Wilky Property Holdings Plc v London & Surrey Investments Ltd

On 17 August 201 1 1 handed down a judgment [201 1] EWI-IC 2226 (Ch) in relation to the application by the & Surrey Investinents Limited ("LSI") a stay, pursuant to the Arbitration Act 1996 or the inherent jurisdiction of the Court, of the Part 8 Claim issued on 18 November 2010 by the Claimant, Wilky Property Holdings plc ("Wilky"). I adopt the same abbreviations as in that earlier judgment. to which reference should be made for the background to this dispute.

In my first judgment I held that a dispute resolution provision in clause 22 of the Agreement between the parties dated I November 1996 is a provision for expert determination and not an arbitration clause to which the Arbitration ACT 1996 applies, Having thereby decided that a mandatory slay of Wilky's Part 8 Claim was not required, I left over I-or further arguinent the question of whether il would be appropriate to stay the Part 8 Claim in whole or in part under the inherent jurisdiction of the Court as now reflected in the CPR Part 3. I (2)(f). "Fhat jurisdiction was recently considered by the Court of-' Appeal in Barclays_Bank v_NxdQ.mCapital [201 ] EWCA Civ 826.

For its part, Wilky has acknowledged that with the exception of (i) LSI's claim under paragraph 18(3)(d) of the revised Statement of Case to 20% of the net profits that Wilky receives from any subsequent sale of the Aldershot Scheme (which Wilky says is premature because there has been no such sale), and (ii) an allegation by LSI in paragraph 23 of the revised Statement of Case that Wilky was in repudiatory breach of the Agreement (which Wilky denies and contends falls outside the scope of clause 22), all of the claims made in l.,Sl's revised Statement of Case of 22 September 201 1 can be the subject of a to Mr. Pye.

As I indicated in my earlier judgment, Wilky"s Part 8 Claim Form was issued at a time at which LSI had made a c()nsiderably wider claim f-ör expert determination than is now formulated in the revised Statement of (.)ase dated 22 September 1 .

The parties were agreed that according to the judgments in Barclays Bank v. Nylon Capital, and in particular the observations of Thomas LJ at paragraph 42, the questions for the Court are whether the individual paragraphs of the Part 8 Claim Form raise a real (as opposed to a hypothetical) dispute; and if so, whether it is in the interests of justice and convenience that the Court should proceed to determine that dispute rather than allowing Mr. Pye to conduct his expert determination first.

I therefore turn to the individual paragraphs of the Part 8 Claim Form. There was some common ground between the parties.

8 and 9 These paragraphs seek declarations that the expert could only determine disputes or differences concerning the meaning or effect of the terms of the Agreement as were necessary for the calculation of the Profll Share or Compensatory Payment; and a flirt-her declaration that no dispute or difference had in fact arisen that was capable of valid reference to an expert under clause 22. Mr. Rainey QC, for Wilky, accepted that in light of my earlier judgment, Wilky could no longer pursue the claims under paragraphs 8 and 9 of his Part 8 Claim Form, because both declarations would be flatly contrary to my earlier decision, Mr. Rainey therefore accepted that the claims in those paragraphs should be dismissed.

I turn to consider the disputed paragraphs of the Part 8 Claim Form.

Paragraph 1 seeks a declaration that the right to refer disputes to expert determination under clause 22 is fimited to (i) disputes arising in respect of schemes which were "Approved Schemes" under the Agreement: and (ii) disputes as to quantification of a Profit Share and a Compensatory Payment if and when (and only if and when) entitlement to Profit Share has accrued on completion of an Approved Scheme.

Mr. Matovu objected that in light of Iny earlier judgment it could not be said that the right to refer disputes to expert determination under clause 22 was limited those two matters. As a matter of strict wording that is undoubtedly right, but Mr. Rainey submitted that such defect in the drafting did not really go to the central thrust of the rekief sought, that the defect could easily be cured by the addition of words such as "Save as to matters of interpretation of the Agreement..", and that a claim which could be saved by amendment should not be dismissed.

I think Mr. Rainey is right, and thal il is appropriate to approach this question as a matter of substance. ^Olhe substance of the issue raised by this paragraph - defining the right to a Profit Share or Compensatory Payment by ref:örence to the completion (Yf an Approved Scheme — are matters which are potentially five between the parties. 'They seem to Ine to fall into the same category as those paragraphs which have been agreed should be stayed in order to permit Mr. Pye to proceed with his determination. therefore propose to stay paragraph I .

Paragraph 7 Paragraph 7 of the Part 8 Clailn Form is a difficult paragraph understand. It seeks.

Mr. Rainey accepted that the drafting of this paragraph left something to be desired. He explained, however. thal this paragraph was intended to seek a declaration that the expert could not make a decision as 10 which of the various different bases of assessinenl- of' Profit Share that are referred to in clause 16(i) of the Agreement was applicable in the events that have occurred, and could not förce Wilky to make an election as between those bases. I have some sympathy with Mr. Matovu's contention that the wording of' this paragraph comes perilously close to suggesting that the expert cannot do precisely what I have held that he can do, namely to interpret the provisions of the Agreement and to calculate the amount of any Profit Share due.

I am, however, aware that the precise meaning and/or el-lint of clause 16 of the Agreemenl is likely to be raised in the course of the determination to be undertaken by Mr. Pye, and thal the parties are agreed that I should simply stay paragraphs 4-6 which also deal with various issues arising under clause 16. In these circumstances I think that the correct approach for me to take is also to stay paragraph 7. I thereby signify no view one way or another as to the contents of paragraph 7, or as to the

Paragraph 1 0 Paragraph 10(i) seeks a declaration that there is no right under clause 22 or otherwise to refer 10 expert determination "a global accounting of all sums due between the parties"; and paragraph 10(ii) seeks a declaration that an expert determination of Profit Share or Compensatory Payment cannot validly purport to determine that any particular sum must be paid by Wilky to LSI.

So far as paragraph 10(i) is concerned, Mr. Rainey submitted that it was obvious that clause 22 was limited and provided no authority f-ör an expert to conduct a global accounting (by which I understood him to mean a determination of all disputes) between the parties. 1--1e further pointed to paragraph 51 of my earlier judgment in which I rejected a suggestion that clause 22 was an "any disputes" clause. I did not understand Mr. Matovu seriously to dispute this argument. However, Mr. Matovu>s point was thal it might be appropriate or necessary for the expert acting under clause 22 to take into account in his calculation of Share, any amounts paid by Wilky to ISI as an advance on Profit Share.

So far as paragraph I O(ii) is concerned, although each party seemed to have understood the wording differently, it became apparent at the hearing that Mr. Rainey and Mr. Matovu in fact agreed (i) that an expert appointed under clause 22 could not make an enforceable order f_ör payment of any st-lin from Wilky to l_4SI. and that (ii) any sum determined by an experi under clause 22 and in accordance with the Agreemenl would be due and payable as a contractual debt, suf2ject to any valid defences, counterclaims or rights of set-off in the ordinary way

Although I have reservations about whether the issues apparently raised in para.graph 1 0(i) are really likely to becolne live betweel'\ the parties, I think thal it is appropriate to stay that paragraph rather than deal with it in any other way. will, however. make the same observation as in relation to paragraph 7, namely that if an attunpt is Inade to lift the stay, the "global accounting" wording ought to be clarified to describe accurately precisely what is in dispute.

On the assumption thal I have correctly encapsulated the common position reached at the hearing in relation to paragraph it ought to be possible to reflect that position in an agreed recital to my order. Assuming that can be done and there is no real dispute between the parties, I cannot see what continued purpose would be served by paragraph I()(ii) remaining on the Part 8 Claim Form. It should therefore be dismissed.

Paragraph 12(i) seeks a declaration that the trading and sale of a pharmacy was not part of the Approved Scheme at Aldershot under clause 8 of the Agreement and therefore fell outside the scope of the Agreement. Paragraph 12(ii) seeks a declaration that any diffu•ence 01' dispute arising in respect of' these matters is not capable of valid reference to expert determination pursuant to clause 22.

Mr. Matovu contends thal paragraph 12(ii) is plainly too wide as drafted, on the basis that it must al least be possible following my earlier judgment for a dispute or diff-érence as to the interpretation of the Agreement in respect of this Inattu• validly 10

But Mr. Pye's determination of that issue may be open to subsequent challenge, and the parties are agreed that paragraph 12(i) which expresses the substance of the matter - should be stayed to allow Mr. Pye to give his expert determination in the first instance. I therefore propose, for similar reasons to those outlined in relation to paragraph I(i) — of which this seems to me to be a particular example simply to stay paragraph 12(ii).

P.aræ:aph 13(ji) Paragraph 13(i) concerns arrangements between Wilky and Prudential in relation the Inanagement of the Gatwick Green scheme and seeks a declaration that they fall entirely outside the scope of the Agreement. Paragraph 1 3(iii) seeks a declaration that the payments received by Wilky from Prudential were in any event reimbursement of management expenses and not profits. The parties s,vere agreed that these paragraphs were or might be live issues and that they should be stayed pending Mr. Pye's determination.

Mr. Matovu's objection to paragraph 13(ii), which seeks a declaration that a dispute or difference in relation to these Inatters is not capable of valid to expert determination under clause 22, falls into the same category as those in relation to paragraphs and 12(ii) above. Accordingly I propose to stay rather than to dismiss that claim.

Paragra hs 14 and ] 5 'Phese paragraphs concern the interpretation of clauses 1 8 and 19 of the Agreement.

C.lause 18 opens with the words,

Wilky has indicated that it may wish to invoke clause 18 and to contend that there should be a reduction to LSI's entitlement to a Profit Share on account of what are, as yet, unspecified failures by LSI to provide "Commitments", Quite apart from any disputes over the substance of these alleged "Commitments", or ISI's alleged failure to meet them, the parties are at odds over whether any such reduction as provided for by clause 18 is a matter which falls within the scope of an expert determination of Profit Share under clause 22, or whether it is a reduction to be determined by a Court separately from and subsequent to a calculation of Profit Share under clause 22.

Mr. Rainey submitted, however, that any argument about a pro-rata reduction under clause 18 was akin to a claim that LSI had breached the Agreement. He said that I had already implicitly decided that this could not be included in an expert determination under clause 22 when I had observed in paragraph 51 of my earlier judgment that,

I reject this submission. 1 have not decided any point concerning clause 18, and it is important that my words in paragraph 51 are not taken out of context. In making the observations that I did, I was not addressing clause 18 and I did not intend in any way to pass judgment upon whether the pro-rata reduction mentioned in clause 18 could be regarded as a claim for breach of the Agreement; or whether it was, example, properly to be regarded as component element of the calculation of the contractual entitlement to Profit Share.

In these circumstances I think that if Wilky wishes to raise issues concerning clause 18 of the Agreement (and I reiterate that as things stand at present it has not done so clearly or with any particularity) the question of whether such issues fall within the scope of' the an expert determination under clause 22 is s()mething which should first be considered by the expert, who will already be seized of the other matters in dispute, and is therefore likely to be able conveniently to consider how to deal with this issue in its wider context,

roved Jud nncnt (No.2)

Mr. Rainey further objected to this course on the basis that as this was a question which went to the scope of the authority of the expert, any decision by the expert on this matter would inevitably be subject to review by the Court on the basis ()utlined in Barcla s Bank v N Ion Ca ital. He submitted, referring to the observations of Thomas LJ at paragraph 44, that it would therefore be wastefül of time and expense for the Court not to decide it now, or at least give directions for it 10 be decided by the Court first.

I do not accept that argument, and I do not think that 'Thomas LJ was intending to lay down a prescriptive rule in paragraph 44 of his judgment in Barclays Bank v Nylon Capital. In the circumstances of this case, it is in my view important first to clarify whether, and if so on what basis, Wilky intends to run a point under clause 18 at all. think that the obvious and convenient forum for that to occur is in the expert determination by Mr. Pye. Mr. Pye, who is an experienced dispute resolver. has indicated his intention to hold a directions meeting with the parties as a first stage in the process leading to his expert determination, I see no reason, f•ör example, why he should not be entitled to request that Wilky clarify whether, and if so, on what basis. it c()ntends that clause 18 affects a determination of any Profit Share or Compensatory Payment due to LSI. I also see no reason why that cannot be done entirely without prejudice to any contention by Wilky that the application of clause 18 is not a Inatter for expert determination,

Having identified the true scope of any issue regarding clause 18. and its relationship to the other matters thal are indisputably before him for determination, Mr. Pye will then be able to decide what steps to take in relation 10 the clause 18 issue. As Mr. Matovu reminded Mr. Pye and the parties will have a wide variety of procedural options open to them in relation 10 any such clause 18 issue, including in particular those identified by Lord Neuberger MR in paragraph 71 of his judgment in Barclays Bank v. Nylon CÄpital.

Although it was suggested at the hearing that this approach might give rise to an undesirable form of "hokey-cokey' in which the parties moved in and out of litigation and expert determination. I do not think that is right. Mr. Pye is definitely seized of the main issue of determination of any Profit Share and Compensatory Payment, If a clause 18 issue is raised, the views of Mr. Pye as to how the resolution of that issue can best take place in a co-ordinated, timely and cost-efTective manner which assists his expert determination are likely to be of some relevance to the Court. In contrast, for the Court simply 10 decide to proceed to determine lhe nature and scope of clause

Accordingly, I decline to decide or give directions for the decision by the Court at this stage of the matters raised in paragraph 14 of the Part 8 Claim. I propose to stay that paragraph.

P-æagtaph 16 Paragraph 16 seeks a declaration that differences or disputes concerning amounts paid to LSI (or Mr. Webb) personally by Wilky between 1996 and 20]0. whether as an advance of anticipated Profit Share or otherwise, are not capable of expert determination under clause 22. In the absence of any clear delineation of the dispute in this regard or how it relates to the expert determination, I think that this question falls into the same category as paragraphs 14 and 15, and propose to deal with it in the same way by a stay.

Eæagaph 17 Paragraph 17 raises the issue of' whether the Profit Share can include profits which might have been. but were not actually, made by Wilky. 'lhis stems from a point made in LSI's original claim 10 the efTec1 that the Aldershot Scheme had been mismanaged by Will<Y with the result that its profits were reduced. Wilky seeks a declaration that the Profil Share does not include such notional profits, a declaration that the right to refier the quantum of the Profit Share to expert determination under clause 22 is limited to disputes as to profil actually made, and a declaration that disputes concerning the alleged mismanagement (Yf the Aldershol Scheme are not capable of valid reference under clause 22.

I^the allegations of mismanagement are not included by LSI in its revised Statement of Case, but as I have indicated, LSI has purported to reserve its position on the making of further claims. It is not possible to say at this stage that these are entirely hypothetical issues which may not become live between the parties.

I consider that the issues raised by paragraph 17 fall into the same category as those in relation to paragraphs 13 and 14 above, and the same reasons I also propose to stay paragraph 17.

As I have already said, issues concerning the meaning and effect of clause 16 of the Agreement and its application to the Facts of this case are likely to be central to any determination by Mr. Pye. Accordingly it seems to me to be just and convenient to stay these claims to enable Mr. Pye to conduct his expert determination first. There is no good reason or advantage in the Court deciding to try the issues itself at this stage.

In the result, with the exception of' paragraphs 8 and 9, which must be dismissed, and paragraph 1 0(ii) which I think can be dismissed on the assumption that the parties can agree a form of words to record their cornmon understanding, I will order that the remainder of Wilky's Part 8 Claim Form be stayed. Any application to lift the stay will have to be made on notice by an application under CPR Part 23 in the ordinary way. I request counsel to agree a suitable f'örm of order providing (if thought fit) for a specific period of notice to be given of any such application.

Paragraph 2 of the application notice seeks an order thal Wilky goive I_SI and its advisors,

Mr. Matovu submitted that LSI had an entitlement to these orders on the basis of enforcement by the Court of clause 19 of' the Agreement which provides that LSI,

Mr. Rainey accepted that the Court could, in an appropriate case, make an order enforcing clause 19. However, he disputed that there was any wider implied obligation upon Wilky to give disclosure to LSI, and in particular he submitted that there was no basis upon which Wilky could be obliged to draw up a list of documents in the form sought, which resembled an order f•ör disclosure under CPR Part 31. Mr. Rainey pointed out that the Agreement contained an express clause dealing with the matter of giving ISI access to Wilky's documents which made it unlikely thal there could be implied a term to diff-kerent or wider effect. He also observed that Smith v Peters was only authority for the proposition that a party to an expert determination had an implied duty to co-operate to enable (i.e. the valuer) to perform his determination, and thal the decision was nol authority f-k)l' the existence of an implied duty to give assistance to or co-operate with requests for information or documents from the other disputing party.

Mr. Rainey further submitted that since luSI's application was in seeking an order for specific perförmance of clause 19. the Court would have to be satisfied both that there was a relevant obligation* and that Wilky had breached (()T was threatening to breach) it. He submitted that lhe Court not be so satisfied on the limited evidence before it, and in particular that there was no basis upon which Wilky could be ordered to give IAS} access to the website containing information relevant to the sale of the Aldershol Scheme. Mr. Rainey also pointed out, for exarnple, that it was disputed that LSI had any entitlement under the Agreement to a Profit Share based upon a sale of the Aldershot Scheme unless and until such sale was actually completed, and hence that until that point of interpretation of I-he Agreement had been resolved, the Court could not reach any view that there was any obligation to provide material relating to a prospective salen still less that there had been any breach of such obligation.

Finally, Mr. Rainey submitted that when one at each of the categories of information and documents sought, it was apparent either' that LSI already knew the relevant figures, or had already been provided with the relevant information and documents (including in three lever arch files of documents provided under cover of a letter from Wilky's solicitors dated 14 October 201 1), or thal what was sought was not a "financial record" within the meaning of clause 19, or that the infbrmation and documents sought were only relevant to parts of LSI's claim for a Profit Share or Compensatory Payment that it was disputed that the expert had authority 10 determine.

I think that there is force in most of Mr. Rainey s submissions as to the limitations on the scope of the Court's powers and to the appropriateness of exercising them at this stage on the available material, I should indicate that al the hearing I was not inclined

However, I do not need to decide these issues, because in the course of argument, an alternative modus operandi emerged which was acceptable to the parties. As I understand it, what is proposed is that I should simply adjourn LSI's application generally, so as to enable LSI, after considering the documents and information with which it has been provided, to send to Wilky a list of specific documents and/or information which it contends should be provided to it. It is intended that the parties will then have a meeting at which that request can be explored. It Inay be that such meeting takes place before or after a meeting with Ml'. Pye. and it may also be that Mr. Pye will be in a position to express his own view as to whether such documents are necessary for the purposes of his expert determination and/or as envisaged by clause 19 of the Agreeinent. Whilst Mr. Pye's views would obviously not bind the Court, they might be of some assistance to it,

If, f-k)llowing this process. I.,SI wished to pursue an application to the Court to enförce its rights under clause 19, the parties were agreed (of:' course without prejudice to any arguments that might be advanced on such application) that it would make procedural sense that such application could be made by application notice under CPR Part 23 rather than requiring I.uSI to issue a fresh claim form under CPR Part 7 or 8. In that regard, although Mr. Rainey had an ingenious suggestion as to how the Court might order such an application to stand as originating process, I think thal the simplest route would be the order staying Wilky"s Part 8 Claim I-o be on terins that permit LSI to have its current application relisted (in an amended form and with a I-urther supporting witness st-at-einent if so advised) on a specified number of days' notice, I see no reason why such an order is not within the Court's powers under CPR Part

Al the conclusion of the hearing I indicated to the parties Ihat in the interests of savil'lg time and costs I would be willing 10 deal with any consequential Inatters concerning the precise form of order and the question of costs on the basis of written submissions. 'Phat offer remains open, and assuming that it is to be taken up I would ask that written submissions be exchanged and sent to me electronically by close of business on Friday 1 1 November 201 1, with any reply submissions provided by close of business on 'Puesday 15 November 201 1. If, however, either or both parties wish to have a further hearing, then they should make that desire known, with brief reasons, as soon as possible so that arrangements can be made through the usual channels.