Demco Investments & Commercial SA v SE Banken Forsakring Holding Aktiebolag

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMR. JUSTICE COOKE,Mr. Justice Cooke
Judgment Date30 June 2005
Neutral Citation[2005] EWHC 1398 (Comm)
Docket NumberCase No: 2004/834
Date30 June 2005

[2005] EWHC 1398 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Before

Mr. Justice Cooke

Case No: 2004/834

Between
Demco Investments & Commercial S.A. & Others
Claimants
and
Se Banken Forsakring Holding Aktiebolag
Defendant

M. Driscoll Q.C and J. Swirsky (instructed by Hextalls LLP) for the Claimant

N. Strauss Q.C., D. Matthews Q.C. and S. Hossain (instructed by Slaughter & May) for the Defendant

Hearing dates: 23 rd June 2005

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 Mr. Justice Cooke

Introduction

1

This is an application for leave to appeal under Section 69 of the Arbitration Act 1996. The Award which is the subject of the appeal is dated 16 th August 2004 and the Arbitrators were Mr. Kenneth Rokison Q.C., Mr. Jonathan Gilman Q.C. and Mr. Jan Paulsson, a partner in Freshfields and the current president of the LCIA. The panel was thus a distinguished panel of lawyers with extensive knowledge and understanding of contract and insurance law. The Award ran to 229 pages with appendices constituting two ring binders full of documents. The Arbitrators considered 222 sample cases on an individual basis where it was alleged that the company (Interlife) which had been sold by the Claimants (the Sellers) to the Defendant (the Buyer) had mis-sold pensions to individuals in circumstances where those individuals had either failed to join or opted out of the occupational pension schemes which were available to them. The sums in issue are said to be of the order of £40 million.

2

The grounds of appeal take up twenty pages of single spaced type with a Schedule listing seven questions of law upon which the Sellers sought permission to appeal. That Schedule is attached. Not to be outdone, the Buyer served thirty-three pages of submissions which led to the Sellers' answer of a further forty pages. Not satisfied with this, the Court was presented with a sixty-three page skeleton argument on one side and a nineteen page skeleton argument on the other with substantial appendices to each. If the appeal was to succeed, most of the individual sample cases would fall to be reviewed, but there are approximately a further 2700 cases which the Arbitrators have not yet considered.

3

In mounting its application for permission to appeal, the Sellers initially accepted that the test they had to satisfy was that the Arbitrators were "obviously wrong" in the conclusions they had reached. Later they sought to say that there were matters of public importance involved and that some of the Arbitrators' conclusions were "open to serious doubt" even if not "obviously wrong".

4

The Buyer's approach was to say that the prime areas of complaint raised by the Sellers (issues 1 and 2) did not give rise to questions of law within the meaning of Section 69 of the Arbitration Act 1996, that no questions of general public importance were raised and that the Arbitrators' decisions were correct. As a fallback position, the Buyer argued that, if the Arbitrators' were obviously wrong on some of the points raised by the Sellers, then the Arbitrators' were also obviously wrong on the twelfth issue which the Arbitrators' decided, a matter of construction of the Deed of Indemnity in relation to the financial limitation set by a particular clause on the sums recoverable for breach. That contingent application, which was made out of time and without a formal application, does not arise because I have concluded that permission to appeal should not be given to the Sellers.

5

Although, as appears from the terms of the judgment, I have determined the issues on the basis of the "obviously wrong" test, for reasons which appear, my conclusions would have been no different had I adopted the less stringent test put forward by the Sellers.

Jurisdiction

6

The Buyer submitted that the Court had no jurisdiction to entertain the Sellers' application because the right to appeal had been excluded by the terms of the Arbitration Clause in the Purchase Agreement and the Deed of Indemnity in respect of the sale of the shares in Interlife because it provided for any dispute to be "finally settled by Arbitration in accordance with rules of the Arbitration Institute of the Stockholm Chamber of Commerce". Whilst, as a matter of logic, this point should be determined in priority to any others, it is a point which is not without difficulty, and, as I have come to the conclusion that the application must fail for a number of other reasons, I do not need to decide this issue.

Questions of law

7

Section 69 of the Arbitration Act, insofar as relevant, provides as follows;

"69.—(1) Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings. An agreement to dispense with reasons for the tribunal's award shall be considered an agreement to exclude the court's jurisdiction under this section.

(3) Leave to appeal shall be given only if the court is satisfied —

(a) that the determination of the question will substantially affect the rights of one or more of the parties,

(b) that the question is one which the tribunal was asked to determine,

(c) that, on the basis of the findings of fact in the award —

i. the decision of the tribunal on the question is obviously wrong, or

ii. the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and

(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.

(4) An application for leave to appeal under this section shall identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted.

(5) The court shall determine an application for leave to appeal under this section without a hearing unless it appears to the court that a hearing is required."

The first 2 questions of law in the Schedule—Issues 1 and 2 in the Award

8

Issues arose between the parties as to the characterisation of an issue as a question of law. The first two questions of law set out in the Schedule to the Application referred to the finding of the Arbitrators of mis-selling of pensions by Interlife and of gross negligence in a large number of individual sample cases, asserting that such findings were based on inferences, referred to in the body of the Award, which no reasonable Arbitrator could have made. The exact terms of the question of law, as set out in the Schedule, bear examination, although I do not set them out here in the body of the judgment.

9

The Sellers maintained in their second set of submissions that the Arbitrators made four crucial errors which they say are errors made in respect of questions of law: —

i) First, it is said that the Arbitrators wrongly decided in the Defendant's favour without any evidence before them from any of the Investors to whom the policies had allegedly been mis-sold, except for two particular Investors. It is said that to find a case of mis-selling in any of the sample cases without hearing from the Investor is wrong in principle and that this is a matter of law because a Court would be compelled to decide as a matter of fairness and justice that there had been no mis-sale.

ii) Secondly, it is argued that the Arbitrators, having correctly stated in paragraph 10.206 of the Award the test to be that "it was not appropriate to sell a personal pension policy to an Investor who appeared at the time of sale to be a "stayer" (over the long-term) in his or her current OPS employment", then applied, from paragraph 10.207 onwards, a different test, namely that a sale would be held to be inappropriate unless there was evidence at the time of sale that the Investor appeared not to be a "stayer". This effectively reversed the burden of proof and this also gave rise to a question of law.

iii) Thirdly, the Sellers maintained that whilst the Arbitrators had considered the question of whether a particular leaflet used in sales interviews (the Choice in Pensions leaflet) itself gave rise to a breach of duty owed to a potential Investor, they failed, having decided that there was no such breach in the leaflet itself, to take it into account in a positive way in deciding whether or not an interview with an Investor did give rise to a mis-sale.

iv) Fourthly, the Arbitrators are criticised because they drew no inference from the fact that the Investor had taken out a personal pension and given up his or her OPS pension. It is said that this fact was evidence from which an inference should be drawn that the Investor was not a "stayer" in his or her OPS employment.

10

In their third set of submissions and orally before me, the Sellers' focus was different. Whilst maintaining that the issues raised were the same, the Sellers formulated the matter as follows: —

"1. Was it, between 1989 and 1992, a breach of the duty of care which a pensions sales representative owed to a potential Investor, who, at the time of sale, was in OPS employment for the representative to sell a personal pension to that Investor, without first being informed by the Investor that the Investor was uncertain about his or her future employment plans (even though, ex hypothesi, the Investor was willing to take out a personal pension, and, in the case of an NHS employee, had read or had read to him or her the Choice in Pensions leaflet, and still wanted to take out a personal pension)? In particular 1.1 is it a requirement of the duty of care that unless...

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