England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
IN THE MATTER OF AN ARBITRATION CONDUCTED IN ACCORDANCE
WITH THE LCIA RULES

		CL-2015-000713 CL-2016-000348 Rolls Building, Fetter Lane London EC2A 2LL
		05/01/2018

CHRISTOPHER HANCOCK QC:

Introduction

1. Having given judgment in this matter, I now have to deal with an application for permission to appeal made by the Claimant ("Stockman").

The applicable test.

2. The applicable test to be applied is essentially agreed between the parties. I am to bear in mind the following:

(1) On a section 67 or 68 challenge under the 1996 Act, permission to appeal from a first instance judgment can only be granted by the Commercial Court Judge who heard the challenge: see e.g. Integral Petroleum v Melars [2016] 1 CLC 235. ?

(2) This rule is because the legislature has borne in mind that the parties, prior to any Court hearing, have already had a hearing before the tribunal of their choice. In general therefore, the philosophy underlying the 1996 Arbitration Act militates against a further appeal.

(3) Subject to these considerations, the test that I am required to apply is whether the appeal has a real prospect of success.

The issues on which permission is sought.

3. Stockman seeks permission on the following issues:

(1) The correctness of the decision in relation to the scope of the original remission, insofar as that relates to the decision that the arbitrator had jurisdiction to determine the claim for damages in addition to specific performance. Here Stockman argues that the remission did not extend to such a claim. They also contend that the decision that there was an ad hoc submission of claims for damages was wrong; and that the decision that there was a waiver of rights to object to jurisdiction was also wrong.

(2) The correctness of the decision in relation to "Functus Officio" (and the related "Variation of the Second Award" issue). Here the application is largely limited to damages in addition, but there is also one narrow point in relation to damages in lieu. Stockman argues that, having awarded specific performance, the arbitrator lost the power to award damages in lieu of specific performance; and that the Award did not reserve jurisdiction at all in relation to any claim for damages in addition to specific performance.

(3) The correctness of the decision in relation to the "Fraud Challenge". Here Stockman seeks permission to appeal the decision that Stockman suffered no substantial injustice as a result of Arricano procuring the Fifth Award by fraud, on the basis that the contention that the condition precedent was not complied with, on the facts of this case, is reasonably arguable.

4. I deal with each of these applications in turn.

The original remission.

5. Under this head, Stockman accepted that I had set out the correct principles in my judgment. The complaint made was that I had not applied those principles correctly to the facts. There is thus no question of any novel issue of law for the Court of Appeal to consider.
6. As to the application of the law to the facts, Stockman argued that:

(1) The only damages claim made prior to the first Award was for damages for invalid termination of the COA;

(2) The damages claimed for such breach were limited to legal fees and expenses;

(3) The damages claim was rejected by the arbitrator because he found that the COA had been validly terminated.

(4) That conclusion was never overturned by Arricano. When the matter was remitted, it was to deal with the question of whether the call option had been validly exercised, not whether the COA had been validly terminated.

(5) Accordingly the only damages claim extant at the time of the first Award was never remitted by Field J.

7. Stockman went on to argue that my judgment was wrong because I had failed to appreciate that its complaint went beyond an argument that the quantum of an existing damages claim had increased. Instead, it was argued, I should have concluded that the complaint was that a new cause of action had been raised which could not have been within the scope of the remission.
8. I should note, first, that Mr Collins QC very clearly, and correctly, accepted that the way in which the point was put on this application was not the way it was argued at the hearing. This in itself must militate against the grant of permission.
9. However, more importantly, in my judgment, the point is not a good one. I reach this view for the following reasons.

(1) As I noted in my judgment, when the matter went before Field J, there were essentially two matters which needed to be considered. The first was whether the arbitrator had been correct to conclude that the Call Option had not been validly exercised. The second was, if he was not correct, what further order or orders would then need to be made to give effect to his revised conclusions.

(2) What was then remitted reflected these two points. The terms of the remission made clear that the arbitrator had to consider the point that had not been properly considered before in relation to the argument as to the exercise of the Call Option; and, depending on his conclusion, had to go on to consider what followed from that. There was no limitation on the matters which needed to be considered as following from his conclusion, if it was revised.

(3) In fact, his conclusion was then revised. That in turn triggered the need to consider what orders were necessary in the light of that revised conclusion. In my judgment, this in turn led to the necessity to consider, not only the arrangements to give effect to the Call Option, but also the remedies required in the event that the exercise of the Call Option was not respected.

10. I quite accept that the stark facts of this case mean that it has been difficult to apply the agreed principles to those facts. However, in circumstances in which there is no dispute as to those principles; where there have already been two hearings in relation to the issues; and in a case where, in my judgment, the intent of the remission was clearly to ensure that all issues flowing from a decision that the Call Option had been validly exercised should then be determined by the arbitrator, I conclude that this is not a case in which there is any real prospect of success on appeal. This is clearly not a case which is appropriate for consideration by the Court of Appeal. Accordingly, I dismiss this first argument.

Ad hoc submission and waiver.

11. This conclusion means that I can deal with these points briefly, since they were alternatives to the submission based on the width of the original remission.
12. Once again, there is no question of any noew issue of law in relation to either of these matters. The question is one of application of the law to the facts. That again makes it less fit for the Court of Appeal.
13. Stockman argues that, in relation to both of these points, there cannot in fact have been an ad hoc reference or a waiver because the specific reference made in the correspondence at the time was to a claim for damages in lieu of specific performance and thus did not embrace a claim for damages in addition to specific performance. In response to the suggestion that what was being referred was the dispute in relation to the Althor transaction, they argued that in fact the damages claim related not to the transfer of the shares, but to the dissipation of assets in the company.
14. Arricano responded by saying that they referred the matters then known to them, and that this could not be taken as excluding aspects of the matter which thereafter came to light. I agree with Arricano that the reference cannot be taken to be limited in the manner Stockman suggest, and I do not think that either of these points have any real prospect of success. Hence I would have refused permission on these grounds quite apart from the question of the width of the initial remission.

Functus officio.

15. Next, Stockman contended that my judgment was incorrect in relation to the finding that the arbitrator was not functus officio following his Second Award. Under this head, two points were made. These arguments were independent of any findings on the scope of the initial remission, and presupposed that the arbitrator did have jurisdiction to deal with claims for damages as at the time of his Second Award.
16. First, they argued that the arbitrator was functus in relation to the claim for damages in lieu of specific performance, because, having granted specific performance, he could not grant damages in place of specific performance. This was so despite his reservation of jurisdiction to deal with the damages claim. His jurisdiction to award damages came to an end when he elected to award specific performance.
17. I do not accept this argument. The arbitrator specifically reserved his jurisdiction in relation to this element of the claim, having given permission to amend to add it: see paragraph 168 of the Second Award. Essentially, therefore, in my view, the Award on this was a provisional one. Mr Collins QC very fairly accepted that a conditional or provisional Award was possible, but argued that this was not such an Award. That is of course a matter of construction of the Award. In short, I disagree with Stockman's suggested construction, and I do not think that Stockman has any real prospect of success on this point. I therefore refuse permission to appeal.
18. Stockman's second argument related to the claim for damages in addition to specific performance. Here, in common with the arbitrator, I found that the arbitrator retained jurisdiction in relation to the claim if and insofar as his directions in relation to the escrow arrangements were not complied with.
19. Stockman, in response, argued that the relevant paragraph of the Second Award (paragraph 166(d)) was confined to dealing with the mechanics of any escrow arrangement or the identification of the third party with whom the money was to be deposited. Again, in my judgment, as a matter of the true construction of the Award, this is too limited a reading of this paragraph. The arbitrator reserved to himself, as he found, jurisdiction to revisit all matters in the event that the agreement contemplated in this paragraph of the Award was not reached. Again, therefore, I refuse permission to appeal on this ground.

Fraud and substantial injustice.

20. Finally, Stockman sought permission to appeal in relation to my refusal to remit the Fifth Award, on the grounds that Stockman had not established substantial injustice.
21. Once again, the test to be applied was, effectively, common ground between the parties. The question is whether the argument that Stockman wished the arbitrator to consider was reasonably arguable.
22. The first point that I have to consider is Stockman's submission that I have effectively usurped the role of the arbitrator in deciding this point. However, in my judgment, this will always be the case where the Court decides not to remit because a point is not reasonably arguable. The real question I have to consider is thus whether the argument that Stockman wishes the arbitrator to consider – ie whether there was a failure to comply with a condition precedent by reason of the terms on which the deposit was paid – is not reasonably arguable.
23. Whilst accepting that this question had to be determined as at the moment when the condition is said to have been satisfied, then Stockman argued that evidence of what happened thereafter might be relevant in answering this question. Here, it was argued that the requirements for compliance included not merely the fact of the deposit of monies, but also the independence of the third parties with whom it was deposited, and the terms on which it was deposited, including the question of whether it was deposited on terms that it be available to be released to Stockman. Here, there was no satisfactory evidence that these conditions had been complied with as at the relevant date.
24. Arricano, for its part, argued, firstly, that the only ground on which any application to Court had been made was that the monies, whilst paid as at the relevant date, were thereafter withdrawn, and it was not now open to Stockman to seek to raise further grounds on which it was said that the condition precedent had not been complied with. Secondly, it was argued, as it had been at the hearing, that it was quite clear that the arbitrator would reject these arguments, since he had firmly rejected the submission that there had been a fundamental breach of the contract by virtue of the withdrawal of the monies.
25. In my judgment, once again, this point has no real prospect of success. Here, Stockman's case was clearly that, had the arbitrator been told the truth about the fact of the withdrawals, he would have held that there was a failure to comply with the condition precedent. In my judgment, this is clearly not so. I agree with Arricano that Stockman are now seeking to raise new points, in a vain attempt to get round the fact that their original complaint could not reasonably succeed.