John Downing v (1) Al Tameer Establishment (2) Shaikh Khaikh Khalid Al Ibrahim [CA (Civil), 22/05/2002]

JurisdictionEngland & Wales
JudgeLord Justice Potter,Lord Justice Keene
Judgment Date22 May 2002
Neutral Citation[2002] EWCA Civ 721
Docket NumberCase No: A3/2001/1975
CourtCourt of Appeal (Civil Division)
Date22 May 2002
Between
John Downing
Appellant
and
(1) AL Tameer Establishment
(2) Shaikh Khalid AL Ibrahim
Respondent
Before

Lord Justice Potter

Lord Justice Keene and

Mr. Justice Sumner

Case No: A3/2001/1975

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEENS BENCH DIVISION

MANCHESTER DISTRICT REGISTRY

(His Honour Judge Kershaw QC)

Andrew Moran QC & Ms Catherine Fisher (instructed by Cobbetts, Manchester) for the Appellant

Alexander Layton QC & Charles Kimmins (instructed by Kennedys, London) for the Respondent

Lord Justice Potter

Introduction.

1

There is before the court an appeal by the claimant against the judgment and order of His Honour Judge Kershaw QC made on 2 April 2001 whereby, having set aside the issue and service of the writ in the action against the second defendant on the basis that he was not a party to the contract the subject of the claim, he refused to set aside the writ as against the first defendant but granted the application of the first defendant for a stay of proceedings pursuant to s. 9 of the Arbitration Act 1996 on the grounds that the contract contained a valid arbitration agreement operative between the claimant and the first defendant in respect of the claimant's claim for repudiation of the contract in which it was contained. In the event that the claimant's appeal against the stay is allowed, the first defendant applies to pursue a cross-appeal for an order that the issue and service of the writ against the respondent should be set aside pursuant to CPR Part 11 (see further at paragraphs 41–46 below).

The background and history of the proceedings.

2

The claimant is the inventor of a process for separating crude oil from water (referred to as "Black D"). The first defendant is a corporation established under the laws of the Kingdom of Saudi Arabia. The second defendant, who is no longer an effective party to the proceedings is a Saudi Arabian national who was at the time of the written agreement the subject of the proceedings the sole owner (or according to the defendants, the majority shareholder) of the first defendant on whose behalf he signed the agreement.

3

Having taken out a patent in respect of his invention, the claimant needed, but lacked, money for its exploitation, market and manufacture. He was introduced to the defendants and, by a written agreement dated 22 February 1991 ("the Agreement") he agreed with the first defendant jointly to exploit "Black D" for commercial gain on the basis of an equal participation in the venture.

4

It is not necessary for the purposes of this appeal to set out the terms of the Agreement save to record that Clause 13 contained an arbitration clause in the following terms:

"Should there be any difference of opinion between the parties hereto, or if any other dispute arises as to any matter provided for herein, the parties shall endeavour to settel (sic) the differences or dispute in an amicable manner or through mutual consultation. In case the difference cannot be settled through mutual consultation, the matter shall be submitted for arbitration by three arbitrators to be appointed by each of the parties hereto whose award shall be final and binding."

In addition, Clause 14 provided that:

"The law applicable to this Agreement shall be the law of the U.K."

5

The requirement that the three arbitrators should be appointed "by each of the parties" gives rise to some ambiguity as to the precise procedure envisaged for their appointment in the absence of agreement upon all three names. However, the parties do not suggest that the arbitration clause is thereby invalid or that any issue turns upon the ambiguity for the purposes of this appeal.

6

It is the claimant's case that, following the signing of the Agreement, he submitted evaluation tests to two testing institutes which demonstrated the viability of the product but that, following an apparently unsuccessful result obtained by a company called Arthur D Little at the defendant's instructions in Saudi Arabia, the first defendant thereafter wrongly ceased to communicate with the claimant or take any further steps pursuant to the Agreement, and failed to co-operate and provide any further financing in accordance with its terms. The first defendant also denied that there was any agreement between the parties. After intermittent correspondence, the claimant accepted the first defendant's repudiation of the Agreement by letter dated 12 February 1997 and thereafter commenced proceedings against the first and second defendants in circumstances explored in detail below. The correspondence relevant to the issues argued upon this appeal ran as follows.

7

On 14 December 1994 the claimant wrote to the second defendant as representative of the first defendant:

"In accordance with our contract dated February 22 1991 …

I have notified you that a "dispute" exists due to your failure to comply with any part of our agreement. I have made every effort at resolving our differences in an amicable manner, with no response. I have requested that we settle our dispute with the use of mutual consultation, and again my pleas have been met with silence.

At this point I must assume you have no intention of honouring our agreement or proceeding in good faith to resolve our differences. In accordance with paragraph 13 I believe the only remaining solution is to retain assistance from outside arbitrators. Please submit your choices for independent arbitration within five working days so we may select three and resolve our differences of opinion once and for all."

8

The reply of the second defendant was as follows:

"… So far as I can see, if there was a contract between you and this Company (which is denied) you have committed a fundamental breach of that contract insofar as you have not carried out testing of the product at a number of establishments …

It is almost four years since the date of the Heads of Terms and you are now asserting rights to arbitrate those Heads of Terms in circumstances where you have not complied with your obligation and where there has been all but complete silence from you …

You have not produced to us adequate reports of testing … I propose to close my file. This company, however, reserves all its rights against you for loss of profit and other damages arising out of your failure to comply with your obligations under the contract within a reasonable time or at all should you commence any proceedings whether by arbitration or otherwise and we will unhesitatingly bring all claims against you personally."

9

On 19 January 1995 the claimant's American lawyers wrote to the first defendant, marked for the attention of the second defendant as follows:

"We want to emphasize that Mr Downing does not want to arbitrate his potential dispute with Al Tameer unless he is forced to. On the contrary, he requested that you settle your differences by mutual consultation first, as required under Clause 13 of the Agreement. …"

The letter then made various proposals which it asked the first defendant to consider.

10

On 16 February 1995 the claimant's American lawyers wrote to solicitors for the first defendant referring to a telefax of 16 February which is not available, observing:

"We have noted that you consider any further discussion on this case to be a waste of time, but given the apparent strength of your client's conviction, perhaps you could take a moment to persuade us why your clients believe that they have no agreement with Mr Downing."

11

Having received no reply, on 15 June 1995 the claimant wrote to the first defendant:

"Having had no reply to my letters/requests for you to settle the difference of opinion which we have, I again request that we appoint three arbitrators to settle the dispute we have.

Please put forward three names for my consideration as arbitrators to be appointed.

Please reply within seven days."

12

In those circumstances, on 22 June 1995 the solicitors for the first defendant, Palmer Cowan, replied on its behalf:

"… We have made it perfectly clear in the past that our clients do not accept that they have or have had at any time any contractual relationship with you. They have no intention of dealing with you further and you should consider this matter closed." (emphasis added)

13

On 19 July 1996 solicitors for the claimant wrote to the first defendant's then solicitors as follows:

"We act on behalf of Mr John Downing to whom you wrote on 22 June 1995 advising that you acted on behalf of Al Tameer Establishment.

Mr Downing has instructed us to pursue a claim against your client for breach of an Agreement made between our client and yours on 22 February 1991 …

Under Clause 14 of the Agreement UK law was to apply. In the circumstances, our client has good cause of action against yours for breach of contract. Accordingly we await your proposals for settlement of our client's claim and should be pleased to receive a response within seven days failing which we shall issue proceedings.

If your client is unwilling to try to settle this matter, please confirm that you will agree to accept service of any Writ on behalf of your client."

14

On 24 July 1996 the first defendant's then solicitors replied:

"… Your client has asserted on a number of occasions that our client is in breach of contract. We have pointed out to Mr Downing that we do not share this view. Indeed, we do not consider that our client has any contractual relationship with your client.

We do not have instructions to accept service of proceedings nor do we have instructions to make any settlement proposals to you …

...

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  • Chapter VIII. Decisions of national tribunals
    • United States
    • United Nations Juridical Yearbook No. 2008, January 2008
    • 1 January 2008
    ...it Ms Fatima relied upon the decision of the Court of Appeal in Downing v Al Tameer Establishment [2002] 2 All E R (Comm) 545, [2002] EWCA Civ 721 As the Court of Appeal there stressed however, that case turned upon an analysis of its own facts which included both denial by the defendant th......

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