WAH V GRANT THORNTON INTERNATIONAL LTD AND OTHERS

Arbitration - Jurisdiction - Tiered dispute resolution clause - Whether reference to mediation a condition precedent to the commencement of arbitration - Arbitration Act 1996, section 67

The claimants were two of the partners in a Hong Kong partnership, JBPB & Co, which was a member of GTIL, an international network of accountancy firms. Section 14.3 of the Member Firm Agreement provided that: (a) any dispute was in the first instance to be referred to the Chief Executive; (b) the Chief Executive was to attempt to resolve the dispute in an amicable fashion within a month; (c) the dispute would then be referred to a Panel of three members of the Board; and (d) until the Panel determined that it could not resolve the dispute, or after a month after the dispute had been referred to it, whichever was earlier, arbitration could not be commenced. Section 14.4 then provided for arbitration if the procedure in section 14.3 did not produce any resolution. JBPB was expelled from the network. JBPB referred the matter to the Chief Executive, who recused himself. It proved impossible to establish a panel, and arbitration was commenced. The majority partners, but not the claimants, agreed to settle the action, and the arbitrators subsequently ruled that the settlement had validly terminated the arbitration. The claimants appealed against the award under section 67 of the Arbitration Act 1996, asserting that section 14.3 was a condition precedent to arbitration and, because the section 14.3 procedure had not been followed, the arbitrators had no jurisdiction. Hildyard J, dismissing the appeal, held that section 14.3(a) to (c) did not create a condition precedent because the procedure was too equivocal in its requirements and too nebulous in terms of the parties' obligations. Hildyard J further held that section 14.3(d) did not prevent a reference to arbitration where a Panel had not been constituted, in that the purpose of the provision was to put a time limit on determination by the Panel and not to postpone arbitration indefinitely.