A v B [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Colman J. |
| Judgment Date | 28 July 2006 |
| Date | 28 July 2006 |
| Court | Queen's Bench Division (Commercial Court) |
Queen's Bench Division (Commercial Court).
Colman J.
Barbara Dohmann QC, Clare Stanley, Adrian Briggs and Matthew Shankland (instructed by Weil Gotshal & Manges) for the claimant.
Graham Dunning QC and James Collins (instructed by Allen & Overy) for the first defendant
Michael Briggs QC, Nicholas Lavender and Toby Landau (instructed by Lewis Silkin) for the second defendant.
Shane Doyle QC (instructed by Taylor Wessing) for the third and fourth defendants.
The following cases were referred to in the judgment:
A & B v C & DUNK [1982] 1 Ll Rep 166. Abidin Daver, TheELR[1984] AC 398.
Alfred C Toepfer International GmbH v Societe Cargill FranceUNK [1997] 2 Ll Rep 98.
Al-Naimi (t/a Buildmaster Construction Services) v Islamic Press Agency Inc [2000] CLC 647.
Anglia Oils Ltd v Owners of the Marine Champion [2002] EWHC 2407 (Admiralty).
Aratra Potato Co Ltd v Egyptian Navigation Co (The El Amria)UNK [1981] 2 Ll Rep 119.
Birse Construction Ltd v St David LtdUNK [1999] BLR 194.
Brink's-MAT Ltd v ElcombeWLR [1988] 1 WLR 1350.
Buckeye Check Cashing Inc v Cardegna (2006) 546 US 440.
Donohue v Armco Inc [2002] CLC 440.
Etri Fans Ltd v NMB (UK) LtdWLR [1987] 1 WLR 1110.
HIH Casualty & General Insurance Ltd v Chase Manhattan Bank [2003] 1 CLC 358.
Law Debenture Trust Corp v Elektrim Finance BV [2005] 2 CLC 39.
Marc Rich & Co AG v AG Societa Italiana Impianti pAECAS (Case C-190/89) [1991] ECR I-3855.
Naviera Amazonica Peruana SA v Compania Internacional de Sequros de PeruUNK [1988] 1 Ll Rep 116.
Navigation Maritime Bulgare v Rustal Trading Ltd (The Ivan Zagubanski)UNK [2002] 1 Ll Rep 106.
Owens Bank Ltd v Bracco [1994] ECR I-117.
Owusu v JacksonECAS (Case C-281/02) [2005] 1 CLC 246; [2005] ECR I-1383.
Through Transport Mutual Insurance Association (Eurasia) Ltd v New India Assurance Co Ltd [2004] 2 CLC 1189.
Vale do Rio Doce Navegacao SA v Shanghai Bao Steel Ocean Shipping [2000] CLC 1200.
Van Uden Maritime BV v Kommanditgesellschaft in firma Deco-LineECAS (Case C-391/95) [1998] ECR I-7091.
Arbitration — Stay of proceedings — Service out of jurisdiction — Claim to avoid arbitration agreement and to restrain arbitrator continuing with Swiss arbitration — Claims against arbitrator within arbitration exclusion in Judgments Regulation — Agreement as to seat of arbitration analogous to exclusive jurisdiction clause — No strong grounds for English court to interfere with Swiss arbitration and decide matters of Swiss law — Court had inherent jurisdiction to stay proceedings in favour of arbitration — Discretionary factors favoured stay — Personal claims against arbitrator stayed on case management grounds — Service against other defendants out of jurisdiction set aside — Stay against arbitrator meant proceedings against other defendants not in interests of justice — No justification for joining defendants who would be entitled to stay under statute — Arbitration Act 1996, s. 9 — Council Regulation 44/2001, art. 1(2)(d).
These were applications to stay English proceedings in favour of a Swiss arbitration and to set aside service out of the jurisdiction.
The claimant (A) was the younger brother of the second defendant (C). The brothers had carried on business together until they fell out. The falling out involved disputes over the assets of a discretionary Bahamian trust (trust A) and of various companies including the fourth defendant (company E). The first defendant (B) was an English solicitor and the third defendant (D) was a Bahamian lawyer who acted from time to time as legal adviser to the brothers in relation to their commercial interests.
B had been approached to settle the dispute between the parties. He also acted as a consultant to A. Eventually an arbitration agreement had been signed by each of A, C, D and B. The agreement required a relatively complex structure of preliminary steps to be taken in respect of the temporary disposition of disputed assets, the standstill of pending proceedings, the withdrawal of criminal proceeding against A in the Bahamas and the parties' facilitating the work of the arbitrator and the procedures to be adopted in the arbitration; it was also an agreement that all outstanding disputes would be determined by B on the basis that he would be given extremely wide powers for that purpose and that the parties waived objections which they might otherwise have had to B acting or continuing to act in his capacity as sole arbitrator. The arbitration commenced with its seat in Geneva.
Just over a year later A issued proceedings against the defendants claiming a declaration that the arbitration agreement was void and had been rescinded in English and Swiss law and that all orders or awards made or purported to be made by B were void and unenforceable. A further claimed against B an injunction preventing him from continuing to take any steps as arbitrator. There were also claims for damages for breach of contract and/or duty and/or undertaking and/or pursuant to s. 2(1) and/or (2) of the Misrepresentation Act 1967 against each of B, C and D in respect of various misrepresentations said to have induced A to enter into the arbitration agreement. The damages claims included claims against B for breach of his fiduciary duty as A's solicitor. The claim against C was that he had assisted in a fraudulent scheme to obtain total control of the A group of companies and to exclude A from all rights and interests in it. The claims against company E related to moneys provided by A as security for costs in proceedings brought by that company. The proceedings were served on C and D outside the jurisdiction.
B applied for a stay on the grounds that the proceedings concerned an arbitration the seat of which, as provided for in the arbitration agreement, was Geneva and which was expressly governed by Swiss law; the matters raised in the particulars of claim fell within the scope of the arbitration agreement and should accordingly be decided by the arbitrator or were matters alleged to go to the jurisdiction of the arbitrator which should be decided by the arbitrator in the first instance, subject to any review by the Swiss courts.
C and D applied to set aside service out of the jurisdiction relying on material non-disclosure at the time of A's original application for leave to serve out, want of jurisdiction, forum non conveniens and lack of any reasonable prospect of success on the arbitration claims.
Held, granting the applications:
1. If the appropriate order was that the arbitration claims against B should be stayed to enable the arbitration to proceed, the continuation of proceedings against C and D could not be appropriate in the interests of justice. Further, if either or both of them would be entitled to a stay under s. 9 of the 1996 Act if they became parties to the proceedings, there could be no justification for the exercise of the court's discretion so as to enable them to be joined, even if it might otherwise have jurisdiction. (A & B v C & DUNK[1982] 1 Ll Rep 166 applied.)
2. The claims in the present proceedings had as their object the avoidance of the arbitration agreement and the setting aside of the orders already made by B in his capacity as arbitrator and looked at as a whole they were claims the principal object or focus of which was arbitration in the sense that they were designed to impugn the validity or existence of the arbitration agreement and the jurisdiction of the arbitrator. Therefore all those claims against B which were for relief the effect of which was to set aside the arbitration agreement, permanently stop the arbitration and/or to set aside B's arbitral orders were within the arbitration exclusion in art. 1 of Council Regulation 44/2001. The balance of the claims against B personally, the non-arbitration claims, did not fall within the exclusion.
3. The court retained an inherent jurisdiction to stay English proceedings in favour of arbitration in a case where there was an issue whether the parties entered into a binding agreement to arbitrate or whether the subject matter of the action was within the scope of the arbitration. (Etri Fans Ltd v NMB (UK) LtdWLR[1987] 1 WLR 1110andAl-Naimi v Islamic Press Agency[2000] CLC 647 applied.)
4. Whether it should be the arbitrator or the court that decided in the first instance whether the arbitration agreement should be avoided ab initio or rescinded and, if the arbitrator, what right of recourse to the Swiss courts might be available to either party who wished to challenge the arbitrator's decision would be determined in accordance with Swiss law exclusively in the Swiss courts, Geneva being the place of the seat of the arbitration. For an agreement as to the seat of an arbitration was analogous to an exclusive jurisdiction clause. It would require extremely strong grounds for the English court to interfere with the arbitration by trying the issue whether under Swiss law A was entitled to avoid the arbitration agreement, to have all the arbitrators' orders rescinded and to restrain him from proceeding further with the references. There were no such grounds and the discretionary factors were in favour of a stay. (Naviera Amazonica Peruana v Compania Internacional de Sequros de PeruUNK[1988] 1 Ll Rep 116andWeissfisch v Julius[2006] 1 CLC 424 applied.)
5. The personal claims against B were not claims which fell within the reference or which B could decide in his capacity as arbitrator. However they were inextricably bound up with the main substantive issues in the arbitration which remained to be decided. It was clearly correct to order a temporary stay of the personal claims on case management grounds pending determination of the substantive claims in the arbitration.
6. Service on C should be set aside. The structure of s. 9 of the 1996 Act left no doubt that once the existence of an arbitration agreement had been established by the applicant,...
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