Lord Scarman’s warning of the “treacherous shortcut” that can be preliminary issues in Tilling v Whiteman remains sage. It is true that isolating vaguely drafted questions for preliminary determination, or those that have no significant impact on the outcome of a case, can lead to a disproportionate outlay of costs early on in proceedings. This does not mean that preliminary issues cannot also serve as a useful means of non-treacherously short-circuiting the time and costs of taking a dispute through the ordinary arbitration process. The authorities on what sort of issues are appropriate for early determination are not controversial, but an interesting point can be the timing of that determination. At what stage should the parties isolate and arbitrate?
First, a brief reminder of the principles to be applied in considering whether a preliminary issue is appropriate. Evidently, the arbitrator will find guidance in the courts’ approach. The point for determination should be a knockout, and Neuberger J’s ten questions to bear in mind in Steele v Steele remain as good a starting point as any:
(1) would the determination of the issue dispose of the case or at least one aspect of it; (2) could the determination cut down costs and time; (3) how much effort will be involved in identifying the relevant facts for determining the preliminary issue of law; (4) can the legal issue be determined on agreed facts; (5) if the facts are not agreed, does that impinge on the value of the determination; (6) would the determination fetter the one or both parties or the tribunal itself in achieving the result required of the actual trial; (7) to what extent is there a risk of the determination of the preliminary issue increasing costs or delaying trial; (8) is the issue actually relevant to the dispute; (9) would the determination lead to applications to amend submissions so as to avoid the consequences of the determination; and (10) is it just to order the preliminary issue?
There is a degree of overlap here, which serves to make the central question all the clearer. As Lord Hope put it a little later in Boyle v SCA Packaging, is there a “knockout point”? If an issue can be identified, the determination of which would likely prove decisive of the reference, then that is a good foundation for having that issue determined on a preliminary basis for the sake of efficiency and expediency. That said, this remains subject to the tenth point and section 33 of the Arbitration Act 1996; the tribunal should ensure a fair resolution of the dispute and the parties’ right to put their respective cases. But if a preliminary determination is set to be a trustworthy (as opposed to treacherous) shortcut, then that tack may well be the fairest, and indeed most sensible, route to take. So, were the parties at loggerheads about the meaning of a particular clause in a contract whose interpretation in one’s favour would knock out the other’s claim or defence, the interpretation may be ripe for preliminary resolution.
When then, should the determination take place? Here the lines become a little more blurred. On the one hand, all involved may have a clearer understanding of the issues in the case after submissions have been exchanged, or perhaps even further down the line. On the other, all this will depend on the nature of the given dispute, and if a particular issue is identified early on as likely to come within the key criterion (determinative), then there is no reason in principle why the preliminary issue should not be considered at an earlier stage in the proceedings, even prior to submissions being exchanged.
The basis for a pre-pleading closure preliminary issue was considered in broad terms by Mr John Baldwin QC (sitting as a deputy judge of the Patents Court) early this year in Koninklijke Philips v Asustek. He took the view that although pleadings were not closed, they were sufficiently far advanced to identify the significance of the particular issue. This shows the theory above in action. Though the stage of the proceedings is relevant, that relevance is mostly connected to whether the issue itself can be identified and have its significance recognised. It is true that Neuberger J’s ten questions recognise preliminary issues later in the proceedings (why else the reference to amending pleadings?), but as the authorities continually make clear, it is the issue itself with which the tribunal should be most concerned.
It follows that a great deal of care needs to be taken in framing the issue in question, so that the effect of its determination can be considered. If it is likely to be decisive, then that is the surest starting point. Once that is recognised, the timing of the preliminary issue becomes secondary, although it still retains a relevance in clearly identifying the cogent issue. The shortcut can be risked when the parties or the tribunal see fit, but it should be investigated for treacherous footing before veering down its path.
