1. This is an application on the part of the defendants for an order staying the suit under the provisions of Section 19, Arbitration Act. The claim is one for damages said to have been occasioned by the failure of the defendants to deliver 19 out of 21 cases of piecegoods, which the defendants had sold to the plaintiff under a contract in writing dated 29th December 1938. Shipment under the contract was expressed to be 'June-July 1939, via Rangoon.' It is common ground that the piecegoods in question were of Japanese manufacture. On 21st September 1939, the defendants wrote to the plaintiffs as follows:
We have been informed by our supplier's representative that on account of the very unsettled international situation they are unable to give definite information as regards the shipment of the goods relating to the contract above-mentioned. We draw attention to Clause 6 of the contract and make it clear that we are not in any way liable for late arrival of the goods.
2. The plaintiffs replied on 22nd September by a letter in which they observed:
The present international situation was created in the month of August and hence we fail to understand why the goods were not shipped in August.
3. On 24th November 1939, the defendants informed the plaintiffs that the goods had not yet been delivered and that the manufacturers were asking for a further extension of a month which meant that shipment should be made in November 1939. The letter ends:
If we do not receive confirmation of the required extension within 48 hours, we shall understand that you cancel the above goods, which please note.
4. The plaintiffs on 28th November wrote accepting November shipment with the usual late allowance, but apparently this acceptance was conditional on the defendants furnishing a satisfactory explanation of the delay, for, three days later, the plaintiffs write a letter which ends as follows:
Please note that owing to your failure to supply the goods, we had to sustain a loss of about Rs. 2000, and we shall look to you for the said loss. If we do not receive any satisfactory reply from you immediately, we shall be forced to do the needful in the matter as will be advised by our lawyer.
5. On 7th December 1939, the plaintiffs wrote to enquire by what vessel the goods had been shipped in November. This elicited no reply and on 3rd January 1940, the plaintiffs' solicitors called on the defendants to deliver within 48 hours. On 11th January, the defendant's solicitors replied stating that the plaintiffs had refused to agree to the extension of the time for shipment as requested, the contract stood cancelled and that there was no liability on the part of the defendants to pay any damage. The suit was filed on 22nd January 1940, and notice of the present application was taken out on 15th February. The arbitration clause is in the following terms:
In the event of any dispute between the parties as to damage, difference, inferiority, short quantity or measure or weight or defect or amount of allowance or any dispute in question arising between the parties hereto regarding this contract, or the goods subject of this contract, it shall at the option of the sellers be referred to the Bengal Chamber of Commerce or two European or Japanese merchants, one to be named by each party.
6. It is evident from the correspondence that the defendants are seeking to justify their failure to perform the contract by relying on Clause 6. Clause 6 is as follows:
Should the goods or any portion of the same not have been shipped owing to war, Government control, suppliers and/or producers stopping payment or being prevented by accidents to or the destruction of works from preparing same or any other causes beyond human control or should they be destroyed or rendered unmerchantable in course of transit or from any cause whatsoever should fail to reach their destination after being shipped, then the contract shall be rescinded for such goods or portion thereof and the sellers shall not be responsible for any such nonfulfilment of the contract, in the event of the manufacturers experiencing any difficulties in making the goods such as Government putting control on the output or stopping exports etc., directly or indirectly on account of war, the contract will be considered as cancelled unconditionally with respect to the entire lot or to the portion remaining unshipped as the case may be.
7. The references to this clause and to the international situation, when regard is had to the place of origin of the goods, indicate that the defendants will maintain that the goods have not been shipped owing to war, within the meaning of the clause. The plaintiffs have, among other things, called attention to the use of the term 'cancellation' by the defendants, and they say that the defendants should not be permitted to take up the position that the contract has been cancelled, and at the same time invoke the provisions of the arbitration clause in it. On that point I am not in agreement with the submissions made on the plaintiffs' behalf. By using the word 'cancellation,' I think the defendants mean no more than that owing to the events which have happened, they have been relieved of their liability to deliver the goods. They do not mean that the contract has come to an end for all purposes, as is the case when a contract is rendered void by frustration. An example of such a state of thing is to be found in (1926) A C 497 Hirji Mulji v. Cheong Yue Steamship Co. Ltd., where a steamship, the subject-matter of a charter party, was requisitioned by the Government before the date of the charter party coming into operation. There it was held that the ad. venture having been frustrated by the action of the Government, the charter party came to an end for all purposes, including the purpose of the arbitration clause. I have been referred to a case in which I dealt with a somewhat similar contention, Harinager Sugar Mills Ltd. v. Skoda (India) Ltd. ('36) 41 CWN 563 and finally an authority of great weight, (1936) 2 All E R 952 Toller v. Law Accident Insurance Society Ltd..
8. It has also been suggested that the defendants have not been ready and willing to do all things necessary for the proper conduct of the arbitration within the meaning of Section 19. The only ground for such a contention is their denial of liability and their statement that the contract has been can-celled. I think that these facts are quite insufficient to deprive them of the right which they would normally have to apply for, and obtain, an order for stay. I have referred to decisions of the Court of appeal which show that in the vast majority of cases the Court will not on its discretion refuse to grant an application such as this one. I certainly should make the order asked for but for the decision of the Court of appeal in (1914) 31 TLR 137 Edward Grey & Co. v. Tolme & Runge (No. 1). In that case there was a contract for the sale of goods to be shipped to Hamburg. There were provisions in the contract that in the event of Germany being involved in war with England, the contract should be deemed to be closed, and that if war should prevent shipment, any party should be entitled to go to arbitration. Before the contracts were performed, war broke out between England and Germany with the result that the sellers were unable to ship the sugar. The buyers thereupon brought an action for a declaration that the contracts were suspended or dissolved and an injunction restraining the defendants from proceeding to arbitration. The defendants thereupon applied for a stay order under Section 4, Arbitration Act, 1889, which Scrutton J. in his discretion refused. An appeal against his decision was unsuccessful.
9. The question there was a question of law as to the construction of the contracts. Now it seems to me that if Scrutton J. was right in holding that the matter was not one which should be decided by arbitration, the sort of consideration which induced him to come to that decision applies far more strongly in the present case, because one of the questions which the tribunal dealing with this matter will have to decide, is whether the state of things now existing in the Far Bast is war within the meaning of el. 6. It is by no means a simple question of law and appears to me most unsuited for decision by laymen. I observe that under the terms of the contract the defendants are entitled to have the matter referred to the decision of two Japanese merchants. I cannot help feeling that if the defendants were to take that course, the decision would cause considerable embarrassment to the parties responsible for it. That is a special circumstance in this case which I feel I am entitled to take into consideration. Having regard therefore to the decision in (1914) 31 T L R 137 Edward Grey & Co. v. Tolme & Runge (No. 1), to the nature of this dispute, and to the terms of this particular arbitration clause, I feel that I ought to exercise my discretion against the defendants. The consequence is that this application is dismissed with costs.