Downing v Al Tameer Establishment
| Jurisdiction | England & Wales |
| Judge | Potter,Keene L JJ,Sumner J |
| Judgment Date | 22 May 2002 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 May 2002 |
Court of Appeal (Civil Division).
Potter and Keene L JJ and Sumner J.
Andrew Moran QC and Catherine Fisher (instructed by Cobbetts) for the appellant.
Alexander Layton QC and Charles Kimmins (instructed by Kennedys) for the respondent.
The following cases were referred to in the judgment of Potter LJ:
Allied Marine Transport v Vale do Rio Doce Navegacao SA (“The Leonidas D”)) [1985] 1 WLR 925
Al-Naimi v Islamic Press Agency Inc [2000] CLC 647.
Andre et Cie SA v Marine Transocean Ltd (“The Splendid Sun ”)ELR [1981] QB 694.
Birse Construction Limited v St David LtdUNK [1999] BLR 194.
Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corp LtdELR [1981] AC 909.
Hume v AA Mutual International Insurance Co Ltd [1996] LRLR 19.
Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal (“The Hannah Blumenthal”)ELR [1983] 1 AC 854.
Scott v Avery (1856) 5 HL Cas 811.
Spiliada Maritime Corp v Cansulex Ltd (“The Spiliada”)ELR [1987] AC 460.
Vitol SA v Norelf Ltd [1996] CLC 1159; [1996] AC 800.
Waddon v Whitecroft-Scovill LtdWLR [1988] 1 WLR 309.
Arbitration — Arbitration agreement — Whether defendant denying any contractual relationship had repudiated arbitration agreement — Whether issue of proceedings was acceptance of repudiation — Whether defendant entitled to stay in favour of arbitration — Whether England appropriate forum — Whether reference to “UK law” meant English law — Whether court wrong to extend validity of writ for purpose of service abroad — Arbitration Act 1996, s. 9(4).
This was an appeal by the claimant against the decision of a judge granting the application of the first defendant for a stay of proceedings pursuant to s. 9 of the Arbitration Act 1996 on the ground that the contract contained a valid arbitration agreement operative between the claimant and the first defendant in respect of the claimant's claim for repudiation of the contract in which it was contained. In the event that the claimant's appeal against the stay was allowed, the first defendant applied to pursue a cross-appeal for an order that the issue and service of the writ should be set aside pursuant to CPR, Pt. 11.
The claimant, “D”, invented a process for separating crude oil from water and entered into an agreement with the first defendant in 1991 jointly to exploit the invention for commercial gain. The agreement was governed by “ UK law” and contained an arbitration agreement. D's case was that after initial evaluation testing of the product the defendant wrongfully failed to take any further steps pursuant to the agreement. In 1994 and 1995 D invited the defendant to agree to appoint arbitrators. The defendant denied the existence of any contractual relationship between the parties. In 1997 D, on the basis that he had accepted the defendant's repudiation of the agreement including the arbitration agreement, commenced proceedings which were served in Saudi Arabia. The judge refused to set aside the writ on forum grounds but stayed the proceedings under s. 9 of the Arbitration Act 1996. The judge accepted that the defendant had repudiated the arbitration agreement as well as the main agreement but rejected D's argument he had accepted that repudiation by issuing and serving proceedings. D appealed. The defendant sought permission to appeal on the forum issue.
Held allowing D's appeal and refusing the defendant permission to appeal:
1. The judge was right to hold that the defendant by denying in 1995 and 1996 any contractual relationship with the claimant had repudiated the arbitration agreement as well as the main agreement. The defendant had denied the obligation to arbitrate and had maintained that stance.
2. The judge was wrong to hold that issue and service of the writ did not amount to unequivocal acceptance of that repudiation. The fact that a party was always free to commence proceedings despite the existence of a valid arbitration clause, at the risk of a stay being granted if the other party applied for one, did not mean that, in the circumstances of a particular case, such commencement could not constitute an unequivocal acceptance of the defendant's previous refusal to arbitrate, so that the court was satisfied that a stay should not be granted. Where the issue of proceedings was in response to the defendant's refusal to recognise the existence of the arbitration agreement and reflected a consequent decision of the claimant to abandon arbitration in favour of court proceedings, it was open to the court to hold that the arbitration agreement sought to be relied on for the purposes of a stay had in fact come to an end and hence was inoperative for the purposes of s. 9(4) of the 1996 Act.
3. The judge concluded that England was the appropriate forum on grounds that the agreement was in English and was governed by English law, and that the witnesses on the key issue as to the results of the testing of the invention were in England. The judge did not err in the exercise of his discretion and plainly came to the right conclusion. In the context “UK law” meant English law and there was no uncertainty about the applicable law. The defendant's application for permission to appeal was refused.
4. The court also refused the defendant permission to appeal against the judge's dismissal of his application to set aside the orders of the court granting an extension of the validity of the writ for the purposes of service abroad.
1. There is before the court an appeal by the claimant against the judgment and order of HHJ Kershaw QC made on 2 April 2001 whereby, having set aside the issue and service of the writ in the action against the second defendant on the basis that he was not a party to the contract the subject of the claim, he refused to set aside the writ as against the first defendant but granted the application of the first defendant for a stay of proceedings pursuant to s. 9 of the Arbitration Act 1996 on the grounds that the contract contained a valid arbitration agreement operative between the claimant and the first defendant in respect of the claimant's claim for repudiation of the contract in which it was contained. In the event that the claimant's appeal against the stay is allowed, the first defendant applies to pursue a cross-appeal for an order that the issue and service of the writ against the respondent should be set aside pursuant to CPR, Pt. 11 (see further at para. 41–46 below).
2. The claimant is the inventor of a process for separating crude oil from water (referred to as “Black D”). The first defendant is a corporation established under the laws of the kingdom of Saudi Arabia. The second defendant, who is no longer an effective party to the proceedings is a Saudi Arabian national who was at the time of the written agreement the subject of the proceedings the sole owner (or according to the defendants, the majority shareholder) of the first defendant on whose behalf he signed the agreement.
3. Having taken out a patent in respect of his invention, the claimant needed, but lacked, money for its exploitation, market and manufacture. He was introduced to the defendants and, by a written agreement dated 22 February 1991 (“the agreement”) he agreed with the first defendant jointly to exploit “Black D” for commercial gain on the basis of an equal participation in the venture.
4. It is not necessary for the purposes of this appeal to set out the terms of the agreement save to record that cl. 13 contained an arbitration clause in the following terms:
“Should there be any difference of opinion between the parties hereto, or if any other dispute arises as to any matter provided for herein, the parties shall endeavour to settel (sic) the differences or dispute in an amicable manner or through mutual consultation. In case the difference cannot be settled through mutual consultation, the matter shall be submitted for arbitration by three arbitrators to be appointed by each of the parties hereto whose award shall be final and binding.”
In addition, cl. 14 provided that:
“The law applicable to this Agreement shall be the law of the U.K. ”
5. The requirement that the three arbitrators should be appointed “ by each of the parties” gives rise to some ambiguity as to the precise procedure envisaged for their appointment in the absence of agreement upon all three names. However, the parties do not suggest that the arbitration clause is thereby invalid or that any issue turns upon the ambiguity for the purposes of this appeal.
6. It is the claimant's case that, following the signing of the agreement, he submitted evaluation tests to two testing institutes which demonstrated the viability of the product but that, following an apparently unsuccessful result obtained by a company called Arthur D Little at the defendant's instructions in Saudi Arabia, the first defendant thereafter wrongly ceased to communicate with the claimant or take any further steps pursuant to the agreement, and failed to co-operate and provide any further financing in accordance with its terms. The first defendant also denied that there was any agreement between the parties. After intermittent correspondence, the claimant accepted the first defendant's repudiation of the agreement by letter dated 12 February 1997 and thereafter commenced proceedings against the first and second defendants in circumstances explored in detail below. The correspondence relevant to the issues argued upon this appeal ran as follows.
7. On 14 December 1994 the claimant wrote to the second defendant as representative of the first defendant:
“In accordance with our contract dated February 22 1991…
I have notified you that a “dispute” exists due to your failure to comply with any part of our agreement. I have made every effort at resolving our differences in an amicable manner...
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