Accentuate Ltd v Asigra Inc.
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE TUGENDHAT |
| Judgment Date | 30 October 2009 |
| Neutral Citation | [2009] EWHC 2655 (QB) |
| Docket Number | Case No: CC/2009/APP/0385 |
| Court | Queen's Bench Division |
| Date | 30 October 2009 |
[2009] EWHC 2655 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
The Honourable Mr Justice Tugendhat
Case No: CC/2009/APP/0385
Mr Philip Moser (instructed by Dobsons) for the Appellant
Mr Igor Ellyn QC and Mr Peter de Verneuil Smith (instructed by Clyde & Co LLP ) for the Respondent
Hearing dates: 20th October 2009
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.
Mr Justice Tugendhat:
This appeal from the decision of DJ Levinson (“the District Judge”) sitting at Chichester District Registry on 28 May 2009 raises questions as to the relationship between EU law and the law of arbitration.
The Claimant is an English company. The Defendant is a Canadian company based in Ontario. On 19 January 2004 they had made an agreement headed Master Reseller Agreement (“MRA”) for the distribution by the Claimant of software products of the Defendant. The Defendant gave notice to terminate the agreement on 13 November 2006. The MRA contained a choice of law clause, that is clause 18.3, which contains a choice of the laws of Ontario and the federal laws of Canada as the governing law (“Ontario law”). It also contained an arbitration clause, clause 18.5, requiring that all disputes be settled by arbitration to be held in Toronto.
I shall refer to the Defendant as the Licensor, and to the Claimant as the Distributor.
On 6 September 2006 the Distributor informed the Licensor that it was preparing a claim for breach of contract together with a further claim for compensation under the Commercial Agents (Council Directive) Regulations 1993 (“the Regulations”). On 5 June 2007 it quantified this by letter in the sum of £1.75m. On 21 June 2007 the Licensor gave notice of arbitration. On 31 July 2008 the Distributor issued a Claim Form and on 4 August 2008 the District Judge gave permission to the Distributor to serve the Licensor out of the jurisdiction. On 6 February 2009 the Licensor applied to the District Judge to set aside her order of 4 August and service. The Licensor also applied for a stay of the proceedings pursuant to s.9 of the Arbitration Act 1996. On 29 May 2009 the District Judge declared that this court has no jurisdiction to hear the Distributor's claim, granted the Licensor's applications, and gave permission to the Distributor to appeal.
In the arbitration the Licensor claimed a declaration that the Distributor had no claims against the Licensor under the MRA upon any basis. The Distributor protested that arbitration proceedings would be pointless. It contended that it is unlawful to seek to contract out of the Regulations, with the result that the English courts would not be bound by any finding by the arbitral Tribunal to the effect that there was no claim under the Regulations. Nevertheless, the Distributor participated in the arbitration, submitting to the Tribunal that the claim under the Regulations was outside the scope of the arbitration clause. But in the alternative, the Distributor included a counterclaim for compensation under the Regulations.
The arbitrators issued a number of Awards. On 20 December 2007 they denied the Distributor's request for a declaration that the Regulations were outside the scope of the arbitration clause. On 3 March 2008 they determined that the Regulations did not apply in determining the rights and liabilities of the parties, but that these were to be determined according to Ontario law. On 10 February 2009 they declared that the Licensor was liable to the Distributor for certain direct losses unrelated to the Regulations.
The Licensor had no interest in enforcing these Awards, in the sense of taking steps to have the quantum assessed and recovered. In a monetary sense the Award was against the Licensor. But in substance the Licensor had achieved what it had set out to achieve. The Licensor's interest in the Award is to use it as a means of defeating the claim that the Distributor was bringing in England for compensation under the Regulations. The Licensor's case is that if the Distributor wished to challenge the Award then it should have done so by an appeal or an application to set it aside. It is the Licensor's case that any such step must be taken in the courts of Canada. It is not suggested that an application to set aside a Canadian award can be made in England. The Distributor has taken no such steps in Canada. It submits it does not need to, because the Award is contrary to public policy and a nullity under EU law.
The Distributor submits that the obligation of the English court is to give effect to EU law in priority to the arbitration award. The law of the European Union is not foreign law, and is a matter of which the English courts must take judicial notice: European Communities Act 1972, s3, Sch 1 Pt 1. The Licensor submits it is the other way round.
The Arbitration Act 1996, in succession to the Arbitration Act 1975, now gives effect to the New York Convention of 10 June 1958 on the Recognition and Enforcement of Foreign Arbitral Awards which has been ratified by all Member States: Chitty on Contracts 30 th ed para 32–011. Canada is a party to that Convention.
If that were the only issue between the parties at this stage, it would be a point of law. But the Licensor also submits, in the alternative, that on the true construction of the MRA, and on the facts, the Distributor is not an agent within the meaning of the Regulations. If that be so, the Distributor would have no claim for compensation. But it would also follow that the Distributor would have no basis for submitting that the Award was not binding upon it. So the Licensor should not have to defend the claim brought in England on its merits, but that claim should be stayed.
Accordingly, by a Respondent's Notice, the Licensor seeks to uphold the Order of 29 May on the grounds that the Distributor has no arguable case, and there is no serious issue to be tried, that the Regulations apply to the MRA, as a matter of construction of that agreement, or in the light of the facts. The Licensor also seeks to uphold the Order of 29 May on a ground unrelated to the merits of the dispute, namely that the Distributor did not make full and frank disclosure.
THE PROVISIONS FOR SERVICE OUT OF THE JURISDICTION
The provisions of the CPR in force when permission was given to serve out of the jurisdiction were CPR 6.20(5)( c), 6.20(6) and 6.21(1) and (2A), which, so far as material, read as follows:
“6.20 … a claim form may be served out of the jurisdiction with the permission of the court if ….
(5) a claim is made in respect of a contract where the contract … (c) is governed by English law …
(6) a claim is made in respect of a breach of contract committed within the jurisdiction…
6.21(1) An application for permission under rule 6.20 must be supported by written evidence stating: (a) the grounds on which the application is made and the paragraphs of rule 6.20 relied on; (b) that the claimant believes that his claim has a reasonable prospect of success….
6.21(2A) The court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim”.
What these provisions require is explained in the case law, and is not in dispute. The Distributor emphasises that all that is required is that it should show a “good arguable case” that this Court has jurisdiction, and that on the merits all that it must show is that there is a serious issue to be tried: Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 A.C. 438, and generally: White Book 2009, paras. 6.37.1 and 6.37.15.
The Licensor emphasises that in Albon v Naza Motor Trading SDN BHD [2007] 1 Lloyds Law Rep 297, 302 para 15 Lightman J stated to have a good arguable case “generally speaking the applicant for permission must show a strong probability that the claim falls within the letter and the spirit of the Gateway”. The test of a “serious issue to be tried” is the same merits test as a “reasonable prospect of success” ( BAS Capital Funding Corp v Medfino Ltd [2004] 1 Lloyd's Rep 311). As Lightman J said in the same paragraph of Albon, that is a lesser hurdle than a good arguable case.
The Distributor submitted to the District Judge that permission should be granted on the following four grounds:
i) that the contract is governed by English law, namely the Regulations, because the Ontario choice of law clause in the contract is contrary to the mandatory provisions of the Regulations. It submits that a choice of arbitration in Ontario is also contrary to the same mandatory provisions of the Regulation. It relies on Ingmar GB Ltd v Eaton Leonard Technologies Ltd [2000] ECR I-9305 paras 21–26;
ii) that the failure to pay the compensation due to it under the Regulations is a breach of an implied term, and it occurred in England because the payment was due in England. Alternatively, it submits that the termination of the contract on 4 August 2006 was a breach within the jurisdiction;
iii) that England is the most appropriate forum because it is incorporated in England, the contract was performed in England and the payment was due in England;
iv) alternatively, that the English court has “sui generis jurisdiction and because it seeks a remedy to which it is entitled pursuant to mandatory provisions of EU law, in order to give effect to the overriding rules of EU law”.
THE DISTRICT JUDGE'S JUDGMENT
In the application by the Licensor to set aside leave, the Licensor set out the following grounds:
i) a failure to give full...
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