Michael Wilson & Partners, Ltd v John Forster Emmott
| Jurisdiction | England & Wales |
| Judge | Mr Justice Burton |
| Judgment Date | 26 June 2015 |
| Neutral Citation | [2015] EWHC 2152 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 26 June 2015 |
| Docket Number | Case No: 2014 FOLIO 1210 |
2015 EWHC 2152 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Burton
Case No: 2014 FOLIO 1210
Nicholas Lavender QC (instructed by Michael Wilson & Partners, Limited and also by its director and employee Mr Wilson) for the Claimant
David Holland QC (instructed by Michael Wilson & Partners, Limited under the Public Access Scheme)
Philip Shepherd QC (instructed by Kerman & Co LLP) for the Defendant
Hearing dates: 25 and 26 June 2015
APPROVED JUDGMENT
This has been another round in the seemingly endless saga of disputes between the Claimant, Michael Wilson & Partners, Limited ("MWP") of which Mr Michael Wilson is the sole continuing Principal, and John Emmott ("the Defendant"). The partnership between MWP and the Defendant constituted by an Agreement dated 8 October 2011 ("the Emmott Agreement"), ended when the Defendant left in June 2006. After allowance made for breaches of fiduciary duty by the Defendant, substantial sums have been found payable to the Defendant by MWP on a valuation as at 31 December 2005 of that partnership by Arbitrators, Mr Christopher Berry, Lord Millett and Ms Valerie Davies. The relevant awards for my purposes are a Second Interim Award ("SIA") made on 19 February 2010, unsuccessfully appealed by MWP [2011] EWHC 1441 (Comm), and now a third (Quantum) award ("TQA") made on 5 September 2014, subject to a Clarification pursuant to s.57 of the Arbitration Act 1996 ("the 1996 Act") dated 30 October 2014. I do not need to mention or deal with the plethora of other proceedings that have taken place between the parties, including the making and discharging of freezing orders in favour of MWP prior to the Arbitration and the making and continuation of freezing orders in favour of the Defendant subsequent to the SIA, and extended worldwide after the TQA, a successful contempt motion brought by the Defendant against MWP, and numerous interlocutory applications for security for costs and proposed amendments.
A substantial number of points has been sought to be brought forward by MWP in respect of the TQA, which, as a result of an order of Flaux J on 16 February 2015 and then with the assistance of new counsel Nicholas Lavender QC, with David Holland QC, have been slimmed down to the four matters which have been argued before me by them and, for the Defendant, by Mr Philip Shepherd QC, who has remained counsel for the Defendant throughout. The applications before me are by reference to ss. 67, 68 and 69 of the 1996 Act, and so far as concerns s.69, Flaux J has ordered that the application for permission to appeal be heard together with the other applications, on the basis that if permission were granted this would also be the substantive appeal.
Clause 3.4 of the Emmott Agreement
The first ground, which was argued by Mr Holland, is by way of a challenge to the jurisdiction of the Arbitrators pursuant to s.67. It is also put in the alternative by MWP by reference to ss.68 and 69, but Mr Holland accepts that, insofar as it relates to an assertion of lack of jurisdiction in the Arbitrators, it must be tested by reference to ss.31 and 73 of the 1996 Act. s.31 reads, in material part, as follows:
" (1) An objection that the arbitral tribunal lacks substantive jurisdiction at the outset of the proceedings must be raised by a party not later than the time he takes the first step in the proceedings to contest the merits of any matter in relation to which he challenges the tribunal's jurisdiction.
A party is not precluded from raising such an objection by the fact that he has appointed or participated in the appointment of an arbitrator.
(2) Any objection during the course of the arbitral proceedings that the arbitral tribunal is exceeding its substantive jurisdiction must be made as soon as possible after the matter alleged to be beyond its jurisdiction is raised.
(3) The arbitral tribunal may admit an objection later than the time specified in subsection ( 1) or (2) if it considers the delay justified."
s.73 reads, in material part:
"(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Part, any objection—
(a) that the tribunal lacks substantive jurisdiction… he may not raise that objection later, before the tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection."
The Arbitration was carried out pursuant to clause 5.2 of the Emmott Agreement. MWP allege that the Arbitrators have no jurisdiction to address the dispute relating to the value of the Defendant's interest in the partnership, because it should have been dealt with pursuant to clause 3, which is said to oust or override clause 5.2 in the event, and reads in material part as follows:
"3. Termination.
3.1 Either Party shall be entitled to terminate this Agreement at its discretion by not less than six (6) months' notice in writing to the other;
3.2 In the event that either Party commits any material breach of this Agreement, then the other Party may (if such breach is capable of remedy) give a notice to such Party requiring it to remedy the same within a period of five (5) working days…
3.3 In the event of any termination by Mr Emmott or by MWP as set out in either Clause 3. 1 or 3.2 above, Mr Emmott shall promptly resign as a Director of MWP…
3.4 Furthermore, Mr Emmott shall offer his Shares for sale and transfer to MWP (or such other person or entity MWP may nominate) at a price and on terms and conditions to be negotiated and agreed between the Parties or, in the absence of agreement, to be determined by a panel of experts, comprising [then it describes which experts are to be comprised in the panel] acting as experts and not as arbitrators and whose decision shall be final and binding on the Parties. On agreement or conclusion of such valuation, MWP (or its nominees) shall purchase the Shares of Mr Emmott and Mr Emmott shall sell his Shares in MWP…
3.5 In addition to the provisions as set out in Clauses 3.2–3.4 above, Mr Emmott and MWP shall calculate, negotiate and seek to resolve in an amicable manner all financial matters and issues then outstanding between them so that a set of books and accounts are drawn up in order to calculate the respective amounts owing by MWP to Mr Emmott or vice-versa as of the date of termination of this Agreement. If the Parties are unable to reach agreement on such matters, the issues in dispute shall be referred for final decision to the experts as referred to in Clause 3.4 above."
The point arose in the pleadings prior to the SIA in September 2008, when in paragraph 83 of the Amended Defence and Counterclaim the following was pleaded:
"83. Accordingly, Mr Emmott is entitled to the 33% of shares in MWP. MWP is obliged to give effect to that entitlement by either (a) effecting a transfer of shares in MWP to MR Emmott (or his nominee) from Mr Wilson or his nominee or (b) causing new shares in MWP to be issued (if available) and allotted to Mr Emmott (or his nominee).
In either event, so that Mr Emmott (or his nominee) becomes the holder of 33% of the shares in MWP.
84. MWP has refused, despite repeated request and despite Mr Emmott's contractual right to it under Clause 3.7 of the agreement to deliver out to Mr Emmott a true copy of its share register and Mr Emmott is unable to ascertain who appears there as a shareholder of MWP.
…
90. In repudiatory breach of Clauses 2.2 and 2.3 of the Agreement, MWP has refused to transfer or issue to Mr Emmott the 33% of holding in MWP to which he is entitled."
MWP's response was in paragraph 31 of the Amended Reply and Defence to Counterclaim:
"31. Further and for the avoidance of doubt it is averred that, in the event that Mr Emmott was entitled to shares in MWP (which is denied), he is obliged pursuant to clause 3.4 of the Agreement to offer them for sale at a value, if not agreed, determined by three accountants (as described in clause 3.4) acting as experts, whose decision is to be final and binding. The value of such shares is not a matter for this arbitration, the parties having agreed another method (under clause 3.4) by which to achieve such valuation."
In the SIA the Arbitrators recorded at paragraph 3.20, that, as the Defendant knew, the shares had not actually been issued or transferred to him, and recorded in paragraph 3.25 MWP's case that the Defendant's entitlement to a shareholding had not arisen. In valuing the partnership, the Arbitrators awarded a sum of money in lieu of the shares, effectively as it was subsequently put, by way of equitable or Lord Cairns Act damages in lieu of specific performance, for the reasons set out in paragraph 8.10 to 8.13 of the SIA and in particular as explained in paragraphs 8.11 and 8.12 as follows:
"… we are not minded to make such an order, for three reasons. In the first place, MWP is a "quasi-partnership" company, and the partnership has clearly come to an end. We would not contemplate making an order which would have the effect of continuing the relationship, even as mere co-shareholders, any more than we would contemplate allowing the full relationship established by the Emmott Agreement to continue. It would be...
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