Peterson Farms Inc. v C & M Farming Ltd (No 2)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Langley |
| Judgment Date | 04 February 2004 |
| Neutral Citation | [2004] EWHC 121 (Comm) |
| Docket Number | Case No:2003 Folio 327 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 04 February 2004 |
[2004] EWHC 121 (Comm)
The Honourable Mr Justice Langley
Case No:2003 Folio 327
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr D. Foxton (instructed by Messrs Baker & McKenzie) for the Claimant
Mr A. Marriott QC (instructed by Messrs Debevoise & Plimpton LLP) for the Defendant
Hearing dates: 26 and 27 th January 2004
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Hon. Mr Justice Langley
THE APPLICATION
The Claimant ("Peterson") seeks a declaration that certain findings in an ICC Arbitration Award were made without jurisdiction. The application is made under section 67 of the Arbitration Act 1996 which, so far as material, provides that:
"(1) A party to arbitral proceedings may … apply to the court –
(a) …
(b) for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction.
A party may lose the right to object (see section 73) ….
(2) ….
(3) On an application under this section challenging an award of the arbitral tribunal as to its substantive jurisdiction, the court may by order –
(a) …
(b) …
(c) set aside the award in whole or in part.
(4) …."
Section 73, so far as material, provides:
"(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 … tribunal … 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
The Arbitration involved a claim for damages by the Respondent ("C&M") as Claimant against Peterson as Respondent arising out of the sale by Peterson of live poultry. C&M is an Indian company. It changed its name from "Nasik" in the course of the material events. Peterson is a company organised under the laws of the State of Arkansas, USA.
The sales of poultry were made under a written contract entitled "Sales Right Agreement" made on 7 September 1996 ("the Agreement"). Clause 17 of the Agreement provided that:
"All disputes … which may arise between the parties out of or in relation to or in connection with this agreement or for the breach thereof, shall be finally settled by International Chamber of Commerce, UK."
Clause 19 of the Agreement provided:
"This agreement shall be interpreted and construed in accordance with the laws of Arkansas, USA."
The poultry was infected with an avian virus. C&M claimed some $US 16m in damages. C&M initiated the arbitration by a Request dated 27 April 2000. The appointed tribunal was Joel Hirschhorn, Judge Abraham Gafni and Julian D.M. Lew as Chairman. Terms of Reference were executed on 24 September 2001. The hearing took place in London between 1 and 11 July 2002. The Final Award, the subject of the present application, was dated 10 March 2003.
THE AWARD
The tribunal awarded C&M damages in the sum of US$ 6,747,217.
Under the Agreement Peterson sold to C&M male "grandparent" birds. C&M mated the birds to produce "parent" males which it would sell on as hatching eggs or day-old chicks. Those sales were made both to other "C&M group entities" (60%) and (40%) to other purchasers. The other C&M group entities used the parent males to breed with parent females to produce broiler chicks which they would sell on as chicks or hatching eggs.
The award of damages was made up of two parts:
i) Losses suffered by C&M itself, consisting of lost sales because of the reduced numbers of parent male chicks and hatching eggs it was able to produce and lost market share and loss of future profits. The total of this award ("the grandparent losses") was US$ 1,222,448. There is no challenge to this part of the award.
ii) Losses suffered by the other C&M group entities consisting also of lost sales, lost market share and loss of future profits ("the parent losses") in the total sum of US$ 5,524,769. It is this part of the award which is the subject of Peterson's challenge. Essentially it is Peterson's submission that the tribunal had no jurisdiction to entertain claims by entities which were not named as parties to the Agreement.
THE BASIS OF THE DISPUTED AWARD
The jurisdiction issue was before the tribunal itself. Entirely sensibly, it was agreed that the issue should be dealt with in the course of the hearing and in the award. C&M, in its submissions, took the point that Peterson was out of time in making the objection under section 31 which provides (so far as material) that:
"(1) ….
(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 … (2) if it considers the delay justified
(4) Where an objection is duly taken to the tribunal's substantive jurisdiction and the Tribunal has power to rule on its own jurisdiction, it may –
(a) …
(b) deal with the objection in its award on the merits.
If the parties agree which of these courses the Tribunal should take, the Tribunal shall proceed accordingly.
(5) …."
The tribunal had jurisdiction to rule on its own substantial jurisdiction as there was no contrary agreement: section 30(1). It followed the course in section 31(4)(b) and dealt with jurisdiction in its award on the merits: paragraphs 78 to 102 and Section Fa of the Final Award. It ruled that it did have jurisdiction to consider and determine the damages claims of the other entities not named as parties to the Agreement. Nothing was said in the Final Award about delay in raising the jurisdiction issue (in contrast to another jurisdiction issue on which Peterson succeeded).
The tribunal decided that it had jurisdiction on two bases:
i) First, and primarily, by application of what has come to be known as "the group of companies doctrine". The "doctrine" finds its origin in the interim award of an ICC tribunal dated 23 September 1982 in case No 4131 in which the Claimants were a number of companies in the Dow Chemical "group"; and
ii) Second, on the basis that C&M entered into the Agreement as agent for the other entities in the group who were thus parties to the Agreement and the arbitration clause contained in it.
THE ISSUES ON THE APPEAL
There is a dispute as to the nature of the hearing itself. Mr Foxton, for Peterson, submits that an application under section 67 is a re-hearing of the jurisdiction issue. Mr Marriott QC, for C&M, submits it is only a review. Notwithstanding that submission and understandably, Mr Marriott made submissions on the wider basis as well. Indeed C&M served evidence on Arkansas law from a Ms. Stewart for this appeal which was not before the tribunal. Peterson responded with a witness statement from a Mr Hollingsworth. Both are well qualified practising lawyers in Arkansas. Neither party sought to or did serve any further factual evidence.
Mr Marriott seeks to repeat the submission made to but not addressed by the tribunal that Peterson's delay precludes or should preclude the jurisdiction issue being raised at all. Mr Foxton submits that it is not open to Mr Marriott to take the point and in any event it has no merit.
The first substantive issue concerns the approach of the tribunal itself to the issue of jurisdiction. Mr Marriott submits the tribunal was entitled to follow the approach it did. Mr Foxton submits that it went wrong from the very first step in its reasoning by rejecting the application of Arkansas law to the issue.
The other issues relate to the application and validity or otherwise of "the group of companies doctrine"; the case based on agency; a further case advanced by C&M based on equitable estoppel and an ad hoc submission by Peterson. The case on equitable estoppel also raised an issue as to whether or not C&M could rely on certain passages in Ms Stewart's witness statement (paragraphs 23 to 26) or had agreed in correspondence not to do so. I ruled that C&M had indeed agreed not to pursue those matters and my reasons for doing so are set out in this judgment.
There was also some debate about the costs award made by the tribunal. In the event it was effectively agreed at the end of the hearing that should I grant Peterson's application the matter would have to be remitted back to the tribunal to be re-considered unless the parties were able to reach some other agreement. C&M was not willing to agree to my having jurisdiction to deal with the matter.
After the hearing, Mr Foxton wrote to me (copied to C&M's solicitors) to submit that he had been in error in conceding that the court did not have power to vary the costs order made by the tribunal without the consent of both parties. Mr Foxton referred to section 67(3) of the 1996 Act. In response C&M's solicitors maintained that the concession was correct and in any event that the agreement made at the conclusion of the hearing should be honoured. Whilst I think Mr Foxton is right on the powers of the court I also think in the circumstances in which the matter arose that it would be wrong and unfair to C&M to depart from what was agreed. That...
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