Paczy v Haendler & Natermann G.m.b.H.
| Jurisdiction | England & Wales |
| Judgment Date | 04 December 1980 |
| Judgment citation (vLex) | [1980] EWCA Civ J1204-5 |
| Court | Court of Appeal (Civil Division) |
| Date | 04 December 1980 |
[1980] EWCA Civ J1204-5
In The Supreme Court of Judicature
Court of Appeal
Civil Division
On Appeal from Mr. Justice Whitford
Lord Justice Buckley
Lord Justice Brightkan
MR. KENNETH ROKISON. Q. C. and MR. ROBIN JACOB (instructed by Messrs. Monier-Williams & Keeling) appeared on behalf of the Appellants.
MR. BERNARD BUDD. Q. C. and MISS MART VITORIA (instructed by Messrs. Stephenson Harwood) appeared on behalf of the Respondent.
This is an appeal from a decision of Mr. justice Whitford given on the 4th July last when he removed a stay which he had earlier imposed by an order dated 30th April, 1979 staying an action commenced by the Plaintiff, Mr. Paczy, on the ground that the dispute was one which the parties to the relevant contract had agreed should be referred to arbitration.
The contract in question was dated 23rd October, 1974. It was a contract under which the Plaintiff purported to grant a licence to the Defendant Company, a German company, to manufacture and sell airgun pellets in accordance with a method of manufacture which the Plaintiff claims to have invented. Under that agreement the Defendant Company was to pay the Plaintiff royalties on the sales of the product. Clause 12 of the contract, which incidentally supervened upon an earlier contract between tho parties relating to the same subjectmatter, but I do not think we are concerned in any way now with the earlier contract, is in these terms:
"Any dispute arising out of or in connection with this Agreement shall be settled with recourse to the Courts in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. The arbitrators shall have power to rule on their own competence and on the validity of the Agreement to submit to Arbitration."
It is common ground that that clause is an arbitration agreement which falls within the scope of Section 1 of the Arbitration Act, 1975, the arbitration agreement not being a domestic arbitration agreement as defined in that section. Subsection (1) of Section 1 of the Act of 1975 is in these terms:
"If any party to an arbitration agreement to which this section applies, or any person claiming through or under him,commences any legal proceedings in any court against any other party to the agreement, or any person claiming through or under him, in respect of any matter agreed to be referred, any party to the proceedings may at any time after appearance, and before delivering any pleadings or taking any other steps In the proceedings, apply to the court to stay the proceedings; and the court, unless satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings."
It will be observed that the section imposes a mandatory duty upon the court to stay the proceedings at law unless the case falls within the words of exception, "Unless satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed".
On the 12th October, 1978 the Plaintiff commenced an action against the Defendant Company by writ in the High Court in which he claimed, "an inquiry as to the damages sustained by the Plaintiff by reason of the Defendants' breaches of [the contract in question/, and payment of all sums found due upon taking such inquiry together with interest thereon", and an injunction to restrain the Defendants "from using confidential information the property of the Plaintiff and from selling airgun pellets in the manufacture of which such information has been used. An inquiry as to the damages sustained by the Plaintiff by reason of the Defendants' use of confidential information the property of the Plaintiff or at the Plaintiff's option an account of profits and payment of all sums found due upon taking such inquiry or account together with interestthereon" Then there are claims for ancillary relief. In that action the Plaintiff delivered a Statement of Claim, in which he claimed that the Defendant Company had breached the contract by failing to submit royalty accounts and failing to pay royalties in accordance with the contract. It was pleaded that the Plaintiff duly determined the agreement with the result that it came to an end on the 10th July, 1978, and it was alleged that since that date the Defendants had wrongfully made use of confidential information which they had obtained under the agreement. In that action the Plaintiff has obtained a legal aid certificate for the purpose of fighting the action with a nil contribution.
On the 15th December, 1978 the Defendant Company, without having served a defence or taken any other step in the action, issued a summons for a stay under Section 1 of the Arbitration Act, 1975. In support of that summons evidence was filed in the form of an affidavit of a Mr. Johnson, stating that the matters in dispute were matters within the scope of the arbitration agreement and that the Defendants were ready and willing to do and concur in all things necessary for causing the dispute to be decided by arbitration. Evidence was filed in answer in an affidavit of Mr. Fordham raising various points with which I need not deal, and stating in paragraph 6 of his affidavit that the Plaintiff was a legally aided person and that if the action were to be stayed the Plaintiff would find difficulty in meeting the costs of any arbitration proceedings as legal aid was not available for such proceedings. I draw attention to the fact that the word used there is "difficulty". That evidence was supported by evidence by the Plaintiff himself in an affidavit in which h? said that he was at the timeof swearing the affidavit unemployed and reliant on unemployment pay and on social security benefit. He refers to the fact that he has been granted legal aid for the purpose of the action with a nil contribution, and he says, "I am advised that legal aid is not available for arbitration proceedings and I would be quite unable otherwise to meet the costs of any such proceedings". So he puts it rather higher in that affidavit than Mr. Fordham had put it in his; he says that he would be quite unable to finance arbitration proceedings.
On the 21st July, 1978 the Defendants' solicitors wrote to the Plaintiff's solicitors saying:
"We have made our clients' position clear to you in earlier correspondence, and would just add that if, as you threatened last August, your client does commence proceedings, they will be vigorously defended and a counterclaim made for your client's breach."
I need not go into the nature of the counterclaim in any depth, but it is founded upon allegations that the process of manufacture of the air pellets, which was the subject-matter of the relevant contract, was not in fact a process Invented by the Plaintiff and that it was not a secret process and that the Plaintiff was not in a position to confer an exclusive licence upon the Defendant Company, and upon that basis the Defendant Company asserts that it is in a position to claim repayment of royalties which they had in fact paid before the rupture took place under the contract.
The relevant rules which govern proceedings in arbitrations of the kind of which this arbitration would form one are the rules of the International Chamber of Commerce which, so far as relevant for present purposes, provide by Article 3,paragraph 1:
"A party wishing to have recourse to arbitration by the International Chamber of Commerce shall submit its request for arbitration to the Secretariat of the Court, through its National Committee or directly. In this latter case the Secretariat shall bring the Request to the notice of the National Committee concerned.
……
2. The Request for arbitration shall inter alia contain the following information:
(a) Names in full, description, and addresses of the parties, (b) a statement of the Claimant's case, (c) the relevant agreements, and in particular the agreement to arbitrate, and such documentation or information as will serve clearly to establish the circumstances of the case, (d) all relevant particulars concerning the number of arbitrators and their choice in accordance with the provisions of Article 2 above.
"3. The Secretariat shall send a copy of the Request and the documents annexed thereto to the Defendant for his Answer."
Article k requires the Defendant to put in a defence within a limited period.
Article 5 provides that "if the Defendant wishes to make a counterclaim, he shall file the same with the Secretariat, at the same time as his Answer as provided for in Article 4."
Article 9 deals with a deposit which is required to cover the costs of the arbitration. Paragraph 1 provides:
"The court shall fix the amount of the deposit in a sum likely to cover the costs of arbitration of the claims which have been referred to it.
……
2. As a general rule, the deposits shall he paid in equal shares by the Claimant or Claimants and the Defendant or Defendants. However, any one party shall be free to pay the whole deposit in respect of the claim or the counterclaim should the other party fail to pay a share.
3. The Secretariat may make the transmission of the file to the arbitrator conditional upon the payment by the parties or one of them of the whole or part of the deposit to the International Chamber of Commerce.
4. When the terms of reference are communicated to the Court in accordance with the provisions of Article 13, the Court shall verify whether the requests for deposit have been complied with.
"The terms of reference shall only become operative and the arbitrator shall only proceed in respect of those claims...
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