Appeal from magistrate's court.

The plaintiff/appellant brought an action against the defendant/respondent on a bill of exchange accepted by him and later dishonoured. The bill was in payment of goods purchased by the defendant/respondent from the plaintiff/ appellant. The contract of sale contained a valid arbitration Clause.

At the trial there was evidence that there was a dispute between the parties in regard to the goods, the subject matter of the sale. The defendant/respondent counter-claimed for damages for breach of contract.

The trial Magistrate held that arbitration was "a condition precedent before any remedy can be sought in a court of law", and non-suited the plaintiff/appellant.

The plaintiff/appellant appealed.

On Appeal:

HELD:

(1)     When a matter which should have been referred to arbitration under a valid arbitration Clause in an agreement is taken to court the proper order to make is to stay the proceedings pending arbitration and not to non-suit the plaintiff.

(2)     An arbitration Clause will not be enforced by the court if the other party to the proceedings has taken a step in them after appearance. In the present case, the defendant/respondent took a major step in filing a counter claim; he had no right, therefore, to object to the legal proceedings.

Appeal allowed: Decision of Court below set aside: Case sent back to Court below for decision on the merits.

Act referred to:-

Arbitration Act, 1950 (England) section 4

APPEAL from magistrate's court.

Smith for the Plaintiff/Appellant.

Bashua for the Defendant/Respondent.

De Lestang, C.J.: The appellant who was plaintiff in the court below brought an action against the respondent on a bill of exchange accepted by him and later dishonoured. The bill was in payment of goods purchased by the respondent from the appellant. The contract of sale contained the following arbitration Clause:-

"All contracts are subject to English Law and all differences are to be referred to a single arbitrator agreed upon by the parties or in default of agreement to be appointed by the President for the time being of the London Chamber of Commerce and the Arbitration Act 1950 shall apply to the reference."

At the trial there was evidence that there was a dispute between the parties in regard to the goods, the subject matter of the sale.

Indeed the respondent counter-claimed for damages for breach of contract.

The learned Chief Magistrate held that arbitration was "a condition precedent before any remedy can be sought in a Court of Law" and non suited the appellant. The appellant appeals.

In my view the decision of the learned Chief Magistrate cannot be supported.

In the first place when a matter which should have been referred to arbitration under valid arbitration Clause in an agreement is taken to Court the proper order to make is to stay the proceedings pending arbitration and not to non-suit the plaintiff.

Secondly an arbitration Clause will not be enforced by the court if the other party to the proceedings has taken a step in them after appearance. (Arbitration Act 1950 section 4 (1)). In the present case the respondent took a major step in filing a counterclaim. He had no right, therefore, to object to the legal proceedings.

Thirdly I am not at all sure that the arbitration Clause covers an action founded on the bill of exchange which is a different contract but it is not necessary to decide this question.

For these reasons the appeal succeeds and the decision of the court below non-suiting the appellant is set aside together with the order for costs. The case will go back to the same Court for decision on the merits.

The appellant will have the costs of this appeal assessed at 24 guineas.

Appeal allowed: Decision of Court below set aside: Case sent back to Court below for decision on the merits.