Patley Wood Farm LLP v Brake & Anor

SIR WILLIAM BLACKBURNE: I am now concerned with whether or not I should make an order under section 44 of the Arbitration Act 1996. I propose to deal with this very shortly because we have other matters to deal with and I am concerned to get through them by the end of the afternoon. Very helpfully, Mr Gavaghan has supplied me with a draft of the proposed order that he seeks, in effect making into an order of the court the directions which the arbitrator, Mr Lee, made by an order dated yesterday.

Section 44 does not confine the court simply to giving effect to directions or orders made by the arbitrator; it is rather wider in scope, and I do not need to repeat the wording of section 44 because, so far as material, it is set out in the judgment I gave at the end of the hearing shortly before the Christmas break.

In the course of submissions it became plain that the form of order which Mr Gavaghan invites me to make needs a degree of recasting. Let me deal first of all with the parts that I regard as reasonably straightforward. They are, looking simply at the proposed order, paragraphs 5 to 11. There are two questions. The first is whether I would have jurisdiction to make orders in the terms sought, if not in the precise terms then in substance in the terms sought. Secondly, if I do, whether I should exercise that jurisdiction; in other words, picking up the way in which I dealt with the matter on 19 December, whether in all the circumstances I consider it appropriate to exercise my powers under section 44 to make the order sought.

I am satisfied that I do have that jurisdiction. It seems to me that the relief that is sought is designed to preserve and enhance the sale value of the farm and also of what has been referred to as the cottage. The cottage is in a somewhat odd position in this sense, that, as I understand it, when it was acquired in the names of Mr and Mrs Brake and Mrs Brehule, who is the moving spirit behind the claimant, LLP, and that partnership monies were used in that acquisition. On the face of it therefore, if that is the case, the cottage is plainly partly an asset. However, it is said – and I know nothing about the details of this – that for one reason or another the Brakes are entitled to pray in aid the doctrine of proprietary estoppel to assert an interest in the cottage which, on one view so I am told, is equivalent to the totality of the value of the cottage; in other words, to the cottage itself. That dispute is not being dealt with in the course of this arbitration but in separate proceedings. Should it turn out that that claim fails then I would assume that the cottage would be a partnership asset and would come within the purview of the arbitration of which Mr Lee has charge.

With that reference to the cottage and that short, and no doubt not wholly accurate, summary of its position, I am satisfied that the relief sought in paragraphs 5 to 11 in the draft, are within the scope of section 44. These paragraphs are intended to apply whether or not the Brakes bid for the farm, or, for that matter, the cottage, if they are not otherwise successful in their proprietary estoppel claim. I am satisfied that it is appropriate that orders in these terms should be made. I would, however, suggest – and I have raised this with counsel – that there should be some revision of the draft. For example, paragraph 11 is not truly a separate paragraph it’s an explanation of what is meant by “the reasonable withholding of consent”.

The other observation I make is that, so far as paragraphs 6A, 6B(ii), 7, 9 and 10 are concerned, these provisions prohibit the Brakes from taking certain steps or, in other cases, require them to give disclosure of communications and that sort of thing. It seems to me that those provisions should apply no less to the LLP. Indeed I notice that the last sentence of paragraph 9 says “for the avoidance of doubt, the same restriction shall apply to the claimant [that is to say, the LLP]”. What I have suggested to Mr Gavaghan, and I think he accepts this, is that, so far as those paragraphs 6A, 6B(ii), 7, 9 and 10 are concerned, his client should give undertakings in the terms of then, adapted only to refer to his client rather than to the Brakes.

That leaves paragraph 4 which states that, “the Brakes must agree to the sale of West Axnoller Cottage with or at the same time as West Axnoller Farm if the receiver so requires”. The receivers, I remind myself, have been appointed by chargees pursuant to powers contained in the chargewhich, however, is restricted to the farm; but it may be, and there is a suggestion, as I understand it, in the evidence, that a greater price will be achieved for the farm if the cottage is sold at the same time. It is probably the case that a greater price would be realised for the cottage if it is sold at the same time as the farm.

The question is whether or not I should make an order in the terms of that paragraph. Again, the first question is whether I would have jurisdiction to do so. Insofar as both the farm and the cottage are assets of the partnership, it seems to me that I can properly exercise my jurisdiction under section 44 because I will be exercising that jurisdiction with a view to the preservation, indeed the enhancement, of the value of those two assets. Insofar as it turns out, as a result of the separate proceedings, that the cottage is not or is no longer an asset of the partnership, but nevertheless its sale at the same time as the farm may result in increasing the price for the farm, then again it seems to me I would have jurisdiction, for the same reason, to make the order sought.

I am satisfied therefore that it is within the jurisdiction of section 44. Whether it is appropriate to do so, the answer, in my judgment, is that it is. Given its purpose which is to enhance the value of the farm and given the difficulties that there obviously are as between the parties over the possession of the cottage, it seems to me that it would probably be better to make the position clear by an order of this court, to which would be attached a penal notice.

That leaves then paragraphs 1, 2 and 3 of the draft. Essentially what paragraph 1 is concerned with is to prevent the Brakes from either entering into an agreement (or, having entered into an agreemen) carrying out an agreement to purchase the farm, except on two conditions. The first is – and I reminded of an amendment that I suggested I think at the last hearing that the sum frozen by the order of Birss J by paragraph 18 of his order be increased – either the payment of that sum into court or, providing such other form of security agreed by the claimant in writing or in the absence of agreement as determined by me (the arbitrator). That is one condition. The other condition is the out and out payment to the claimant of certain costs which this court has ordered since Mr Lee made his costs award. That, I am told, is a sum of £127,000 together with half of the arbitration fee charged by the LCIA since the sums ordered by the costs award, namely £80,000 plus interest.

I confess I have some considerable doubt as to whether it is within the jurisdiction of section 44 that I should make orders in those precise terms. I am certainly persuaded that, given the difficulties that the claimant has faced in the course of this litigation, not least breaches of the freezing order, it is sensible to spell out in clear terms, backed by a penal notice, exactly what the Brakes must do.

As to jurisdiction, I would have some considerable hesitation over whether it is appropriate for me to order, however fair I might think it be, the Brakes to pay the claimant the costs ordered by this court since the costs award. What I propose to do therefore is this. I shall provide that, except with the consent of the arbitrator, the defendants should not, whether by themselves et cetera, either enter into or carry out any agreement to purchase the property of the farm without (a) paying the sum frozen of £882,000 into court or providing such other form of security agreed by the claimant in writing or in the absence of agreement as determined by Mr Lee before entering into a binding agreement for the purchase of the farm; and (b) either paying the sum to the claimant or providing such other form of security et cetera in relation to both the High Court costs of £120,433.75 and the £80,000 arbitration fee. In other words, both conditions will be cast in effectively the same form so that either they are paid in one case into court or to the claimant or they are secured in some acceptable manner. If that happens then there is nothing to stop the Brakes from entering into an agreement to purchase the farm and thereafter completing it.

At one stage I questioned whether it was appropriate to prevent them by an order of this court from entering into an agreement separately from completing the agreement, but I am persuaded, given the difficulties that there have been in this hard-fought long litigation, that this wider form of relief is appropriate. I can see no reason why, before committing themselves to a purchase of the property, the defendants should not explain to the arbitrator precisely how, if they are successful in entering into the agreement, they are going to fund their purchase without either breaching the terms of the agreement order or without making provision for, as it seems to me, the other clear indebtedness which they owe.

So for these reasons I shall make the order sought but in the revised form that I have endeavoured to describe. It will require, I fear, a minute of order.

I am going to give the claimant its costs. As far as disclosure is concerned, I am going to give the claimant 90 per cent of its costs, reducing it by ten per cent to reflect those items where it was not successful. So far as the section 44 application is concerned, I am going to give the claimant its costs of today in relation to the quite separate relief with which I have been concerned today. I am not going to give the claimant any of its costs of the section 44 application when it was last before me. I am going to give the Brakes in relation to their costs of the section 44, 50 per cent of those costs up to and including the hearing last December.