Tang Chung Wah (Aka Alan Tang) and Another v Grant Thornton International Ltd and Others

Hearing date: 3rd July 2012

The nature of the dispute

The Claimants apply for an order under section 67 of the Arbitration Act 1996 ("the 1996 Act") that the final award ("the Final Award") of an arbitral tribunal ("the Tribunal") appointed by the London Court of International Arbitration ("the LCIA") made on 26 March 2012 (reference no. 111853) is of no effect because the Tribunal did not have substantive jurisdiction.

The claim was brought under Part 8 of the Civil Procedure Rules on 23 April 2012 and thus within 28 days of the date of the Final Award. The Claim Form was amended and re-issued on 13 May 2012.

The basis for the claim is the Claimants' contention that certain provisions of the relevant agreement pursuant to which the Request for Arbitration was made to the LCIA on 18 April 2011 stipulated steps to be taken as a condition precedent to any arbitral process and that such steps were not taken prior to that Request (or at all).

The question determinative of the claim is a familiar one but it is not without difficulty: it is whether the provisions in issue had enforceable contractual effect and operated as conditions precedent such that the Tribunal cannot have had jurisdiction, and was wrong in its determination that it had.

There have been a number of cases in which the enforceability of clauses providing for mediation or conciliation prior to arbitration or proceedings in court has been considered. These suggest, exemplify and explain various requirements to be fulfilled if such a clause can be given contractual effect; but the essential question is whether their content is sufficiently precise and certain to be enforced. Like an agreement to agree, a provision for dispute resolution which lacks sufficient detail as to the process required to be undertaken cannot be enforced. I return to discuss these authorities later.

The parties and the background

The Claimants are two of the partners in a partnership governed by Hong Kong law called JBPB & Co ("JBPB"). (Strictly, references to JBPB should be taken to be to all partners in JBPB at the time when the LCIA arbitration commenced.)

The First Defendant ("GTIL") is a private company incorporated in England. GTIL is the "umbrella" organisation for the Grant Thornton network of accountancy and audit firms: it does not itself provide services to clients.

The claims and counterclaims made in the arbitration to which these proceedings relate ("the Arbitration") arose from GTIL's expulsion of JBPB (then known as Grant Thornton in Hong Kong ("GTHK")) from GTIL's network in late 2010. It is common ground that the merits of the underlying dispute are not relevant to the issues now before me, and I say no more in that regard.

The Second to Ninth Defendants ("the Majority Partners"), together with the Tenth Defendant ("Mr Chow"), were at all material times partners in JBPB. They were represented separately from the Claimants at the Arbitration by the firm of Hart Giles and were referred to as the Majority Partners in the Final Award.

GTIL and the Majority Partners did not contest the Tribunal's jurisdiction at the Arbitration and asked that the Tribunal's decision that it had jurisdiction be affirmed. The Claimants did contest jurisdiction and now seek to set aside the Award accordingly.

Rosenblatt, who represented the Claimants in the Arbitration, also represented Mr Chow until September 2011. However, they then ceased to do so: and after September 2011 Mr Chow has not been represented and he has had no involvement in the Arbitration. Nor was he represented before me. Indeed, when the matter came on for hearing it was unclear whether he had been served or what his position was. I agreed nevertheless to continue with the hearing, subject to Mr Chow being provided with a transcript and afforded the opportunity at a subsequent date (fixed for 6 August 2012) to make any further submissions he wished. In fact, I subsequently was informed (and provided with an e-mail from Mr Chow to confirm) that Mr Chow did not wish to participate and did not intend to acknowledge service, though in the e-mail he also stated that he agreed with the Claimants that the Tribunal had no jurisdiction. The further hearing fixed for 6 August 2012 was abandoned as being unnecessary.

To return to the history of the matter, the Majority Partners had, by late October 2011, and after a mediation attended by all relevant parties, purported to enter into a settlement agreement with GTIL and others by way of deed ("the Settlement Deed", which was stated to be effective as from 28 September 2011). The Settlement Deed, which is governed by English law, provided for the Arbitration and other proceedings in the High Court of Hong Kong SAR to be discontinued or withdrawn.

The Claimants are not parties to the Settlement Deed. On 6 October 2011, they sought and obtained in Hong Kong an injunction to prevent a meeting being convened of all JBPB partners to adopt it. The injunction was subsequently lifted and at the meeting which then took place the Settlement Deed was ratified by the Majority Partners. The validity of the Settlement Deed is now the subject of proceedings in the High Court of Hong Kong SAR. Again it is common ground that the merits of those proceedings are not relevant to my determination.

The reference to arbitration and the Tribunal's Final Award

What is relevant is that on 9 November 2011 GTIL and the Majority Partners asked the Tribunal to terminate the Arbitration, on the basis that the dispute had been settled. The Claimants contested this. On 18 November 2011 the Tribunal ruled that the issue whether the dispute had been settled should be decided at a hearing on 2 February 2012.

At that hearing the Claimants contended that the Tribunal had no jurisdiction to determine the issue. The Tribunal thus had to deal with and rule upon the issue of its own jurisdiction, as it was empowered and required to do by sections 30 and 31 of the 1996 Act.

The Tribunal described the issues requiring its decision in the following terms:

(1) Does the Tribunal have jurisdiction to determine this dispute?

(2) If the Tribunal has jurisdiction, does the Settlement Deed preclude the [Claimants] from continuing their claims against GTIL?

(3) Deciding the claims for costs of the various parties.

The Final Award addresses each in turn, identifying the matter of jurisdiction as the threshold issue.

The Tribunal held that:

(1) there was no contractually enforceable condition precedent to prevent it having jurisdiction, that the arbitration clause had been validly invoked and that accordingly it did have such jurisdiction (paragraph 4.18 of the Final Award);

(2) the Settlement Deed required the Arbitration to be terminated; the Tribunal deciding to leave open whether nevertheless the Claimants could pursue proceedings against the Majority Partners under an agreement called the Deed of Termination (which is governed by the laws of Hong Kong, contains no arbitration clause and which could therefore not be the subject of the Arbitration): (paragraphs 5.14 and 5.16 of the Final Award);

(3) GTIL should be entitled to specified costs against the Claimants but the Majority Partners should not be entitled to recover their costs from the Claimants (paragraph 7 of the Final Award).

As previously indicated, only the first issue arises for my adjudication, and that issue is as to the substantive jurisdiction of the Tribunal.

The basis of this application

There is no dispute that, unlike appeals on a point of law under section 69 of the 1996 Act (where leave of the Court is required), challenges to the substantive jurisdiction of an arbitral tribunal with a view to declaring any award to be of no effect under section 67 of the 1996 Act may (pursuant to section 67(1)) be made as of right.

Sub-section 67(3) of the 1996 Act empowers the Court to (a) confirm or (b) vary or (c) set aside the award in whole or in part.

It is not disputed that, following Dallah Estate & Tourism Holding Co v Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46, the proper approach for the Court is to treat the challenge to an arbitral tribunal's jurisdiction as a rehearing rather than a review. Indeed, as Lord Hope put it (at paragraph 30), "The tribunal's own view of its jurisdiction has no legal or evidential value…however full was the evidence before it and however carefully deliberated was its conclusion."

As Lord Hope went on to explain (at paragraph 31), however, that is not to say that a court seised of the issue "will not examine, both carefully and with interest, the reasoning of an arbitral tribunal which has undertaken a similar examination. Courts welcome useful assistance." It is simply that the court is neither bound nor restricted by the tribunal's reasoning and findings.

The MFA and its relevant provisions