Virdee v Virdi

LORD JUSTICE BROOKE: This is a very unhappy dispute between two brothers who are members of the Sikh community who are both solicitors. Disputes arose between them in 1998 which gave rise to an arbitration agreement, to the terms of which I will refer in due course. Unhappily it is common ground that although the arbitrators produced an award, this award must be set aside. Linked litigation, which arose to some extent out of the disputes between the two brothers, led to a very long High Court case before Patten J in which he gave judgment on 15th March 2002. Mr Davinder Singh Virdee, the appellant, had previously instructed Mr Michael Black QC, who appeared for him in front of His Honour Judge Hallgarten QC at the Central London County Court and settled the skeleton argument in support of the appeal. Mr Virdee is no longer able to afford Mr Black's services and has appeared in person. His brother, Amritpal Singh Virdi, formerly instructed Messrs Penningtons, who instructed Mr Patrick Hamlin of counsel. But, following the High Court battle, which proved to be extremely expensive for him, his solicitors came off the record and thereafter he was conducting the response to this appeal in person.

The appeal was called on for hearing at 10.30. We were assured by Mr Virdee, the appellant, that his brother had been given notice of the hearing, and it appeared, from a telephone call which was made by a member of the court staff to his brother's office, that his brother was indeed aware of the hearing. We adjourned between 10.30 and 11.15 in order to give his brother a chance to appear, if that was his wish. He did not appear and I am now giving judgment. I started giving judgment at noon. We considered it appropriate to proceed with the matter in his absence as we were completely satisfied that he had had notice of the hearing.

It is unfortunate that we have not had the assistance of counsel on each side because the appeal raises a preliminary point on the jurisdiction of this court which would have been of general interest to practitioners if we had had the opportunity of hearing it argued by counsel on both sides. As it is, we have had a brief commentary by Mr Black in a letter when he was apprised of the point, and we have also had the opportunity of reading a skeleton argument prepared by Mr Hamlin of counsel before his instructions were withdrawn.

Given that we have not had the benefit of counsel's arguments on both sides, although we have had access to the material to which I have referred, this case should not be regarded as binding precedent in the sense that, if the matter comes before the court again, the court should not have the opportunity of considering it and hearing full argument on it free from the shackles of precedent. In all the circumstances, however, we must, of course, deal with the point now on the material which is in front of us.

It arises in this way. The application, originally made to the High Court and then transferred to the Mercantile List of the Central London County Court, was originally an application to revoke the award made by the previous arbitrators, to revoke their appointment as arbitrators and to appoint new arbitrators. That application was made expressly under sections 67 and 68 of the Arbitration Act 1996. Correspondence then followed between the parties in which it was quite clear that the respondent did not oppose the revocation of the authority of the previous arbitral tribunal or the revocation of its award, but the parties were unable to agree on the make up of the new arbitral panel and they were also unable to agree on aspects of the procedure which the new panel should follow. In those circumstances, an amended application was made to the Central London County Court, to which the proceedings had now been transferred, which contained, by amendment, two new applications for relief. By a new paragraph 1(a), the applicant sought:

The matter was argued before Judge Hallgarten QC on 18th March 2002. He gave directions which were in due course set out in an order which was drawn up on 23rd April 2002. The first five paragraphs of the order were directed by consent. In effect, they included the removal of the previous arbitrators; the setting aside of the whole of the purported award of some of the arbitrators under section 67 of the Act because the Tribunal did not have substantive jurisdiction; setting aside the award under section 68 of the Act as the award was declared to be of no effect; and an order under section 18 of the Act reconstituting the arbitral tribunal and setting out four terms:

One then came to the items which could not be agreed and on which the judge made rulings, some of which Mr Virdee seeks to appeal. I read out his last five orders in turn:

The three items to which Mr Virdee, the appellant, took exception are paragraphs 6, 9 and 10. He wished to argue that the newly appointed arbitrators must be members of the Sikh religion, he wished to argue that the arbitration agreement on its proper interpretation excluded legal representation and he wished to argue that the arbitration agreement, on its proper interpretation excluded any possibility of the Tribunal making an order relating to legal costs. He also wished to challenge an observation which had been made by the judge during the course of argument, which was not carried forward into his order, that this was a case in which, on the proper interpretation of the arbitration agreement, an appeal to the court on a point of law under section 69 of the 1996 Act was excluded.

When the application for permission to appeal came before Mance LJ on 28th May 2002, he granted limited permission to appeal. He said:

On 28th May, unknown to Mance LJ, a division of this court gave judgment in the case of the Athletic Union of Constantinople v The National Basketball Association and Others [2002] EWCA Civ 830. The Master of the Rolls gave the only judgment, with which Robert Walker and Clarke LJJ agreed. That was a matter in which Rix LJ had given permission to appeal from a judgment of Mr Richard Field QC, sitting as a Deputy Judge in the Commercial Court, in relation to a challenge to an arbitral award. An application was made before this court to set aside Rix LJ's order under CPR 52.9. Lord Phillips observed that the court was given power to set aside a grant of permission to appeal under that rule, but it would only exercise those powers in exceptional circumstances.

During the course of his judgment, Lord Phillips observed that this was a case in which the Deputy Judge had made a decision under section 67 of the Arbitration Act, and, for the reasons set out in his judgment, he was satisfied that, given that the Deputy Judge did not grant permission to appeal under section 67(4) of the Act, this court had no jurisdiction to hear the appeal. He followed the earlier decision of this court in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [2001] 1 QB 388, which was a case concerned with section 69(8) of the Arbitration Act.

When this point was brought to Mance LJ's attention he said, in a written note dated 30th June, that, having considered the letter by Messrs Pennington for the respondents and the response written by the appellant's firm quoting the observations made by Mr Black QC on the point, he saw some force in an argument that he had no jurisdiction to grant permission to appeal in respect of ground (1), that was the appointment of the new arbitrators. He said: "However, the point is contentious". He was not sure that ground (2) raised quite the same considerations. He said:

Following that direction, the court received a skeleton argument as to the jurisdictional point from Mr Hamlin, who was then instructed on behalf of Mr Virdi, and we have had the opportunity to consider those submissions. We have had no similar input from Mr Black, apart from the short comments in the letter to which I have referred, Mr Virdee being without funds to continue to instruct him. We have heard Mr Virdee on the first jurisdictional point this morning. He had little to add to the points made by Mr Black in writing.

It appears to me that the appointment of the new arbitral tribunal and the definition the characteristics of those who could serve on the new tribunal were fairly and squarely caught by section 18(5) of the Arbitration Act 1996. The judge had been invited to revoke the appointments of the previous arbitrator to make any necessary arbitration appointment itself. The jurisdiction of the court was invoked under section 18, and, although in section 27 the vacancy of a member of an arbitral tribunal was also mentioned, this case appears to fall fairly and squarely into the ambit of section 18 of the Act.

For those reasons, I am satisfied that this court has no jurisdiction to consider the first ground of appeal from the judge's order, the judge himself having refused permission. It is therefore not necessary for us to consider the reasons why the judge decided that it was not essential for members of the new arbitral tribunal to be members of the Sikh community or whether any mistake was made under section 19 of the Act under which the court should have due regard to any agreement of the parties as to the qualifications required of the arbitrators. Parliament has made it completely clear that in this respect the decision of the judge is to be final, unless the judge himself considers that there are matters which are fit to be considered by the Court of Appeal so as itself to grant leave.

The other matters raised in the grounds of appeal fall into a rather different category, and we did not invite Mr Virdee to address us on them.

Part I of the Arbitration Act contains, on many occasions, restrictions on the right of appeal to the Court of Appeal, and these restrictions take different forms. However, the relief that Mr Virdee was seeking in relation to directions from the judge as to whether legal representation should be allowed, and as to whether there should be any power to direct the costs between the parties, do not fall within the language of any of the sections of the Arbitration Act. I have recited the application which was made to the court under the new paragraph (4) of the amended application. It is noticeable that no reference was made to the jurisdiction of the court under any particular section when that relief was sought, and no objection was taken to the jurisdiction of the court by the other side. As a matter of form, no answer was submitted in response to the amended application and the matter came before Judge Hallgarten for directions in the absence of an answer.

At all events, the parties were content that he should interpret the agreement so as to put the arbitration back on regular lines, resolving the matters in dispute between the parties. But, as I have said, the parties were not invoking the express jurisdiction of the court on any of the sections of the Arbitration Act when asking for the judge's help in this respect. In Inco Europe Ltd v First Choice Distribution [2000] 1 WLR 586 Lord Nicholls of Birkenhead, with whose speech the other members of the House of Lords agreed, has ruled that if there is no express provision made in the Arbitration Act barring a right of appeal which would otherwise be available under the Supreme Court Act 1981, then the Arbitration Act itself should not be read as excluding any such right of access to the Court of Appeal. On the face of it, therefore, if it is right that the Arbitration Act itself does not have a provision barring access to this court in relation to the kind of relief which was being sought from Judge Hallgarten, then the ordinary rules as to access to this court should apply.

But for a statutory exclusion, this court would therefore have jurisdiction to hear an appeal from the order of Judge Hallgarten, subject, being a final decision in the multi-track, subject to the provisions as to the need for permission to appeal which are set out in CPR Part 52. For those reasons, I am satisfied that this court does have jurisdiction to consider grounds (2), (3) and (4) of the grounds of appeal. I must re-emphasise that this is not a matter on which we have had the opportunity of hearing argument from counsel in court.

The first matter we have to consider, then, is the matter on which Mance LJ did grant leave, which is whether the arbitration agreement, as amended by the consent order of the judge, excluded a right to legal representation. For this purpose I must go back to the agreement itself and read quite substantial parts of it. The agreement recites as follows:

Subject to a provision relating to mediation, which was deleted by consent and which I will not read, paragraph [3] reads as follows:

What stayed in paragraph [6] were these words:

In his judgment Judge Hallgarten dealt with the question of legal representation in these terms:

I have read the judge's ruling on costs as well as the judge's ruling on legal representation because it appears to me that they are fairly closely connected.

When he refused permission to appeal the judge said this:

Section 36 of the 1996 Act provides:

The respondent seeks to support the reasons given by the judge. He argues that there was no express exclusion of legal representation and that there should not be an implied exclusion without persuasive evidence of agreement. Four points were raised: first, what Judge Hallgarten said when refusing permission to appeal; second, if representation was to be excluded, the agreement could (and should) in clear words have so stated; third this is a claim worth (on the appellant's evidence) some £1.5 million and involves issues of company trust law; fourth, the fact that the agreement contemplates the parties representing themselves is not to be seen as an agreement that they will not seek to be represented should they later consider such representation to be appropriate.

Mr Virdee today has drawn us, as did Mr Black when he settled his skeleton argument on his client's behalf, to three features of the arbitration agreement, all of which, he submits, point to the parties appearing by themselves and not incurring the costs of legal representation. The first is clause 3, which provides that the parties shall be invited to an agreed meeting to make written and verbal representations to the committee on all the matters involved. It is argued that there is no reference to legal representation in that context. Second, the committee is to hear these representations and also any further representations and then make its further directions. Third, paragraph 9 provides that the final submissions shall be made personally by DSV and ASV and the witnesses would not be present. The appellants argue that the whole tenor of the agreement provides that this is an arbitration agreement of the same type (except that the money involved is far larger) as that provided in statutory form in the small claims track where neither party is represented by lawyers or entitled to ask for legal costs against each other and the matter is to be dealt with informally. In the context of this arbitration agreement it would be an arbitration conducted under the auspices of the Sikh temple by members of the temple in an informal way and without the heavy costs of lawyers on either side and the risks, if a party lost, of an order being made to pay the costs of the other side.

I have been influenced not only by the informality of the arbitration agreement which the parties were envisaging, but also, and in particular, by the reference to the parties making such representations as they consider relevant or necessary of their own accord and making the final submissions personally. In my judgment, on the proper interpretation of this agreement, it was not envisaged that the parties should be free from the outset to instruct lawyers to appear on their behalf. The procedure of the Tribunal will be very much a matter for the Tribunal when it is appointed, and I would not like this general ruling to suggest that, supposing a difficult point of law arose during the course of the hearing, the Tribunal itself, after hearing submissions by the parties, might not, given its case management powers, direct that on that issue they should hear legal argument, even though the argument would only be addressed to that issue, because they would be bound by the terms of the agreement that the final submissions must be made by the parties personally. We have not heard argument on that specific point, but I am quite satisfied that the judge's order as drawn up by the court goes beyond what the parties intended by their agreement, and that the agreement never envisaged that the party might be free of its own option to instruct lawyers from the outset of the proceedings. To that extent I would allow this appeal.

So far as the third point is concerned, it seems to me that this follows my view on the second point. I would grant permission to appeal. I consider the point is properly arguable. Given that I am satisfied that there is no power for the parties to instruct lawyers of their own choice, the question about the costs of the lawyers on the other side falls away. Given that the parties have agreed that the Chairman of the Tribunal should be appointed by the President of the Law Society and be entitled to charge fees for his services as a legally qualified Chairman, inevitably the parties would, in the ordinary way, have to undertake jointly to bear his fees, and it must be within the jurisdiction of the Tribunal to determine, when it makes the award, where those fees should finally rest. If the Tribunal were to permit legal argument of any particular issue -- that point has not yet arisen -- then it might be that the Tribunal would consider that the costs of that issue should follow the event of that issue, but the Tribunal would first hear argument on the matter. Subject to that, it appears to me that this point falls away and the whole of the declaration under paragraph 10 of the order falls away.

In relation to the fourth point, the appellant has already sought leave to appeal on a point of law against the order made by the arbitrators under this agreement. He submitted that he was entitled to do this because what was happening was so obviously bad that it had to be set aside. In my judgment, this arbitration agreement cannot be interpreted so as to exclude access to the court under a point of law under section 69 of the Arbitration Act, and I would refuse permission to appeal on that point.

Accordingly, in my judgment the court should declare that it has no jurisdiction to grant relief on the first ground of appeal, but to vary the order made by the judge in appropriate terms on the second and third grounds of appeal. It should refuse permission to appeal on the fourth ground.

LORD JUSTICE BUXTON: I agree. I add only two very short comments of my own. First, so far as jurisdiction is concerned, it is clear that the Arbitration Act carefully specifies those cases in which the leave of the court is required before an appeal can be brought to this court. One of those cases is to be found in section 18(5) of the Act relating to the appointment of arbitrators. It was to section 18 that the applicant specifically appealed, as my Lord has said, when he brought his amended application before the court below. That necessarily carried with it the limitation imposed by section 18(5).

So far as the other matters that are sought to be ventilated before this court are concerned, it is notable that in the careful skeleton argument on the point prepared by Mr Hamlin, to which my Lord has already referred, it was not suggested that there were direct provisions in the Arbitration Act referring to the question of legal representation or costs or to the exclusion agreement under section 69. What was sought to be argued there was that those matters were in some way contingent upon, and part of, the application with regard to the appointment of arbitrators. I am not persuaded that that is so, and I doubt whether I would have been persuaded even if we had had the benefit of oral argument on that point. That, however, underlines that the Act does not address the jurisdiction of this court with regard to those matters, and that is why I agree with the view my Lord has taken as to our jurisdiction on those issues.

Within those specific issues, I wish to address only the question of legal representation because we are differing from the learned judge on that point.

When the judge said at page 6, line 4 of his judgment:

Subject to those two comments, which are no more than limited footnotes to my Lord's judgment, I entirely agree with the order that he proposes.

I agree with both judgments.