Michael Wilson & Partners Ltd v Thomas Ian Sinclair and Another (1st and 2nd Respondents) (3) John Forster Emmott (3rd Respondent (as to costs only)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Simon,The Senior President of Tribunals,Lord Justice Patten |
| Judgment Date | 13 January 2017 |
| Neutral Citation | [2017] EWCA Civ 3 |
| Docket Number | Case Number: A3/2012/2616 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 January 2017 |
[2017] EWCA Civ 3
Lord Justice Patten
The Senior President of Tribunals
and
Lord Justice Simon
Case Number: A3/2012/2616
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COMMERCIAL COURT
The Hon Mr Justice Teare
Royal Courts of Justice
Strand, London, WC2A 2LL
Charles Samek QC, David HollandQC and Adam Solomon (instructed by direct access) for the Appellant
Mr Sinclair (in person and on behalf of the 2nd Respondent)
Philip Shepherd QC (instructed by Kerman & Co LLP) for Mr Emmott
Hearing dates: 1 and 2 November 2016
Approved Judgment
Introduction
The facts underlying this claim arose over 10 years ago. Since then the legal issues have involved the parties in litigation in three continents, a protracted arbitration and many hearings before the Commercial Court in London.
The present proceedings were begun on 12 October 2010. On 21 September 2012 they were struck out, save for a claim in debt, as an abuse of the court's process by Teare J, see Michael Wilson & Partners Limited v. Sinclair and others [2012] EWHC 2560 (Comm). The Judge gave permission to appeal and the explanation for the delayed hearing is set out in an earlier judgment of this court, see Michael Wilson & Partners Limited v. Sinclair and others [2015] EWCA Civ 774.
The nature of the claim and the issues on the appeal
In brief summary, the claimant ('MWP'), a company providing legal and consultancy services, claims against four defendants: Thomas Sinclair ('Mr Sinclair') and Sokol Holdings Incorporated ('Sokol'), who are the respondents to the appeal, and Eagle Point Investments Limited ('EPIL') and Butterfield Bank (Bahamas) Limited ('Butterfield') who are not.
MWP claims in respect of shares ('the Max shares') and cash ('the Max funds) which EPIL received from an AIM listed company ('Max'). It asserts that EPIL received the Max shares and Max funds on behalf of Mr John Emmott, a director and employee of MWP; and that Mr Emmott had acquired them in breach of contractual obligations and fiduciary duties which he owed to MWP as a partner. The claim against Mr Sinclair and Sokol ('the Sinclair defendants') is brought on the basis that Mr Emmott acquired these benefits with the knowing assistance of the Sinclair defendants, or alternatively, that the transfer of the benefits constituted the payment of a bribe or secret commission for which the Sinclair defendants are liable.
By their defence the Sinclair defendants contend that the Max shares and Max funds were received by EPIL on behalf of Mr Sinclair and not on behalf of Mr Emmott; and there was no breach of obligation owed to MWP by Mr Emmott for which they are liable.
The defendants joined Mr Emmott as a party to the litigation under CPR Part 20, and at the hearing before Teare J, he was an active participant, supporting the Sinclair defendants' application to strike out the claim against them. In the lengthy period since the judgment under appeal the Part 20 claim has been discontinued against Mr Emmott, although submissions were made on his behalf by Mr Shepherd QC without objection from Mr Samek QC, who appeared for MWP.
In order to understand the basis of the strike out application it is necessary to consider events which took place in 2006.
On 14 August 2006 (more than 4 years before the commencement of the Commercial Court action) MWP began arbitration proceedings against Mr Emmott, claiming that he received the Max shares and Max funds as a bribe or secret profit from the Sinclair defendants. By an award dated 6 April 2010, the arbitration tribunal (Lord Millett, Christopher Berry and Valerie Davies) rejected that claim, concluding that Mr Emmott had received the shares on behalf of Mr Sinclair and had no control over or a beneficial interest in them.
As the Judge expressed it at [2] of his judgment:
It is a remarkable feature of the claim brought by MWP that the central allegations made in it have already been determined against MWP in an arbitration in which MWP, Mr. Emmott and Mr. Sinclair have been involved, for the past 6 years. I use the word involved deliberately. MWP and Mr. Emmott were party to that arbitration. Mr. Sinclair was not. He did however give evidence to the arbitral tribunal. His interest in the arbitration was such that he funded Mr. Emmott's defence of the claim brought in the arbitration by MWP against Mr. Emmott. The arbitrators … held that there was no relevant breach of fiduciary duty by Mr. Emmott and that the Max shares were beneficially held by Mr. Sinclair. Notwithstanding that award (which was unsuccessfully challenged by MWP under sections 68 and 69 of the Arbitration Act 1996, see MWP v Emmott [2011] EWHC 1441 (Comm), MWP now seeks to raise the same issues in this … action. The application to strike out therefore raises interesting questions regarding the interplay between arbitration and litigation.
To put it another way, MWP's claim in the Commercial Court action is entirely inconsistent with, and contrary to the findings made in, the award to which MWP had been a party. It was on this basis that the Sinclair defendants, supported by Mr Emmott, applied to strike out the claim under CPR Part 3.4(2) or to obtain a summary disposal of the claim under CPR Part 24.2.
Although the application was advanced on a number of grounds, they succeeded on only one. The Judge concluded that to permit MWP to make the same factual allegations which it had made in the arbitration and which had been rejected by the arbitrators was an abuse of the court's process.
It is against that decision that MWP appeals.
At its most simple, the issue can be expressed as follows: whether it is an abuse of the Court's process for A to claim in legal proceedings against C, on a basis which has been decided against A in arbitration proceedings between A and B?
The circumstances in which that question is to be answered are, however, important; and there are further questions which arise on this appeal that it will be necessary to address in the course of this judgment:
(1) whether, and to what extent, the award (a) was admissible on the application before Teare J and on this appeal, and (b) would be admissible at a trial;
(2) the extent to which the abuse of process jurisdiction on which the Sinclair defendants rely applies when the prior determination is an arbitration award rather than the judgment of a court;
(3) whether the Judge was wrong, on the particular facts of this case, to conclude that the proceedings were an abuse of process; and finally,
(4) whether, if MWP were unsuccessful on the appeal, it would be entitled to an abatement of an adverse costs order made by the Judge to the extent that the costs of the Sinclair defendants included those of Mr Emmott against whom they subsequently discontinued?
The facts in more detail
The facts which are material to the appeal are set out fully in the judgment of Teare J, and can be summarised more briefly for present purposes.
MWP provided legal and business consultancy services in Kazakhstan; and until June 2006 Mr Emmott was a director and employee of the company.
Mr Sinclair is the Managing Director and a major shareholder of Sokol, a US company with interests in Kazakhstan. Sokol was a client of MWP and engaged the firm in connection with natural resource transactions in Kazakhstan, including the transaction with which the present action is principally concerned (the 'Max 1 Transaction'). Since August 2006, Butterfield has been the trustee of a trust in which Mr Emmott is interested. It is understood to own EPIL, a Bahamian company.
The Max 1 Transaction involved the purchase and on-sale by Sokol of interests in Kazakhstan oilfields; and Mr Emmott acted in connection with the transaction and played a significant role in its success.
Shortly before the conclusion of the transaction, some of those involved in the deal were rewarded by the issue of shares. In early August 2005, 134.1 million shares in Max were issued to 25 allottees (including Sokol), in accordance with instructions given by Mr Sinclair.
14.75 million of those shares (the Max shares) were issued to EPIL; and it is MWP's case that these were issued for the benefit of Mr Emmott as his reward for his involvement in the Max 1 Transaction. It contends that, since Mr Emmott was involved in the transaction as its agent and employee, the Max shares should have been accounted for, in addition to the fees paid or due under its letter of engagement with Sokol. It is MWP's case that in breach of his contractual and fiduciary obligations to MWP, he connived with the Sinclair defendants to divert the Max shares to himself (through EPIL), rather than ensuring that they were allotted to MWP.
In addition to the Max shares EPIL also received US$950,000 (the Max funds), which MWP contends also ought to have been accounted for; and that, again wrongfully and in breach of obligation, Mr Emmott diverted the Max funds to himself.
In June 2006, Mr Emmott left MWP to work for a competitor business known as 'Temujin'. MWP alleges that he conspired with two other former employees of MWP, Mr Nicholls and Mr Slater, from late 2005 to form Temujin and to take advantage of work and opportunities belonging or available to MWP. The work and opportunities included projects in which the Sinclair defendants were concerned; and the role of the Sinclair defendants in this alleged conspiracy, and their assistance and procurement of alleged breaches of contract and fiduciary duty which it involved, are the subject of another action, the Temujin action.
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