A v B
| Jurisdiction | England & Wales |
| Judge | The Hon. Sir Jeremy Cooke,Sir Jeremy Cooke |
| Judgment Date | 25 November 2016 |
| Neutral Citation | [2016] EWHC 3003 (Comm) |
| Docket Number | Case No: CL-2016-000225 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 25 November 2016 |
[2016] EWHC 3003 (Comm)
Sir Jeremy Cooke
Sitting as a Judge of the High Court
Case No: CL-2016-000225
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN AN ARBITRATION CLAIM
Royal Courts of Justice
Strand, London, WC2A 2LL
Vasanti Selvaratnam QC (instructed by Clyde & Co) for the claimant
David Brynmor Thomas (instructed by Addleshaw Goddard) for the defendant
Hearing date: 23rd November 2016
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 Hon. Sir Jeremy Cooke Sir Jeremy Cooke Introduction
In this arbitration claim, the Claimants, E, applied to set aside the Second Partial Award of an ICC Tribunal consisting of Dr Gavan Griffith QC, Sir Gordon Langley and Mr Ali Al Aidarous (the Tribunal) dated 29th February 2016 (the Award). By the Award, the tribunal permitted the substitution of the original Claimant, P, an Indian company, by another Indian Company, F, and delivered an Award in favour of F on the merits of the claim brought under a Long-Term Contract (LTC) between P and E for the supply of iron ore fines. The Tribunal awarded F the sum of US$39,472,800.00 plus interest reserving the question of costs.
E's challenge is brought under section 67 of the Arbitration Act 1996 (the Act) on the ground that the Tribunal lacked jurisdiction to permit the substitution of F as claimant on the basis that the Arbitration had lapsed by reason of the dissolution of P on merger into F on 7th February 2015. Because no notice had been given to E or the Tribunal of the arrangement by which the "Undertaking" of P vested in F until 25th February 2015 when F applied to be substituted as claimant, it is said that the Arbitration died because there had been no effective assignment of the right before P ceased to exist. Alternatively, E seeks to appeal the Award under section 67 or challenge it under section 68(2)(b) and/or (e) and/or (c), on the basis that the Tribunal lacked jurisdiction or power under the 1998 ICC Rules to permit substitution of F as claimant. F contends that it is not open to E to rely on the absence of any power to substitute F for P under the 1998 ICC Rules because of the statutory waiver contained in section 73 of the Act.
The key to the primary issue between the parties lies in the characterisation of the manner in which the business, rights and liabilities of P devolved upon and became vested in F. On this, the Tribunal had the benefit of expert evidence from two distinguished Indian lawyers and the court has had the benefit of their reports and the transcripts of their evidence at the Arbitration hearing. Ultimately, it did not seem to me that anything turned on any differences between them which were largely matters of language rather than substance. That distinction between language and substance also lies at the heart of the dispute between the parties in this court. E contends that, absent true "universal succession" in the civil law sense of the word, the devolution of P's rights and its claim in the Arbitration is to be treated as an equitable assignment of which notice must be given before the assignor is dissolved. Unless such notice is given prior to that time, the Arbitration lapses and the arbitrators have no jurisdiction to continue or to substitute F for P. Notwithstanding protestations to the contrary, E's case, when the devolution of assets/liabilities to F is analysed, inevitably results in the original claim in the arbitration disappearing into a black hole. This is because the assets, liabilities and choses in action represented by law suits and arbitration claims vested in F at the very same time as P ceased to exist. If the vesting is to be treated as an equitable assignment, no notice of such assignment could be given in practice until the assignor had ceased to exist, since the assignment by the assignor and its dissolution were essentially contemporaneous.
The application to the arbitrators
F's application to be substituted as the claimant was made on the basis that, pursuant to orders made by the Goa Bench of the Bombay High Court, P had merged, together with another entity, into F. All three companies were part of the F group of companies. F contended before the Arbitrators and before this court that the Scheme of Amalgamation which was approved by these orders had the following consequences, as a matter of Indian law:
(i) P ceased to exist as a legal entity with effect from 7th February 2015 and merged with F.
(ii) All of P's assets were vested in F.
(iii) All suits, actions and proceedings were not abated, discontinued or prejudiced but were to be continued and enforced by F.
(iv) F undertook to have all such proceedings transferred into its name and continued and
(v) F was accordingly entitled to be a party in any proceedings involving P.
The first four of those consequences could not seriously be disputed since they were all made good on the evidence of Indian law. It was the last which gave rise to dispute. On the basis of the Scheme, F requested both the ICC and the Tribunal to:
(i) Replace all references to P in the ICC files with F;
(i) To describe the claimant in the Award as F; and
(ii) To include in the Award an appropriate note of the facts which made it appropriate for the substitution to take place.
The Scheme of Amalgamation
P, F and the third company in the group referred to above all filed company petitions in the Goa bench of the High Court pursuant to section 391 of the Indian Companies Act 1956 on 25th August 2014. The petition sought the merger of the three companies in the manner and subject to the terms and conditions contained in a Scheme of Amalgamation filed with the court. Pursuant to and on the terms of the scheme, the other two companies were merged into F to constitute a single company under the Companies Act.
By Orders dated 28th January 2015 passed in respect of the respective petitions, the court approved the merger in the terms of the Scheme and on the terms contained in the Orders. Under the terms of those Orders, certified copies were to be filed with the Registrar of Companies within 30 days of sealing, which was duly done on 7th February 2015. It was common ground between the Indian lawyers and the parties that 7th February 2015 was the effective date for the merger.
Under section 394 of the Companies Act, which contained provisions for facilitating reconstruction and amalgamation of companies, the following wording appeared:
"Where an application is made to the Tribunal under section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section … the Tribunal may either by the order sanctioning the compromise or arrangement or by a subsequent order make provision for all or any of the following matters:
(i) The transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any transferor company;
…
(iii) The continuation by or against the transferee company of any legal proceedings pending by or against any transferor company;
(iv) The dissolution, without winding up, of any transferor company.
…
2. Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in it, and those liabilities shall be transferred to and become the liability of, the transferee company …
4. In this section –
(a) "property" includes property rights and powers of every description; and "liabilities" includes duties of every description."
The Scheme which was approved by the court was set out in Annexure G to the Order, which provided that "upon this Scheme coming into effect" and subject to its provisions in relation to the mode of transfer and vesting, the "Undertakings of the Transferor Companies [including P] as a going concern shall be transferred to and vested in or be deemed to be transferred to and vested in the Transferee Company" [F], "without any further act or deed". The Undertakings were defined as including all the assets, debts, liabilities, duties and obligations of the Transferor Companies. It was provided that "all suits, actions and proceedings of whatsoever nature by or against the Transferor Companies pending and/or arising on or before the effective date shall not abate or be discontinued or be in any way prejudicially affected by reason of the transfer of the businesses of the Transferor Companies pursuant to the Scheme, but be continued, prosecuted and enforced by or against the Transferee Company as effectually as if the same had been pending and/or arising against the Transferee Company".
I need not set out in any further detail the terms of the Scheme nor the court orders which made that Scheme effective. What is clear however is that, it was only on the effective date (which, as it turned out was 7th February 2015, when certified copies of the Orders were filed with the Registrar of Companies) that "all the assets of the petitioner company comprised in the undertaking" would, pursuant to the provisions of sections 391–394 of the Indian Companies Act, "without any further act, instrument or deed, be and stand transferred to and vested in or be deemed to have been and stand transferred to and vested in the Transferee Company as a going concern. Under the terms of the Orders, all liabilities of the Petitioner Company similarly devolved upon the Transferee Company "upon the coming into effect of this Scheme" and, at the same time, "all suits, actions and legal proceedings by or against the petitioner company pending and/or arising on or before the effective date" were...
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