Nihal Mohammed Kamal Brake and Another v Patley Wood Farm LLP
| Jurisdiction | England & Wales |
| Judge | Mr Tim Kerr QC |
| Judgment Date | 10 November 2014 |
| Neutral Citation | [2014] EWHC 4192 (Ch) |
| Docket Number | Case No: HC13E05350 |
| Court | Chancery Division |
| Date | 10 November 2014 |
[2014] EWHC 4192 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Rolls Building
7 Rolls Buildings
Fetter Lane, London
EC4A 1NL
Mr Tim Kerr QC
Sitting as a Deputy Judge of the High Court
Case No: HC13E05350
Mrs Nihal Brake appeared in person on behalf of the Claimants
Mr Jonathan Gavaghan (instructed by Lester Aldridge QC) appeared on behalf of the Defendant
Approved Judgment
There is before me an application by Mr and Mrs Brake brought on 10 December 2013 by means of an arbitration claim under sections 67 and 68 of the Arbitration Act 1996 ("the 1996 Act"). In the application the following is sought: that what is described as an "award" of Mr Michael Lee, arbitrator, dated 12 November 2013, also described in the notice of application as "the jurisdiction order", be set aside in its entirety; and in the alternative relief is sought remitting certain matters to Mr Lee. The application is opposed by Mr Gavaghan of counsel, and has been very well presented by Mrs Brake on behalf of herself and her husband.
The background to this matter arises from an arbitration by Mr Lee, dissolving a partnership constituted by a partnership agreement. The full background can be found in a number of judgments of this court (including one of mine earlier this year given in April 2014 after a hearing in early March 2014). I shall assume in this judgment that the reader has access to the judgment of Peter Smith J given on 18 December 2013 ( [2013] EWHC 4035 (Ch)) and of myself given on 25 April 2014 ( [2014] EWHC 1439 (Ch)). I shall not repeat the full background history insofar as it is set out in those judgments. I shall refer to the defendant as "the LLP".
The grounds of the application, in essence, are that Mr Lee exceeded his jurisdiction, bringing the matter within section 67 of the 1996 Act, and/or that there was a serious irregularity causing substantial injustice within the rubric of section 68 of that Act. Mrs Brake's fundamental argument was that the order or direction of Mr Lee made on 12 November 2013, which is the subject of this challenge, was "an award" within the 1996 Act and that, by making that order, Mr Lee usurped the role of a Mr Bunker, an accountant.
Mr Bunker was appointed by the Institute of Chartered Accountants in England and Wales ("the ICAEW") to determine a dispute that arose under clause 9.4 of the partnership agreement at the instance of Mr and Mrs Brake. In broad terms, clause 9.4 was the provision that enabled a partner to require the appointment of an accountant to determine an accounting dispute arising in the course of the partnership.
Mrs Brake argued forcefully that clause 9.4 is, in effect, being overridden by the approach of Mr Lee, and in particular by the order which the Brakes now seek to challenge. That order, dated 12 November 2013, stated as follows:
"In view of the Respondents failure to comply with my previous directions in respect of the delivery of the partnership financial records to Ritchie Phillips together with an authority for the partnership accountant to discuss the partnership's financial affairs with Saffery Champness I now make the following peremptory order:
By midday on Monday 18 November 2013 the Respondents are directed to deliver the partnership financial records to Ritchie Phillips together with a written authority to Mr Stuart Ritchie to give to Saffery Champness such information and documents as Saffery Champness require."
It is described as, and is, a peremptory order. That means that it may be enforced in this court via section 42 of the 1996 Act. It was in April 2012 that the LLP required the appointment of an arbitrator under the rules of the London Court of International Arbitration ("LCIA") leading to the appointment of Mr Lee. The detailed background and process followed in that arbitration leading to Mr Lee's main award dissolving the partnership, and his costs award, can be found in my earlier judgment of April 2014 mentioned above.
During the course of the arbitration leading to Mr Lee's main award, issued by him in June 2013, Mrs Brake wrote to Mr Lee and the LLP saying that the Brakes intended to require the appointment of an arbitrator under clause 9.4 of the partnership agreement. That then happened. There was then a lengthy argument in correspondence, from about May 2013 to March 2014, on the issue as to whether Mr Bunker's appointment was correctly made and whether he had any jurisdiction to determine any dispute under the partnership agreement. The LLP took the position that he did not, and maintained that position in correspondence and at a subsequent hearing before Birss J (about which it is unnecessary to say more).
It was in the middle of that argument that Mr Lee made the peremptory order quoted above. Mrs Brake argued that Mr Lee had unfairly favoured the position of the LLP by preferring its suggested candidate, Saffery Champness, and in particular a Mr Wareham of that firm, as the appointed expert to assist him, Mr Lee, in the course of conducting a dissolution account pursuant to his main award; while the Brakes, for their part, assisted by Mr Peter Williams of Michelmores Solicitors, advocated that Mr Bunker should deal with outstanding accounting matters. Mrs Brake complained that at a hearing on 26 September 2013, Mr Lee had permitted or encouraged Mr Mason of BDO, the firm of accountants instructed by the LLP, to attend the hearing but had not invited the attendance of Mr Stuart Ritchie, who had in the past acted as the partnership's accountant.
Mrs Brake said, in effect, that there was an inequality of arms at that hearing. She also complained that the effective exclusion or undermining of Mr Bunker's role, notwithstanding his valid appointment under clause 9.4 of the partnership agreement, meant that the accounting exercise was unnecessarily expensive because of the additional costs arising from the involvement of the LCIA, Mr Lee and Saffery Champness; and that if Mr Bunker's role had been properly recognised, those costs could have been avoided and the exercise conducted more economically.
Mr Gavaghan, for the LLP, pointed out that the arbitration started under clause 9.4 o the partnership agreement, leading to the appointment of Mr Bunker, was only commenced in late 2012 when a trial of the arbitration before Mr Lee was set to commence (though it was subsequently postponed) in February 2013. Mr Gavaghan submitted that the present application was in the nature of a collateral attack on Mr Lee's main award, upheld by me in my earlier judgment, in which he ordered that the partnership be dissolved and a dissolution account taken.
It followed inexorably, submitted Mr Gavaghan, both under section 37(1)(a)(i) of the 1996 Act and under rule 21.1(a) of the LCIA rules, that the arbitrator had the power to appoint an expert accountant to assist him...
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