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The Hannah Blumenthal [1983] 1 AC 854


Arbitration agreement not frustrated by delay caused by the parties

Facts

A contract was made for the sale of a ship. A dispute arose between the parties regarding alleged defects. The dispute was referred to arbitration but the requirement for a third arbitrator under the contract was not fulfilled and the arbitration was delayed. The sellers raised proceedings for a declaration that the arbitration agreement was discharged by repudiation, consensual rescission or frustration.

Issue

At first instance, it was held that there had been no agreement to abandon the arbitration but it had been discharged by frustration. The Court of Appeal agreed that the agreement had been frustrated because, due to the long period of time that had passed, it would be impossible for there to be a fair trial of the buyer’s claim. The buyer further appealed to the House of Lords.

Held

The House of Lords allowed the appeal. The arbitration agreement was not frustrated. Both parties were in default of the agreement by not applying to the arbitral tribunal for direction to prevent delay. Such a default excluded the operation of the doctrine of frustration. Lord Diplock held that the virtual impossibility of a satisfactory trial following the delay was incapable of being classified as a frustrating event; even If it had come about without the default by either party. Furthermore, the sellers had not proven abandonment of the arbitration as they had not shown that they believed that the buyers had intended to abandon the action and there were actions by them which were inconsistent with such a belief.


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