England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE BRIGGS)

		Royal Courts of Justice Strand, London, WC2A 2LL
		20th March 2013

Sir Terence Etherton:

1. Philip Hanby Limited ("PHL") has applied for permission to appeal an order made by Briggs J on 24 May 2012, by which he refused PHL permission to appeal under section 69 of the Arbitration Act 1996 ("the 1996 Act") from the second award dated 6 February 2012 of Professor Grant Jones in an arbitration between PHL and various corporate entities ("the Ringrose Partners"), named after individual solicitors carrying on business as solicitors under the title "the Ringrose Law Partnership" ("Ringrose").
2. On 24 January 2013 Briggs J refused PHL permission to appeal his order of 24 May 2012. On 8 March 2013 Longmore LJ directed that the matter be listed before a full court to determine whether the Court of Appeal has jurisdiction to entertain PHL's application for permission to appeal.

The arbitration

3. PHL is a former partner in Ringrose. On 1 April 2008 PHL and other companies executed a deed of partnership relating to the formation of Ringrose. PHL resigned from Ringrose on 30 September 2008 and executed a deed of retirement on that date. A dispute arose between PHL and the Ringrose Partners as to the sums due to and from each other, including a dispute as to the meaning and effect of the retirement deed.
4. Pursuant to an arbitration clause in the partnership deed, Professor Jones was appointed by the President of the Law Society to be the sole arbitrator to resolve the dispute. In the arbitration the Ringrose partners served points of claim to recover £7,619 from PHL. PHL served points of defence and a counterclaim for £41,177. The Ringrose partners discontinued their claim on 13 December 2010, leaving just the counterclaim in issue.
5. Following an oral hearing, on 8 June 2011 Professor Jones made what he called his "First Partial Award". In it he awarded and directed that the Ringrose Partners' interpretation of the retirement deed was to be preferred to that of PHL, so that PHL was to give credit against an agreed capital sum at 30 April 2008 of £65,177 for all payments PHL had received from Ringrose or for which it should account since 1 May 2008. On that footing PHL and the Ringrose Partners then agreed that the balance due to PHL was £14,395.
6. In his second award Professor Jones awarded the agreed sum of £14,395 to PHL. He also awarded the cost of the claim together with interest to PHL. He awarded the cost of the counterclaim to the Ringrose Partners. His reasons as to his award of costs were set out in some 13 closely printed pages attached to, and forming part of, his second award. Very briefly summarised, his reasoning so far as the costs of the counterclaim were concerned was that costs should follow "the event", and "the event" was the issue of "liability " on which he had found in favour of the Ringrose Partners on the proper interpretation of the retirement deed.
7. The costs involved in the arbitration have far exceeded the amounts which were ever in issue. The evidence indicates that the solicitors for the Ringrose Partners estimate their costs to be in the region of £109,000. This is yet another of those regrettable cases in which the mere size of the legal costs of dispute resolution is a significant factor in the perpetuation of the litigation.

The application in the High Court for permission to appeal

8. On 2 March 2012 PHL issued a claim form in the Chancery Division for an order pursuant to section 69 of the 1996 Act: 1) granting permission to appeal the decision in the second award that PHL pay the costs of the counterclaim; and 2) varying the second award so as to provide that the Ringrose Partners pay the costs of the counterclaim. That was supported by a witness statement dated 29 February 2012 of Grenville Reeves, a managing clerk in the employ of Foreman and Co, PHL's solicitors, and a skeleton argument of Mr Shantanu Majumdar, counsel.
9. In view of what I shall say in due course about the Court of Appeal's jurisdiction in relation to this matter, it is not necessary to set out in detail the various bases on which it is said, on PHL's behalf, that Professor Jones's award in favour of the Ringrose Partners of the costs of the counterclaim was wrong. The principal points made by PHL were that Professor Jones's conclusion that PHL "lost" its counterclaim was plainly wrong and that, in coming to that conclusion, Professor Jones had wrongly identified "the event" which costs should follow.
10. A further witness statement of Mr Reeves dated 12 February 2013 describes what happened in these proceedings after the issue of the claim form on 2 March 2012. The main events can be summarised as follows. In late May 2013 Mr Reeves was informed by the Ringrose Partners' solicitor that the matter had been referred to Mr Justice Briggs for consideration on the papers. On 19 July 2012 Mr Reeves was informed by PHL's counsel's clerk that she had been told by Briggs J's clerk that the Judge was then away from London on circuit but he had told his clerk that he had thought that he had dealt with the matter before leaving on circuit. In early August 2012 Mr Reeves was informed by counsel's clerk that the court could find no trace of the file and that Briggs J was on circuit until late September. On 10 August 2012 Mr Reeves was informed by his London agent, whom he had instructed to attend court personally, that the court had no record of the matter. On 31 October 2012 Mr Reeves's London agent obtained directly from Briggs J's clerk an unsealed and unsigned copy of an order dated 24 May 2012, which he then had sealed by one of the court associates.
11. That order was as follows:

"Leave to appeal under Section 69(2) of the Arbitration Act 1996 refused.

The reasons are as follows:

(1) I accept that the determination of the question will affect the rights of one or more of the parties, having regard to the substantial burden of costs, by comparison with the amounts at stake. I also accept that the question is one which the Tribunal was asked to determine.

(2) Nonetheless, on the detailed findings and reasons given in the Second Award, I am not satisfied that the Decision of the Tribunal as to costs was obviously wrong. The Tribunal had a broad discretion in relation to costs, gave full reasons for its conclusion and the Second Award discloses no error of law.

(3) The question is not one of general public importance.

(4) I do not consider that a hearing is required."

12. On 12 November 2012 Mr Reeves wrote a letter to Briggs J requesting that the Judge either review his decision not to hold an oral hearing or grant permission to appeal his decision to the Court of Appeal.
13. On about 2 January 2013 Mr Reeves was informed by his London agent that he had been told by Briggs J's clerk that the Judge could not reply to Mr Reeves's letter as the file could not be found.
14. On 9 January 2013 Mr Reeves's London agent delivered to Briggs J's clerk a copy of the claim form and the original submissions.
15. On 11 January 2012 Mr Reeves received through the DX a copy of what purports to be another sealed order of 24 May 2012 in different terms to that which Mr Reeves had earlier received. It was apparently sealed on 13 June 2012. That order simply stated that "permission to appeal under section 69(2) of the Arbitration Act 1996 be refused" but without giving any reasons.
16. By order dated 24 January 2013 and sealed on 1 February 2013 Briggs J ordered that there be no review of his decision of 24 May 2012 and that permission to appeal to the Court of Appeal be refused. Once again, there appear to be two versions of the order. There is an order in PHL's bundle for this hearing bearing a seal dated 1 February 2013, which, after a formal recital, simply stated that there be no review of the decision of 24 May 2012 and that permission to appeal to the Court of Appeal be refused. In addition there is another version, apparently sent to the parties' solicitors but unsealed, which gives the following reasons for those decisions:

"(1) There is no jurisdiction to review a decision to refuse an oral hearing

(2) In any event a re-reading of the papers discloses no good reason for doing so.

(3) There is no question of general public importance or other special reason why the matter should be considered by the Court of Appeal."

The appeal

17. PHL's Notice of Appeal states that PHL wishes to appeal Briggs J's order of 24 May 2012 and that there be substituted an order granting permission to appeal Professor Grant's second award. It contains an application for permission to appeal.
18. The Amended Grounds of Appeal state that the application for permission to appeal is made under section 16 of the Senior Courts Act 1981. The amended Notice of Appeal states that the following matters are relied upon. (1) The process by which Briggs J made his decision "was so undermined by unfairness that he did not make a valid decision under [section 69 of the 1996 Act]". (2) The Judge's decision was invalid in view of the administrative history, including "the unexplained and inordinate delay at each stage of the process", the loss of the court file, the provision of two different orders refusing permission under section 69 at a time when PHL had been told that the file was missing and that the court had no record of the application under section 69, raising serious questions about what decision was made and when and what material was before the Judge. (3) Those deficiencies lead to the reasonable inference that the Judge was thereby led into error on the merits, in particular the Judge's "fundamental misunderstanding of the relevant law" insofar as the Judge considered that the arbitrator had a "broad discretion as to costs" contrary to section 61 of the 1996 Act,the DAC report (viz. the report of the Departmental Advisory Committee on Arbitration Law on the Arbitration Bill (1996)). (4) The Chartered Institute of Arbitrators' Guidance and "the relevant jurisprudence" under the 1996 Act. (5) Those failings were compounded by the Judge's refusal of permission to appeal. (6) The Judge's reasons disclosed that he wrongly applied the test in sub-section 69(8) of the 1996 Act whereas the relevant sub-section was 69(6).

The legal principles

19. Section 69 provides as follows:

"Appeal on point of law.

(1)Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings.

An agreement to dispense with reasons for the tribunal's award shall be considered an agreement to exclude the court's jurisdiction under this section.

(2)An appeal shall not be brought under this section except—

(a) with the agreement of all the other parties to the proceedings, or

(b) with the leave of the court.

The right to appeal is also subject to the restrictions in section 70(2) and (3).

(3) Leave to appeal shall be given only if the court is satisfied—

(a) that the determination of the question will substantially affect the rights of one or more of the parties,

(b) that the question is one which the tribunal was asked to determine,

(c) that, on the basis of the findings of fact in the award—

(i) the decision of the tribunal on the question is obviously wrong, or

(ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and

(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.

(4) An application for leave to appeal under this section shall identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted.

(5) The court shall determine an application for leave to appeal under this section without a hearing unless it appears to the court that a hearing is required.

(6) The leave of the court is required for any appeal from a decision of the court under this section to grant or refuse leave to appeal.

(7) On an appeal under this section the court may by order—

(a) confirm the award,

(b) vary the award,

(c) remit the award to the tribunal, in whole or in part, for reconsideration in the light of the court's determination, or

(d) set aside the award in whole or in part.

The court shall not exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.

(8) The decision of the court on an appeal under this section shall be treated as a judgment of the court for the purposes of a further appeal.

But no such appeal lies without the leave of the court which shall not be given unless the court considers that the question is one of general importance or is one which for some other special reason should be considered by the Court of Appeal."

20. The law on the jurisdiction of the Court of Appeal to entertain appeals from a decision of the High Court judge under section 69 is now well established. The leading authorities include Henry Boot Construction (UK) Limited v Malmaison Hotel (Manchester) Limited [2001] QB 388, Athletic Union of Constantinople v The National Basketball Association (No 2) [2002] EWCA Civ 830, [2002] 1 WLR 2863, Aden Refinery Co. Limited v Ugland Management Co. Limited [1987] QB 650, North Range Shipping Limited v Seatrans Shipping Corporation [2002] EWCA Civ 405, [2002] 1 WLR 2397, Daisystar Limited v Town and Country Building Society [1992] 1 WLR 390, BLCT (13096) Limited v J Sainsbury plc [2003] EWCA Civ 884, [2004] 2 P&CR 3, CGU International Insurance plc v AstraZeneca Insurance Co Limited [2006] EWCA Civ 1340, [2007] Bus LR 162. So far as relevant to the present application (that is, an application arising out of a claim in the High Court rather than the county court) those cases are authority for the following principles:

(1) The "court'" mentioned in section 69 is the High Court: 1996 Act section 105, Henry Boot Construction, Athletic Union of Constantinople.

(2) Accordingly, only the High Court can give or refuse permission to appeal an arbitral award pursuant to section 69(2)(b): North Range Shipping Ltd at [10].

(3) Similarly, only a High Court judge can grant permission to appeal under section 69(6) a High Court judge's decision under section 69(2)(b): comp. Henry Boot Construction (a case under section 69(8)).

(4) Notwithstanding the apparent finality of the High Court's refusal of permission to appeal from the arbitral award under section 69(2)(b) where the High Court has refused permission to appeal to the Court of Appeal pursuant to section 69(6), the Court of Appeal retains a residual jurisdiction to set aside the refusal of permission under section 69(2)(b) in certain situations of unfair or improper process. Those situations are, firstly, where the High Court judge never reached something which can properly be called "a decision" at all, and, secondly, where the decision was reached through a process incompatible with the European Convention on Human Rights and Fundamental Freedoms ("the Convention"). There is doubtless a degree of overlap between those two categories. As to the first of those two categories, possible examples given (obiter) by Mustill LJ in Aden Refinery at page 662A (and endorsed in Daisystar at page 394) include a decision that was not reached through any intellectual process but by chance, whimsy or bias. As to the second category, namely decisions reached by an unfair process incompatible with the Convention, the explanation of the Court of Appeal's residual jurisdiction is that sub-section 69(2)(b) and (6) are to be interpreted, pursuant to the Human Rights Act 1998 sections 3 and 6, as applying only to Convention compliant decisions. In the case of both categories the distinction is between unfair or improper process, which may found the residual jurisdiction, on the one hand, and criticism of the substantive merits of the decision, including perversity, which is incapable of founding residual jurisdiction, on the other hand: North Range Shipping at [12], CGU International Insurance at [73], [79], [80] and [85].

(5) Unless it falls within one of those two categories in (4) above, the High Court judge's refusal of permission under section 69(2)(b) (where permission to appeal to the Court of Appeal has been refused under section 69(6)), falls outside the jurisdiction of the Court of Appeal to determine appeals from any judgment or order of the High Court pursuant to the Senior Courts Act 1981 section 16(1): Henry Boot Construction [2001] 1 QB at 396G. Where, on the other hand, the High Court judge's refusal of permission is undermined by an unfair or improper process within the two categories in (4) above, section 16 of the Senior Courts Act 1981 provides the procedural basis for an appeal invoking the residual discretion of the Court of Appeal: CGU International Insurance at [73] and [78].

(6) If the High Court judge's purported refusal of permission under section 69(2)(b) is not legally a decision within the subsection (that is to say because it falls within one or other of the two categories in (4) above, then the correct course is for the Court of Appeal to set aside the purported decision and to remit the application to the High Court for a fresh decision.

(7) The above analysis of the Court of Appeal's residual jurisdiction has been directed to the decision of the High Court judge refusing permission to appeal under section 69(2)(b) from the arbitral award, but it applies also and separately to the refusal under section 69(6) of permission to appeal to the Court of Appeal itself: comp. CGU International Insurance.

(8) Similar reasoning applies to the High Court judge's refusal of permission to appeal to the Court of Appeal pursuant to section 69(8): CGU International Insurance.

Discussion

21. We have had the advantage of written and oral submissions from Mr Majumdar, on behalf of PHL. The Ringrose Partners have chosen not to appear, but there has been drawn to our attention a letter dated 14 March 2013 from them to Mr Reeves and its enclosures, which they requested be placed before us. The letter makes a number of points in opposition to PHL's application for permission to appeal.
22. Despite Mr Majumdar's admirable and succinct oral submissions I consider that it is quite clear that: (1) this court does not have jurisdiction to grant the relief sought in the notice of appeal; and (2) there is no real prospect of PHL successfully invoking the residual discretion of the Court of Appeal to set aside Briggs J's order of 24 May 2012.
23. The Notice of Appeal states that PHL wishes this court to vary the order of 24 May 2012 by substituting an order granting permission to PHL to appeal the second award of Professor Jones. Only a High Court judge has power to grant that permission under section 69. The Notice of Appeal must, therefore, be dismissed for want of jurisdiction on that ground. Mr Majumdar accepts this analysis, but he has said that, if necessary, he would apply for permission to amend the Notice of Appeal.
24. Even if the Notice of Appeal was amended so that the relief sought in the Notice of Appeal was restricted to setting aside the order of 24 May 2012 and remitting to a High Court judge the application for permission to appeal the second award, the facts do not disclose any real prospect of successfully invoking the residual jurisdiction enabling the Court of Appeal to make such an order.
25. As I have said, the Court of Appeal's residual jurisdiction rests upon there having been a process sufficiently improper or unfair as to undermine the existence of anything that can properly be called a "decision" within section 69(2)(b) or which contravenes the Convention. It must frankly be admitted that the administrative processes within the court following the issue of the claim form on 2 March 2012 in this case leave a great deal to be desired. It is right that, as head of the Chancery Division, I should apologise to PHL, and indeed all the parties, for those failings. They have come nowhere near, however, to anything capable of giving rise to the Court of Appeal's residual jurisdiction.
26. What is necessary for that purpose is something which undermines the decision-making process itself. The failings in the present case were administrative failures. They did not touch the legitimacy of the decision-making process by which Briggs J arrived at his decision refusing permission under section 69(2). The circumstances in which the copy of the order of 24 May 2012, apparently bearing a seal dated 30 June 2012 ("the June version"), came to be made and sent are obscure. What is clear, however, from the copy of that order sealed on 31 October 2012 ("the October version") are the reasons for the Judge's decision refusing permission to appeal under section 69(2)(b). Those reasons, as seen by PHL's solicitors in the October version of 24 May 2012 order, were sufficiently stated to be compliant with Article 6 of the Convention. For what it is worth, although in my view nothing turns on the point, internal court inquiries have revealed that the records of Briggs J and his clerk show that the October version of the order of 24 May 2012 was created by him on 23 May 2012, was modified on 24 May 2012 and has been kept electronically. They have no record of the 24 May 2012 order which does not contain reasons (i.e. the June Version).
27. The most likely explanation for the June version of the order of 24 May 2012 is that one of the associates, when drawing up and sealing the order, considered that it was not necessary for the order to contain the reasons given by Briggs J in the original version drawn up and signed by him. That is all consistent with the evidence in Mr Reeves's witness statement of 12 February 2013 that Mr Reeves's London agent obtained the October version of the order directly from Briggs J's clerk, who then had it sealed by an associate. It is also consistent with the two versions of the order of 24 January 2013, one of which was signed by Briggs J and contains reasons, which is the version that would have been passed to the associates, and the formal court order sealed on 1 February 2013, which omits the reasons.
28. The fact that there were delays in obtaining an order refusing permission under section 69(2), further delays in obtaining an order on PHL's application for an oral hearing or for permission to appeal, and that the court file was reported on occasion to have been lost and that the court had no knowledge of the matter similarly do not touch the integrity of the decisions of Briggs J under section 69(2) or 69(6). They all relate to administrative inefficiencies, regrettable though they were, and did not impinge on the decision-making process itself. It is simply impossible to contend that they led to the conclusion that there were never decisions of Briggs J which could properly be described as decisions under section 69(2) and 69(6) or that those decisions were reached in breach of PHL's Convention rights.
29. Both the amended grounds of appeal and Mr Majumdar's written and oral submissions criticise Briggs J's stated reason in his order of 24 May 2012 that Professor Jones had a broad discretion as to costs. I do not agree with PHL's observations on this aspect. It seems to me that section 61 of the 1996 Act does not more than state what is currently provided in CPR 44.3(2) in respect of litigation generally. It is not necessary to address this point in particular detail. I should, however, refer to Mr Majumdar's oral amplification before us of his written submissions on this part of the appeal. He drew our attention to observations made by Longmore LJ in Republic of Kazakstan v Istil Group Limited (No. 2) [2007] EWCA Civ 471, [2008] Bus LR 878 at paragraph [11]. Longmore LJ, referring to CGU International Insurance, said as follows:

"In order to maintain the compatibility of sections 68 and 69 with the Human Rights Act and the requirement of a fair hearing in article 6 of the Convention…., the courts are allowed a very limited inroad on the finality of the judge's decision and have held that if there was any procedural unfairness in the judge's decision, in relation to the question of an appeal or, if this is different, a failure to engage with the arguments on that limited question, this court can set aside the judge's decision and consider what further order should be made…."

30. Mr Majumdar relied upon the phrase "a failure to engage with the arguments" as a way of expressing PHL's case in relation to the costs issue. He submitted, in short, that the Judge's reasoning given in the October version of the 24 May 2012 order that Professor Jones had "a broad discretion in relation to costs" did not address the specific point of criticism that "the event" selected by the arbitrator was incorrect and unjustifiable as the basis for an award of all the costs of the counterclaim in favour of the Ringrose partners.
31. I do not accept that the submission properly reflects what Longmore LJ intended to say in paragraph [11] of the Republic of Kazakstan case or that it reflects the jurisprudence and legal principles as I have identified them. The submission advanced by Mr Majumdar on this point is simply an attack on the merits of the Judge's exercise of his discretion in the light of his identification of the relevant "event". The Judge, in his reasoning given in the October version of the 24 May 2012 order, states expressly that the second award disclosed no error of law. Furthermore the Judge, who will plainly have read the supporting arguments of each side both in favour of permission to appeal and opposing it, will have been aware of the respondent's case that the arbitrator had a broad discretion and that the exercise of that discretion fell within the ambit of a proper exercise of discretion. It seems to me, therefore, that, although presented in a way consistent with the language of Longmore LJ, the reality is that this particular attack is a straightforward attack on legal merits.
32. Furthermore, it seems to me that, in referring to CGU International Insurance, Longmore LJ was doing no more than referring to the types of failure to engage which would amount to a non-decision, in particular those of which examples given by Mustill LJ in the Aden case, namely ones which were based upon whimsy, bias or the like.
33. The attack on Briggs J's order of 24 January 2013 on the ground that he wrongly applied the test in section 69(8) instead of directing his mind to section 69(6) fails on the same ground. It relates to the merits of the exercise of his discretion and not to any unfairness or impropriety in the decision-making process. So far as the latter is concerned, it is clear from the unsealed copy of the order signed by Briggs J on 24 January 2013 that he had re-read the papers before making his order on that date.
34. Finally, I should refer to Mr Majumdar's argument at the end of his oral submissions that, standing back from all the procedural inadequacies to which I have referred, this is a case in which a reasonable observer would fail to have confidence in the overall decision-making process. Insofar as this is a statement based on impression as opposed to reality, it goes well beyond any of the existing jurisprudence. In my judgment it is not a sound proposition and I reject it as a basis for impugning the order of 24 May 2012 in this case. As I have said, the jurisprudence is perfectly clear that the distinction is between, on the one hand, attacking the merits which is incapable of giving rise to the Court of Appeal's residual jurisdiction and, on the other hand, a flaw in the decision-making process which undermined and can be shown to have undermined the process itself.

Conclusion

35. For all those reasons, I would hold that the Court of Appeal has no jurisdiction to entertain PHL's Notice of Appeal in this case.

Lord Justice Longmore:

36. I agree. Ideally a judge's order on an arbitration application should be sent to the parties shortly after it is made and there should be an electronic or other record of the date when the judge's order on that application is sent to the parties.
37. Mr Majumdar, on Mr Hanby's behalf, says that it is important that litigants have confidence that the court process is fair and by implication that Mr Hanby feels he has been dealt with unfairly by reason of the events recorded by my Lord.
38. Although I have much sympathy for Mr Hanby in the position which he finds himself in, any defects in the procedure in producing the order of Briggs J cannot affect the propriety of that order when it was made on 24 May 2012. I agree with the disposition of my Lord.

Lord Justice Tomlinson:

39. I too have great sympathy for Mr Hanby but I agree with both judgments.

Order: Court of Appeal has no jurisdiction to entertain application for permission to appeal