SEA2011 Inc v ICT Ltd

This is a claim brought to determine a jurisdictional challenge under section 67 Arbitration Act 1996. The challenge relates to an arbitration which the defendant, ICT Ltd, brought against the claimant, SEA2011 Inc, pursuant to an arbitration agreement in clause 10.1 of a written Sales Agency Agreement dated 28 January 2011. These underlying arbitration proceedings were commenced by ICT Ltd by a Notice of Arbitration dated 20 April 2016. The Arbitrator has issued two partial awards dated 29 June 2017 rejecting the jurisdictional challenges. This judgement has been anonymised in accordance with CPR 62.10(3).

In outline, SEA2011 Inc’s challenge to the Arbitrator’s jurisdiction is threefold. First, it contends that ICT Ltd is not a party to the Sales Agency Agreement and thus not a party to clause 10.1 because there was no English company of that name in existence at the time of the agreement. Therefore the Arbitrator’s jurisdiction, as defined by the Notice of Arbitration, does not extend to determining the disputes ICT Ltd has raised. Secondly, SEA2011 Inc argues that it, too, was not a party to the Sales Agency Agreement. The named “Principal” in it was SEA Inc, a separate legal person from SEA2011 Inc, which was only incorporated after the agreement was concluded. Thirdly, SEA2011 Inc submits that the Arbitrator was precluded from considering ICL Ltd’s submission that the issue of the separateness of SEA Inc and SEA2011 Inc could be overcome by finding an implied contract between it and SEA2011 Inc on the same terms as the Sales Agency Agreement. That was because in the Notice of Arbitration ICL Ltd had sought to address the point by an argument, now abandoned, that the Sales Agency Agreement was assigned by SEA Inc to SEA2011 Inc. There was no mention of implied contract.

SEA Inc was incorporated in Canada on 15 April 2004. Its president was Mr BY, and Mr JZ was one of its directors. Its shareholders were Mr BY (17%), Mr JZ (17%), Mr ST (17%) and Mr CS (49%). It was a distributor of electronic components manufactured by a Chinese company, DA Ltd, under a contract dated 10 January 2005.

The claimant, SEA2011 Inc, was incorporated on 10 December 2011. Its president was Mr JZ. Its shareholders were originally DA Ltd (55%), Mr JZ (25%) and Mr ST (20%), but are now DA Ltd (60%) and Mr JZ (40%). DA Ltd terminated the original agreement with SEA Inc and appointed SEA2011 Inc as its distributor with effect from March 2012. The Arbitrator characterized these changes as amounting to an internal reorganization in all likelihood for DA Ltd’s and Mr JZ’s purposes.

The defendant, ICT Ltd, was incorporated in England on 10 July 1998. At the date of its incorporation its registered name was IN Ltd. Its shareholders and directors were Mr JW and Mr S. Mr S is a Dutch national and someone with no connection to the present dispute. The company was dormant from about 2004 and filed dormant accounts with Companies House for the years ending 31 July 2010, 2011 and 2012. It changed its name from IN Ltd to ICT Ltd on 20 January 2012. At incorporation its registered address was at Mr S’s home address in West Sussex. That was changed on 17 August 2010 to Mr and Mrs JW’s home address in Kent, and that remains the registered address.

On 17 August 2010 there was a change of director registered at Companies House: Mr JW replaced Mr S. In addition Mrs JW became company secretary. However, the annual return for the company in July 2011 recorded that the company’s sole director was Mr S although the accounts filed at that time are signed on its behalf by Mr JW as director. On 26 January 2012 a termination of Mr S’s appointment as director was filed with Companies House. In the annual return dated 30 July 2012, the sole director was named as Mr JW. He and his wife held one share each. In my view Mr JW became the sole director in August 2010 and there was a mistake in the annual return for 2011 in naming Mr S.

ICT Ltd is an Isle of Man company incorporated on 26 November 2010, described in this judgment as ICT (IOM). Mr DH and Mr JW were instrumental in its formation. There is little publicly available information about this company because of the confidentiality the Company Registry in the Isle of Man offers. ICT (IOM)’s annual returns for the years 2011 to 2013 were presented by a registered agent in the Isle of Man. The director was listed as a company, “Castle Directors Ltd” in the Isle of Man. The relevant box if the company were dormant was not ticked. The company was struck off the register in 2016. The company was not mentioned to Mr JZ before the Sales Agency Agreement was signed. Indeed it seems that Mr JZ and SEA2011 Inc did not know of it until November 2016, when ICT Ltd disclosed its existence after the current dispute arose.

In 2010 Mr DH decided to enter the technical and sales agency business together with his previous colleague, Mr JW, with a view to representing manufacturers of electronic components. Mr DH and Mr JW met Mr JZ of SEA Inc at a major electronics exhibition in Munich held between 9 and 12 November 2010. They discussed the possibility of their acting as a sales agent in Europe for SEA Inc. Following that meeting Mr JZ accompanied Mr DH and Mr JW to the UK for further discussions, and on 13 November 2010 they took him on a tour of a warehouse at a trading estate in Kent. In his witness statement Mr JW stated that the warehouse and its location were important from Mr JZ’s perspective as a distribution centre. SEA2011 Inc accepted Mr DH’s explanation that the Kent warehouse was chosen for its close proximity to major motorways, channel tunnel and trade links to Europe.

On the visit Mr JZ saw signage at the warehouse with a logo which read “ICT” without “Ltd”. He took a photograph of this, which was in evidence at the hearing. The description “ICT” without “Ltd” appears in emails in December 2010/January 2011 and the logo and that description appear in at least one email in evidence in January 2011. In my view “ICT” without “Ltd” was the trading name of the business.

At the end of the visit, Mr DH gave Mr JZ a draft sales agency contract. I infer from what followed that the party named in this was ICT Ltd. There was negotiation over the terms. One point was the termination period. Mr DH explained in an email dated 9 December 2010 that as a UK company operating in Europe the contract had to comply with European law. Agreement was finally reached.

The Sales Agency Agreement was dated 28 January 2011. The parties were named as SEA Inc with a Canadian address as “the Principal”, and ICT Ltd as “Agent”, “a company incorporated in the United Kingdom”, with a registered office identified as the warehouse at the trading estate in Kent already mentioned. Under the agreement, the agent was given an exclusive sales agency in Europe for promoting and selling the principal’s products. Commission was dealt with in clause 6 and Appendix B. In broad terms commission was generally 5.5%, but might be split between two regional agents when design-in, the purchase order and delivery came from different locations. Clause 10.1 provided:

“Any dispute arising out of or in connection with this agreement shall be referred to the arbitration in London of a single arbitrator appointed by agreement between the parties or, in default of agreement, nominated on the application of either party by The Law Society”.

Clause 13 of the agreement provided for the service of notices by hand or sending to the other party at the address given. The agreement was signed by Mr JZ for SEA Inc as the “General Manager” of “S Relays” and Mr DH as “Director” for ICT Ltd.

On 12 March 2012, an email was sent from a person in “Sales/Accounting” at SEA Inc. It read that SEA had moved to a new address, which was given. The next line read: “Our company name registered as: SEA2011 Inc”. The email continued that all letters should be sent to the new address and cheques should be payable “to the NEW Title in the future. If your company used to wire payment to us every month (sic). Please contact us immediately for New Bank account information.” The email seems to have been sent to over 200 addressees. Later the new bank details were provided to ICT Ltd.

In April 2013 ICT Ltd wrote to Mr JZ of SEA2011 Inc about a new business opportunity with a German company. Mr JZ responded asking if ICT Ltd would accept commission at 1% in respect of two parts. Mr DH of ICT Ltd replied and referred to “our contractual 5.5% commission”, in other words referring to the commission rate in the Sales Agency Agreement. Mr JZ responded, asserting that SEA2011 Inc “couldn’t support the project if we still pay [ICT Ltd] 5.5% commission”. In an email dated 25 April Mr DH disagreed, referring to the fact that SEA “signed the European Sales Representative Agreement with [us] in 2011 agreeing to a 5.5% commission” and concluded: “We trust you appreciate the seriousness of our contractual obligations and the fact we are prepared to accept an extraordinary one year reduction in our commissions …” After a further response by Mr JZ, Mr DH wrote “we cannot agree to a reduction of our legally obligated commissions of 5.5% …”.

In early January 2014 ICT Ltd emailed Mr JZ of SEA2011 Inc in respect of a purchase order from the same German company, asserting that because ICT Ltd had provided all the design promotion and other work to win the order, it should obtain design-credit commission, a reference to that term in the Sales Agency Agreement. In an email dated 7 January 2014, Mr JZ responded: “Yes, this project is recorded to 3.3% split commission for ICT”.

On 1 March 2015, Mr JZ sent a short email to ICT Ltd: “After thoroughly consideration (sic) I decided that SEA would terminate our rep contract from today Feb 28 2015”.

There was correspondence between solicitors. The solicitors representing SEA2011 Inc had originally informed those representing ICL Ltd that they were acting for SEA Inc, and took a month to correct themselves. The issue that SEA2011 Inc was not an original contracting party to the Sales Agency Agreement and that it had not become a party to that contract was raised. They opined that “it appears likely that a new agreement was formed between SEA2011 Inc and your client, the terms of which were implied by the parties’ conduct.”

ICT Ltd commenced arbitration by way of a Notice of Arbitration dated 20 April 2016. Paragraph 2 defined the Sales Agency Agreement dated 28 January 2011 as “the Agreement”. Then in paragraph 3 the notice set out the arbitration clause in the Sales Agency Agreement. Paragraph 4 stated that in or around March 2012 the business of SEA Inc was transferred to SEA2011 Inc, and that about the same time

“the Agreement (including all benefits and obligations of SEA Inc thereunder) was assigned from SEA Inc to SEA2011 Inc. SEA Inc was dissolved on or around 3 October 2012.”

Paragraph 5 recited the termination of the agreement. Paragraph 6 began: “A dispute has arisen between [ICT Ltd] and [SEA2011 Inc] out of and in connection with the terms of the Agreement”. It and the following paragraphs set out details of the claim for damages, including under the Commercial Agents (Council Directive) Regulations 1993. Paragraphs 10 and 11 stated that the claims for breach of the Sales Agency Agreement constituted a dispute under the arbitration clause and referred it to arbitration.

The parties were not able to agree on a single arbitrator and so ICT Ltd applied to The Law Society, which appointed an Arbitrator on 1 August 2016.

Six months after the reference to arbitration, in early November 2016, SEA2011 Inc’s solicitors raised the issue that ICT Ltd had only been re-named to its present title in January 2012 and sought an explanation.

The Arbitrator considered SEA2011 Inc’s jurisdictional objections by way of preliminary issues. He produced a Partial Final Award and a Second Partial Final Award, both dated 29 June 2017. In the first he dismissed what in this judgement is called the second jurisdictional challenge. In the second he dismissed what in this judgement is called the first jurisdictional challenge.

SEA2011 Inc issued its Arbitration Claim Form in this court on 27 July 2017 challenging the Arbitrator’s awards under section 67 of the Arbitration Act that the Arbitrator has substantive jurisdiction. The claim form was amended by consent on 22 December 2017.

The hearing before me was a rehearing of the issues of jurisdiction in accordance with the principles laid down in Dallah Real Estate & Tourism Holding Co v Pakistan [2010] UKSC 46; [2011] 1 A.C. 763. There was documentary and witness evidence. SEA2011 Inc relied on two witness statements dated 26 July 2017 and 18 September 2017 from Mr JW, a Canadian lawyer who is acting for it in the underlying arbitration. ICT Ltd relied on the witness statement of Mr DH dated 8 September 2017.

SEA2011 Inc submitted that I should give Mr DH’s evidence little or no weight. Before the hearing it indicated that it intended to cross-examine him but he did not appear at trial. Albeit Mr DH is resident in Florida, he could have given evidence by video-link. Further, SEA2011 Inc contended, Mr DH’s evidence contained assertions about facts and matters which, if accurate, could be corroborated by documents which must be in ICT Ltd’s possession. These were not produced and I was entitled to draw adverse inferences against it: Re Mumtaz Properties [2011] EWCA Civ 610; [2012] 2 BCLC 109, [14], per Arden LJ. I have taken both these matters into account in assessing Mr DH’s evidence, although I note that Mr DH did not give oral evidence before the arbitrator, and in correspondence between solicitors no reason was given by SEA2011 Inc for oral evidence on Mr DH’s part.

SEA2011 Inc’s first jurisdictional challenge was that ICT Ltd was not a party to the Sales Agency Agreement, since as of 28 January 2011 ICT Ltd’s registered name was IN Ltd and it only changed that to ICT Ltd on 20 January 2012, 12 months after the agreement was entered. SEA2011 Inc rejected ICT Ltd’s contention that the doctrine of misnomer could be invoked to correct ICT Ltd to IN Ltd. First, SEA2011 Inc submitted, the agreement said “Ltd” and there was also the reference to it being incorporated. It was not a case where a trading name had been used. To conclude that the words “ICT Ltd” were a mistake merely because of the existence of IN Ltd strained the doctrine of misnomer too far, since no mention was ever made of the name IN Ltd prior to the conclusion of the contract. The statement that it was a “company incorporated in the United Kingdom” was legally meaningless and was not an appropriate device to undermine the accuracy of the stated name. As demonstrated by the factual matrix, the Kent address was included in the contract since the location of the warehouse was important to Mr JZ.

Further, SEA2011 Inc submitted, to conclude that the words should read “IN Ltd” actually produced commercial absurdity, since if IN Ltd was in fact the contracting party, both it and its director would have committed a series of criminal offences under sections 82-84 Companies Act 2006 and The Companies (Trading Disclosures) Regulations 2008 by virtue of the fact that it did not display its registered name at the warehouse or on its business correspondence and documentation.

Finally, SEA2011 Inc submitted, ICT Ltd’s principals owned an Isle of Man company, which at the time of the signature of the Sales Agency Agreement was called ICT Ltd (what in the judgment is called ICT (IOM)). It was neither arbitrary nor absurd to conclude that the reference to “ICT Ltd” in the agreement was to that company, and not to IN Ltd, a company with a quite different name. In particular, IN Ltd was not a “company incorporated in United Kingdom” and its registered office was not at the Kent warehouse address.

Even if there were a clear mistake, SEA2011 Inc submitted, it could not be said that the obvious correction to make was to change “ICT Ltd” to read “IN Ltd” in the Sales Agency Agreement. There was nothing to suggest IN Ltd would change its name a year after the Sales Agency Agreement. The name IN Ltd was not mentioned to Mr JZ at any stage prior to the conclusion of the contract. On the contrary, the only name he saw, including on the signage during the warehouse visit, was “ICT”. There was nothing to suggest it was trading as ICT. Its annual filings at Companies House were that it was still dormant. By contrast ICT (IOM)’s filings were that it was not dormant. Further, there was nothing to suggest that it was significant to the parties that “the Agent” be a company incorporated in England, as opposed to elsewhere, or that the Isle of Man company would not, as a corporate vehicle, have had the use of the Kent warehouse. If the name were to be changed to IN Ltd, the words as to where it was incorporated and its registered address would also need to be changed.

Separately from the doctrine of rectification, mistakes in a contract may be corrected as a matter of construction. Two conditions must be satisfied: first, there must be a clear mistake on the face of the contract, and secondly, it must be clear what correction ought to be made: East v Pantiles (Plant Hire) Ltd (1981) 263 EG 61, per Brightman LJ. In adopting these tests, Lord Hoffmann in Chartbrook v Persimmon Homes [2009] UKHL 38; [2009] 1 AC 1101 also approved their further explanation by Carnwath LJ in KPMG LLP v Network Rail Infrastructure Ltd [2007] EWCA Civ 363; [2007] Bus LR 1336. Lord Hoffmann said:

“[23]…The first qualification is that “correction of mistakes by construction” is not a separate branch of the law, a summary version of an action for rectification… As Carnwath LJ said, at p 1351, para 50:

“Both in the judgment, and in the arguments before us, there was a tendency to deal separately with correction of mistakes and construing the paragraph ‘as it stands’, as though they were distinct exercises. In my view, they are simply aspects of the single task of interpreting the agreement in its context, in order to get as close as possible to the meaning which the parties intended.”

[24] The second qualification [is]…that in deciding whether there is a clear mistake, the court is not confined to reading the document without regard to its background or context. As the exercise is part of the single task of interpretation, the background and context must always be taken into consideration.

[25] What is clear from these cases is that there is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant...”

Errors in the description of parties to a contract are addressed by the same principles as explained by Lord Hoffmann in Chartbrook v Persimmon Homes: see Liberty Mercian Ltd v Cuddy Civil Engineering Ltd [2013] EWHC 2688 (TCC), [2014] BLR 179, where Ramsey J sets out an invaluable analysis of the case law on misnomer, which it would be invidious to repeat. Suffice to say that the authorities include Nittan (UK) v Solent Steel Fabrications [1981] 1 Lloyd's Rep. 633 (misnomer in naming company in exclusion clause), and Almatrans SA v Steamship Mutual Underwriting Association (Bermuda) Ltd [2006] EWHC 2223 (Comm); [2007] 1 Lloyd's Rep. 104 (party unable to avoid letter of undertaking with the argument that it was for a company with a similar name, where there was only one entity the letter could possibly have been referring to).

While accepting these authorities, SEA2011 Inc submitted by reference to a sentence in Lord Neuberger MR’s judgment in Pink Floyd Music Limited, Pink Floyd (1987) Limited v EMI Records Limited [2010] EWCA Civ 1429, [20], that the party contending for a correction must show that the words as drafted produce an outcome which is arbitrary or irrational. In my view there is no additional threshold. First, Lord Neuberger said that “one is normally looking for” an arbitrary or irrational outcome, not that these are essential prerequisites. Secondly, Lord Neuberger MR immediately continued after the sentence, that “accordingly” the court must be satisfied (quoting Lord Hoffmann’s words in Chartbrook v Persimmon Homes) that there has been a clear mistake and it must be clear what correction ought to be made. In other words, his gloss does not alter in any way Lord Hoffmann’s analysis.

In my view there was a clear mistake on the face of the Sales Agency Agreement. As of 28 January 2011 there was no company registered in any part of the UK named ICT Ltd, nor one registered at the address given in the agreement. At that point the name of IN Ltd had not been changed; that occurred a year later. The reality is that the agreement was prepared by lay persons and the precision to be expected in such circumstances will not generally be equivalent to what would be expected if lawyers were involved: cf. Thorney Park Golf Limited (t/a Laleham Golf Club) v Myers Catering Ltd [2015] EWCA Civ 19, [24] per McCombe LJ. The inference is that they did not get around to changing the name as they should have. I accept ICT Ltd’s submission that the criminal offences referred to by SEA2011 Inc have no relevance to the construction exercise.

Further, that clear mistake can be readily corrected in my view as a matter of construction considering, as is necessary, the meaning which the Sales Agency Agreement would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 W.L.R. 896, at 912-913; Bank of Credit and Commerce International SA v Ali [2001] UKHL 8; [2002] 1 A.C. 251 [39].

The Agreement described the company as incorporated in United Kingdom. (As the Arbitrator noted, to laypeople United Kingdom is often synonymous with England and Wales.) The background knowledge included that Mr DH had described the company to Mr JZ as a UK company operating in Europe requiring a termination period of 3 months under European law. The context of the case was also that Mr DH and Mr JW intended that the company they would use for the agency business had the trading name ICT, and was trading from a warehouse in Kent. Mr JZ was aware of that intention, having seen and photographed the logo and description “ICT” when visiting the warehouse in November 2010. What was also reasonably available to the parties because it was searchable at Companies House was that a few months earlier Mr JW had become the sole director of IN Ltd, a company incorporated in England and Wales, which at the same time had also changed its registered address to his home address, close to the warehouse premises. IN Ltd was filing dormant accounts, but the last such accounts for the year ended 31 July 2012 had been approved on 16 April 2012. There is nothing in the evidence to suggest that the warehouse was used for transhipment before January 2012, so that issue is not as salient as SEA2011 Inc suggested. Overall, the inference is that IN Ltd was the company intended to conduct the ICT business but no one got around to changing the name.

The existence of ICT (IOM) is legally irrelevant: its existence was unknown to Mr JZ at the time of the agreement. Even if he could reasonably have known of its existence, given the nature of the Companies Registry in the Isle of Man the association of Mr DH and Mr JW with it would not reasonably have been available to him. Given that the Isle of Man is not in the UK or the EU, ICT (IOM) would not have been a company incorporated anywhere in the UK, or with a registered address in Kent, or subject to the European law if it entered agency arrangements. Although the registered address in the agreement was wrong, it indicated that the company to which reference was being made had a registered address in England and not in the Isle of Man.

Thus the meaning to reasonable persons having this background knowledge of the words naming “ICT Ltd” as the Agent in the Sales Agency Agreement would be that they were being used to describe IN Ltd, before its name change, trading as ICT. The necessary correction of the agreement to align its wording with that meaning would be to substitute for “ICT Ltd” the description “IN Ltd trading as ICT”. Correction would also include amending “a company incorporated in the United Kingdom” to “a company incorporated in the England and Wales”, and the reference to the registered office as being at the warehouse to “trading from”. The first jurisdictional challenge fails.

SEA2011 Inc submitted that the fact that it was not named as a party to the Sales Agency Agreement – the agreement referring to the separate legal personality, SEA Inc, as the principal – could not be overcome by the doctrine of implied contract. That was the argument which ICT Ltd had successfully used before the Arbitrator.

SEA2011 Inc submitted that a court would not imply a contract lightly. Here ICT Ltd had been notified of the change to SEA2011 Inc in the email of 12 March 2012. The parties’ conduct in the period after March 2012 could not be said to be only consistent with their having impliedly agreed a contract on exactly the same terms as the Sales Agency Agreement dated 28 January 2011. The exchange of emails in April 2013 showed that Mr JZ was expressly refusing to pay commission at the rates set out in the Sales Agency Agreement.

In its written submissions, SEA2011 Inc also submitted that ICT Ltd had to show that there was an implied contract which included the arbitration clause at clause 10.1 of the Sales Agency Agreement. That required showing specific conduct referable to the arbitration clause because it was well established that an arbitration clause was an ancillary provision and a separate contract from the host agreement: see section 7 Arbitration Act 1996. There was no such conduct.

The legal principles regarding implied contract are common ground and summarized in Chitty on Contracts, paragraph 1-104:

“Contracts may be either express or implied. The difference is not one of legal effect but simply of the way in which the consent of the parties is manifested. … There may also be an implied contract when the parties make an express contract to last for a fixed term, and continue to act as though the contract still bound them after the term has expired. In such a case the court may infer that the parties have agreed to renew the express contract for another term or the court may infer an implied contract drawing on some of the terms of the earlier contract, but omitting others”.

In my view, after March 2012 the parties impliedly agreed to be in a contractual relationship on the terms of the Sales Agency Agreement. That is the way their consent was manifested, and a matter of inference from the circumstances. The commercial context was one where both SEA Inc and SEA2011 Inc were largely in common ownership and where SEA2011 Inc took over seamlessly the role of principal to ICT Ltd as a sales agent sometime after it was incorporated. The dealings between the parties continued to be the same in practical matters for some three years. ICT Ltd continued to deal with Mr JZ. Neither side sought to amend any terms of the agreement in the period of three years up to the termination email in March 2015. ICT Ltd did nothing to indicate it was aware of any change in legal personality.

There was the email of 12 March 2012. There was a dispute before the Arbitrator about whether ICT Ltd received it, and about the list of addressees SEA2011 Inc produced, which included ICT Ltd addressees. For current purposes I assume that ICT Ltd did receive that email. However, it focused on the change of address. I agree with the Arbitrator that the minor change of name contained in it did not inform any recipient that there had been change in legal personality.

Indeed from March 2012 until Mr JZ’s email about termination, the overall picture is of SEA2011 Inc dealing as principal with ICT Ltd as its agent, primarily through Mr JZ. The change of legal personality was ignored. On at least three occasions, including when Mr JZ sent the email about termination in March 2015, the parties made reference to the terms or existence of the Sales Agency Agreement as if they continued to apply. (I am not surprised that ICT Ltd has only been able to produce a few examples when typically businesspeople tend to refer to their written contracts only in times of dispute.) Particularly telling were the occasions when both parties corresponded on the basis that there was an agreed contractual commission rate, not that they were operating under different arrangements. Moreover, there was Mr JZ’s termination email, of “our rep contract”, an obvious reference to the Sales Agency Agreement.

There is no basis for any suggestion that the arbitration clause was not part of an implied contract between the parties. In my view the task is to establish the parties’ consent in the ordinary manner in respect of the arbitration provision in question. That task is approached in a normal, commercially realistic manner from the perspective of reasonable business people in the position of the parties. In general there are no special rules in deciding on the incorporation of an arbitration clause in a contract (see Christopher Clarke J in Habas Sinai Ve Tibbi Gazlar Isthisal Endustri AS v Sometal SAL [2010] EWHC 29 (Comm); [2010] Bus. L.R. 880 at [46]), and there is no reason that the position should be any different with the doctrine of implied terms. It may be that there is a presumption against the parties having consented to the implication of an existing arbitration clause in a new contract if the clause needs modification or would place an unduly onerous obligation on one of them, or if one party did not have proper notice of it: see Habas Sinai Ve Tibbi Gazlar Isthisal Endustri AS v Sometal SAL, [20]-[21], [47]. None of these is the situation here.

In this case the obvious inference is that the arbitration clause was implied in the contract between SEA2011 Inc and ICT Ltd. There was the same subject matter as under the Sales Agency Agreement, dealings continued as before, both parties had knowledge of the clause, and there was no need for modification for it to work between the parties. I accept ICT Ltd’s submission that there is no reason in this case to depart from the normal inference that when commercial persons adopt by obvious inference from their conduct the terms of an ongoing agreement governing the relationship between one of them and a third party, they should be taken to have adopted all of those terms, including any arbitration provision.

The third jurisdictional point taken by SEA2011 Inc is that the Arbitrator had no jurisdiction to adjudicate ICT Ltd’s claim based on the terms of the Sales Agency Agreement, because in the Notice of Arbitration it had contended that the agreement was assigned to SEA2011 Inc. Subsequently it accepted that there had been no assignment. There had been no mention in the notice of the argument relied on before the Arbitrator, that the terms of the Sales Agency Agreement were from March 2012 the terms of an implied contract between it and SEA2011 Inc. In support of its submission SEA2011 Inc invoked a passage in the judgment of Colman J in Westland Helicopters Ltd v Sheikh Salah Al-Hejailan [2004] EWHC 1625 (Comm); [2004] 2 Lloyd's Rep. 523:

“[48]…Once the jurisdiction of the arbitrator has been engaged by the reference to him of a particular dispute or group or class of disputes, which fall within his jurisdiction as pre-defined by the agreement to arbitrate, his jurisdiction is further confined by the scope of the reference and he cannot make an award in relation to a claim which is not within that scope unless all parties agreed that the scope should be widened sufficiently to include it.”

There are three points to make about this argument. First, the issue was not raised before the Arbitrator, who focused much of his First Partial Final Award on implied contract. If implied contract did not fall within the Notice of Arbitration, it seems to me that (to adopt Colman J’s words) “all parties [impliedly] agreed that the scope should be widened sufficiently to include it”. Secondly, in my view as a matter of construction the notice does include the implied contract argument. That is because paragraph 4, which raised assignment, was intended to be descriptive, falling between statements that the business was transferred from SEA Inc to SEA2011 Inc at the outset of the paragraph, and that SEA Inc was dissolved in early October 2012 at the end. The matters of dispute which were referred to arbitration came later in the notice, and broadly stated concerned the termination of the agency and the damages for breach of contract and of the Commercial Agents (Council Directive) Regulations 1993. An implied contract argument falls squarely within that a matter of legal analysis. Thirdly, it should be recalled that Coleman J’s dictum occurred in a complex case where a party put its claim on a different basis from that first advanced. One aspect of the case was a claim for interest. Section 49 of the Arbitration Act 1996 provides that parties can agree that a tribunal award interest.  Immediately following the quoted passage, Colman J considered at [49] the abandonment by counsel on the opening day of the arbitration of a claim for interest, and how his later attempt to reinstate it should be addressed. Suffice to say that in the present case ICT Ltd never abandoned any implied contract argument.

It is trite law that arbitrators have jurisdiction to decide only matters properly referred to them, but this principle does not act as a straightjacket as SEA2011 Inc seemed in its submissions to suggest. Colman J recognised that the parties can agree to widen the scope of a reference to arbitration. On ordinary principles that does not need express agreement. Further, the ordinary rules of construction apply to a notice of arbitration. That means that the task is to identify what its words mean for a reasonable person with knowledge of their factual context. On both these grounds, as I have held, SEA2011 Inc’s third jurisdictional challenge fails.

For the reasons given I refuse to set aside the Arbitrator’s awards or to declare that he lacks jurisdiction. The claim is dismissed.