Glidepath BV and Others v Thompson and Others
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Eady |
| Judgment Date | 04 May 2005 |
| Neutral Citation | [2004] EWHC 2234 (Comm),[2005] EWHC 818 (Comm) |
| Docket Number | Case No. HQ04XX00778 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 04 May 2005 |
[2004] EWHC 2234 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Mr. Justice Eady
Case No. HQ04XX00778
Miss V. Windle (instructed by Messrs. Mishcon de Reya) appeared on behalf of the Claimants.
Mr. R. Neill (Solicitor Advocate of Messrs. Bevan Ashford) appeared on behalf of the Defendants.
The background to this claim is complex and it is not necessary to explore the allegations in any detail for the limited purposes of the present applications.
Three corporate claimants are suing four individuals and two corporations, following the collapse of a business venture. There are allegations of fraud and mismanagement. The claims are partly for financial compensation and partly proprietary in character. There is a complicated contractual history but it is not now disputed that the action should be stayed to arbitration, in accordance with one or more of the various arbitration clauses. No arbitrator has yet been appointed; there is, at this juncture, only an agreement in draft.
There are before the court applications by the first and sixth defendants for the discharge of certain freezing, disclosure and disk-imaging orders granted originally by Holland J. on 4th March of this year and subsequently varied. Late in the day, during the hearing itself, there was a further application made to set aside also some associated Norwich Pharmacal orders against third parties.
The first defendant, Mr. John Thompson, has proffered undertakings to preserve assets and evidence pending the decision of an arbitrator as to their continuance. Those are not, however, acceptable to the claimants. An order is also sought by the first and sixth defendants that the claimants should return all documents and copies obtained from the defendants and third parties pursuant to the orders, save for any documents of their own, so as to restore the status quo ante as far as possible. It is said that they should not be permitted to retain or profit from the fruits of court orders improperly obtained. Moreover, the first defendant also seeks a full indemnity in respect of the cost of complying with the orders, measured, it is said, in hundreds of thousands of pounds.
In the alternative, in so far as it may seem to the court inappropriate to set aside the freezing and disclosure orders, the first and sixth defendants ask for an order under s.44(6) of the Arbitration Act 1996, conferring jurisdiction on the arbitrator to make any appropriate orders at a later stage in connection with the subject matter of those orders.
In order to summarise the contractual and commercial background briefly, I gratefully turn to the convenient summary in the skeleton argument of the first and sixth defendants, dated 16th July, at para.54.
The first to fourth defendants (Mr. John Thompson, Mr. Steven Biddlecombe, Mr. Mark Merrick and Mr. Nicholas Anderson) worked for Spherion Technology (UK) Limited ("Spherion"), a division of which provided data management services to major commercial clients. Spherion's United States parent decided to close down the European operation and to dispose of that division. The first to fourth defendants sought funding from investors to set up a new company to develop a data management services business. The business venture had been in the contemplation of Spherion prior to its United States parent company's decision to close down the European operation. Spherion had arranged to acquire hardware and software to support the business venture and proposed to purchase another data management business in France and Germany, called Exodus, from the liquidators of that business.
Salford Continental Inc., a fund management company, was held out as managing the funds of the New World Value Fund, itself described as an exclusive club of "high net worth individuals". Salford represented to Mr. Thompson and the management team that the funds for the new company, which was (then) called Newco, would be supplied by the New World Value Fund through Salford. The terms upon which it agreed to do so were set out in what was called the term sheet agreement of 3rd April 2002. The parties to that agreement were, among others, Mr. Thompson and Salford. It contains an ICC London arbitration clause.
From 3rd April 2002, Salford and, subsequently, Glidepath Holding set about implementing the business plan with the first to fourth defendants. It was exhibited to the term sheet agreement, which permitted Salford to be replaced as a contractual party by another entity which would own Newco. In the event, that right was exercised by Salford, and the other entity was the second claimant in these proceedings, Jeimon Holdings NV.
On 6th June 2002, Mr. Thompson became the sole director of the vehicle chosen as Newco, which was a Dutch company called Ruud Koopman, which, on 18th June of that year, changed its name to Glidepath Holding BV. Glidepath Holding was wholly owned by Jeimon Holdings NV at that time. On 19th September of the same year, Glidepath, Jeimon and the first and sixth defendants — i.e. Mr. Thompson and Earlyred Corporation NV — entered into a shareholders' agreement, pursuant to which Earlyred, a company which was associated with Mr. Thompson, became a ten percent shareholder in Glidepath Holding, and the parties set out the terms of their relations as shareholders in that company. The shareholders' agreement contains an arbitration clause to the effect that any dispute under, or arising out of, this agreement shall be referred to a single arbitrator in accordance with the provisions of the Arbitration Act 1996.
Also on 19th September 2002, Glidepath Holding and Mr. Thompson entered into a service agreement which set out Mr. Thompson's duties as managing director of the company. That, too, is governed by an arbitration clause which reads as follows:
"Any dispute under, or arising out of, this agreement shall be referred to a single arbitrator in accordance with the provisions of [DUTCH LAW]."
Clause 18 provides that the Thompson service agreement was to be in substitution for any previous arrangement or contract of service between Mr. Thompson and the company or any group company.
The parties to the shareholders' agreement entered into an amendment agreement on 29th October 2002, which contains its own arbitration clause corresponding to that contained in the shareholders' agreement (see Clause 8). After the venture had failed, on or about 22nd July 2003, some of the parties entered into a number of agreements terminating their relationships. These consisted of a cash escrow agreement, a share purchase and call option agreement. Those contained clauses conferring jurisdiction on the English courts but, more importantly, the first defendant was a party to none of those agreements.
On 22nd July 2003, Mr. Thompson, Glidepath Holding and Jeimon entered into a deed of variation which amended some of the clauses in the Thompson service agreement. The arbitration clause was not itself amended. Mr. Thompson later entered into a deed of termination, which purported to affect the parties' obligations under the earlier agreements. It preserved the right of the parties to the shareholders' agreement to make claims against each other for breaches of that agreement relating to any fraud or for misconduct or wilful concealment.
The grounds upon which the court is invited to set aside the orders are (1) that they were made without jurisdiction and (2) that there was a lack of full and frank disclosure.
Put at its simplest, the argument of the first and sixth defendants is that, since the claimants have now, after initial reluctance, conceded a stay to arbitration, it follows that they should have anticipated from the outset that a stay would be granted and recognised that the court has no jurisdiction over the dispute for that reason. To this, the claimants' response is "Non sequitur". Their case is that the court had jurisdiction at all material times.
It is necessary to refer to the distinction between the court's inherent powers now reflected in s.37 of the Supreme Court Act 1981 and those under s.44 of the Arbitration Act 1996. Under the latter regime, it is common ground, there is no power to order disclosure of documents going to the substantive issues between the parties but only for the purpose of preserving assets or evidence. The position is to be contrasted with the situation as it stood under the Arbitration Act 1950, which contemplated orders by the court for disclosure and/or interrogatories; that was revoked by s.103 of the Courts & Legal Services Act 1990.
Effectively, the court is now confined in such cases to granting relief in support of the relevant arbitration proceedings. The original order of Holland J. was thus wider than would have been permitted on an application under s.44, in so far as he ordered disclosure of defined categories of documents. I am satisfied, however, that the application before him in March was founded upon the court's inherent jurisdiction; that was how it was framed and presented. In any event, an application under the 1996 Act would, technically, be required to be made to the Commercial Court.
On 5th May of this year, Andrew Smith J. varied the order and suspended compliance with the disclosure obligations. That suspension remains in force until seven days from the determination of the application to set aside, now before me. It is the claimants' case that, between the time when Holland J.'s order became effective and the suspension of 5th May by...
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