Goodwood Investments Holdings Inc. v Thyssenkrupp Industrial Solutions AG
| Jurisdiction | England & Wales |
| Judge | Mr Justice Males |
| Judgment Date | 09 May 2018 |
| Neutral Citation | [2018] EWHC 1056 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 09 May 2018 |
| Docket Number | Case No: CL-2018-000090 |
Neutral Citation Number: [2018] EWHC 1056 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Males
Case No: CL-2018-000090
M/Y “Palladium”
Alec Haydon (instructed by Bargate Murray Ltd, Solicitors) for the Claimant
David Bailey QC and Jessica Sutherland (instructed by Reed Smith, LLP) for the Defendant
Hearing date: 3 May 2018
Judgment Approved
Introduction
This is an application under section 45 of the Arbitration Act 1996 for determination by the court of a question of law arising in the course of an arbitration. In my experience this section is relatively little used but, as this application shows, it has a useful role to play. The question, in short, is whether an arbitration claim under a shipbuilding contract has been settled in without prejudice correspondence between the parties' solicitors. The claimant (“the Purchaser”) contends that it has been, the defendant (“the Builder”) that it has not.
As the arbitrators pointed out in giving permission for this application to be made, all concerned in the arbitration would be uncomfortable if the arbitrators were to consider this without prejudice correspondence only to determine that no settlement had been concluded. They would then be faced with either having to resume the arbitration, excluding from their minds material which it would be better if they had not seen, or being replaced with a new and untainted tribunal. An application under section 45 avoids that danger.
Because I am giving this judgment in public and because my conclusion is that there has been no settlement of the arbitration, I shall confine my account of the matter to what is necessary in order to explain and determine the question of law. For the same reason I shall avoid going into the details of the parties' settlement offers and counter offers.
Section 45
Section 45 of the 1996 Act provides, so far as relevant:
“(1) Unless otherwise agreed by the parties, the court may on the application of a party to arbitral proceedings (upon notice to the other parties) determine any question of law arising in the course of the proceedings which the court is satisfied substantially affects the rights of one or more of the parties. …
(2) An application under this section shall not be considered unless –
(a) it is made with the agreement of all the other parties to the proceedings, or
(b) it is made with the permission of the tribunal and the court is satisfied –
(i) that the determination of the question is likely to produce substantial saving in costs, and
(ii) that the application was made without delay.”
The parties agreed that an application under section 45 would be useful in order to obtain a decision whether the claim had been settled, but did not agree on the precise formulation of the question to be determined. Accordingly the arbitrators formulated the question and gave permission for the application to be made pursuant to subsection (2)(b). They did so on 16 January 2018, necessarily in the circumstances without sight of the relevant correspondence.
The question formulated by the arbitrators was:
“Whether or not the Purchaser's response contained in either: (a) Bargate Murray's letter dated 11 October 2017, or (b) alternatively, Bargate Murray's letter dated 24 October 2017, to the Builder's settlement offer contained in Reed Smith's letter dated 9 October 2017, in light of the legally relevant exchanges between 9 October and 30 November 2017, created a binding and enforceable Settlement Agreement between the Purchaser and the Builder.”
Bargate Murray were the Purchaser's solicitors. Reed Smith were the Builder's. All the relevant exchanges were in writing between the parties' solicitors. I shall therefore refer to messages as coming from the Purchaser or the Builder, without spelling out in each case that they were sent by the solicitors.
Prior to the commencement of the hearing before me, the Purchaser abandoned any case that the Builder's offer was accepted by its letter dated 24 October 2017. Accordingly the remaining question for which the arbitrators have given permission is effectively whether the Builder's offer of 9 October 2017 was accepted by the Purchaser's letter of 11 October 2017. I conclude, in agreement with the parties and the arbitrators, that the statutory criteria required to be satisfied before the court can determine this question are satisfied.
Following the arbitrators' formulation of the question of law, the Purchaser considered further the way in which it would seek to put its case. It identified two further questions which it wished the court to determine, namely:
(1) whether a binding settlement agreement arose on the terms of the Builder's offer of 9 October 2017 as clarified by the Purchaser's letter of 11 October 2017 as a result of the parties agreeing to the adjournment of the arbitration hearing; and
(2) whether its acceptance of the Builder's offer gave rise to a legally binding obligation on the Builder to seek formal approval of its board for the terms agreed and not to do anything in the meantime which would prevent approval of those terms from being granted.
These questions are not within the scope of the permission given by the arbitrators, but the Builder agrees that I should determine them. Accordingly there is jurisdiction to do so pursuant to subsection (2)(a). I am satisfied that it is appropriate to do so. It would be most unfortunate if this application did not finally resolve the question whether the Purchaser's claim in the arbitration has been settled. I proceed, therefore, on the basis that the Purchaser has had the opportunity in this application to put forward all its arguments in support of its case that the arbitration has been settled, and that determination of these questions adversely to the Purchaser would mean that the arbitration has not been settled. Mr Alec Haydon for the Purchaser confirmed that this is indeed the position.
In the course of the hearing before me Mr Haydon confirmed also that the only way in which the Purchaser now puts its case is that the Builder came under a legally binding obligation to seek formal approval of its board for the terms agreed and not to do anything in the meantime which would prevent approval of those terms from being granted. Mr Haydon described this as an “Interim Obligation”.
Background
The arbitration concerns a claim by the purchaser of a luxury superyacht known as M/Y “Palladium” for breach of a warranty contained in a shipbuilding contract dated 31 May 2006 between the Purchaser and the Builder. In fact the Builder sub-contracted the entire construction of the yacht to what was then a subsidiary company.
It was the Purchaser's case in the arbitration that:
(1) Shortly after the yacht was delivered to the Purchaser on 16 September 2010, cracks started to appear in the yacht's paint system.
(2) The Purchaser required the Builder to repair the cracking pursuant to the “Builder's Warranty” contained in the shipbuilding contract.
(3) Several attempts were made by the Builder to repair the paint system but the repairs failed to prevent further cracking from appearing over time.
The Purchaser therefore commenced arbitration, claiming declaratory relief and either an order for specific performance or damages. The main issue to be resolved in the arbitration was whether or to what extent the paint system needed to be replaced or repaired in accordance with the warranty. The arbitrators fixed a hearing which was scheduled to last for five weeks, beginning on 9 October 2017.
There had been previous unsuccessful attempts to settle the case, but in the period leading up to the hearing, from 8 September 2017 onwards, these efforts resumed. Settlement was considered at various times on two possible bases, one of which involved agreement by the Builder to carry out further repair or replacement work while the other involved a money payment. All of the settlement offers and counter offers were headed “without prejudice save as to costs”. In some cases the offers were said to be made by analogy with Part 36 in order to pave the way for a submission when the arbitrators came to deal with costs that the same or similar consequences should follow as when a Part 36 offer is not accepted in court proceedings. I say nothing about the merits of any such submission. So far the occasion for making such a submission has not arisen.
On 8 September 2017 the Purchaser made an offer to settle the case by means of a money payment. It explained that the figure proposed was calculated as being a sum sufficient to enable it to have certain parts of the vessel refaired and repainted plus a measure of compensation for the remainder of the paint system, together with a further specified payment for legal costs. In response, the Builder sought clarification of the precise extent of the hull and superstructure which the Purchaser envisaged would have to be refaired and repainted. This was provided on 21 September 2017. The offer was rejected on 26 September 2017.
In a second letter of 26 September 2017 the Builder offered a lower sum by way of settlement, which was said to represent its own calculation of the cost of the refairing and repainting work in the Purchaser's previous offer as clarified. There was no suggestion that, following the Purchaser's clarification of 21 September 2017, the scope or extent of such work remained unclear. The Builder offered also a contribution to the Purchaser's costs. This offer introduced for the first time a requirement that there be “a formal settlement...
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