Celtic Bioenergy Ltd v Knowles Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Jefford |
| Judgment Date | 16 March 2017 |
| Neutral Citation | [2017] EWHC 472 (TCC) |
| Docket Number | Case No: HT-2016-000314 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 16 March 2017 |
[2017] EWHC 472 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Jefford
Case No: HT-2016-000314
Mr Vincent Moran QC (instructed by DAC Beachcroft LLP) for the Claimant
Mr Jonathan Acton Davis QC (instructed by Isca Legal LLP) for the Defendant
Hearing dates: 9 th February 2017
This is an application to set aside/vary or remit the award of the arbitrator, Mr Vaughan, made on 6 September 2016 on the grounds of serious irregularity in that it was obtained by fraud or in a manner contrary to public policy.
In short, the Award made various declarations to the effect that the Respondent to this application ("Knowles") had complied with certain provisions of an ad hoc arbitration agreement between the Applicant ("CBL") and Knowles. Since the publication of the award, correspondence has come to light which CBL says shows that Knowles had not done so and that the evidence they presented to the arbitrator was incomplete, misleading and fraudulent. The timing of this discovery by CBL has meant that they have also made an application for an extension of time to make this application. I deal with this at the conclusion of this judgment.
The background to the arbitration
The hearing of this application occupied a lengthy court day and was preceded by detailed and helpful written submissions in which the parties properly and effectively focussed on the specific issues that arose. However, CBL also relies on the context in which this arbitration and the making of this award have taken place and I certainly consider it to be relevant. It is a complex and convoluted story but I set it out as briefly as possible below.
Events up to March 2016
CBL were engaged by Devon County Council ("DCC") on a project for the design and construction of a composting facility.
Disputes arose between CBL and DCC about payment including claims for loss and expense and the deduction of liquidated damages. Some of those disputes were dealt with in adjudication and at some point an arbitration was also commenced.
Knowles entered into a series of agreements with CBL to provide advice and representation in the adjudications and the arbitration.
A Deed of Assignment dated 19 November 2010 was executed between Knowles and CBL under which CBL assigned to Knowles its rights against DCC. The Deed, however, at the same time reserved to CBL, the assignor, the right to enforce payment or claim damages. There was also a side letter of the same date which provided that sums obtained by Knowles would be held in a client account for CBL's benefit less sums due to Knowles as fees.
This rather curious set of documents has already been the subject of comment by this Court in Devon County Council v Celtic Composting Systems [2014] EWHC 552 (TCC) at [11] and [12], proceedings in which DCC sought to restrain CBL from taking further steps in an adjudication it had commenced against DCC. Stuart-Smith J noted that DCC was concerned about the making of payments to Knowles against whom they may have no recourse for repayment. These comments encapsulated DCC's concerns about the assignment.
That adjudication no. 8 proceeded and resulted in decisions that sums were due to CBL. On 7 February 2014, Knowles issued invoices to DCC in respect of the sums awarded in the adjudication (£16,255.37 and £170,727.33 plus VAT). The invoices were addressed to DCC's Chief Executive, the Executive Director of Environment, Economy and Culture and Mr Whitton of Waste, Engineering and Transport Services and were sent by special delivery. These sums were not paid by DCC.
In the meantime, it appears that disputes arose between CBL and Knowles as to Knowles' entitlement to payment for the services it had provided in adjudications nos. 6 to 8 and the quality of the services provided. One of the agreements for services contained an arbitration clause and an arbitration was commenced.
The parties agreed to enter into an ad hoc arbitration agreement ("the ad hoc agreement") dated 8 July 2014 to expand the scope of the arbitration so that all these disputes could be resolved in arbitration.
The ad hoc agreement also provided that the parties agreed:
"3. THAT Knowles will withdraw and extinguish it (sic) invoices served on Devon County Council.
4. THAT Knowles will provide an indemnity in favour of Devon County Council in the matter of the Celtic BioEnergy assignment in favour of Knowles and that it will not pursue Devon County Council for such sums as are owed by Devon County Council to Celtic BioEnergy Limited."
There was, therefore, a trade-off between CBL and Knowles in which CBL agreed to all Knowles' adjudication fee claims being dealt with in one arbitration and Knowles agreed to give up any direct claims against DCC which represented a concern to DCC in paying any amounts found due in the adjudications.
Around the same time, and reflecting the conditions of ad hoc agreement, a Deed of Waiver and Indemnity dated 18 July 2014 (which I shall refer to as the first Deed of Waiver) was executed by CBL and Knowles. The Deed recited, at paragraphs A to H, the construction contract and its performance, the rights to payment which CBL had acquired or might acquire against DCC, and the Deed of Assignment. It then provided:
(i) that Knowles waived all its right to payment under the construction contract and the assignment; and
(ii) that "[Knowles] will indemnify and save harmless the Council against all claims, legal and equitable and actions in contract or howsoever arising pursuant to the Deed of Assignment dated 19 November 2010 or payments made pursuant to the Construction Contract to any party whomsoever."
By letter dated 18 July 2014 from Wheelers (solicitors acting for CBL) a copy of the first Deed of Waiver and credit notes from Knowles for each of the invoices referred to at paragraph 9 above were sent to DCC.
There were issues raised about the signatories of the Deed of Waiver which Knowles sought to address. On 13 November 2014, DCC wrote to Knowles asking whether there was any other reason DCC might not rely on the documentation. Knowles replied on 27 November 2014:
"Knowles answer is "yes", there are other reasons, which are that Knowles to paraphrase [DCC], is not fully appraised of the circumstances under which it entered into the purported waiver and indemnity."
Returning to the arbitration, the arbitrator initially appointed resigned and Mr Vaughan was appointed in his place in January 2015. The parties agreed that there should be a split hearing. The initial hearing would consider (i) whether Knowles' fees for adjudications nos. 6, 7 and 8 were fixed or capped and (ii) when and under what terms those fees became payable. A further hearing would consider Knowles' entitlement to payment including CBL's claim to be entitled to set-off damages for breach.
At some point CBL had commenced an arbitration against DCC and CBL and DCC reached what Mr Moran QC, on behalf of CBL, referred to as a "settlement that they had agreed in principle". The stumbling block to that settlement "in principle" being finalised was DCC's continued concern about Knowles' claims against it.
It appears that that led to CBL and DCC agreeing a form of the Deed of Waiver. I shall refer to this as the second Deed of Waiver. It was sent to Knowles by CBL's current solicitors by a letter dated 5 June 2015 asking Knowles to execute this Deed.
There was, so far as I am aware, no response to this letter.
At the same time, the arbitration between Knowles and CBL proceeded and on 22 August 2015 the arbitrator made his award ("the Partial Award") on what were referred to as the initial issues:
(i) The arbitrator decided that the fees that would be due to Knowles for their services in respect of adjudications nos. 6 to 8 were fixed or capped.
(ii) The arbitrator decided that the fees would be payable from the proceeds of adjudication no. 8, 14 days after receipt of those sums or, if the proceeds were insufficient, on the publishing of an award in or the settlement of the arbitration between CBL and DCC.
The arbitrator was not asked to decide whether any sums were actually payable and he did not do so.
In October 2015, the arbitrator made an award determining that Knowles was liable for the costs of determining the initial issues. Knowles sought to appeal this costs award and made an application in the Commercial Court under s. 69(2)(b) of the Arbitration Act for leave to appeal. Leave to appeal was refused on paper on 16 February 2016.
On 1 March 2016 Knowles wrote to CBL's solicitors enclosing a draft Request for Arbitration to the LCIA. The proposed arbitration related to Knowles' claim for £2 million in fees relating to services provided to CBL in the arbitration between CBL and DCC. CBL's solicitors responded to the LCIA pointing out under the terms of Knowles' appointment payment disputes were to be dealt with by litigation and "any other disputes" were to be referred to arbitration.
The March Correspondence
On 16 March 2016, however, Knowles also wrote to DCC demanding payment — this is the beginning of the so-called March correspondence to which it is necessary to refer in some detail.
The letter dated 16 March 2016 was sent to DCC's Chief Executive and Executive Director of Environment, Economy and Culture and to Mr Whitton of Waste, Engineering and Transport Services, in each case by "Special Delivery Guaranteed". It was signed by Mr Andrew Rainsberry, managing director of Knowles.
The letter referred to a letter dated 13 May 2011 which gave notice of the assignment and to that notice of assignment of...
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