Maurice J Bushell & Company v Graham Irving Born
| Jurisdiction | England & Wales |
| Judge | Mr M H Rosen |
| Judgment Date | 22 February 2017 |
| Neutral Citation | [2017] EWHC 2227 (Ch) |
| Docket Number | Case No: HC-2016-001632 |
| Court | Chancery Division |
| Date | 22 February 2017 |
[2017] EWHC 2227 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
Mr M H Rosen QC sitting as a Deputy Judge of the High Court
Case No: HC-2016-001632
Mr C Maynard appeared on behalf of the Claimant
Mr R Comiskey appeared on behalf of the Respondent
(As approved)
Mr M H Rosen QC
This judgment follows the hearing this morning of the arbitration claim relating to an arbitration under the rules of the Chartered Institute of Arbitrators, between Maurice J Bushell & Co as Claimant and a former partner, Graham Irving Born as Respondent.
(1) Background
By way of background the Respondent, Mr Born, was a partner in the Claimant firm of accountants between 1967 and 2002 when he retired and set up his own practice. Disputes arose in which the firm sought repayment of Mr Born's current account which Mr Born challenged; and Mr Born in his turn sought payment of a pension under the relevant partnership agreement.
There was also an unlimited service company in which both partners of the firm were shareholders called Maurice J Bushell & Co Ltd in respect of Mr Born sought to have his shares purchased by his former partners, the purchase price to be set off against his liability of the current account once ascertained.
The relevant arbitration, in which there were served Particulars of Claim and a Defence in the middle of 2008, gave rise to a number of issues or purported issues which in due course had to be dealt with by the accountant arbitrator, whom at this stage it is not necessary for me to name.
There were various hearings and various issues and sub-issues were settled by agreement but as it transpired a series of awards was necessary and those also gave rise to amendments to awards and also certain excursions into court.
The various awards dealt with a selection of staged issues and over a period from I think the first award in December 2011, eventually reached the third award by way of or having undergone an appeal on the first award in relation to two of the issues which have been succeeded in respect of (inaudible), which I will mention shortly. The fourth award in March 2014 dealt with interest issues.
The fifth award, which was dated 25 April 2016, dealt with most of the costs issues which had not been previously determined. In the course of that fifth award the arbitrator at paragraph 7.13 to 7.15 — this was a long award — dealt with the questions of costs by considering who had been the overall net winner in the arbitration proceedings and the effect of his decisions on the various issues which had been raised.
(2) The fifth arbitration award
The current arbitration claim addresses in particular one of those issues, in which the arbitrator found the Respondent Mr Born to be the winner. That related to his entitlement in respect of his shares in the company. This so-called "corporate issue" had been the subject of the first award and the appeal from it, together with another issue in relation to his pension entitlement, in respect of which the appeal from the first award had been unsuccessful.
The Claimant firm failed in its contention that for various reasons the respondent was not entitled to or had forfeited his pension entitlement. I was told that the capital value of that pension was eventually assessed at £112,000 odd, but it is payable by way of an annuity and some payments in that respect were taken into account in various financial calculations as to what was outstanding between the party on the accounts, particularly with the current account and cross claims and set offs.
In the fifth award, as I have mentioned, the arbitrator dealt with the various issues by way of a summary in paragraphs 7.13.1 to 7.13.8. The last sub-paragraph held that neither party had behaved unreasonably to the extent that costs should be awarded on an indemnity basis.
Having summarised the position as regards the seven main issues with which he was concerned and having very briefly stated whom he regarded as successful or not as regards to each issue, the arbitrator said in paragraphs 7.14 and 7.15 that the Claimant firm was partially successful on two issues, the Respondent Mr Born, was successful partially successful on four issues and as regards the interests issue, neither party had been successful.
The fifth award continued:
"However, because of the relative importance of the two major issues, the pension annuity and the respondent's interest in the company and the time take up by these issues, I find that the respondent, that is Mr Born, was substantially more successful than the claimant firm." (Quote unchecked)
To put this into perspective, the Claimant's submission on costs stated that there was a net amount owed to Mr Born of £9,269 (although the pension annuity was over-valued by £3,000) on figures which assumed that the Respondent was disputing whether he had any liability on his current account, which was not the case and do not take into account the £30,000 settlement of the corporate issue.
The arbitrator found that there was a net amount due to the Respondent Mr Born, after all issues were taken into account. However, the claimant states that in fact a net amount was due to them subject only to the question of the pension/annuity bonus.
(3) The appeal
The appeal brought by the Claimant in this arbitration claim is pursued under section 69 of the Arbitration Act 1996, which provides for an appeal on a question of law. The section requires leave of the court to be granted unless the parties to the arbitration all agree. Permission to appeal was granted in the present case by Snowden J on 22 July 2016.
Snowden J stated in paragraph 3 of his reasons for granting permission and extending time by one day to allow for the appeal, that he was satisfied that the arbitrator appeared to have erred in taking into account the settlement of the unfair prejudice proceedings between the respondent and some of the other partners in relation to the company which I have mentioned.
Snowden J further state that the arbitrator had not resolved the "corporate issue" raised in the arbitration in favour of the Respondent and ought not to have had regard to the disposal of the separate unfair prejudice dispute which (1) was not the subject of the arbitration and (2) was settled on express terms inter alia that it was not and should not be represented or construed as an admission of liability or wrongdoing on the part of any of the parties to the agreement or any other person.
The Respondent to the appeal, Mr Born, subsequently conceded that he arbitrator had erred in the respect identified by Snowden J when granting permission to appeal and it follows that the appeal will be allowed to that extent.
The Respondent does not concede, as Snowden J also said he was satisfied, that the arbitrator was wrong in concluding that overall the Respondent was substantially more successful than the Claimant and that his consequent exercise was obviously flawed and was an error or law. The exercise of the arbitrator's discretion as to costs was obviously flawed, but it does not follow from the nature of that flaw, as regards the result of a so-called corporate issue, that the Respondent was not more successful than the claimant in the arbitration as a whole.
The reasons why the arbitrator was wrong on the corporate issue was because, amongst other things, the claim to entitlement had been pleaded solely on the basis of an oral agreement and as had been made plain both on the appeal against the first award and in the arbitrator's own third award, there was no amendment allowed in order to put the claim in relation to the company on a wider equitable or non-contractual basis.
Moreover, the amount which the arbitrator took into account as showing that the Defendant/Respondent had won on that issue was under a particular settlement agreement, which was not part of the claim in the arbitration and which represented less than a third of the amount, or the half, as Snowden J put it, of the amount being claimed as regards that entitlement in money terms.
The Respondent having conceded the arbitrator's error in law as regards the corporate issue and who had won, it appears as though if the issue was live for any...
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