Hussman (Europe) Ltd v Al Ameen Development & Trade Company
| Jurisdiction | England & Wales |
| Judge | Mr Justice Thomas |
| Judgment Date | 19 April 2000 |
| Judgment citation (vLex) | [2000] EWHC J0419-1 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 19 April 2000 |
| Docket Number | Case No: 1999 Folio No. 1199 |
[2000] EWHC J0419-1
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Hon. Mr Justice Thomas
Case No: 1999 Folio No. 1199
Mr Cyril Kinsky (instructed by Messrs McClue Naismith) for the Applicants
Mr Andrew Bird (instructed by Messrs Pearson Lowe) for the First Respondents
Mr Mark Pelling (instructed by Messrs Edwin Coe) for the Second, Third and Fourth Respondents
I certify that the attached text records my judgment and direct that no further note or transcript need be made
Mr Justice Thomas
Introduction
There is before the Court an application by the applicants to set aside an arbitration award on the grounds (under s. 67 of the Arbitration Act 1996) that there was no jurisdiction to make an award in favour of the first respondents as they were not a party to the arbitration agreement and on the grounds (under s. 68 of the Act) that there had been serious irregularities. The applicants also seek an order under s. 28 of the Act that the fees and expenses charged by the second, third and fourth respondents who were the arbitrators should be considered and adjusted by the court on the grounds that they were excessive. Before considering the issues raised by these applications, it is necessary to set out the background.
Background
The original agreement
The claimants are the successors in title to Hussmann Craig Nicol Limited (HCN). No point arises on the assumption by the claimants of the obligations and liabilities of HCN and I shall therefore refer to them both as HCN. HCN has been part of the Hussmann Corporation International (Hussmann USA) since 1984.
On 5 January 1990 HCN entered into a distributorship agreement (called the sales and services agreement) with Al Ameen Development and Trade Establishment of Saudi Arabia appointing them distributors for their products in Saudi Arabia. Under the law of Saudi Arabia, an establishment is in effect a registered trading name; it has no legal personality distinct or separate from its owner. Al Ameen Development and Trade Establishment was the trading name of Mr Ahmed Pharaon and was registered by the number 101007415. I shall refer to this as the Establishment to distinguish it from the first respondents to which the business was subsequently transferred as I shall explain.
By May 1991 the Establishment had ordered refrigeration cabinets from HCN for which a balance remained outstanding of about £217,000. On 28 May 1991, HCN agreed to accept £162,297 (amounting to 75% of the balance) paid by instalments. HCN maintained that their agreement to take 75% was conditional on punctual payment. The payments due were made punctually except in November and December 1991 and January 1992 when the payments were late. When the February 1992 payment was not made, HCN sent a chaser to the Establishment. They responded by saying that Hussmann products had been sold to the Al Azizya supermarket chain without their knowledge.
Although HCN manufactured refrigeration display cabinets, their parent Hussmann USA also manufactured cabinets, though their lines were different. HCN's position in response to the point taken by the Establishment was that the sales to Al Azizya were sales by Hussmann USA and HCN was not involved. HCN went on to say that although the distributorship agreement was for HCN products, they had agreed with Hussmann USA to reserve a distributorship fee. This was paid by Hussmann USA to HCN who held that sum against what was owed by the Establishment. Matters between the Establishment and HCN continued to be the subject of dispute; one of the disputes related to a contention by the Establishment that it had appointed a sub-distributor, Al Naerabayn, and that entity was responsible for payment of goods supplied to it and not the Establishment. HCN contended that sums were owing and the Establishment maintained commission was due.
The transfer of the business to a limited liability company
In May 1994 the Establishment and HCN agreed that the Establishment would pay $57,428 in settlement of the outstanding balance. It was again HCN's contention that it was a condition of this agreement that this sum would be promptly paid. It will be necessary to refer to the circumstances in which that agreement was made in a little more detail in due course; this is because a change was made shortly before this by Mr Pharaon to the ownership of the business. That change can be summarised as follows:
• By an agreement made on 25 December 1992, Mr Pharaon incorporated the business carried on by him through the Establishment into a limited liability company known as Al Ameen Development and Trading Company with a registration number 1010122156; this entity is the first respondent to this application and to distinguish it from the Establishment, I shall refer to it as the Company. Mr Pharaon's family held 100% of the shares in the Company. After incorporation, the business of the Establishment was transferred to it and on 14 February 1994 the Ministry of Commerce of Saudi Arabia gave approval to the transfer.
• Mr Pharaon's evidence was that a circular dated 4 April 1994 was sent to all those he did business with including HCN; that letter stated:
"Memorandum to Whom it may concern
We hereby inform that the name "Al-Ameen Establishment" is changed to read as "Al-Ameen Dev. & Trade Co.". A copy of the Gazette paper is enclosed herewith.
Ahmed Pharaon
Owner & General Manager"
The copy of the Gazette dated 26 October 1993 enclosed was in Arabic; no translation was then supplied. From a translation that was before the arbitration tribunal, the Gazette notice made clear that the business of the Establishment had been transferred to the Company.
• HCN did not know whether they had received the notification, but their position was that they did not know of the transfer from the Establishment to the Company.
As this issue goes to the jurisdiction of the tribunal, it will be necessary to examine the question in greater detail in due course.
The termination of the agreement and the appointment of the arbitration tribunal
The payments promised to HCN were not made. HCN decided to terminate the agreement and did so by notice on 23 April 1996, because they wished to appoint a new distributor and recover the sum due. For both these reasons, on 7 February 1997 HCN commenced an arbitration under clause 17 (the arbitration clause) of the distributorship agreement of 5 January 1990 which provided:
"This agreement shall be governed under the commercial agencies regulation of Saudi Arabia, amendment and implementing procedures in accordance with the Royal Decree No. II dated 20.02.1382 Hijra. Any dispute arising out of or in connection with this agreement shall be finally settled in accordance with the arbitration provisions in the Rules of Conciliation, Arbitration and Expertise of the Euro-Arab Chamber of Commerce, by one or more arbitrator(s) appointed in accordance with the set rules."
Their notice requesting arbitration was made against Al Ameen Development & Trade Establishment. In the notice Al Ameen was defined as follows:
"Al Ameen" means Al Ameen Development & Trade Establishment (also known as Al Ameen Development & Trade Co.) a limited liability company incorporated under the laws of the Kingdom of Saudi Arabia (Commercial Registration No. 7415) and having a place of business at PO Box 166, Riyadh 11411, Saudi Arabia."
Although the definition referred to it being a limited liability company, the number given was the registration number of the Establishment.
The arbitration was to take place pursuant to the terms of the arbitration clause of the distributorship agreement under the Rules of Conciliation, Arbitration and Expertise of the Euro-Arab Chamber of Commerce to which it will be necessary to refer in greater detail. On 21 May 1997 HCN nominated Mr Anthony Murray as their arbitrator; he was at the time a partner in a firm of solicitors in Glasgow but has since become a partner of a firm of solicitors in London. On 22 July 1997 Dr Nader Gangi was nominated by Pearson Lowe solicitors instructed by Mr Pharaon and the Company as the arbitrator for the respondents to the arbitration; where it is not clear to me whether any distinction was being made between the Establishment, the Company and Mr Pharaon, I shall refer to the other party to the arbitration as the Respondents. Dr Gangi resigned in January 1998 and was replaced by Dr A Anvari, a lawyer practising in London. Thereafter the Euro-Arab Arbitration System appointed His Honour Judge Eugene Cottran as Chairman of the tribunal; he is a Circuit Court Judge who prior to his appointment had in the course of a distinguished career gained considerable expertise in Arab law. Permission was given by the Lord Chancellor to his appointment on terms that he conducted the arbitration in his own time and that any remuneration or fee charged was paid to HM Treasury. I understand that he very generoulsy and conscientiously agreed to the appointment on these terms to try and assist the Euro-Arab Chamber of Commerce and its new arbitral system. This was the first arbitration they had had which proceeded to a full hearing.
The pleadings, the hearing and the award
On 10 April 1997, HCN submitted their statement of claim claiming £108,000; they repeated in this pleading their definition of Al Ameen. The Respondents did not submit their defence and the counter claim until 2 February 1998. An objection was taken by HCN to the service of this pleading on the grounds of delay and this question was referred to the arbitrattion tribunal. Submissions were made. On 20 March 1998 the...
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