(1) Bilta (UK) Ltd ((in Liquidation)) (2) Kevin John Hellard (liquidator of Bilta (UK)Ltd) and Another v (1) Muhammad Nazir and Another (3) Pan 1 Ltd and Others

JurisdictionEngland & Wales
CourtChancery Division
JudgeTHE CHANCELLOR OF THE HIGH COURT,The Chancellor,THE HONOURABLE MR JUSTICE SALES,Mr Justice Sales
Judgment Date30 July 2012
Neutral Citation[2012] EWHC 2163 (Ch),[2010] EWHC 1086 (Ch)
Date30 July 2012
Docket NumberCase No: HC09C03502

[2010] EWHC 1086 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Before: The Honourable Mr Justice Sales

Case No: HC09C03502

Between
Bilta (UK) Limited (in Liquidation)
Claimant
and
(1) Muhammad Nazir
Defendants
(2) Chetan Chopra
(3) Pan 1 Limited
(4) Aman Ullah Khan
(5) Sheikh Zulfiqar Mahmood
(6) Jetivia Sa
(7) Urs Brunschweiler
(8) Trading House Group Limited (bvi)
(9) Muhammad Fayyaz Shafiq

Mr Peter Shaw (instructed by HPJ Gateley Wareing) for the Claimant

Mr Graham Charkham (instructed by MacFarlanes LLP) for the Sixth Defendant

Hearing dates: 5/4/10

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

THE HONOURABLE MR JUSTICE SALES Mr Justice Sales

Mr Justice Sales:

1

This is the hearing of an application by the Sixth Defendant (“Jetivia”) for an order to stay these proceedings on the grounds that the Claimant (“Bilta”), which is a company in liquidation, is party to an agreement with Jetivia (“the Framework Agreement”) which contained at clause 8.7 an arbitration clause which (so Jetivia contends) covers the claim now made against it by Bilta.

2

Bilta resists the application on three grounds: (i) it disputes that it ever entered into the Framework Agreement; (ii) it submits that, even if the Framework Agreement is applicable, clause 8.7 does not cover its claim against Jetivia, alternatively that it does not cover part of its claim against Jetivia; and (iii) it contends that Jetivia has lost any right it had to seek a stay of the proceedings (a) because CPR Part 11 governs the making of such an application and therefore, since Jetivia failed to make its present application within 14 days after filing its acknowledgement of service on 26 November 2009, by virtue of CPR Part 11(5), Jetivia “is to be treated as having accepted that the court has jurisdiction to try the claim”, alternatively (b) by reason that, in making an application to court dated 20 January 2010 for an extension of time to serve its defence, Jetivia took a “step in [the] proceedings to answer the substantive claim” and is now debarred by section 9(3) of the Arbitration Act 1996 (the 1996 Act”) from making an application to stay the proceedings.

The legal framework

3

Section 9 of the Arbitration Act 1996 provides in relevant part as follows:

“9. Stay of legal proceedings

(1) A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.

(2) An application may be made notwithstanding that the matter is to be referred to arbitration only after the exhaustion of other dispute resolution procedures.

(3) An application may not be made by a person before taking the appropriate procedural step (if any) to acknowledge the legal proceedings against him or after he has taken any step in those proceedings to answer the substantive claim.

(4) On application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed. …”

4

CPR Part 11 is entitled “Disputing the Court's Jurisdiction”. It provides in relevant part as follows:

“11-(1) A defendant who wishes to —

(a) dispute the court's jurisdiction to try the claim; or

(b) argue that the court should not exercise its jurisdiction,

may apply to the court for an order declaring that it has no such jurisdiction or should not exercise any jurisdiction which it may have.

(2) A defendant who wishes to make such an application must first file an acknowledgement of service in accordance with Part 10.

(3) A defendant who files an acknowledgement of service does not, by doing so, lose any right that he may have to dispute the court's jurisdiction.

(4) An application under this rule must —

(a) be made within 14 days after filing an acknowledgement of service; and

(b) be supported by evidence.

(5) If the defendant —

(a) files an acknowledgement of service; and

(b) does not make such an application within the period for specified in paragraph (4),

he is to be treated as having accepted that the court has jurisdiction to try the claim. …”

5

CPR Part 62 is entitled “Arbitration Claims”. As its title suggests, it contains rules about arbitration claims. CPR Part 62.2(1)(a) defines “arbitration claim” to include “any application to the court under the 1996 Act”. Part 62 thus covers applications to court for a stay of proceedings before the court. Part 62.8 provides:

“62.8—(1) An application notice seeking a stay of legal proceedings under section 9 of the 1996 Act must be served on all parties to those proceedings who have given an address for service.

(2) A copy of an application notice under paragraph (1) must be served on any other party to the legal proceedings (whether or not he is within the jurisdiction) who has not given an address for service, at —

(a) his last known address; or

(b) a place where it is likely to come to his attention.

(3) Where a question arises as to whether —

(a) an arbitration agreement has been concluded; or

(b) the dispute which is the subject-matter of the proceedings falls within the terms of such an agreement,

the court may decide that question or give directions to enable it to be decided and may order the proceedings to be stayed pending its decision.”

6

There is nothing in CPR Part 62 which states that CPR Part 11 applies in relation to an application for a stay of legal proceedings made under section 9 of the 1996 Act and CPR Part 62.8.

The nature of Bilta's claims against Jetivia

7

The liquidator of Bilta claims that the First and Second Defendants (Mr Nazir and Mr Chopra), who were previously its directors, caused Bilta to enter into trading transactions with various counterparties in relation to European Emissions Trading Scheme Allowances (known as “EUAs”). The transactions and ownership of the EUAs in question were recorded by the relevant registry in Denmark. Bilta would purchase EUAs from various counterparties, including Jetivia, and would sell them on to its own customer, the Third Defendant (“Pan 1”). Bilta was liable to account for value added tax (“VAT”) in relation to its own supplies of EUAs to Pan 1. The allegation by the liquidator of Bilta is that Mr Nazir and Mr Chopra, in breach of their fiduciary duties to Bilta, arranged for Pan 1 to make payments of the sums it owed to Bilta, including the VAT element which was due, to various other parties. It is alleged that this was part of a so-called MTIC or VAT carousel fraud scheme and that by their actions Mr Nazir and Mr Chopra caused Bilta to be deprived of funds which rightfully should have been paid to it and to become massively insolvent so as to be unable to account for VAT which was payable by it.

8

Various of the transactions in relation to which Mr Nazir and Mr Chopra are alleged to have arranged for Pan 1 to pay away monies due to Bilta involved sales by Jetivia of EUAs to Bilta (“the Jetivia sales”) where, it is alleged, Pan 1 paid the sums due to Bilta (including the VAT element thereon which should have been paid to Bilta and then accounted for by Bilta to the tax authorities) to Jetivia.

9

In addition, Bilta alleges that in relation to one transaction, the sale of a parcel of 67,000 EUAs by Bilta, the transferor of the EUAs to Bilta was recorded at the registry as a person other than Jetivia, but Mr Nazir and Mr Chopra arranged for Pan 1 to pay the sum due in respect of the sale of those EUAs (amounting to €993,174.50) to Jetivia. In relation to that transaction (“the non-Jetivia sale”), it is alleged that Jetivia received the sum in question even though it had not sold the relevant EUAs to Bilta and even though Bilta owed Jetivia no contractual obligation to make any payment.

10

The principal claims now brought by the liquidator of Bilta against Jetivia and its director, the Seventh Defendant (“Mr Brunschweiler”), are claims that Jetivia and Mr Brunschweiler are liable to account to Bilta in equity for knowing receipt of the proceeds of diverted book debts due to Bilta and for dishonestly assisting Mr Nazir and Mr Chopra in perpetrating their breaches of fiduciary duty to the detriment of Bilta. These claims are not directly based on any contracts for sale between Bilta and Jetivia, although in relation to the Jetivia sales they are linked to such contracts. The claim in relation to the non-Jetivia sale is not, as formulated, a claim which has any apparent connection with any contract of sale between Bilta and Jetivia.

Ground 1—The Framework Agreement

11

Jetivia's case is that its trading with Bilta was governed by the Framework Agreement, which set out terms applicable to all the sales transactions between them. Clause 8.7 of the Framework Agreement provides:

“8.7 This Agreement and sale and buy transactions shall be governed by Swiss law without regard to conflict of law provisions. Any dispute arising under, out of or in connection with this Agreement or under, out of or in connection with sale and buy transactions shall be resolved by arbitration. The language of arbitration shall be English. The appointing authority shall be the Secretary General of the Permanent Court of Arbitration. The number of arbitrators shall be three. The place of arbitration shall be Hague, The Netherlands, and the applicable rules of arbitration shall be the Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment, as in effect at the time of...

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