-off" clause the
application of which to the particular facts of the case is an issue in the arbitration, leave should not normally
be given unless it is apparent to the judge upon a mere perusal of the reasoned award itself without the
benefit of adversarial argument, that the meaning ascribed to the clause by the arbitrator is obviously wrong.
But if on such perusal it appears to the judge that it is possible that
[1982] A.C. 724 Page 743

argument might persuade him, despite first impression to the contrary, that the arbitrator might be right, he
should not grant leave; the parties should be left to accept, for better or for worse, the decision of the tribunal
that they had chosen to decide the matter in the first instance. The instant case was clearly one in which
there was more than one possible view as to the meaning of the "one-off" clause as it affected the issue of
divisibility. It took two days' argument by counsel before the learned judge to satisfy him that the arbitrator
was wrong on this and upon the interdependent question of frustration, four days' argument before the Court
of Appeal to convince them that the judge was wrong and the arbitrator right and over three days' argument
in trying to persuade this House to the contrary, even though it was not found necessary to call upon the
respondent to address us on the merits. Even apart from the reasons special to this case mentioned at the
outset, which led Mocatta J. and Donaldson J. to conclude that it was a case in which no court would grant
leave to appeal from the arbitrator's award, it is in my view typical of the sort of case in which leave to appeal
on a question of construction ought not to be granted.

For reasons already sufficiently discussed, rather less strict criteria are in my view appropriate where
questions of construction of contracts in standard terms are concerned. That there should be as high a
degree of legal certainty as it is practicable to obtain as to how such terms apply upon the occurrence of
events of a kind that it is not unlikely may reproduce themselves in similar transactions between other parties
engaged in the same trade, is a public interest that is recognised by the Act particularly in section 4. So, if the
decision of the question of construction in the circumstances of the particular case would add significantly to
the clarity and certainty of English commercial law it would be proper to give leave in a case sufficiently
substantial to escape the ban imposed by the first part of section 1 (4) bearing in mind always that a
superabundance of citable judicial decisions arising out of slightly different facts is calculated to hinder rather
than to promote clarity in settled principles of commercial law. But leave should not be given even in such a
case, unless the judge considered that a strong prima facie case had been made out that the arbitrator had
been wrong in his construction; and when the events to which the standard clause fell to be applied in the
particular arbitration were themselves "one-off" events, stricter criteria should be applied on the same lines
as those that I have suggested as appropriate to "one-off" clauses.

The other question of law arising out of the award in the instant case if the construction of the charterparty as
respects the "divisibility" of the adventures for the 1979 season and the 1980 season respectively were to be
decided in favour of the owners, as the arbitrator held it should, was whether in the events that had
happened by September 26, 1979 (which were very much "one-off" events), the adventure for the 1979
season had by then become frustrated. Disputes on questions whether contractual obligations have been put
an end to by frustration and the somewhat analogous questions as to whether one party to a commercial
contract is entitled to refuse to continue to perform his own obligations
[1982] A.C. 724 Page 744

under the contract in consequence of a fundamental breach or breach of condition by the other party, are
frequent subjects of commercial arbitration.

The legal concept of frustration, as my noble and learned friend, Lord Roskill, points out, can be expressed in
the short and simple language used by Lord Radcliffe in Davis Contractors Ltd. v. Fareham Urban District
Council [1956] A.C. 696. Whether a particular event or series of events have made further performance
something radically different from that which was undertaken by the contract involves, as is indicated by Lord
Radcliffe's adverb and its oft-used variant "fundamentally," a question of degree upon which, though faced
with the same facts, different opinions may not unreasonably be held by different men.
 Page 18

In deciding how to exercise his discretion whether to give leave to appeal under section 1 (2) what the judge
should normally ask himself in this type of arbitration, particularly where the events relied upon are "one-off"
events, is not whether he agrees with the decision reached by the arbitrator, but: does it appear upon perusal
of the award either that the arbitrator misdirected himself in law or that his decision was such that no
reasonable arbitrator could reach? While this should, in my view, be the normal practice, there may be cases
where the events relied upon as amounting to frustration are not "one-off" events affecting only the
transaction between the particular parties to the arbitration, but events of a general character that affect
similar transactions between many other persons engaged in the same kind of commercial activity, the
closing of the Suez Canal, the United States soya bean embargo, the war between Iraq and Iran, are
instances within the last two decades that spring to mind. Where such is the case it is in the interests of legal
certainty that there should be some uniformity in the decisions of arbitrators as to the effect, frustrating or
otherwise, of such an event upon similar transactions, in order that other traders may be sufficiently certain
where they stand as to be able to close their own transactions without recourse to arbitration. In such a case,
unless there were prospects of an appeal being brought by consent of all the parties as a test case under
section 1 (3) (a), it might be a proper exercise of the judge's discretion to give leave to appeal in order to
express a conclusion as to the frustrating effect of the event that would afford guidance binding upon the
arbitrators in other arbitrations arising out of the same event, if the judge thought that in the particular case in
which leave to appeal was sought the conclusion reached by the arbitrator, although not deserving to be
stigmatised as one which no reasonable person could have reached was, in the judge's view, not right. But
such was far from being the instant case.

For all these reasons this was the sort of case in which in my opinion leave to appeal from the arbitrator's
award ought never to have been given.

LORD FRASER OF TULLYBELTON. My Lords, I have had the advantage of reading in draft the speeches of
my noble and learned friends, Lord Diplock and Lord Roskill. I agree with them, and for the reasons stated in
those speeches, I would dismiss this appeal.

[1982] A.C. 724 Page 745

LORD RUSSELL OF KILLOWEN. My Lords, I have had the advantage of reading in draft the speeches of my
noble and learned friends, Lord Diplock and Lord Roskill. I agree with them and for the reasons stated in
those speeches I would dismiss this appeal.

LORD KEITH OF KINKEL. My Lords, I agree with the speeches of my noble and learned friends, Lord
Diplock and Lord Roskill, which I have had the benefit of reading in draft, and, for the reasons which they
give, would dismiss the appeal.

LORD ROSKILL. My Lords, this appeal by the appellant charterers to your Lordships' House against a
decision of the Court of Appeal (Lord Denning M.R., Templeman and Watkins L.JJ.) dated May 22, 1980, in
favour of the respondent owners of the Greek motor vessel Nema raises two entirely separate questions.
The first is whether what I shall call "the 1979 venture" agreed upon between the appellants and the
respondents on the terms of a consecutive voyage charterparty dated November 2, 1978, "for six voyages,
charterers' option seven voyages" during 1979 from Sorel P.Q. to either Calais or Hartlepool was, in the
events which occurred, frustrated. This is the central issue between the parties to which the appellants'
printed case was entirely directed. That issue is of great importance to them and your Lordships were told
that a substantial sum of money is involved.

But the second question is of wide general importance. Yet it is mentioned only in passing in the
respondents' printed case and then principally only in a postscript (paragraph 27) of that document. My
 Page 19

Lords, this is the first occasion upon which your Lordships' House has had to consider the Arbitration Act
1979 and it was to enable that consideration to be given, especially to the principles upon which leave should
be granted by the High Court to appeal from a decision of an arbitral tribunal under section 1 (2) and (3) (b)
of the Act of 1979 and also the principles upon which any certificate which by reason of section 1 (7) of that
Act is an essential prerequisite to a further appeal from the High Court to the Court of Appeal should be
granted, that leave to appeal to your Lordships' House was given on July 23, 1980.

My Lords, I have had the advantage of reading in draft the speech prepared by my noble and learned friend,
Lord Diplock, on the second question. I entirely agree with it and respectfully adopt the criticisms which he
has made of the several judgments of Robert Goff J. on this question in the instant case and in the two
subsequent cases, The Oinussian Virtue [1981] 1 Lloyd's Rep. 533 and The Wenjiang (unreported), in which
that learned judge felt free not to follow the decision of the Court of Appeal in the instant case. I would only
add with profound respect to Robert Goff J. that if the learned judge's view were allowed to prevail I find it
difficult to see what useful purpose has been served by the passing of the Act of 1979 which had as one of its
primary targets the abolition of the special case since it seems to me that if leave to appeal from an arbitral
tribunal to the High Court is to be given in accordance with the principles which the learned judge there
enunciated, the notoriously
[1982] A.C. 724 Page 746

satisfactory results to which special cases have given rise in recent years will be perpetuated albeit in a
different form.

If the views expressed by my noble and learned friend, Lord Diplock, are shared by all your Lordships it
follows that not only ought leave to appeal to the High Court not to have been granted by Robert Goff J. in
the present case but also that the certificate under section 1 (7) and indeed leave to appeal to the Court of
Appeal itself ought also not to have been granted by the learned judge. It is therefore somewhat ironical that
it is because two successive appeals from the arbitrator were wrongly permitted that your Lordships' House
has now to determine what I have called the first question, that of the alleged frustration of the 1979
adventure. The arbitrator held that it was frustrated. Robert Goff J. reversed that decision. The Court of
Appeal restored it. Your Lordships' House must now decide between these conflicting opinions and it is to
this, the first question, that I now turn.

My Lords, I begin by setting out the relevant clauses of the charterparty dated November 2, 1978, as they
stood when that charterparty was first concluded. The parties used a standard form, C (Ore) 7, as the basis
of their agreement but since that form is designed for use for a single voyage it naturally required, and indeed
received, substantial amendment and addition; so much so that the finished product well justifies the
application of my noble and learned friend, Lord Diplock's word, "one off." Even so, understandably in the
circumstances, there are some loose ends and some somewhat untidy drafting which could sometimes leave
doubt whether a particular clause was directed to the charterparty as a whole or only to individual voyages
made under that charterparty or conceivably only to the first voyage made thereunder. Nonetheless, the
essential provisions are clear enough and read thus:

"2.… proceed with all convenient speed to Sorel and there load … a full and complete cargo of
titanium slag … 15000 long tons 5 per cent. more or less in owners' option … and being so
loaded … proceed to Calais or Hartlepool in charterers' option. …

"3. Freight to be paid at the rate of … per ton. …

"5. The cargo to be shipped at the rate of and to be discharged at the rate of … time lost by
reason of … any of the following causes shall not be computed in the loading or discharging
time … strikes, lockouts, stoppage of … essential to the working, carriage, delivery, shipments
 Page 20

or discharge … whether partial or general … or any other cause beyond control of charterers,
unless steamer is already on demurrage. …

"10. … should the steamer not be in loading port and ready to load on or before April 30, 1979,
for first voyage (see clause no. 38) it shall be at the option of the charterer whether or not he
will load the vessel. Laydays are not to count before April 1, 1979, except by charterers'
consent …

"19. Ship to apply to Quebec Iron and Titanium Corporation, P.O. Box 40, Sorel, P.Q. … for
cargo …

"27. In the event of any general strike, riot, insurrection, revolution or war, which may prevent
shipment of titanium slag under this

[1982] A.C. 724 Page 747

charter, the owners in the event of no cargo having been loaded, have the option of cancelling
this charter or if any cargo has been loaded they have the right to proceed on the voyage with
the cargo so loaded. …

"37. This charterparty to remain in force for 6 voyages, charterers option 7 voyages, such
option declarable at termination of fifth voyage or September 30, 1979, whichever is the sooner.
Intervals between voyages minimum 30 days/maximum 50 days. Owners have the option of
return cargoes, but same limited to a maximum of three.

"38. Charterers have the option of cancelling the vessel for any voyages for which she has not
presented at loading port by December 5, 1979."

It is clear from these provisions that both parties recognized that since Sorel was on the St. Lawrence river
and might, therefore, become ice bound before the end of 1979, the vessel might not be able to perform all
seven voyages which the 1979 adventure contemplated when the charterparty was signed.

My Lords, the relevant facts found by the arbitrator are set out with such admirable clarity by him in 15
numbered paragraphs in section of his reasoned award that I hesitate even to attempt to summarize them in
an inevitably shorter and no doubt less clear form. But I fear some reference to them is essential. The more
important findings include the following: (a) the first voyage was performed between May 17 and June 20,
1979. On or about June 21, 1979, the appellants exercised their option for the seventh voyage. Industrial
action, whether a strike or a lock-out is irrelevant, had begun at the plant of the shippers (QIT), named in
clause 19, on June 6, 1979, and thenceforth there was a total shutdown at that plant. This began before the
vessel returned to Sorel to load for the second voyage. (b) On June 22, 1979, the owners claimed to cancel
the whole charterparty under clause 27. This claim was later that day limited to a claim to cancel the second
voyage. Discussions thereupon took place as a result of which addendum no. 2 was signed. I shall later set
out the relevant clause of addendum no. 2 in full since much of the argument for the appellants was founded
upon it. Suffice it for the present to say that provision was there made inter alia for a further seven voyages in
1980 ("the 1980 adventure") and that the respondents were also given the right to fix the vessel for a
transatlantic voyage in place of the second voyage. In the event the respondents were unable to take
advantage of this latter concession by the appellants. Accordingly, on July 11, 1979, addendum no. 3 was
signed under which the appellants agreed to pay the respondents $2,000 per day from July 1 until the end of
the strike or until the appellants agreed to release the vessel for an intermediate voyage. (c) On July 20 the
appellants did so release the vessel for an ore cargo to Glasgow. Another request by the respondents was
refused but the respondents were allowed to carry a return cargo to Canada. (d) In August 1979 the
 Page 21

prospects for the end of the strike were gloomy; but the appellants refused to release the vessel for a further
round voyage. Whereupon on August 14, 1979, the respondents rejected the appellants' instructions to
return to Sorel for another voyage and on
[1982] A.C. 724 Page 748

August 16, 1979, they fixed her for an intermediate voyage for their own account which would not be
completed until towards the end of September. The rejection of the appellants' instructions led to an
application by them for an injunction. Such an injunction was granted ex parte on August 17, 1979, but it was
lifted on the following day by the vacation judge (Mars-Jones J.) upon his learning that the vessel was
already fixed for the unauthorised August voyage, the respondents giving an undertaking not to fix the vessel
for another voyage pending an arbitration on the question whether they would be entitled to do so. An
arbitration was thereupon fixed for hearing for September 26, the parties varying the Centrocon arbitration
clause which had been incorporated into the charterparty and appointing a very experienced maritime
arbitrator, Mr. Donald Davies, as sole arbitrator. A further application came before Donaldson J. at which the
undertaking was renewed and the matter was adjourned until October 2, 1979, the beginning of the legal
term. As it happened, on September 26, 1979, the day when the arbitration took place, the vessel had just
completed discharge under the non-approved voyage and subject to the result of the arbitration was ready to
sail back to Canada for a further voyage under the charterparty. By October 2, 1979, the arbitrator had
already announced that the award was in favour of the respondents though he had not yet published his
reasons. At the adjourned hearing in the High Court by Mocatta J. the respondents were discharged from
their undertaking. (e) In paragraph 15 of section F the arbitrator found as follows. "As at September 26 there
were no immediate prospects for the ending of the strike. The earliest probable date for the resumption of
loading of titanium slag is the end of October." The result of his award was notified to the parties on
September 28 but in that paragraph I think the arbitrator is stating the position as he saw it on September 26
when the arbitration took place and not when his reasoned award was later published on October 3. (f) Your
Lordships were told that in the event the strike ended on October 5, 1979, and work had begun again on
October 18, 1979.

My Lords, it seems from section G of the arbitrator's award that the now crucial question whether the 1979
adventure was frustrated was never fully argued for the respondents at the arbitration. Mr. Rix, who appeared
for the appellants in the arbitration, told your Lordships that this possible conclusion was only mentioned in
the course of his address to the arbitrator. The respondents seem only to have argued - see section G of the
award - first, that each individual voyage was severable and susceptible of frustration, secondly, that the
whole of the consecutive voyage charterparty by which was meant the entirety of the adventure (which by
September 26, 1979, covered 1980 as well as 1979) had been frustrated and thirdly, that by clause 27 the
respondents were entitled to cancel the charterparty. None of those arguments was advanced in your
Lordships' House. The arbitrator in section H, paragraph 1 of his reasoned award rejected the first and third
of the three contentions I have mentioned. As for the second, in section H 1 (a) he said; "The whole of the
consecutive voyage charterparty dated November 3 [sic], 1978, was frustrated by September 26, 1979."
Read in isolation this conclusion
[1982] A.C. 724 Page 749

would seem to mean that the entirety of the adventure both for 1979 and 1980 was, in his view, frustrated,
thus accepting the respondents' second contention as already set out. But in section 8, paragraph 6 the
arbitrator added:
"For the sake of completeness I should mention that I have disregarded addendums [sic] nos. 2
and 3 while arriving at my conclusions. My decision only adverts to the seven consecutive
voyages for 1979. No consideration has been given by me to the part of addendum no. 2
relating to the seven voyages contemplated for the 1980 season."

Thus it seems clear from this statement that the arbitrator in the conclusion above referred to in section H 1
(a) was intending to hold that only what I have called "the 1979 adventure" was frustrated leaving the mutual
 Page 22

obligations of the parties in 1980 to be performed in the fullness of time. Not unnaturally in these
circumstances the solicitors for the parties were puzzled and in connection with the projected appeal to
Robert Goff J. sought enlightenment from the arbitrator in a joint letter dated November 15, 1979. The
arbitrator replied in a telex dated November 16, 1979, which was followed by a letter of November 21, 1979.

My Lords, I must confess that I do not find this interchange enlightening. I think, whatever criticism may be
made of the actual language which the arbitrator used in his award - and it must be remembered that this
award was prepared with admirable clarity in a great hurry - the arbitrator's intention is plain enough. He was
intending to hold and clearly did hold, notwithstanding that the point had never been firmly taken before on
behalf of the respondents, that the 1979 adventure was, but the 1980 adventure was not, frustrated. It is
implicit in his contention that the two adventures were on the true construction of the charterparty as varied
by addendum no. 2 separate and distinct adventures. It is this view which the Court of Appeal has accepted
but which Robert Goff J. rejected.

My Lords, in order to determine which of these two views is correct two separate questions must be asked
and answered. First, upon the true construction of the charterparty as varied by addendum no. 2, were the
1979 and 1980 adventures separate and distinct adventures? If they were not it was common ground that
this appeal must succeed. Second, if the 1979 and 1980 adventures were separate and distinct adventures
was the arbitrator, on the facts found by him, entitled to hold that the 1979 adventure was frustrated or has
he erred in point of law in so doing?

My Lords, on the first issue your Lordships were referred to a number of decisions upon consecutive voyage
charterparties. I do not propose to refer to them for each was a decision upon the particular contract then in
issue and decisions upon one particular contract are of no assistance whatever in interpreting another and
quite different contract and ought not to be cited for this purpose. In Larrinaga and Co. Ltd. v. Société
Franco-Américaine des Phosphates de Medulla, Paris (1923) 29 Com.Cas. 1, 11, Lord Atkinson in the
context of a very different type of contract from the present where the question was whether the obligation to
perform three later separate adventures under a tonnage agreement had
[1982] A.C. 724 Page 750

survived the abandonment during the First World War of three earlier adventures, described the particular
contract as one which.
"dealt with six wholly distinct, separate, and severable adventures between which there was no
interdependence in the sense that the carrying out of any one of them was made to depend in
any way upon the carrying out or abandonment of any of the others."

If I may borrow Lord Atkinson's language and apply it to the present charterparty as varied by addendum no.
2, the question is whether the 1979 and 1980 adventures are in any way interdependent so that the carrying
out of the 1980 adventure depended in any way upon whether or not the 1979 was performed. I have already
set out the relevant clauses in the charterparty as it was originally executed. I will now set out the relevant
clauses in addendum no. 2 which bore the date June 28, 1979:
"Addendum no. 2 Nema charterparty dated November 2, 1978, Sorel/Calais or Hartlepool … 2.
In consideration of the strike situation presently existing at Sorel, charterers agree that 'Nema'
be permitted to now undertake one transatlantic voyage with iron ore, St. Lawrence to Glasgow
or Birkenhead (or as otherwise mutually agreed) thereafter returning in ballast to load her next
cargo at Sorel. Except as provided in clause no. 8 (of this addendum), this voyage shall in all
respects replace voyage 2 under this charterparty 2.11.78. 3. (a) It is further hereby mutually
agreed that this charterparty is extended for a subsequent 7 (seven) further cargoes to be lifted
in the period commencing laydays April 1, 1980/ cancelling April 30, 1980, charterers having
the right of cancelling any voyages for which the vessel has not presented by December 31,
1980. (b) Rates of freight for these further 7 cargoes to be U.S. $16.50 … per ton for Calais or
 Page 23

U.S. $17.50 … per ton for Hartlepool. … 4. For the postponed voyage no. 2 of 1979 (in spite of
having declared Hartlepool), charterers have the option restored of declaring discharging port
Hartlepool or Calais. 5. In consideration of the foregoing charterers agree to increase freight
rates for voyages still to be performed in 1979 (eventually FOW 1980 per clause no. 8 of this
addendum) i.e. voyages nos. 2-7 under charterparty 2.11.78 by U.S. $1.00 per ton to U.S.
$13.00 Calais and U.S. $14.00 Hartlepool. … 7. If the current strike at Sorel is still in existence
on completion of discharge of the iron ore cargo or other replacement voyage cargo (if mutually
agreed), the situation to be discussed without obligation. 8. If charterers have to charter another
vessel to lift a Sorel cargo of slag with loading prior to presentation of 'Nema' for her second
lifting owners to remain obligated to perform a replacement voyage in 1979 if possible,
otherwise FOW 1980, at the rate of freight applicable for 1979 per item 5 above."

Reliance was placed on behalf of the appellants upon the fact that the addendum no. 2 was described as an
extension of the charterparty dated November 2, 1978, and also upon the obligation imposed upon the
respondents by clause 8 of that addendum to replace the second voyage
[1982] A.C. 724 Page 751

dealt with in clause 2 by an extra voyage either in 1979 or if not possible "FOW" i.e. first open water, 1980, at
the revised 1979 freight rate. But, my Lords, what one might call the cross references in the addendum no. 2
to both the 1979 and the 1980 adventures does not mean that the performance of one is wholly dependent
upon the performance of the other. The 1979 adventure could end prematurely because of some wholly
extraneous cause, for example, serious damage to the vessel herself, or to the loading facilities at Sorel, and
yet the 1980 adventure be capable of timeous and complete performance in the event of the vessel or those
loading facilities, at the case might be, being sufficiently repaired in time for 1980.

My Lords, two considerations seem to me to point strongly to the independence and against the
interdependence of the two adventures. The first is that clause 3 (a) of addendum no. 2 provides completely
new and different cancelling dates for the 1980 adventure from those in clauses 10 and 38 of the
charterparty of November 2, 1978, for the 1979 adventure. Secondly, the possible interposition of the
substitute voyage for which paragraph 8 of the addendum no. 2 provides, is to take place (in events which
did not in fact happen) first open water 1980, a date which is not linked with either April 1 or 30, 1980, which
are, respectively, commencing and cancelling lay days under clause 3 (a of addendum no. 2. This seems to
me to be a further indication of the independent nature of the obligations for which addendum no. 2 provides.
My Lords, on this question I find the reasoning of Templeman L.J. [1980] Q.B. 547, 568G-570D, entirely
persuasive and and convincing and I respectfully adopt it. Like the learned Lord Justice, I wholly decline to
join the two adventures together in the manner which appealed to Robert Goff J.

I therefore turn to the second question, namely whether the arbitrator was, upon the facts found by him,
entitled in point of law to hold that the 1979 adventure was frustrated. Before considering the grounds upon
which his conclusion was attacked on behalf of the appellants, I venture to offer certain preliminary
observations. First, I hope I shall not be thought discourteous or unappreciative of the industry involved in the
preparation of counsel's arguments if I say that to-day massive citation of authority in cases where the
relevant legal principles have been clearly and authoritatively determined is of little or no assistance, and
should be firmly discouraged. Some citation merely lengthens hearings and adds to costs without in any way
leading to the avoidance of judicial error. In National Carriers Ltd. v. Panalpina (Northern) Ltd. [1981] 2
W.L.R. 45 your Lordships' House recently reviewed the doctrine of frustration and, by a majority, held that it
was susceptible of application to leases. It is clear, reading the speeches of your Lordships, that the House
approved the now classic statement of the doctrine by Lord Radcliffe in Davis Contractors Ltd. v. Fareham
Urban District Council [1956] A.C. 696, 729, whatever may have been said in other cases at earlier stages of
the evolution of the doctrine of frustration.
 Page 24

"… frustration occurs whenever the law recognises that without default of either party a
contractual obligation has become incapable of being performed because the circumstances in
which performance is called for would render it a thing radically different

[1982] A.C. 724 Page 752

from that which was undertaken by the contract. Non haec in foedera veni. It was not this that I
promised to do."

It should therefore be unnecessary in future cases, where issues of frustration of contracts arise, to search
back among the many earlier decisions in this branch of the law when the doctrine was in its comparative
infancy. The question in these cases is not whether one case resembles another, but whether applying Lord
Radcliffe's enunciation of the doctrine, the facts of the particular case under consideration do or do not justify
the invocation of the doctrine, always remembering that the doctrine is not lightly to be invoked to relieve
contracting parties of the normal consequences of imprudent commercial bargains.

Secondly, in some cases where it is claimed that frustration has occurred by reason of the happening of a
particular event, it is possible to determine at once whether or not the doctrine can be legitimately invoked.
But in others, where the effect of that event is to cause delay in the performance of contractual obligations, it
is often necessary to wait upon events in order to see whether the delay already suffered and the prospects
of further delay from that cause, will make any ultimate performance of the relevant contractual obligations
"radically different," to borrow Lord Radcliffe's phrase, from that which was undertaken by the contract. But,
as has often been said, business men must not be required to await events too long. They are entitled to
know where they stand. Whether or not the delay is such as to bring about frustration must be a question to
be determined by an informed judgment based upon all the evidence of what has occurred and what is likely
thereafter to occur. Often it will be a question of degree whether the effect of delay suffered, and likely to be
suffered, will be such as to bring about frustration of the particular adventure in question. Where questions of
degree are involved, opinions may and often legitimately do differ. Quot homines, tot sententiae. The
required informed judgment must be that of the tribunal of fact to whom the issue has been referred. That
tribunal, properly informed as to the relevant law, must form its own view of the effect of that delay and
answer the critical question accordingly. Your Lordships' House in Tsakiroglou & Co. Ltd. v. Noblee Thorl
G.m.b.H. [1962] A.C. 93, decided that while in the ultimate analysis whether a contract was frustrated was a
question of law, yet as Lord Radcliffe said at p. 124 in relation to that case "that conclusion is almost
completely determined by what is ascertained as to mercantile usage and the understanding of mercantile
men."

My Lords, in Edwards v. Bairstow [1956] A.C. 14, 36, Lord Radcliffe made it plain that the court should only
interfere with the conclusion of special commissioners if it were shown either that they had erred in law or
that they had reached a conclusion on the facts which they had found which no reasonable person, applying
the relevant law, could have reached. My Lords, when it is shown on the face of a reasoned award that the
appointed tribunal has applied the right legal test, the court should in my view only interfere if on the facts
found as applied to that right legal test, no reasonable person could have reached that conclusion. It ought
not to interfere merely because the court thinks that upon those facts and
[1982] A.C. 724 Page 753

applying that test, it would not or might not itself have reached the same conclusion, for to do that would be
for the court to usurp what is the sole function of the tribunal of fact.

My Lords, there have been suggestions in some of the decided cases that because questions of frustration
are ultimately questions of law, it is always open to the court to impose its own view rather than adopt that of
the arbitral tribunal. My Lords, I think, with respect, that this is what Kerr J. did in Trade and Transport Inc. v.
Iino Kaiun Kaisha Ltd. (The Angelia) [1973] 1 W.L.R. 210, and what Robert Goff J. has done in the present
 Page 25

case, and I think they were each wrong to do so. I respectfully question whether The Angelia was rightly
decided in the light of the findings of fact by the very experienced arbitrators there concerned. For the future I
think that in those cases which are otherwise suitable for appeal the court should only interfere with the
conclusion on issues such as those which arise in cases of frustration expressed by arbitrators in reasoned
awards, either if they are shown to have gone wrong in law and not to have applied the right legal test, or if,
whilst purporting to apply the right legal test, they have reached a conclusion which no reasonable person
could, on the facts which they have found, have reached. On this matter too I find myself in entire agreement
with what was said by Templeman L.J. [1980] Q.B. 547, 572F. The learned Lord Justice pointed out that the
arbitrator had correctly directed himself in accordance with Davis Contractors Ltd. v. Fareham Urban District
Council [1956] A.C. 696, had made a large number of findings of fact and had reached the conclusion that
the 1979 adventure had been frustrated. The learned Lord Justice went on to say that in those circumstances
he was not prepared to substitute the decision of the court for that of the arbitrator. I respectfully and entirely
agree with him.

It was contended for the appellants that this conclusion would lead arbitrators to assert that they had applied
the right legal test by quoting what Lord Radcliffe had said in Davis Contractors Ltd. v. Fareham Urban
District Council, and then seek to apply the doctrine of frustration to facts to which it could not properly be
applied. My Lords, I question whether this is in fact likely to happen, but if I am wrong and it should happen,
such an error is likely quickly to emerge from any reasoned award, and the court would then be well justified
in interfering in accordance with the principles which I have just endeavoured to state.

Like Templeman L.J., I am entirely satisfied that the arbitrator directed himself correctly in point of law. Do
these findings of fact then justify his conclusion that the 1979 adventure was frustrated? They have been
assailed by learned counsel for the appellants in a number of respects. Complaint was made that the
arbitrator had given too little weight to what had happened in June and July 1979, and to the ability of the
respondents to perform a substitute voyage in lieu of the second voyage, and to the payment made under
addendum no. 3. The arbitrator had, it was said, treated the provision for a seventh voyage as if it were an
absolute obligation. He had ignored the limitation upon the number of voyages which might be performed by
the cancelling date in December 1979. It was also alleged that the arbitrator had ignored the possibility of a
sudden collapse of the strike, which in the event happened,
[1982] A.C. 724 Page 754

and the number of voyages which might then still have been fitted in between its collapse and Sorel
becoming ice-bound. It was argued that both parties had treated the contract as a going concern throughout
the summer and early autumn of 1979, and that by allowing the respondents to use the ship for their own
purposes in August and September 1979, the charterers had shown how anxious they were to maintain the
1979 adventure in being. It was argued that there was no change in that position by the time the arbitration
was held on September 26, 1979.
"My Lords, these are powerful arguments. I see nothing to suggest that the arbitrator did not
consider them carefully. In my judgment he made his findings of fact with reference to
considerations of that kind, and he duly reached his conclusion. Another arbitrator might have
reached a different conclusion for clearly there were many points which had to be taken into
consideration both ways. But I am quite unable to say that the conclusion which Mr. Davies
reached was one which he was not, on the facts which he found, fully entitled to reach. It was
not suggested that a strike could never bring about frustration of an adventure. But it was
pointed out that most attempts to invoke strikes as a cause of frustration have in the past failed.
The Penelope [1928] P. 180 is almost the only example of success, and in that case the
underlying reasoning of the judgment is far from easy to follow, even though the decision may
well be correct.

My Lords, I see no reason in principle why a strike should not be capable of causing frustration of an
adventure by delay. It cannot be right to divide causes of delay into classes and then say that one class can
 Page 26

and another class cannot bring about frustration of an adventure. It is not the nature of the cause of delay
which matters so much as the effect of that cause upon the performance of the obligations which the parties
have assumed one towards the other. In the result I have reached the conclusion that Robert Goff J. was
wrong in reversing the arbitrator's award, and that the conclusion reached by the Court of Appeal was right. I
would, therefore, dismiss this appeal.

Appeal dismissed.

Solicitors: Sinclair Roche & Temperley; Holman Fenwick & Willan.

J. A. G