Kanoria and Others v Guinness
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE LONGMORE,THE MASTER OF THE ROLLS,LORD JUSTICE MAY |
| Judgment Date | 21 February 2006 |
| Neutral Citation | [2006] EWCA Civ 138,[2006] EWCA Civ 222 |
| Docket Number | A3/2005/2673/A,A3/2005/2673 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 February 2006 |
[2006] EWCA Civ 138
Lord Justice Longmore
A3/2005/2673/A
MR T YOUNG QC (instructed by Myers, Fletcher & Gordon Solicitors, LONDON W6 7NJ) appeared on behalf of the Appellant.
MR L FLANNERY (instructed by Messrs Howes Percival, The Guildyard, 51 Colegate, NORWICH NR3 1DD) appeared on behalf of the Respondent.
The order of the court will be that the appellant is to produce security for costs in the sum of £15,000 in a form reasonably satisfactory to the respondent by 4 o'clock on 14 February; otherwise, the appeal will be stayed pending further order. I should say that it will be apparent that I have rejected the argument that it should be confined to the costs of enforcement in India because on the evidence available to the court at the moment, it does appear that Mr Kanoria is saying that he may well not have sufficient funds to answer an order for costs. Of course if that is so, then proceedings to recover costs from India would be pointless and so I have endeavoured to find a middle way and the date will remain as 20/21 February.
Order: Application granted.
[2006] EWCA Civ 222
The Lord Chief Justice of England and Wales
(Lord Phillips of Worth Matravers)
The Master of The Rolls
(Sir Anthony Clarke)
Lord Justice May
A3/2005/2673
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MRS JUSTICE GLOSTER DBE)
Royal Courts of Justice
The Strand
London
WC2A 2LL
MR LOUIS FLANNERY (instructed by Messrs Howes Percival)
appeared on behalf of THE APPELLANTS
MR TIMOTHY YOUNG QC (instructed by Messrs Myers Fletcher & Gordon)
appeared on behalf of THE RESPONDENT
Judgement
Tuesday, 21 February 2006
THE LORD CHIEF JUSTICE
This is an appeal against the order of Gloster J, dated 18 July 2005, setting aside an order made in the Commercial Court by Thomas LJ, dated 15 August 2003, granting permission under section 101(2) of the Arbitration Act 1996 for enforcement of an arbitral award in favour of the appellants made by a sole arbitrator, Mr Justice Chandrachud, a former Chief Justice of India, in Mumbai, India, dated 5 April 2003, under the rules of the Indian Council for Arbitration (the "ICA") . It is brought with permission granted by Longmore LJ.
The appellants were named as the first, second and third claimants in the arbitration. The two companies are incorporated under the laws of India.
The sole respondent to this appeal, Mr Guinness, was one of the two respondents in the arbitration, and the first defendant to the claim to enforce the arbitral award. The second defendant to that claim, Corporate Partnerships Ltd ("CPL") , was the second respondent in the arbitration. It has not sought to challenge enforcement of the award. CPL is a United Kingdom company, of which Mr Guinness is the major shareholder.
The case arises out of a business agreement dated 4 October 1999, which agreement includes an arbitration agreement. Mr Kanoria, Mr Guinness, Kanoria Information Technology and Systems Ltd (which later changed its name to eSols Worldwide Ltd) and CPL were parties to this agreement. It was governed by Indian law.
The business agreement was for the recruitment of software personnel in India to be provided to clients in the United Kingdom. The agreement provided for the creation, by Mr Kanoria and Mr Guinness, of an Indian joint venture company, to be called Indekka, which would be responsible for recruiting the software personnel, with assistance from eSols. CPL was to set up a new division, the Information Technology Division (they never in fact did so) , which was to be responsible for placing the recruits under contract in the United Kingdom with United Kingdom clients. CPL was to account to Indekka for the revenues it received, less certain allowances that it was entitled to retain to cover its costs. A shareholders' agreement of the same date was entered into between Mr Kanoria and Mr Guinness, governing their respective holdings in the joint venture company.
The arbitration agreement in the business agreement provided that the seat of the arbitration should be Mumbai, India, and that the arbitration should be conducted under the rules of the ICA by a sole arbitrator, applying Indian law.
On 25 May 2001, Mr Guinness had the misfortune to undergo a radical retropubic prostatectomy, having been diagnosed with cancer. In due course he went home to convalesce.
On 11 October 2001, Mr Guinness received from ICA notice of arbitration. While this purported to be brought pursuant to the business agreement, Indekka was named as the third claimant, although that company had not been incorporated at the time of the arbitration agreement.
The statement of claim alleged, among other things, that CPL had failed to pay a total of £144,571 sterling to Indekka pursuant to the business agreement. In particular, it alleged that CPL had made excessive deductions. No allegation was made that Mr Guinness had failed to make any payments to Indekka or to anybody else, although another allegation (which is not material to these proceedings) was made against Mr Guinness. Then, without more, the pleading stated:
"The claimants, in the aforesaid facts and circumstances, submit that Claimant No 3 is entitled to claim and recover from the respondents [my emphasis] and the respondents are bound and liable to pay to Claimant No 3, the aforesaid sum of GBP 144,571 together with interest thereon at the rate of 24% pa with effect from 15th March 2001 …."
The pleading subsequently made it quite plain that it deliberately averred that each of the respondents was liable in relation to this sum.
On 11 October 2001, Mr Guinness wrote to ICA referring to the documents that he had received in a letter which ended:
"Due to health reasons I will not be in the office for twelve weeks from today as I am having a course of radiotherapy for cancer. I will not therefore be in a position to respond until the New Year."
ICA wrote back extending time to 31 December 2001.
On 1 February 2002, Mr Guinness wrote to the ICA as follows:
"I refer to previous correspondence in this matter. I have not been in a position to respond and probably will not be able to due to my cancer not being cured. I have not worked since last March and will not be returning to work again. I am convalescing at the moment.
Regrettably I have not therefore studied the bundle of documents sent to me or responded to them. I mean no disrespect by this action but I am incapable at the present time of working.
I would however like to make two points as when I opened the bundle last year it was obvious what it was.
Firstly, any financial agreement was between the claimant(s) and Corporate Partnerships Limited and not me personally."
The second point is of no relevance.
In due course, after a number of adjournments, the arbitration took place in Mr Guinness' absence. An award was issued dated 5 April 2003. After reciting particulars of the claim made, the award continued:
"14. The Claimants, by their Advocates' letter dated 25th May 2001 addressed to both the Respondents, called upon them to pay the aforesaid sum of GBP 144,571 together with interest thereon at the rate of 24% per annum and also called upon Respondent No 1 to resist from employing Indian Software Personnel and recruiting their services to clients in the UK through entities other than Respondent No 2. [That relates to the other allegation made against Mr Guinness.] By the said letter dated 25th May 2001, the Claimants also called upon the Respondents to make available to the Claimants the income and expenditure statement for the period after 14th March 2001 up to date. The Respondents have not sent any reply to the said notice.
15. On the basis of the evidence of Shri Shriprakash Jain and the uncontradicted documentary evidence, I direct that the Respondents shall pay the sum of GBP 144,571 to Claimant No 3. The said amount shall be paid with interest at 12% per annum from 15th March 2001 till payment or realisation. I do not propose to pass any further order on merits."
The arbitrator then awarded the claimants the costs of the arbitration.
On 31 July 2003, the appellants issued their claim to enforce the arbitral award in the Commercial Court, supported by a witness statement from a solicitor, Mr Sigardsson. They claimed enforcement on the grounds (i) that India is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 ("the Convention") ; (ii) that the award was properly made according to the arbitration agreement and the rules of the ICA; and (iii) that the defendants had not complied with the award.
On 15 August 2003, Thomas LJ granted permission to enforce the award. This was served on 20 August 2003, whereupon, on 3 September 2003, Mr Guinness filed his application that the order of Thomas LJ be set aside pursuant to CPR 62.18(9) (a) . He relied on section 103(2) (a) , (c) , (d) , (f) and section 103(3) of the Act.
15. Section 103, headed "Refusal of recognition or...
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