Hussmann (Europe) Ltd v Pharaon
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rix |
| Judgment Date | 04 March 2003 |
| Neutral Citation | [2003] EWCA Civ 266 |
| Docket Number | Case No: A3/2002/0903 |
| Court | Court of Appeal (Civil Division) |
| Date | 04 March 2003 |
[2003] EWCA Civ 266
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
COMMERCIAL COURT
Mr Michael Brindle QC (sitting as a Deputy High Court judge)
IN AN ARBITRATION APPLICATION
ON APPEAL FROM QUEEN'S BENCH DIVISION
The Master of the Rolls
Lord Phillips of Worth Matravers
Lord Justice Rix and
Lord Justice Scott Baker
Case No: A3/2002/0903
Mr Cyril Kinsky (instructed by Messrs McClure Naismith (Scotland)) for the Appellant
Mr Richard Siberry QC and Mr Paul Key (instructed by Messrs Zaiwalla & Co) for the Respondent
This is the judgment of the court.
Mr Ahmed Pharaon is a businessman in Saudi Arabia. On 5 January 1990 he made a contract with Hussmann Craig-Nicol Limited, the predecessor in title of Hussmann (Europe) Limited ("Hussmann", the appellant), to become its sole distributor in Saudi Arabia (the "contract"). At that time and for some time previously Mr Pharaon had traded under the name of "Al Ameen Development and Trade Establishment" (the "Establishment") and it was in that name that Mr Pharaon entered into his contract with Hussmann. That was a registered trading name on the Saudi Arabian commercial register, and it remained on the register until 16 February 1994, when it was deleted. Although his trading name was registered, that did not affect the fact that under Saudi Arabian law the Establishment had no legal personality separate from Mr Pharaon himself. The contract had therefore been made between Hussmann and Mr Pharaon personally.
In the meantime on 25 December 1992 Mr Pharaon incorporated a limited liability company in Saudi Arabia called "Al Ameen Development & Trade Co" (the "Company") and transferred the business which he had previously carried on under the name of the Establishment to it. Under Saudi Arabian law, however, that transfer did not operate as an automatic universal succession of the Company to the Establishment's assets and liabilities, and even an assignment of the Establishment's rights under the contract, let alone a novation of the contract's rights and liabilities, could only have taken place with Hussmann's consent, which was never obtained. The contract therefore continued to be one directly between Hussmann and Mr Pharaon.
When, however, relations between Hussmann and Mr Pharaon began to deteriorate, a deterioration leading on 23 April 1996 to the service of a notice by Hussmann under the contract for its termination with effect from 31 October 1996, and when on 7 February 1997 Hussmann invoked arbitration under the arbitration agreement contained in the contract, confusion was engendered by reason of Mr Pharaon's reorganisation of his business affairs and the succession of the Company to the business of the Establishment. This appeal is concerned with the consequences of that confusion.
Amongst those consequences was an arbitration award dated 11 June 1999 (the "first award") in favour of the Company. However, on 19 April 2000 Thomas J held that the arbitrators had had no jurisdiction to make an award in respect of the Company (the "first judgment"). Further, on 31 July 2000 Thomas J held that it followed that the first award should be set aside and could not be enforced by Mr Pharaon, qua the Establishment, in his own name (the "second judgment"). An order was subsequently drawn up that the first award "is of no effect". The arbitrators were then invited by Mr Pharaon to make a second award, which they did, this time in favour of Mr Pharaon formerly trading as the Establishment, with a publication date of 3 July 2001 (the "second award"). Hussmann returned to court with a new application, this time to declare the second award of no effect, and in a third judgment, handed down on 16 April 2002, Mr Michael Brindle QC, sitting as a deputy high court judge, dismissed Hussmann's application, ruling inter alia that Mr Pharaon had been a respondent to the arbitration all along, and that the arbitrators had not exhausted their jurisdiction by making their first award (the "third judgment"). This appeal is brought by Hussmann against that third judgment.
Two issues have therefore arisen, on each of which Mr Brindle himself gave permission to appeal. The first is whether Mr Pharaon is himself a respondent to the arbitration which Hussmann commenced, either alone or in addition to the Company. The second is whether the arbitration tribunal was functus officio with the result that it had no jurisdiction to make the second award.
With that introduction, it is necessary to set out the background to this appeal in further detail.
Section 67 of the Arbitration Act 1996 (the "Act")
Challenges to the substantive jurisdiction of the arbitrators are dealt with in section 67 of the Act, which provides as follows:
"(1) A party to arbitral proceedings may (upon notice to the parties and to the tribunal) apply to the court –
(a) challenging any award of the arbitral tribunal as to its substantive jurisdiction; or
(b) for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction.
A party may lose the right to object (see section 73) and the right to apply is subject to restrictions in section 70(2) and (3).
(2) The arbitral tribunal may continue the arbitral proceedings and make a further award while an application to the court under this section is pending in relation to an award as to jurisdiction.
(3) On an application under this section challenging an award of the arbitral tribunal as to its substantive jurisdiction, the court may by order –
(a) confirm the award;
(b) vary the award, or
(c) set aside the award in whole or in part.
(4) The leave of the court is required for any appeal from a decision of the court under this section."
The contract dispute
The contract, which was described as a "Sales & Service Agreement", appointed the Establishment as the "General sole and Exclusive Distributor" in Saudi Arabia for Hussmann's refrigerated display cases and cabinets. By clause 13 Hussmann reserved the right to sell its products directly to supermarkets within the territory which stipulated a direct purchasing policy with it, but such sales were to be discussed with the Distributor and to be subject to a commission in the latter's favour. The contract could be terminated on its anniversary date by either party giving six months' notice in writing. An arbitration clause provided for Saudi Arabian law and for any dispute to be settled in accordance with the arbitration rules of the Euro-Arab Chamber of Commerce.
In naming the Establishment ("Al Ameen Development & Trade Establishment") as the Distributor, the contract also referred to its registration number: "Commercial Registration no. 7415".
Hussmann sought by invoking arbitration to recover the value of certain invoices for goods supplied under its contract. Subject to a question as to the party properly invoiced for such goods, this claim was not the focus of the arbitration. The arbitrators found that it was to be quantified at $57,428. There was, however, a much larger counterclaim on the part of the respondent to the arbitration which assumed greater importance, not only because it outweighed the claim, but also because it was heavily disputed as to both liability and quantum. The counterclaim was premised on the allegation that Hussmann had been supplying its products to direct purchasers within Saudi Arabia and ought to have been paying a commission of 7.5%.
On this appeal, however, the merits of the claim and counterclaim are not in question. Rather, the significant issue for present purposes to arise at the arbitration was as to the identity of the respondent to the reference and thus claimant to the counterclaim: Was it the Establishment (ie Mr Pharaon) or the Company?
The reorganisation of Mr Pharaon's business
We have already mentioned that the Company was incorporated on 25 December 1992. On that day Mr Pharaon appears to have entered into a contract with other family members who had become shareholders in the new Company, under which all parties agreed "the transfer of all assets and liabilities" of the Establishment to the Company. However, it was not apparently until 23 August 1993 that this shareholders' agreement was formally witnessed by the Saudi Arabian ministry of commerce, not until 26 October 1993 that the Company was gazetted in the Saudi Arabian "Gazette" as having had transferred to it the business of the Establishment, and not until 14 February 1994 that the ministry of commerce formally approved the transfer. Finally, following the completion of these formalities, the Establishment was deleted from the commercial register on 16 February 1994. We take these dates from the documents before the court and from the findings of Thomas J.
Mr Pharaon's evidence before the arbitrators was that he had sent a circular dated 4 April 1994 to all those with whom he did business, including Hussmann, in the following terms:
"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."
The Gazette, which was in Arabic, spoke not of a change of name but, as stated above, of a transfer of business. The circular was under the heading of "Al-Ameen Dev & Trade Co", was signed by Mr Pharaon as "Owner and General manager", and contained at its foot amongst various printed information the...
To continue reading
Request your trial
-
Earl Ferguson v General Legal Council
...[2015] EWHC 593 (Admin), Hussmann (Europe) Ltd v Ahmed Pharaon (Formerly Trading as Al Ameen Development and Trade Establishment [2003] EWCA Civ 266 (‘ Hussmann Ltd v Pharaon’), and Winston Finzi and Mahoe Bay Company Limited v JMMB Merchant Bank Limited [2015] JMCA App 39A. 41 Additionall......
-
The Secretary of State for the Home Department v Raytheon Systems Ltd
...Capital LLP v Atlantic-Pacific Capital IncUNK [2014] EWHC 1459 (Comm); [2014] 2 Ll Rep 275. Hussmann (Europe) Ltd v PharaonUNK [2003] EWCA Civ 266; [2003] 1 CLC 1066. James Moore Earthmoving v Miller Construction LtdUNK [2001] BLR 322. Lovell Partnerships (Northern) Ltd v AW Construction pl......
-
Ashot Egiazaryan and Another v OJSC OEK Finance and Another
...be an abuse of process: ii) It is not a claim which was referred to the Arbitrators. Remission under s.67 revives the claim (see Hussmann (Europe) Ltd v Pharaon [2003] 1 All ER (Comm) 879 at paragraph 82) but there is nothing to revive. 36 The first question to address is what the claim was......
-
Moscow City Council v Bankers Trust Company and Another
...judgments on arbitration claims where the starting point of the hearing was privacy: see e.g. Hussman (Europe) Ltd. v. Pharaon [2003] EWCA Civ 266, [2002] CLC 1030, Electrosteel Castings Ltd. v. Scan-Trans Shipping and Chartering Snd Bhd [2002] EWHC 1993 (Comm), [2003] 1 Ll.R. 190, Agrim......
-
Case Note
...Press, 2012) at p 210. 68 Robert Merkin, Arbitration Law (LLP, 2004) at para 20.34; see also Hussmann (Europe) Ltd v Ahmed Pharaon[2003] EWCA Civ 266. 69 The jurisdictional requirements are as follows: (a) The request for an additional award must be made within 30 days after receipt of the ......