Andrew Martin v Michael Harris
| Jurisdiction | England & Wales |
| Judge | Mr Michael Green |
| Judgment Date | 21 October 2019 |
| Neutral Citation | [2019] EWHC 2735 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2018-001491 |
| Date | 21 October 2019 |
[2019] EWHC 2735 (Ch)
IN THE HIGH COURT OF JUSTICE
HIGH COURT APPEAL CENTRE
ROYAL COURTS OF JUSTICE
Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Michael Green QC
(sitting as a Deputy Judge of the Chancery Division)
Case No: BL-2018-001491
Mr Michael Jones (instructed by Clyde & Co. LLP) for the Appellants
Ms Elspeth Talbot Rice QC (instructed by Harcus Parker Limited) for the Respondent
Hearing date: 11 October 2019
Mr Michael Green QC:
Introduction
This judgment deals with one disputed consequential matter arising from my judgment on the substantive issues handed down on 23 July 2019, reported at — [2019] EWHC 1962 (Ch) ( Judgment) 1. In the Judgment I answered the three questions put to me in favour of the Appellants and I set aside the arbitration Award dated 23 May 2018 (the Arbitrator called this his “ Final Award Part I”). The parties managed to agree an Order reflecting the Judgment and this stated as follows:
1 The Arbitration Award of Mr Arthur Harverd dated 23 May 2018 be set aside.
2 The Respondent shall pay the Appellants' costs of this arbitration claim, such costs to be assessed on the standard basis if not agreed.
3 The Respondent shall make a payment on account of the costs set out in paragraph 2 above in the sum of £30,000 by 14 days after the date of the order.
4 A hearing be listed on the first available date after 16 September 2019 to deal with any further consequential matters, time estimate 2 hours.
5 Time within which to file and serve a Notice of Appeal be extended to 4pm on the date which is 21 days after the date of the hearing referred to in paragraph 4.
The costs of the appeal were therefore agreed to be paid by Mr Harris. There were two matters that the parties were unable to agree on:
(a) Permission to appeal to Court of Appeal; and
(b) the costs of the arbitration, which had been awarded to Mr Harris by the Arbitrator in a further Award, called the “ Final Award Part II” dated 18 October 2018 ( Costs Award).
Mr Harris has since confirmed that he is not seeking permission to appeal to the Court of Appeal. Therefore, the only matter that I have to deal with is the costs of the arbitration. One would have thought that this might be a fairly straightforward issue, to be dealt with in the same way as if the Court of Appeal had allowed an appeal and consequently reversed the first instance costs order. Mr Jones, on behalf of the Appellants, seeks an order that Mr Harris should pay the costs of the arbitration. However, Ms Talbot Rice QC, on behalf of Mr Harris, submitted that I have no jurisdiction in relation to the costs of the arbitration, whether in respect of setting aside or varying the Costs Award or to make a fresh order in respect of such costs.
Ms Talbot Rice QC's simple point is that the Arbitrator made two separate awards; (1) the substantive decision on the merits, the Award, which was appealed; and (2) the Costs Award, which was not. She relied on the fact that nothing was said in the Claim Form that the Appellants were also seeking to overturn the Costs Award. It is pertinent to point out that the Claim Form was issued on 19 June 2018, shortly after the Award was issued and therefore well before the Costs Award, so it is unsurprising that the Costs Award was not referred to in the Claim Form. Nevertheless, Ms Talbot Rice QC submitted that an amendment could have been made to the Claim Form after the Costs Award was issued and she went so far as to say that the Appellants could have issued a fresh Claim Form solely to appeal the Costs Award. She emphasised, by reference to a number of cases, that arbitration awards are final and can only be challenged in very limited circumstances; this includes costs awards which can similarly only be challenged on the narrow grounds set out in sections 67 to 69 of the Arbitration Act 1996 ( AA 1996) but they do need to be challenged by way of a properly constituted appeal under one or more of those sections.
Mr Jones for the Appellants said that this cannot be right and that the Court in this situation has jurisdiction under the present Claim Form to deal with the Costs Award either pursuant to its powers under section 69(7) of the AA 1996 or pursuant to an implied ancillary power to make a costs order consequential on the successful appeal on the substantive Award. There is a surprising dearth of authority in relation to this. That could be because no one has previously thought to challenge the jurisdiction of the Court in these circumstances. It is not the most attractive or meritorious of arguments for someone who has lost an appeal and had the substantive award set aside to say that they should be entitled to retain the costs order in their favour because the Costs Award, which followed the event, has not been specifically appealed. However unattractive and unmeritorious the argument may appear, I do need to be satisfied that I have jurisdiction to deal with the Costs Award.
The Costs Award
It is clear that the Arbitrator followed the general rule, as prescribed in section 61 AA 1996, that costs should follow the event. The Arbitrator also made an order for an interim payment on account of those costs in the sum of £110,000, which sum was paid to Mr Harris within the 14 days set out in the Costs Award.
However the Arbitrator was actually reluctant to deal with the costs of the arbitration because of the outstanding appeal. He considered that the outcome of the appeal could significantly affect the costs of the arbitration and would therefore have preferred to leave his decision on costs until after the appeal had been determined. At paragraphs 6 and 7 of the Costs Award, the Arbitrator said this:
“6 As the Part I Award is the subject of an appeal I was at first reluctant to determine any costs issues pending the outcome of the appeal.
7 However as a date for the appeal hearing has not yet been fixed and the parties are still in discussion as to their approach to HMRC about the capital gains tax liability, I consider in the circumstances of the case it is appropriate to determine two of the costs issues now, accepting that my determination on the substantive issues may be overturned in the High Court.”
The Arbitrator incorporated detailed Reasons into the Costs Award. In paragraph 8 (iii) he recorded one of the submissions made on behalf of Mr Harris as follows:
“(iii) In the event that the [Appellants'] appeal is successful or that on a full assessment Mr Harris recovers less than [the interim payment on account] Mr Harris will repay the interim sum awarded or the difference.”
To my mind, that was a fairly clear indication that Mr Harris accepted that, if the appeal was successful and the Award set aside, he would at least pay back any interim payment on account. Ms Talbot Rice QC however submitted that there was no concession of that sort and that it was in any event conditional on the Appellants actually appealing the Costs Award as well as the Award. I am afraid that I do not accept that and I do not think that that was how it was viewed by the Arbitrator.
In paragraph 28 of his reasons for the Costs Award, the Arbitrator relied on Mr Harris' assurance that the interim payment would be repaid in the event of a successful appeal and on that basis ordered £110,000 to be paid by the Appellants on account of costs. He said (underlining added):
“28 I am satisfied that in the event that the [Appellants'] appeal is successful, or that on a full assessment the Claimant recovers less than £110,000.00 he will be able to repay the interim costs award or any difference between his interim costs award and the final detailed assessment of costs.”
The Arbitrator then, in paragraph 30, reserved the final detailed assessment of costs
“pending the outcome of the appeal and/or further submissions of the parties.”
In my view, both the Arbitrator and the parties were anticipating that, if the Appellants succeeded in overturning the Award, or Final Award Part I, then the Costs Award, or Final Award Part II, would also be overturned and the interim payment on account would have to be returned by Mr Harris. That was apparently conceded on behalf of Mr Harris. It seems to me that that was the basis on which the Costs Award was made and the underlying consensus as to what would happen if the appeal succeeded, as it has.
I do not consider that when Mr Harris and the Arbitrator referred to the appeal succeeding, they were referring to an appeal against the Costs Award which they recognised at the time would have to be made separately from the substantive appeal against the Award. They were simply referring to the extant appeal by the Appellants against the Award and assumed that, if that was successful, the Costs Award would similarly fall. As the Costs Award followed the event, so everyone expected that if the “event” changed by reason of a successful appeal, the costs of the arbitration would follow that “event” and be reversed. I do not see, contrary to Ms Talbot Rice QC's submissions, that anyone contemplated at the time that the Costs Award would itself have to be specifically appealed in order for it to be reversed.
The question then is whether the fact that the Costs Award was not specifically appealed deprives me of jurisdiction to make the order that all the parties and the Arbitrator anticipated me making. It would be most odd if that is the necessary outcome and would constitute, as it seems to me, a triumph of form over substance.
An Appeal against the Costs Award
By section 58 of the AA 1996, arbitration awards are deemed final and binding and only subject to challenge pursuant to specific...
To continue reading
Request your trial
-
Cbx v Cbz
...Goods Ltd [2018] 4 SLR 271 (folld) Kempinski Hotels SA v PT Prima International Development [2011] 4 SLR 633 (refd) Martin v Harris [2019] EWHC 2735 (Ch) (refd) PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597; [2007] 1 SLR 597 (refd) PT Prima International Developme......
-
CBX and another v CBZ and others
...position regarding any arbitral costs order following setting aside of the substantive award is found in Martin and others v Harris [2019] EWHC 2735 (Ch) (“Martin”). As in the present case, so there the tribunal’s award regarding costs was made separately from and subsequently to its substa......
-
English High Court Confirms Costs Award Part and Parcel of Substantive Award
...that costs follow the event. In Andrew Martin, Nicholas Greene, Coban 2017 LLP (formerly named Strutt & Parker LLP) v. Michael Harris [2019] EWHC 2735 (Ch), the English High Court held that any arbitration award as to costs stood or fell with the substantive award. Therefore, if the substan......
-
English High Court Confirms Costs Award Part and Parcel of Substantive Award
...E. Browne and Robert Price In Andrew Martin, Nicholas Greene, Coban 2017 LLP (formerly named Strutt & Parker LLP) v. Michael Harris [2019] EWHC 2735 (Ch), the English High Court held that any arbitration award as to costs stood or fell with the substantive award. Therefore, if the substanti......