Peterson Farms Inc. v C & M Farming Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE TOMLINSON |
| Judgment Date | 05 September 2003 |
| Neutral Citation | [2003] EWHC 2298 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 05 September 2003 |
| Docket Number | 2003 Folio 327 |
[2003] EWHC 2298 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COUR
Royal Courts of Justice
Strand
London WCA 2LL
Mr Justice Tomlinson
2003 Folio 327
MR GODWIN (instructed by Lovells) appeared on behalf of the CLAIMANT.
MR FOXTON (instructed by Baker & McKenzie) appeared on behalf of the DEFENDANT.
This is an application made by the applicants, C & M Farming Limited, pursuant to section 70(7) of the Arbitration Act 1996, whereby the court is given a discretionary power to order that in circumstances where any application or appeal is brought under sections 67, 68 or 69 of that Act, the court may order that any money payable under the award shall be brought into court or otherwise secured pending the determination of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with.
The application, so far as my experience and I think that of counsel goes, is unprecedented, and raises some issues of principle as well as issues of discretion. The application has also been, if I may respectfully say so, exceptionally cogently argued on each side, and in the ordinary way I would wish to reserve my judgment in order to choose with some care the manner in which I express my conclusions, at any rate on the matters of principle. However, bearing in mind that I shall not be available to deliver any such judgment for some weeks and bearing in mind the nature of the application, it seems to me that it is probably of more assistance to the parties, both to enable them to know where they stand and to take any further steps which they may be advised, either in this jurisdiction or in other jurisdictions in which matters are also proceeding, if I give my decision straight away, together with my necessarily undigested reasons for reaching that conclusion. Furthermore, I think it appropriate to take that course since I am satisfied that, both as a matter of principle but also as a matter of discretion, having regard to the circumstances of this case, it is not appropriate that I should grant the relief sought.
The application arises out of an ICC award made on 10 th March of this year, although apparently published to the parties on 13 th March, in an arbitration in which C & M Farming ("C & M"), an Indian company as I understand it, to which I have already referred, was the claimant, and Peterson Farms Inc ("Peterson"), which I believe to be a company registered in Arkansas, was the respondent. I need not go into the facts. Suffice it to say that pursuant to a Sales Right Agreement dated 7 th September 1996 Peterson had sold to C & M certain chickens, which are referred to (whether colloquially or more advisedly, I am not sure) as grandparent stock. The idea apparently is that the stock so supplied by C & M, all of which were males, would be mated with certain female stock in India, from which would be produced yet further male stock, which in due course would be mated with other females to produce chickens and, of course, eggs. As I understand it, the problem arose because the grandparent stock supplied by Peterson under the agreement, or at any rate some part of it, proved to be infected with a virus called ALVJ. As a result of the arbitration, C & M recovered damages in the sum of US$6.7 million. That was approximately 30% or so, or perhaps a little more, of its claim, which was in total US$16.29 million, although I note that there was also a claim for punitive damages which the tribunal rejected. The contract was governed by the law of Arkansas, but was subject to ICC arbitration, the seat of which was in London. There was appointed to resolve the dispute a distinguished tribunal, consisting of Mr Julian Lew, Judge Abraham Gaffney, and a Mr Joe Hershaw.
The damages awarded by the tribunal fall naturally into two parts. Firstly, there are losses which are accepted to have been suffered by C & M Farming Limited itself, the so-called grandparent losses, which amounted to about a million dollars, together with damages for lost market share and loss of future profits. Secondly, there were awarded by the tribunal what have been called by the advocates before me parent losses, i.e. losses amounting to $5.4 million or so, which were suffered by other entities within the same group of companies as C & M, which other companies within the group were apparently the companies who would be producing the parent birds, and indeed perhaps the grandchild birds, if that is the right way to put it, and who would therefore stand potentially to suffer loss in the event that, as occurred, there was a damaging virus in the grandparent stock.
It is the recoverability of the parent losses as opposed to the grandparent losses which has given rise to a further dispute between the parties as to the jurisdiction of the tribunal, because, as I understand it, at the hearing itself the respondent, Peterson, contended that the tribunal had no jurisdiction to award against it the damages which had been suffered by companies in the group other than C & M Farming Limited, which was itself the nominal party to the Sales Right Agreement.
Following the issue of the award, Peterson accordingly issued an application, pursuant to section 67 of the Arbitration Act 1996, challenging the award, or at any rate that part of the award which gave effect to the arbitrators' conclusion on this point as made without jurisdiction. The arbitrators have concluded that they did indeed enjoy jurisdiction to award the damages claimed as having been suffered by these other companies within the group. As I understand it, before the arbitrators themselves the way in which the matter was put was that, pursuant to what has been described as the Group of Companies doctrine, the arbitrators were entitled to conclude, in the light of the circumstances surrounding the negotiation, execution and so forth of the agreement, that the mutual intention of all the parties was to bind non signatories. The arbitrators concluded, in particular at paragraph 93 of their award, that that was indeed so, but the arbitrators also concluded that it was right, in the circumstances, to conclude that in contracting with Peterson, C & M Farming Limited had, to the knowledge of Peterson, acted as an agent on behalf of all of the companies within the C & M group. The companies within the group are identified a little earlier in the award at paragraph 40.
Peterson challenge those conclusions, and it is that challenge which will form the subject matter of the proceedings under section 67 of the Act, which, it is right to point out, are proceedings which can be brought as of right without any need to obtain the leave of the court.
After the issue of the award, C & M, in relatively early course, took proceedings to seek to enforce it against Peterson. For reasons which I do not fully understand, and which were not entirely explained or attempted to be explained, those proceedings began in Georgia, but in due course they were transferred to the State of Arkansas, where Peterson is incorporated. There appears to have been a certain amount of tactical positioning so far as concerns each party's behaviour subsequent to the issue of the award, since C & M, for their part, plainly did not wish to give colour to any suggestion that the damages awarded might naturally fall into two parts, in respect of one of which there might be any question. Whereas Peterson, for its part, wished to maintain that that was so. It may be for that reason that no formal demand was made by C & M for payment of what might be regarded as the undisputed part of the award, which I should say, although it does not really matter for present purposes, is an amount slightly less than the amount of damages awarded in respect of the grandparent losses, because there was a certain amount accepted to be due the other way from C & M to Peterson Farms.
However, the position has now been reached that, subject to the relevant cheque being cleared, Peterson Farms has paid to C & M the amount awarded to it as to which there is no dispute but that the tribunal had jurisdiction to make the relevant award. Mr Godwin suggests that the delay in Peterson meeting its undisputed liability as to that part of the award is one factor which I should take into account in the exercise of my discretion, but it seems to me that although obviously I must take all factors into account, that particular factor does not, in all the circumstances, weigh very heavily, bearing in mind that the parties have also been locked in combat in the United States in relation to other matters.
Those other matters arise out of the fact that immediately following the issue of the award, indeed on the next day, March 14 th, Mr Lloyd Peterson, who is said by C & M to be the alter ego of Peterson, and who is, on any view, someone who has a very substantial interest in that company, filed a Uniform Commercial Code Financing Statement against all of the inventory, equipment and fixtures, including computer equipment, accounts receivables, general intangibles, payment intangibles, chattel paper, documents and other assets of Peterson Farms. That financing statement is apparently sufficient to perfect a lien in favour of Lloyd Peterson in respect of substantially all of Peterson Farms' tangible and intangible property other than real estate, which, as I understand it, would be superior to any lien that C & M may be able to obtain in respect of such assets under the law of Arkansas by virtue of the award which it holds in its favour.
Furthermore, on 19 th March Mr Peterson filed a mortgage in respect of...
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