Westwood Shipping Lines Inc & Anor v Universal Schiffahrtsgesellschaft MBH & Anor

The first claimants in this matter are Westwood Shipping Lines, who were the time charterers of the relevant vessel from a German company, which I will call for convenience, "GMB", GMB in turn having chartered the vessel from her head owners, Kimberley. Those charterparties were entered into at a time when Westwood were using the vessel by way of a potential backup for their trade. It transpired that they did not need her for that, so at a time when the market charterparty rates were very high, they sub-chartered the vessel back to GMB.

What then happened is that the market dropped and, for reasons which I need not go into, GMB purported to terminate the sub-charter and there was then a claim brought by Westwood against GMB both for breach of the sub-charter and also for breach of the main charter between themselves and GMB. That matter was dealt with in London arbitration and the arbitrators made an award in September of last year, following which GMB went into liquidation in Germany. Mr. Bremen, who is the liquidator of GMB, was appointed on a provisional basis by the German court on 25 January of this year and he was then appointed as the liquidator towards the end of July of this year.

The present application is an application by the claimants for leave to be permitted to rely upon the documents in the arbitration, which I will identify in more detail at the end of my judgment, in relation to which the claimants either submit that there has been a waiver because the documents were referred to at a creditors' meeting by Mr. Bremen, alternatively, they are in the public domain because they were referred to in a judgment of Christopher Clarke J dealing with the attempt by the claimants to enforce the arbitration award they obtained for $11 million. Alternatively, the claimants submit that one of the exceptions to confidentiality recognised by the Court of Appeal in Emmett v Michael Wilson [2008] Bus LR 1361 applies.

The claimants wish to use these materials in support of a proposed claim which they have issued in the Commercial Court dated 5 September 2012 and in relation to which they have served draft particulars of claim on Kimberley NSC, which is an entity which is 50 per cent owner of Kimberley, and Mr. Echevarria, who is one of the principals of NSC, together with Reed Smith, who acted as solicitors for GMB in the arbitration, and Mr. O'Neil, who is the relevant partner of Reed Smith. That claim is a very complicated claim, which I do not need to go into the detail of, but in essence it is alleged that at various stages all of those entities and individuals were parties to an unlawful means conspiracy to damage the claimants, and that includes, at the heart of the allegations against Mr. O'Neil and Reed Smith, that they were aware of a backdated agreement which purported to waive any rights that GMB had against Kimberley up the line, thereby precluding any claim under the head charter, in circumstances where there is, on the material that is pleaded, at least an arguable case that that agreement was not in fact made in November 2009, as it purports to be, but at a much later date, and that the backdating of that agreement, which Mr. Anthony Trace QC on behalf of the claimants, submits is a sham, is part and parcel of the conspiracy.

So far as the position today is concerned, until relatively recently, by which I mean yesterday, the position of Mr. Bremen as the liquidator appears to have been that he resisted the making of any order by this court, on the basis that the court had no jurisdiction. Towards the end of last week Mr. Macfarlane, who is Mr. Bremen’s London solicitor, made an application to the Commercial Court for this matter to be adjourned from today, and in the material that was put before the court it was said that, amongst other things, Mr. Bremen would be challenging the jurisdiction of the court. Cooke J determined that the matter should be heard today and that any issue of adjournment should be dealt with by me.

As it transpires, Mr. Timothy Hill QC on behalf of Mr. Bremen has made it clear that Mr. Bremen takes no point today on jurisdiction, which is probably just as well for him, since there is no point on jurisdiction to be taken. It is quite clear that the arbitration having come to an end, the only court that has jurisdiction to determine whether materials which are produced in a confidential arbitration should be released, so the party can use them for the purposes of English proceedings is the English court, and specifically the Commercial Court, which is the supervising court under the Arbitration Act 1996. Therefore this application is properly brought before this court under s. 44 of that Act and there always was jurisdiction to serve the liquidator out of the jurisdiction in relation to this claim.

As matters have transpired, Mr. Bremen does not resist an order being made, but essentially what he says is that he should be given more time before any order comes into effect, and therefore before the claimants are in a position to use the materials they seek, so that he can investigate further whether or not to bring his own claim against the officers of GMB, or Reed Smith, or Kimberley.

In order to assess the strength or weakness of that point, it is necessary to look in a little bit more detail at what Mr. Bremen has or has not been doing. He was appointed, as I say, in January of this year, and, as he says in paragraph 7 of his witness statement served very late yesterday, one of the matters that a provisional liquidator is required to do under German law is to get in all the assets due, so that it follows that for now 11 months he has been under an obligation in German law to get in the assets of GMB. From that it follows, as I see it, that he was under an obligation to investigate any claims that GMB might have against third parties, including Kimberley, from that early date. He would have been aware also, from the judgment of Christopher Clarke J on 25 May 2012, because he was actually involved at that stage in instructing Reed Smith, and I have no doubt was aware of that judgment, that the learned judge there had set out in essence what the point was about the purported waiver agreement and had also indicated why any argument that GMB did not have a claim against Kimberley was effectively flawed. If he had not been satisfied with the opinion of a Commercial Court judge as to whether there was a good claim, he could have instructed English solicitors and counsel at that stage even before he was appointed on a full basis in July.

It is true that he has complied with the obligations imposed upon him by the German court under German law, including holding the creditors' meeting on 10 September, and production of the creditors' report on 29 August, which went into the history of the arbitration in some detail, so that it cannot be said against him that he has failed to comply with his obligations under German law. Mr. Hill was very keen to emphasise that point in his submissions before me. However, in circumstances where the liquidator is asking for more time, the court is entitled to consider whether or not he could not have already reached the position by today where he was able to decide whether or not to bring a claim against Kimberley or the officers of GMBH, GMB or Reed Smith. It seems to me that although he did not instruct English solicitors and counsel until 23 November, he has had a period of many months in which to investigate this matter and the suggestion that he needs another three months for his German lawyers to investigate even further, or for him to interrogate the officers of GMB, seems to me to be somewhat fanciful. The reality is that the basis upon which it is said that the purported waiver agreement was not a genuine agreement, or was backdated, and the material which supports that allegation, is already quite apparent form the materials that are before the court and it seems to me that that is a matter on which advice could be very quickly obtained in order to make a final decision whether or not to pursue a claim.

It therefore follows that I am not prepared to accede to the suggestion that any order should somehow be deferred for a period of three months, or Mr. Hill suggested shorter periods of time. I am not prepared to accede to any delay in the making of an order. The order will be made with effect from today.

As to the basis upon which the order is sought, Mr. Trace contended that there had been a waiver of confidentiality, both in relation to the dissemination of material, or the information about the arbitration, to all the creditors at the creditors' meeting or through the creditors' report, even though only his clients had attended the creditors' meeting. He also submitted that the material had come into the public domain through the judgment of Christopher Clarke J. He submitted that by those means, even though not all the material in the arbitration had come into the public domain, once some of it was in the public domain it should all be in the public domain. Alternatively, he said, if there had been a partial waiver or some of the material was in the public domain, then unless there was a very good reason for the remainder of the material remaining confidential, the court should order that it should be produced. If the court was not convinced that there had been a waiver or that the material was already in the public domain, then he relied upon one or other of the limits on the obligation of confidentiality identified in Emmett v Michael Wilson.

Despite Mr. Trace's submissions about waiver, I am not satisfied that there was a waiver at the creditors' meeting or through the creditors' report and it does seem to me that Mr. Hill is right that there is an analogy here with the position in the case of privilege where you can waive privilege in relation to one person or for one purpose without waiving privilege generally. Equally, the fact of the arbitration being public through the judgment of Christopher Clarke J, as would be the case with a judgment on an arbitration appeal, for example, does not mean that all the material in the arbitration loses the confidentiality which it would otherwise have. So it does not seem to me that this is a case where there has been waiver or where the documents which are currently sought can be said to be already within the public domain, or the matter is so far within the public domain that everything else should come within the public domain.

So one turns in those circumstances to the principles in Emmett. It is not necessary for present purposes to look beyond paragraph 107 in the judgment of Lawrence Collins LJ, where he says this:

It seems to me in the present case that the claimants have a very strong case for disclosure under the third and fourth of those cases. In this case the claimants have a legitimate interest in pursuing the claim in unlawful means conspiracy. It is, on the face of the pleading, an arguable claim. It is a claim which they could not pursue properly, possibly not at all, unless they have access to the materials from the arbitration. Having read the draft pleading, it relies to a considerable extent on the detail of the arbitration, and in those circumstances, it seems to me, the claimants have a legitimate interest in obtaining the arbitration material for the purposes of pursuing that claim. That in itself would be enough to justify an order for the claimants to be at liberty to use the materials but, in any event, even if that were not the case, it seems to me that this is one of those cases in which the interests of justice clearly require disclosure, not just because otherwise the claimants would be precluded from making what is otherwise an arguable claim, but also because whilst the court is not currently concerned with the detail of those claims and their merits, in circumstances where there is, at least on the face of the material before the court, an arguable case of unlawful actions, unlawful conduct, having taken place, that the court should not allow confidentiality of arbitration materials in any sense to stifle the ability to bring to light wrongdoing of one kind or another. This is simply an application of the same principle which was applied in Emmett v Michael Wilson.

So in those circumstances, it seems to me appropriate to make an order. As regards the documents in relation to which the order will be made, they are essentially agreed but they would be the written pleadings and submissions in the arbitration, all the disclosure in the arbitration, the witness statements, the experts' reports, the inter-solicitor correspondence, the correspondence with the tribunal, transcripts of the hearings, written opening and closing submissions, the award and the reasons. Mr. Trace asks for it to be recorded, which it is, that so far as issues of privilege are concerned, he reserves his position on those, he does not pursue an application for privileged documents today but wishes to have at least liberty to apply in relation to that, if necessary. He also asks for a general liberty to apply, which I grant, in relation to the possibility that there may be difficulties with particular documents in the future. That would seem to me to be a sensible course to adopt, so I will make an order in those terms with those, as Mr. Trace put it, carve-outs.

I am asked to deal with two additional matters arising out of today's application: first of all, the issue as to whether or not the judgment which I have just delivered on an extempore basis should be in public, whereas the hearing has taken place in private. My attention was drawn by Mr. Hill on behalf of the liquidator to Part 62.10 and specifically Part 62.10(3)(b), that, subject to any order the court makes, arbitration claims other than determinations of preliminary points of law or appeals under s. 69 are heard in private, and Mr. Hill pointed out that that was the default position.

The leading authority on this is Moscow City Council v Bankers Trust [2005] QB 207, where giving the judgment, Mance LJ referred to the fact that during the course of hearings in private, the court should be ready to hear representations from one party or the other that the hearing should be continued in public, but importantly, went on to say this about the position of judgment:

It seems to me that this judgment should be in public and that Mr. Trace should be entitled to disclose the judgment to the third parties against whom his clients have the claim, and that the judgment should generally be in public, essentially because there is no confidential information that is going to be disclosed. As Mr. Trace rightly points out, the effect of the judgment I have given is that the whole substratum of that confidentiality has gone for the purposes of the bringing of this claim, so that it would be very odd if the judgment was somehow still clothed with confidentiality when the whole thrust of the order that I have made, and the judgment I have delivered, is that the claimants should be entitled to use the documents from the arbitration.

There is also, as I see it, the general point which Mr. Trace makes, that it is in the interests of justice that matters such as this should be ventilated in public and not be kept private, so for that reason the judgment will be public.

There is then the issue of costs. Mr. Trace submits that although the general rule is that liquidators can get their costs out of the estate, the court should make an order in the present case that Mr. Bremen was not entitled to get all his costs out of the estate but only 75 per cent of his costs, and that he should have to pay 25 per cent of the claimants' costs. Mr. Trace submits that the basis upon which that division should be made, which is the sort of division that is made quite often in cases of this kind, is that, firstly, Mr. Bremen has been difficult, has been obstructive and laissez faire, as Mr. Trace put it, secondly, that in fact the claimants have incurred substantial costs in dealing with matters raised by the liquidator, either at the hearing or before the hearing, specifically the issue of jurisdiction, which was not abandoned until an email sent at about 9 o'clock yesterday morning, too late so far as Mr. Trace was concerned, because he and his junior, Mr. Winter, had already expended the time and energy drafting the relevant skeleton argument which dealt with the issue of jurisdiction, which was, as I have already said, a thoroughly bad point anyway.

Secondly, a substantial part of the hearing was taken up with dealing with the issue as to whether or not, as Mr. Hill submitted, the liquidator should be given yet more time in which to consider whether to bring a claim against third parties such as Kimberley, and I have ruled against him on that. And the reality is that if, as Mr. Hill submits on behalf of Mr. Bremen, he felt under pressure from both camps, that is to say, both the claimants here and also Kimberley and Reed Smith, the obvious solution to that would have been either to seek directions from the German court, alternatively, to come to this court and to say that although he was not in a position to agree to an order, if the court made an order he would abide by it. That could have been done. The hearing would have been a very short one and I suspect very few costs would have been incurred at all. The reality is that the reason why substantial costs have been incurred is that points have been taken, and either abandoned at the last minute or taken and pursued at the hearing, which necessitated their being dealt with, and for that reason I have no doubt that there has been a substantial increase in the costs incurred by the claimants.

So I do propose to make the order which Mr. Trace suggests, that Mr. Bremen should only be entitled to recover 75 per cent of his costs out of the estate and he should pay personally 25 per cent of the claimants' costs.