The Court allows an application to extend time for bringing arbitration proceedings under section 12(3) of the Arbitration Act 1996.

In the recent case of Haven Insurance Company Limited v EUI Limited (T/A Elephant Insurance)[i], the English Court of Appeal dismissed an appeal against a High Court decision granting EUI Limited (Elephant) an extension of time to bring arbitration proceedings after the expiry of a time bar. The Court of Appeal confirmed that it is only willing to grant an extension under section 12(3) of the Arbitration Act 1996 (the Act) in exceptional circumstances, and then only if the circumstances in which the request was made were outside the reasonable contemplation of the parties when they agreed upon the time bar provision.

In Haven, the Court of Appeal held that the lack of clarity in the dispute resolution procedures of the Motor Insurers Bureau (MIB) meant that Elephant had not acted unreasonably and ought to have the opportunity to pursues its claim out of time.

The decision serves as a useful reminder to litigants and counsel of the importance that the English courts attach to complying with time limits and the courts’ unwillingness to interfere with parties’ agreed procedures for an arbitration, even if those procedures relate to the time period after the arbitral award.

Background facts

The appellant, Haven Insurance Company Limited (Haven), and the respondent, Elephant, were both motor insurers and members of the MIB. A dispute arose regarding which insurer was liable to indemnify a victim in a road traffic accident. Under MIB’s Articles of Association (the Articles), disputes were to be resolved by a Technical Committee. The Technical Committee heard the dispute and resolved the matter against Elephant. Elephant filed a written notice of appeal. Article 75 of the Articles governed the appeal process and provided that the Technical Committee’s decision could be appealed to an arbitrator if the member gives written notice of appeal within 30 days of “being notified of the decision of the Technical Committee.”

On 30 April 2015, Elephant appealed the decision. Haven argued that the appeal was out of time because Elephant had been “notified of the decision of the Technical Committee” more than 30 days before it served its written notice of appeal. In other words, Haven argued that Elephant’s appeal was late and did not comply with Article 75. Elephant argued that the appeal was within time as the clock only started to run from 31 March 2015, the date on which the final draft minutes of the Technical Committee were released.

On 4 November 2015, an arbitrator was appointed to hear the appeal. Haven argued that the arbitrator had no jurisdiction to determine an appeal outside of time. The arbitrator rejected this challenge to his jurisdiction. Subsequently, Haven challenged the arbitrator’s jurisdiction in the English High Court under section 67 of the Act. Elephant then applied for an order under section 12 of the Act for an extension of time to commence its arbitration. High Court Justice Knowles allowed the section 67 challenge but also granted Elephant an extension of time to commence the arbitration. In reaching his decision on section 12, Justice Knowles held that there were “quite exceptional circumstances”. Amongst other facts, Justice Knowles was influenced by the following:

  • MIB had emailed Elephant shortly after the Technical Committee meeting stating that “it might be best to await the minutes” and therefore Elephant believed, even if wrongly, that the time limit ran from the date of the release of the minutes.
  • MIB, which had explained to Haven that the Technical Committee customarily allowed 30 days from the date of the minutes, shared this belief.
  • Even though Elephant was aware that the working group had identified that the wording of the Articles was insufficiently clear, and Elephant therefore took some risk, this was “eclipsed by the later encouragement from MIB to await the minutes”.
  • Although Elephant delayed in making its section 12 application and Haven released its retention around March 2015 once the MIB had confirmed that no appeal had been filed, considering all of the circumstances, it was just to extend the time in this case.

Haven appealed the decision on the extension of time to the Court of Appeal.

Judgment

Lord Justice Haddon-Cave handed down the Court of Appeal’s unanimous decision, which dismissed the appeal and confirmed the High Court’s decision to grant the extension of time.

In reaching this decision, Lord Justice Haddon-Cave considered the test laid down under section 12 of the Act, which provides:

(1) Where an arbitration agreement to refer future disputes to arbitration provides that a claim shall be barred, or the claimant’s right extinguished, unless the claimant takes within a time fixed by the agreement some step (a) to bring arbitral proceedings, or (b) to begin other dispute resolution procedures which must be exhausted before arbitral proceedings can be begun, the court may by order extend the time for taking that step …

(3) The court shall make an order only if satisfied –

(a) that the circumstances are such as were outside the reasonable contemplation of the parties when they agreed the provision in question, and that it would be just to extend the time, or

(b) that the conduct of one party makes it unjust to hold the other party to the strict terms of the provision in question…

Lord Justice Haddon-Cave considered that the proper approach was laid down in Harbour and General Works Ltd v Environmental Agency[ii], in which Lord Justice Waller held that section 12 is not intended to “allow the court to interfere with a contractual bargain unless the circumstances are such that if they had been drawn to the attention of the parties when they agreed the provision, the parties would at the very least have contemplated that the time bar might not apply”. Accordingly, section 12 posed two questions:

  • Were the circumstances outside the reasonable contemplation of the parties when they agreed the time bar provision in question?
  • Would it be just to extend the time?

Lord Justice Haddon-Cave considered the following issues:

  1. Unilateral mistake. Haven argued that a unilateral, as opposed to mutual, mistake was insufficient to trigger section 12. Lord Justice Haddon-Cave rejected this argument, holding that the test in section 12(3)(a) is “prospective not retrospective” and is framed in terms of mutual “contemplation”, which is to be assessed at the time when the provision in question was agreed. In this case, the issue in question was whether it would have been in the parties’ reasonable mutual contemplation that “the time for appeal would be other than that which MIB was, when asked, prepared to state.” The High Court answered this question in the negative.
  2. MIB’s email. Haven argued that MIB’s email to Elephant, which said that “it might be best to await the minutes”, was part of a brief exchange and the High Court had been wrong to state this was a “later encouragement from MIB to await the minutes”. The issue was resolved without waiting for the minutes. In rejecting this argument, Lord Justice Haddon-Cave held that this ignored MIB’s widely accepted custom and practice of allowing 30 days from the date of the minutes for appeal and, in any event, receiving the minutes would be beneficial to Elephant, as it would provide the clearest explanation of the reasons for the decision.
  3. Negligent omission. Haven argued that an extension of time would never be granted if the applicant was guilty of a negligent omission. Lord Justice Haddon-Cave rejected this argument as an unduly prescriptive rule, holding that while a court may be very unlikely to grant section 12 relief to a party that has missed a deadline because of the party’s own negligence, each case depends on its own facts.
  4. Awareness of the uncertainty of Article 75. Haven relied on the fact that Elephant had been aware that the MIB working party was considering amending Article 75 because Article 75 was insufficiently clear. However, Lord Justice Haddon-Cave held that this did not advance Haven’s case as the proposed amendment was simply to clarify a point that was already assumed to be valid — i.e. that the 30 days ran from the date of the minutes of the Technical Committee.
  5. Whether to award an extension of time would be just. Haven argued allowing the extension was unjust, as Elephant had delayed in lodging its application and Haven had released its retention in the belief that the time for appeal had expired. While Lord Justice Haddon-Cave agreed with Justice Knowles that Elephant had taken some risk, this occurred against the backdrop of MIB’s accepted custom and practice. Haven also took some risk when it released its retention in circumstances in which an extension was still a possibility.

Comment

Whilst the claim for an extension of time succeeded in this instance, the Court of Appeal recognised that section 12 is “[o]ne of the rare circumstances in which the court may intervene” in arbitration. The High Court had recognised that the case involved “quite exceptional circumstances” in which there was an established custom of the Technical Committee to allow 30 days from the date of the minutes for an appeal. However, the usual position would be that the court would not rescue a party that had failed to comply with a contractually agreed time bar. The decision is a useful reminder of the importance that the courts attach to complying with time limits and their unwillingness to interfere with the parties’ agreed procedures for an arbitration, even if those procedures relate to the time period after the arbitral award.