Itochu Corporation v Johann MK Blumenthal Gmbh & Company KG
| Jurisdiction | England & Wales |
| Judge | Maurice Kay,Stanley Burnton,Gross L JJ |
| Judgment Date | 24 July 2012 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 July 2012 |
Court of Appeal (Civil Division).
Maurice Kay, Stanley Burnton and Gross L JJ.
Adam Johnson (instructed by Herbert Smith LLP) for the appellant.
Luke Parsons QC and Stewart Buckingham (instructed by White & Case LLP) for the respondents.
The following cases were referred to in the judgment:
ASM Shipping Ltd of India v TTMI Ltd of EnglandUNK [2006] EWCA Civ 1341; [2006] 2 CLC 471.
Cetelem SA v Roust Holdings LtdUNK [2005] EWCA Civ 618; [2005] 1 CLC 821; [2005] 1 WLR 3555.
Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [2000] CLC 1689; [2001] QB 388.
Sumukan Ltd v Commonwealth SecretariatUNK [2007] EWCA Civ 243; [2007] 1 CLC 282.
Villa Denizcilik Sanayi ve Ticaret AS v Longen SA (The Villa)UNK [1998] 1 Ll Rep 195.
Virdee v VirdiUNK [2003] EWCA Civ 41.
Arbitration — Appeals — Shipping — Sale of ship — Guarantee — Arbitration clause — Appointment of arbitrator under guarantee arbitration clause — Court appointed sole arbitrator in absence of agreement as to number of arbitrators — No appeal without leave of court — Judge's decision within restriction on appeals — Arbitration clause not specifying number of arbitrators — Permission to appeal refused — Arbitration Act 1996, s. 15(3), 18(3), (5).
This was an application by a guarantor (Itochu) for permission to appeal against an order appointing a sole arbitrator in a dispute under the guarantee.
Itochu had guaranteed the obligations of the seller under a ship sale agreement. The respondents alleged that the seller, a nominee company controlled by Itochu, was in breach of its obligations and made a claim against Itochu under its guarantee.
The guarantee provided for disputes to be submitted to arbitration in London in accordance with English law, and for the award given by the arbitrators to be final and binding on both parties.
The respondents contended that the arbitration clause provided for a sole arbitrator, and Itochu argued that it provided for more than one arbitrator so that the tribunal should consist of three arbitrators.
The judge made an order under s. 18 of the Arbitration Act 1996 appointing a sole arbitrator on the basis that s. 15(3) applied, and refused permission to appeal. Itochu applied for permission to appeal, arguing that the arbitration clause in the letter of guarantee envisaged a tribunal of three arbitrators; alternatively, if it contemplated a tribunal of two arbitrators, then s. 15(2) of the Act was applicable, so adding a third arbitrator as chairman.
The respondents submitted that, by virtue of the judge's refusal of leave to appeal and s. 18(5) of the Act, the Court of Appeal did not have jurisdiction to entertain the intended appeal. If that was wrong, the judge was plainly right to apply s. 15(3) and appoint a sole arbitrator.
Held , refusing permission to appeal:
1. The court did not have jurisdiction to entertain the intended appeal. The judge's order was made in terms under s. 18(3)(d) and was a “decision … under this section” for the purposes of s. 18(5) and caught by the restriction on appeals. It was not a case in which the judge had made an order which was outside his jurisdiction. The question for the judge was whether, on its true construction, the arbitration clause came within s. 15(3). Whatever view the judge took on that question, he had thereafter to make a decision under s. 18(3), which had been invoked by both parties. There was no anterior or preliminary question which might preclude the court from taking a decision one way or the other under s. 18(3). The judge's decision was made under s. 18, even if his reasons (necessarily) encompassed s. 15. It was the decision which was the key to the applicability of s. 18(5). Having regard to the policy of the Act, there was no justification for straining to avoid the operation of the restriction on appeals contained in s. 18(5). It followed that the Court of Appeal did not, even arguably, have jurisdiction to entertain Itochu's intended appeal, and permission to appeal should be refused.
2. The judge was plainly correct on his interpretation of the arbitration clause. Even on the assumption that the parties contemplated more than one arbitrator, there was no agreement “as to the number of arbitrators”. Absent such an agreement, s. 15(3) of the Act provided unambiguously for a default position of a single arbitrator. Thus Itochu's intended appeal would have been bound to fail on the merits, and for that reason also permission to appeal should be refused.
Gross LJ: Introduction
1. By order of Tomlinson LJ the application of the intended appellant (“Itochu”) for permission to appeal from the order of Andrew Smith J dated 2 March 2012 (“the order”) was adjourned to an inter partes hearing of the full court, with the appeal to follow if permission is granted.
2. The order provided for the appointment of Mr Stephen Hofmeyr QC as sole arbitrator in the arbitration between the intended respondents (“the respondents”) and Itochu under a letter of guarantee dated 19 October 2007 (“the letter of guarantee”).
3. At the conclusion of the hearing we indicated that permission to appeal was refused for reasons to be given later. These are my reasons for refusing permission to appeal.
4. The underlying dispute merits no more than the briefest mention. In consideration of the respondents (it is unnecessary for present purposes to distinguish between them) entering into a ship sale agreement (“the MOA”), Itochu agreed, as “primary obligor”, to guarantee the obligations of the seller (“Falcon”), a nominee company it controlled. In the event, a dispute arose under the MOA, leading to the respondents alleging that Falcon was in breach of its obligations thereunder and making a claim against Itochu under the letter of guarantee.
5. The letter of guarantee contained an arbitration clause in the following terms:
“Any dispute arising out of this LETTER OF GUARANTEE shall be submitted to arbitration held in London in accordance with English law, and the award given by the arbitrators shall be final and binding on both parties.”
6. A further dispute then arose between the respondents and Itochu, going to the appointment of an arbitrator or arbitrators, under the arbitration clause. In essence, the respondents contended that the clause provided for a sole arbitrator; for its part, Itochu argued that the clause provided for more than one arbitrator so that the tribunal should consist of three arbitrators. The respondents applied to the Commercial Court for an order under s. 18(3)(d) of the Arbitration Act 1996 (“the Act”) that Mr Hofmeyr QC be appointed as sole arbitrator. Itochu resisted the application, submitting that the Court should instead give directions...
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...similar provisions in England, Henry Boot Construction (UK) Ltd v Malmaison Hotel [2001] QB 338; Itochu Corp v Johann MK Blumenthal Gmbh [2012] 2 CLC 864; Kyla Shipping Co Ltd v Bunge SA [2013] EWCA Civ 734; Philip Hanby Ltd v Andrew John Clarke [2013] EWCA Civ 647. Such approach highlighte......