Emmott v Michael Wilson & Partners Ltd (No 2)
|England & Wales
|Mr. Justice Teare
|12 January 2009
| EWHC 1 (Comm)
|Case No: 2008 Folio 1300
|Queen's Bench Division (Commercial Court)
|12 January 2009
 EWHC 1 (Comm)
Before: Mr. Justice Teare
Case No: 2008 Folio 1300
Case No: 2008 Folio 1308
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Philip Shepherd QC and Steven Thompson (instructed by Michael Robinson) for John Forster Emmott
Anthony Boswood QC, Joseph Carney and Anna Dilnot (instructed by Holman Fenwick and Willan) for Michael Wilson & Partners Limited
Hearing dates: 17 December 2008
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 Teare:
There are two applications before the Court which have been brought by the Claimant, Mr. Emmott. The first, pursuant to section 42 of the Arbitration Act 1996, is for an order requiring the Respondent (“MWP”) to comply with a peremptory order made by an arbitration tribunal. The application is made with the permission of the tribunal and upon notice to MWP. The second, pursuant to section 44 of the Arbitration Act 1996, is for a freezing order. That application is also made with the permission of the tribunal and upon notice to MWP. There is also an application before the Court which has been brought by MWP, pursuant to section 67 of the Arbitration Act, challenging an award of the arbitration tribunal as to its substantive jurisdiction.
The court heard the applications on 17 December 2008. The argument was not finished until 5pm. Although counsel for Mr. Emmott hoped that the court would be able to give judgment on the application on the last day of term, 19 December, that was not possible because of my judicial commitments on 18 and 19 December. On 22 December 2008 I informed counsel that I had decided to grant the relief sought by Mr. Emmott and to refuse the relief sought by MWP. These are the reasons for my decisions.
MWP, a company incorporated in the British Virgin Islands, provides legal services in Kazakhstan. Mr. Michael Wilson is a director and was (at least until 23 February 2008) a shareholder of MWP. Mr. Emmott was a partner in the English firm of solicitors, Richards Butler. By an Agreement dated 7 December 2001 between MWP and Mr. Emmott it was agreed that Mr. Emmott would join MWP as a director and shareholder. Their strategy was to create the leading independent legal and business consultancy in Kazakhstan. It was agreed that in effect MWP and Mr. Emmott would function and operate as a quasi-partnership and that the parties would have and observe the usual partnership obligations and duties to each other. Mr. Emmott was to have a 33% profit sharing interest and, after contributing £225,000, was entitled to receive a 33% shareholding in MWP. Clause 5.2 provided as follows:
“This Agreement shall be governed by and interpreted in accordance with the laws of England and Wales and all and any disputes shall be referred to and subject to arbitration in London before a tribunal of three arbitrators with one arbitrator to be appointed by each Party and the chairman of the tribunal to be appointed by the president of the Law Society.”
An arbitration was commenced by MWP pursuant to the provisions of clause 5.2 in August 2006. Mr. Emmott counterclaimed against MWP. The arbitration hearing commenced on 10 November 2008. It was adjourned on 28 November 2008 and will resume on 13 January 2009. The arbitrators are Mr. Christopher Berry, Lord Millett and Ms.Val Davies. Before the hearing was adjourned the tribunal had heard evidence from Mr. Wilson and from Mr. Emmott.
The procedural history
The peremptory order which forms the subject of Mr. Emmott's application pursuant to section 42 of the Arbitration Act concerns what have been described as “the Steppe shares”. They are 9,930,000 shares in Steppe Cement, a company registered in Labuan, Malaysia and listed in London on the AIM. Mr. Emmott says that these shares were acquired by MWP in lieu of fees owed to MWP. He counterclaims 33% of the shares in MWP. The Steppe shares are a component of the value of the shares in MWP. By way of an amendment to his counterclaim he claims 27% of the Steppe shares pursuant to an agreement alleged to have been made in February 200Mr. Emmott says that the agreement reflected the fact that when he joined MWP in 2002 part of the legal work which generated the fees in lieu of which the Steppe shares were provided had been done before he had joined MWP.
The peremptory order was made by the tribunal on 27 November 2008. It has a long history. By its 8 th Procedural Order on 26 September 2008 the tribunal made a number of orders one of which was:
“That [MWP] is directed (a) to procure that its 27% shareholding in 9,930,000 Steppe shares, which is held according to the oral evidence of Mr. Wilson, nominally by HSBC Global Custody Nominees (UK) Limited (HSBC) is to be held to the order of Christopher Berry, the Chairman of the Arbitral Panel and (b) to confirm in writing to the Arbitrators that such instructions have been accepted by HSBC.”
The time for compliance was 10 October 4pm. The reasons for the tribunal's order with regard to the Steppe shares was described as follows:
“A central issue in this Arbitration surrounds the 9,930,000 Steppe shares. It is only their value (at one time around £30m. and now at least £15m.) which can have justified the vast amount of legal cost expended by the Claimant in various jurisdictions and in various applications in this jurisdiction. This is so whether or not the Respondent's new proprietary claim to 27% of the Claimant's Steppe shareholding is successful. Nevertheless, Mr. Wilson of the Claimants expressly refused, before the Arbitrators, to disclose how 73% of the Steppe shareholding is held. He informed the Arbitrators that all the Steppe shares are pledged either to HSBC or Kazholdings Incorporated “KHI”. In relation to KHI he was unable to tell the Arbitrators the extent of the Claimant's liability, save that it was “north of $5m.” He said that he was associated with KHI but he expressly refused to explain who are the beneficial owners and ultimate controllers of that company.
Accordingly there must be real suspicion that Mr. Wilson declines to provide information so as to “protect” the Claimant's Steppe shareholding from the consequences of any Order the Respondent may obtain in the Arbitration.”
MWP provided to the tribunal certain correspondence apparently passing between MWP and Kazholdings Incorporated (“KHI”).
Counsel for Mr. Emmott told me that Mr. Wilson controlled KHI. That appeared to be based upon a number of matters. In particular, Mr. Wilson had told the tribunal that he was associated with KHI but refused to say who were the beneficial owners and ultimate controllers. Further, as noted by Mr. Emmott's solicitor in his witness statement dated 11 December 2008, Mr. Wilson has referred to KHI as “my other entity” and has referred to loans from KHI to MWP as “my generous personal advances”. Mr. Wilson has stated in his witness statement dated 16 December 2008 that he is not a director, officer or shareholder of KHI. He has said that KHI is not a vehicle for and creature of MWP and that whilst he “may indirectly have some knowledge of its affairs and ability to express an opinion on its decisions, that has nothing to with MWP.” Mr. Wilson's statement did not explain what his relationship with KHI was and so I asked MWP's counsel what it was. I was told that Mr. Wilson had “some ultimate control over it” but was later told by counsel that his instructions were that Mr. Wilson “does not control KHI”. It seems to me that there is a very strong case that, as counsel for Mr. Emmott told me, Mr. Wilson controls KHI. This should be borne in mind when reading the correspondence between MWP and KHI.
By a letter dated 6 October 2008 MWP requested KHI to arrange for the “residual net interest” in relation to 27% of the Steppe shares to be held to the order of the chairman of the tribunal. It is to be noted that although Mr. Wilson had told the tribunal that the shares were pledged either to KHI or HSBC there was no letter written on or about 6 October 2008 to HSBC.
By a letter dated 9 October 2008 KHI required confirmation from MWP that the chairman would hold the shares subject to the prior rights of KHI and HSBC and that the tribunal would not seek to interfere with or render unenforceable those rights. It was said that 27% of the Steppe shares were held in the name of HSBC Global Custody Nominees (UK) Limited in account no. 932601. A copy of a document from Compushare, the registrar of shares in Steppe Cement, appeared to show that a larger number of shares were held in that account. Agreements between KHI and MWP were also exhibited including a fixed and floating charge and a loan agreement signed on behalf of KHI by Mr. Wilson's wife.
By a letter dated 10 October 2008 KHI informed MWP that legal advice had been taken and that it was considered that MWP would be in breach of a number of agreements if it were to allow 27% of the Steppe shares to be held to the order of the chairman of the tribunal. KHI said that it was prepared to consider providing the required consent but only on written confirmation by the chairman that the shares were held subject to all existing rights and by HSBC that it consents.
By a letter dated 28 October 2008 KHI wrote to HSBC Private Bank (Jersey) Limited requesting their agreement to holding the Steppe shares registered in the name of the bank's nominee to the order of the chairman of the tribunal.
The arbitration hearing began on 10...
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