LAW
An overview of recent key court cases
ROUND-UP THE DOCTRINE OF ABUSE OF PROCESS IN RELATION TO A PREVIOUS ARBITRAL AWARD
THE CASE ○ ARBITRATION
Michael Wilson & Partners Ltd v Sinclair & Ors [2012] EWHC 2560 (Comm)
MR EMMOTT WAS A DIRECTOR and employee of Michael Wilson & Partners (MWP). His employment contract provided for arbitration in London. MWP brought arbitral proceedings against Mr Emmott alleging breach of contract and fiduciary duty. MWP claimed, among other things, that Mr Emmott participated in a conspiracy to divert work to a competitor business and that certain shares had been issued to EPIL, a Bahamian company owned by Mr Emmott, for the benefit of Mr Emmott, and these shares should have come to MWP. Mr Emmott contended that the shares were in fact intended for a non-party to the arbitration agreement (Mr Sinclair, a managing director and major shareholder of Sokol) and that they were simply warehoused by EPIL. MWP invited Mr Sinclair to join the arbitration as a party in order that the claims in respect of the shares could be determined conclusively as between all parties concerned. Mr Sinclair refused and yet participated as a witness in the arbitration and funded Mr Emmott’s defence. The tribunal found that there was no breach of fiduciary duty by Mr Emmott and that the shares were beneficially held by Mr Sinclair. Subsequently, EPIL transferred the shares to Mr Sinclair. MWP sought to raise the same issues in the High Court against Mr Sinclair and Sokol (the Sinclair Defendants). The Sinclair Defendants applied to strike out MWP’s claim on the basis that the shares were never received by EPIL on behalf of Mr Emmott. They alleged that they were received by EPIL on behalf of Mr Sinclair and there was therefore no breach of fiduciary duty by Mr Emmott. The application to strike out was supported by Mr Emmott.
The application was opposed by MWP. The Sinclair Defendants maintained that these issues had already been determined against MWP in the arbitration, and that it was an abuse of the process of the court to permit MWP to make a collateral attack on the tribunal’s award. MWP argued that the doctrine of abuse of process was not applicable to this case since Mr Sinclair was not a party to the arbitration and could not rely on it.
circumstances of this case (in particular Mr Sinclair’s involvement in the arbitration) led the court to conclude that the doctrine of abuse of process applied to this case and MWP’s claim was struck out.
○ THE JUDGMENT
The full judgment is available at:
The court held that the underlying factual allegations concerning the conduct of Mr Emmott mirrored those of the arbitration. Although Mr Sinclair was not a party to the arbitration, and court proceedings were therefore the only means by which MWP could bring its claim against Mr Sinclair, the special
○ WHAT IT MEANS
This case provides guidance on the doctrine of abuse of process and collateral attacks on a previous determination in cases where the relevant determination was made by an arbitration tribunal. → www.bailii.org/ew/cases/EWHC/ Comm/2012/2560.html
The court concluded that the doctrine of abuse of process applied to this case
THE LIMITS OF CONFIDENTIALITY IN ARBITRAL PROCEEDINGS
THE CASE ○ ARBITRATION
Gray Construction Ltd v Harley Haddow LLP [2012] Scottish Court of Session CSOH 92
A DISPUTE AROSE BETWEEN Gray Construction Ltd (Gray) and Harley Haddow LLP (Harley) concerning the sums Gray had expended in an arbitration with the National House Building Council (NHBC). The arbitration settled following Gray’s payment to NHBC of £110,000 and it sought to recover from Harley that sum, one-half of the arbitrator’s charges, fees and other expenses in the dispute with NHBC. Harley sought disclosure of the documents concerning the subject matter of the arbitration, including the parties’ pleadings and the terms on which the arbitration settled. The parties had agreed that disclosure of such documents could be granted on the basis that Gray would lodge the documents relating to the arbitration in a confidential envelope so that the court could determine whether to order the disclosure. Harley applied to the court for permission to open the confidential envelope. Gray opposed the motion on the grounds that it would produce an affidavit by Mrs Webster, the solicitor who had acted for it in the arbitration with NHBC and in its settlement, which, according to Gray, would suffice since her evidence could be tested on cross-examination. Harley’s defender disagreed, arguing it was not sufficient as it had a right to prepare for the proof of evidence, including cross-examination, and that it needed to see documents relevant to assessing the reasonableness of the settlement. The parties were prepared to proceed for the purposes of this application on the basis that confidentiality extended to all documents produced or created by or on 8
behalf of the parties in connection with the arbitration. ○ THE JUDGMENT
The court held that there was an implied obligation of confidentiality arising out of the nature of arbitration. The court further held that, under Scottish law, public interest can override such an obligation. If the documents are essential to the action, the court will normally order the production of such documents, but if they are not essential to the action or if the information can be recovered elsewhere without breaching a confidence, the court may exercise its discretion to refuse to order disclosure. In this case, the court decided that disclosure of the documents was necessary to allow Harley to prepare for its proof.
○ WHAT IT MEANS
The case provides a useful illustration as to the circumstances in which the court will override the obligation of confidentiality in arbitration proceedings. The full judgment is available at:
→ www.bailii.org/scot/cases/ ScotCS/2012/2012CSOH92.html Both reports by Tony Marks FCIArb, Director of Legal Services and Julio César Betancourt MCIArb, Head of Research and Academic Affairs at CIArb
The court held that, under Scottish law, public interest can override an obligation of confidentiality
THERESOLVER | May 2013
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