C Ltd v D
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henshaw |
| Judgment Date | 21 May 2020 |
| Neutral Citation | [2020] EWHC 1283 (Comm) |
| Date | 21 May 2020 |
| Docket Number | Case No: CL-2019-000441 |
| Court | Queen's Bench Division (Commercial Court) |
[2020] EWHC 1283 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN THE MATTER OF THE ARBITRATION ACT 1996
AND IN THE MATTER OF AN ARBITRATION CLAIM
Rolls Building,
Fetter Lane,
London EC4A 1NL
THE HONOURABLE Mr Justice Henshaw
Case No: CL-2019-000441
Duncan Bagshaw (instructed by Howard Kennedy LLP) for the Claimant
James Freeman (instructed by Allen & Overy) for the First Defendant
Tom Sprange QC and Gayatri Sarathy (instructed by King & Spalding International LLP) for the Second Defendant
Hearing date: 23 April 2020
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.
| (A) INTRODUCTION | 2 |
| (B) FACTS | 3 |
| (C) APPLICABLE PRINCIPLES | 13 |
| (1) Costs of matters resolved prior to trial | 13 |
| (2) Costs awards against arbitrators | 17 |
| (D) DISCUSSION | 18 |
| (1) Successful party | 18 |
| (2) Merits of section 24 application | 21 |
| (3) Other factors | 26 |
| (E) CONCLUSIONS | 28 |
(A) INTRODUCTION
This judgment follows an extended full day's hearing listed to resolve an application (the “ section 24 application”) by the Claimant (“ C”) for an order under section 24 of the Arbitration Act 1996 (“ the 1996 Act”) removing the Second Defendant (“ X”) as arbitrator in a London Court of International Arbitration (“ LCIA”) arbitration (the “ Arbitration”) between C and the First Defendant (“ D”).
The hearing took place in private pursuant to CPR 62.10(3)(b). All parties were content for the judgment to be public provided it was suitably anonymised.
The section 24 application was brought on the grounds that X had deliberately misrepresented their arbitration experience in their CV, on the basis of which X had been appointed by the LCIA; and that when C asked X about their arbitrator experience, X had responded defensively and referred C back to the allegedly false and misleading CV.
In the event X resigned during the course of the proceedings in the circumstances I describe below. There is therefore no need for any order under section 24. However, C has continued the proceedings in order to claim its costs, on the basis that D and X contested C's prior challenge before the LCIA Court and the section 24 application itself.
This has had the unfortunate result that by the time of the hearing before me the parties' costs schedules claimed in aggregate approximately £256,000 in respect of the section 24 application. That might be compared to the value of C's monetary claim against D in the underlying arbitration of approximately €166,000, albeit C makes certain non-monetary claims too.
C asks the court to order that D and X pay C's costs of and incidental to the section 24 application, including the proceedings before the LCIA Court. D and X resist any such order and contingently seek costs orders in their favour.
(B) FACTS
C and D are both companies which carry on activities with philanthropic aims. C is a company which designs software, and which has created a mobile software application (or ‘app’) and database for use by refugees to help them to identify and locate support services. D is a non-profit federation based in another EU Member State which seeks to find and protect lost, abducted and displaced children.
On 29 August 2017 C and D entered into a licence agreement (the “ Agreement”) whereby C licensed a platform to D, for D to adjust the appearance (or ‘skin’) of the app so as to make it more user-friendly to children.
C says D secured, with C's assistance and introductions, a large grant (around €1.3million) to pursue the configuration and implementation of the modified app.
Having secured the grant, and shortly after the release of the modified app, on 13 July 2018 D sought to terminate the Agreement, for reasons which C maintains were unjustified. C sought to organise a mediation to resolve the dispute, but according to C, D declined to agree to mediate on the dates proposed by C.
C therefore commenced the Arbitration, in which it sought (i) the balance of the fee under the Agreement (€51,061.81), (ii) damages (limited in accordance with a contractual limitation clause to the total amount of the fees, namely around €115,000) and (iii) a declaration that the intellectual property in the modified app, and associated database, belonged to C.
C applied to the LCIA to appoint an arbitrator on an expedited basis, so that there could be an urgent hearing to resolve the question of the ownership of the intellectual property. The LCIA appointed X on an expedited basis on 29 November 2019. X's CV was provided to the parties with the Notice of Appointment.
X has 35 years of experience as counsel, solicitor and mediator in commercial disputes, including LCIA proceedings. X's evidence is that during discussions with the LCIA in March 2018, X made clear that they had not been previously appointed as an arbitrator. X was invited by the LCIA to submit a CV, given X's experience as a mediator and the recognition in the industry that there is no strict delineation between the disciplines. It is common ground that the LCIA was fully aware that X had not previously been appointed as arbitrator in an LCIA arbitration. X says they accepted the appointment in view of their considerable expertise as a mediator and familiarity with the specialist subject matter of the claim.
X's arbitration CV stated that:
“X has been a counsel in a number of arbitrations over [their] 30 year career in the law and has been recommended in the directories. X has recently retired from fulltime private practice to concentrate on [their] Arbitration and Mediation career. X is familiar with all the major Arbitration institutional rules as well as the relevant legislation and Ad hoc arbitration practices. As an adjudicator and arbitrator [X] is confident to make pragmatic procedural and substantive decisions. [X] is used to conflicts where there are strong personalities within the parties' groups and where there may be some cynicism towards the potential for dispute resolution. [X] has an engaging style and is often praised for [their] proactive approach.
Examples of cases X has been involved with either as counsel or Arbitrator include …
[followed by a list of cases]”
Neither party to the Arbitration challenged X's appointment, nor was involved in X's selection or appointment.
According to C, X initially indicated that they would urgently resolve the ownership of the intellectual property in the modified app on a preliminary basis, but after receiving representations from D's solicitors Allen & Overy (“ A&O”) (but not, C says, from C), X decided instead to invite C to apply for interim measures.
On 21 December 2018, C submitted a request for interim measures under Article 25 of the LCIA Rules. A hearing took place on 8 March 2019, at which both parties made oral submissions. On 27 March 2019, X dismissed the request on the grounds that C had not established that the application was urgent or that substantial prejudice would be suffered if interim relief were not granted.
C believed that that decision failed to take proper account of its submissions, and also had concerns as to X's treatment of C's submissions. C concluded that X's decisions not to resolve the intellectual property ownership matter as a preliminary issue, and on the interim measures application, indicated an apparent bias against C and in favour of D and its lawyers.
C therefore in April 2019 filed a challenge (“ the First Challenge”) with the LCIA Court, complaining that X had failed to treat the parties fairly and impartially in the interim measures decision and the procedure leading up to it, adding that in part this might have arisen due to X's lack of experience as an arbitrator.
In response to the First Challenge, X on 19 April 2019 commented to the LCIA (not copied to the parties at the time) that “ I obviously refute any impartiality or bias allegation or indeed any allegations of incapacity/incompetence”. The LCIA wrote to the parties indicating that X had confirmed they did not intend to resign. C's solicitors asked to see X's correspondence indicating that. After a delay, C's solicitors made submissions as to why they should be entitled to see the arbitrator's comments, and on 2 May 2019 the LCIA provided a copy of X's email of 19 April.
In addition, on 1 May 2019 X wrote to the parties and provided them with a separate response to the challenge (forwarding a response X had sent to the LCIA on 29 April), stating:
“I was not asked to respond by the Claimant to the Challenge to my position under Article 10.5. I was asked to and refuse to resign my position.
However I do not wish my lack of response to be taken as any acceptance of the allegations against me in the Challenge under Article 10 of the LCIA rules. Accordingly, I make 2 short comments;
1. I refute any allegations of bias or impartiality. On the contrary, I have tried very hard to give the Claimant time to make all her arguments as fully as she wishes recognising her position as a litigant in person and I have listened and understood these arguments. I have acceded to requests for more time from the Claimant and postponed the first hearing at the Claimant's request despite the Respondent objecting due to a member of their team not being available. As part of the Interim measures decision I have not made any findings on...
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