DDT Trucks of North America Ltd v DDT Holdings Ltd
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE COOKE,Mr Justice Cooke |
| Judgment Date | 29 June 2007 |
| Neutral Citation | [2007] EWHC 1542 (Comm) |
| Docket Number | Case No: 2007 FOLIO 587 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 29 June 2007 |
[2007] EWHC 1542 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Honourable Mr Justice Cooke
Case No: 2007 FOLIO 587
Louis Flannery and Jern-Fei Ng (instructed by Howes Percival LLP) for the Claimants
Neil Berragan (instructed by Irwin Mitchell) for the Defendant
Hearing date: 18 June 2007
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 Cooke
Introduction
The First Claimant (DDT NA) seeks enforcement of an Arbitration Award by Mr Ian Hunter QC dated 13 April 2007 pursuant to section 66 of the Arbitration Act 1996. This is an award on costs (the Costs Award) following an earlier award dated 18 December 2006 which was published in corrected form on 25 January 2007 after minor clerical errors had been put right (the First Award). The First Award is the subject of challenge by the Defendant (Holdings) with applications under sections 67, 68 and 69 of the Arbitration Act. Those applications were made out of time so Holdings also seeks an extension of time. On 11 May 2007 Langley J ordered that these matters be heard together and, pursuant to paragraph 3 of the Order, Holdings paid into an escrow account of its solicitors the full amount ordered in the Costs Award as a condition of proceeding with its applications.
The background and history of the arbitration is fully set out in the First Award. The Arbitration Agreement is contained in Schedule 3 of a Distributorship Agreement dated 12 February 1997 and made between Holdings (then known as DDT Engineering Limited) and DDT NA (then known as Trucks 2000 Limited). DDT NA was at all material times wholly owned by the two brothers, Messrs Joe and Peter Thoesen, whilst Mr Gordon Brown was the leading light and major figure in Holdings. Under paragraph 16.3 of the Distributorship Agreement, provision was made that if Holdings were sold or made an assignment of substantially all of its assets for consideration, it should simultaneously terminate the Distributorship Agreement and make compensation payment to DDT NA in accordance with the provisions of Schedule 3. That Schedule provided for valuation of DDT NA's assets and rights with a base amount to be paid in respect of products and spare parts in its possession and a compensatory amount to be negotiated (if the sale or assignment took place more than 14 months after the date of the Agreement), with a binding arbitration under the AAA, in the event of failure to agree.
In August 1997, Holdings changed its name from DDT Engineering Limited to its current name, having bought another company which then changed its name to become DDT Engineering Limited. The same three persons were Directors of both Holdings and the new DDT Engineering Limited.
The key issue determined by the Arbitrator and the subject of argument before me turned upon a document which was referred to as the “Airport Agreement”. This document was on the new DDT Engineering Limited's notepaper with this company's registered number at the bottom. The text of the first page of the document which was signed by both brothers on behalf of DDT NA and by Mr Brown on behalf of DDT Engineering Limited read as follows:—
“DDT ENGINEERING LIMITED
AGREEMENT WITH
TRUCKS 2000 LIMITED,
(HEREINAFTER KNOWN AS DISTRIBUTORSHIP AGREEMENT)
DATED 12 FEBRUARY 1997.
FULL AND FINAL SETTLEMENT
By mutual consent it has been agreed between the two parties as above, to terminate the said agreement on 4th November 1999 on the following terms —
Repurchase parts stock Value $382,000 subject to inventory check
Repurchase new ADT stock 4 units Value $629,000
Repurchase used ADT stock Value $
The above amounts to be paid in full within 30 days of today's date.
It has also been agreed that neither party will have any claim upon the other party at the conclusion and signing of this agreement, and the mutual agreement made is in full and final settlement between the two parties.”
Whilst there was a second page of this document, the Arbitrator attached little importance to it. It reads as follows:—
“November 4, 1999
Memo of Agreement of issues to be finalised to conclude distributor agreement between DDT Engineering Ltd and Trucks 2000 Ltd (DDT Trucks of North America Ltd) made and attached as part of final settlement agreement.
1) Outstanding warranty claims will be settled to mutual satisfaction of both parties and be paid within 60 days.
2) Interest cost of DDT North America Ltd will be paid for inventory holding period for d30–3 s/n 1801 + T630B s/n 1779 as per letter from Brian Thomson dated Oct 29 1999.
4) DDT to supply 4 new hydraulic ejector cylinders free of charge.
5) DDT North America will be able to purchase from DDT Engineering Ltd and/or LBX/Linkbelt 30 ton chassis as per last one purchased at same price in order convert 30 ton DDT trucks into water tankers.”
This page was signed on behalf of “DDT Engineering Limited” by Gordon Brown and on behalf of “Trucks 2000/DDT NA” by Peter Thoesen.
It was DDT NA's case that these pages were signed at a meeting at Chicago Airport but that the agreement was a nullity or achieved nothing because the party to it was the new DDT Engineering Limited and not Holdings (previously named DDT Engineering Limited) (the identity issue). Thus there was no full and final settlement between the parties to the Distributorship Agreement and DDT NA could pursue a claim in arbitration for compensation under Schedule 3.
Additionally DDT NA claimed that the Airport Agreement of 4 November 1999 had been procured by a fraudulent misrepresentation of intention on the part of Mr Brown for Holdings when, in order to procure the signature of the Airport Agreement, he promised that DDT NA would receive a sum in excess of $5 million (the fraud issue).
The Arbitration
Mr Ian Hunter QC was specifically chosen by the parties from a list of potential arbitrators about whom the solicitors for the parties corresponded. It was recognised that the Airport Agreement was a critical issue and that an English commercial silk would be a good candidate to resolve these matters. The matter was referred to him therefore under the auspices of the AAA, with administration in London by the IDRC. At all times Holdings maintained that there was no valid arbitration, because the Distributorship Agreement had been brought to an end by the Airport Agreement of 4 November 1999, with the consequent termination of the Arbitration Agreement within it. DDT NA argue that the Distributorship Agreement remained extant, because of the ineffectiveness or voidability of the Airport Agreement, but do not appear to have argued before the Arbitrator that the Arbitration Agreement continued independently of the Distributorship Agreement, regardless of any alleged termination of the latter. Throughout the Arbitrator treated this dispute as one which related to his jurisdiction as appears from paragraphs 1 and 87 of the Award and the form of the first declaration which he made.
There was a 4 day hearing before the Arbitrator in November 2006 preceded and followed by lengthy written submissions from both parties. Three days were spent in cross-examination of the witnesses including the two brothers Mr Joe and Mr Peter Thoesen of DDT NA and Mr Brown, the Director of Holdings.
The First Award
In the First Award the Arbitrator described the history of the relationship between the Thoesen brothers and Mr Brown, both prior to and following the Distributorship Agreement in February 1997. He described the events which led to the sale by Holdings of its business to an Italian company called Astra and a deal involving Linkbelt, a company in Kentucky. As part of the Astra deal, he found that Mr Brown was required to resolve issues between Holdings and DDT NA, in order for that deal to go ahead. In consequence there was the meeting on 4 November 1999 at Chicago Airport which led to the allegations of misrepresentation and the execution of the two page document to which I have already referred. The Arbitrator had therefore to determine the credibility of the witnesses who said directly contrary things about what had taken place at that meeting.
At paragraphs 23, 41, 45, 46, 50, 56 and 57 he made express findings about the reliability of the Thoesen Brothers' evidence and the unreliability of Mr Brown's. He approached the allegation of a misrepresentation of an intention on the basis of the criminal standard of proof. He came to “a clear view as to who was telling the truth about 4 November meeting” and held that he was “satisfied that the evidence of Joe and Peter [Thoesen] that Brown did make such a promise is made good on the evidence and I am satisfied to the point that I am sure about this”.
There were four elements which played a part in the Arbitrator's decision.
i) First, cross-examination as to credibility on other matters led him to the conclusion that “Mr Brown was prepared to be more than a little careless with the truth if it suited his purpose” and was “prepared to forward to potential financiers a document which he knew to contain major falsehoods in order to obtain from them what he was seeking”. He said “there is no doubt in my mind that Brown was prepared to circumvent or ignore DDT NA's distribution rights if he thought he could get away with it”.
ii) Secondly, he was influenced by the impression that the witnesses made on him as they gave evidence in relation to 4 November meeting. His expression was that Mr Brown “was lying and...
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