UMS Holding Ltd & Ors v Great Station Properties SA & Anor

Yesterday I handed down judgment in this section 68 challenge to an arbitration award; see [2017] EWHC 2398 (Comm). Three ancillary matters arose for decision upon which I required time to reflect. These are my rulings on those issues. I set out my reasons in short form to avoid further delay in resolving these matters.

The Grigorishin Respondents sought permission to appeal. It is to be noted that unless they secure permission to appeal from this court that is the end of the matter. This restriction on an appeal reflects the intention of the legislature that parties to arbitration should be free from unnecessary delay and expense; see Itochu Corp. v Johann MK Blumenthal GMBH [2012] EWCA Civ 996 at paragraphs 17-18 per Gross LJ.

Mr. Brisby’s first ground for seeking permission to appeal was that there was a conflict of opinion between judges of the Commercial Court as to whether in an exceptional case a serious irregularity within section 68 can extend to a failure to take account of evidence; see paragraphs 17 to 27 and paragraph 31 of my judgment. In such a case he said there must be a real prospect that an appeal will succeed. Alternatively, he said that the fact that there is such a disagreement is “some other compelling reason” for an appeal even if there is no real prospect of success; cf Shared Network Services Limited v Nextiraone UK Limited [2012] EWCA Civ 1171 at paragraphs 1-2 per Lewison LJ.

I do not consider there is a real prospect of success because of the difference of judicial opinion to which I referred in my judgment. First, the opinions of Toulson J. and Akenhead J. were obiter dicta. This is not a case of conflicting decisions. Second, for the reasons explained in paragraphs 28-31 of my judgment the court could only conclude that the Tribunal had overlooked evidence by itself considering all of the relevant evidence. That would be an impermissible exercise for the reasons I have given, as has been held by Flaux J. and Cooke J. There is no suggestion in the obiter dicta of Toulson J. and Akenhead J. that they envisaged the court embarking upon such an exercise. Third, I consider it fanciful to suggest, in circumstances where it is well-established that the reach of section 68 is limited, that the Court of Appeal might consider that such an exercise was an appropriate exercise for the Commercial Court to embark upon.

For the same reasons I do not consider that the obiter dicta of Toulson J. and Akenhead J. are “some other compelling reason” for granting permission to appeal. In circumstances where it is fanciful to suggest that granting permission to appeal would result in the Court of Appeal saying that it was permissible for the Commercial Court to consider and evaluate the evidence before the Tribunal in order to determine whether the Tribunal had overlooked evidence the grant of permission to appeal would merely lead to unnecessary delay and expense which it is the aim of the Arbitration Act to avoid. Thus the observations of Toulson J. and Akenhead J. are not, in the context of an arbitration application, a "compelling" reason for granting permission to appeal.

Mr. Brisby relied upon three further matters.

First, he submitted that there is a real prospect that the Court of Appeal might reach a different view from that which I reached in paragraph 93 of my judgment, namely, that the footnote to paragraph 175 of the Award undermined the allegation that the Tribunal did not have the board minutes in mind. He said this was an important point which went both to the existence of the Illicit Scheme and to the question whether there had been a breach of the JVA. However, I consider it fanciful to suggest that the Court of Appeal would reach a different view. The footnote referred to the board minutes and the Tribunal chose to insert that footnote in the text of the Award. Moreover, when one has regard to the whole of paragraph 175 it is apparent that the Tribunal had in mind a range of evidence which showed that the “whole arrangement was opaque” and thus, as I said in paragraph 94 of my judgment, this challenge requires the court to consider the entirety of the evidence on the subject which was before the tribunal. That is in my judgment an impermissible exercise and I consider it fanciful to suggest that the Court of Appeal would regard such an exercise as permissible.

Second, Mr. Brisby submitted that there was a real prospect that the Court of Appeal might take a different view of Ground E5; see paragraphs 121-127 of my judgment. I disagree. The terms of the Closing Submissions show that the Tribunal decided the issue which it reasonably thought had been put before it. In any event the Tribunal implicitly rejected the case that the resignations had been procured with the aim of pressurising the Grigorishin Respondents to accept a less favourable constitution of the board.

Third, Mr. Brisby suggested that there was a real prospect that the Court of Appeal might decide that there was a serious irregularity where a conclusion of the tribunal was manifestly illogical and could not rationally be sustained. Mr. Brisby’s submission was based upon the decision of Sales J. in Metropolitan Property v Amore Investments [2008] EWHC 2925 (Ch) which he suggested might appeal to the Court of Appeal. However, since there is the highest authority for the proposition that it is not a serious irregularity to reach the wrong conclusion I do not consider that there is a real prospect of success on this issue; see paragraph 38 of my judgment.

Standing back from the detail of Mr. Brisby’s submissions and looking at the application for permission to appeal more generally this section 68 challenge was always bold and optimistic in circumstances where the reach of section 68 is well known to be limited. All of the Grigorishin Respondents’ challenges to the Award were debated in a hearing lasting almost 4 days. I have considered each of them and rejected them all. In circumstances where the findings of fact made by the Tribunal are supported by substantial reasoning and it is plain that the challenges are an attempt to reverse those findings by a party who is disappointed by them there is, in my judgment, no real prospect that the Court of Appeal would reach a different view on these challenges. In such circumstances, and having regard to the aim of the Arbitration Act to reduce unnecessary delay and expense, I do not consider that there is a good or compelling reason for allowing an appeal to the Court of Appeal. I must therefore refuse permission to appeal.

The Claimants seek an interim payment on account of costs. There is no dispute that the court may make an order for an interim payment of costs by the Grigorishin Respondents. The Claimants' statement of costs is in the sum of about £736,000. They seek 65% of that as an interim payment, namely, about £479,000. Since security has been provided in the sum of about £285,000 they seek a further payment of about £193,000.

Mr. Brisby submitted that when security was sought costs were estimated in the lesser sum of £408,000. There has been no proper explanation for the increase to £736,000. Such an increase is not explained by the fact that at the security application it was thought the hearing would last 2 days not 4 days because the estimate included the costs of the security application which lasted a day. In those circumstances he said that there should be no interim payment in excess of the £285,000 already provided. Alternatively, there should only be a modest further sum ordered. Further, the rates charged by the Claimants’ solicitors were greatly in excess of the guideline rates and of the rates charged by the solicitors for the Grigorishin Respondents.

In reply Mr. Jowell said that the sum of £736,000 included a further hearing before Blair J. and also the two rounds of skeleton arguments ordered by Blair J. These had not been budgeted for at the time of the security application. As to the rates, they were higher than those charged by the other solicitors but the total costs incurred by the other solicitors had not been revealed. They may have been higher than those claimed by the Claimants, as had been the case before the Tribunal, indicating a more efficient use of the Claimants' solicitors' services; see paragraph 250 of the Award.

Whilst there may be an explanation for part of the increase from £408,000 to £736,000 there is no compelling explanation for the whole of that increase. Using a broad brush I propose to base my order on the Claimants’ schedule of costs being about £600,000. 65% of that sum is £390,000, Since the Claimants’ already have security for costs in the sum of £285,000 I propose to order an interim payment, in addition to the sum in respect of which security has been given, in the sum of £100,000. That appears to me to me to be a reasonable sum (in addition to the security).

The Claimants also seek an interim payment in respect of their costs of the s.66 application. They have been assessed in the sum of about £20,000. That seems a large sum for a relatively simple application. In respect of those costs I order an interim payment of a further £5,000. That appears to me to be a reasonable sum to order as an interim payment.

The section 68 challenge, pursuant to the Court’s order, was heard in public. In the course of the hearing extensive reference was made to the Award. In its judgment the court also made reference to the Award. Pursuant to the section 66 application the court gave leave to enforce the Award as a judgment and ordered that judgment may be entered in accordance with the terms of the Award. The Claimants maintain that in those circumstances the Award is a public document. The Grigorishin Respondents accept that it is in the sense that a member of the public could make an application under the relevant rule to obtain a copy of the Award but they do not accept that the Claimants are free to make such use of the Award as they wish. They say that the Claimants remain bound by Article 30 of the LCIA Rules by which they undertook

“as a general principle to keep confidential all awards in the arbitration, together with all materials in the arbitration created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain, save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right, or to enforce or challenge an award in legal proceedings before a state court or other legal authority.”

They have therefore sought an order that

“any document that a party is obliged to keep confidential pursuant to Article 30.1 of the LCIA Rules 1998, including for the avoidance of doubt the arbitration award out of which these proceedings arise, may not be used by that party for any purpose other than these proceedings, or disclosed to any third party, solely on the basis that the document has been read to or by the court, or referred to, in the course of the Hearing.”

The Claimants have indicated that they oppose the making of this order with regard to the Award but are neutral with regard to any other documents. It is not known what use the Claimants wish to make of the Award. They are of course entitled to use it in order to pursue their legal rights as is made clear by Article 30. What else they wish to do with it is unknown.

In essence Mr. Brisby submits that in the absence of any explanation as to what the Claimants wish to do with the Award there is no good reason why the Claimants should not be held to their bargain as set out in Article 30 of the LCIA Rules. In essence Mr. Jowell submitted that since the Award is now in the public domain the Grigorishin Respondents are no longer bound by Article 30 in relation to the Award.

The first question is whether the Award is in the public domain. The section 68 challenge took place in public. In the course of that public hearing parts of the Award were read out and the court was invited to read other parts to itself. Indeed before the hearing the court was asked to read the entirety of the Award which it did. Detailed submissions were made in open court concerning the content of the Award. In its judgment the court quoted parts of the Award and referred to other parts. I have no doubt that the Award thereby entered the public domain; see NAB v Serco Limited [2014] EWHC 1225 (QB) at paragraphs 26 and 36.

The second question is whether disclosure of the Award by the Claimants other than for the express purposes permitted by Article 30 of the LCIA Rules would be a breach of that rule. The rule exempts from the prohibition documents “not otherwise in the public domain”. The commas in the rule suggest, on a strict grammatical reading, that the adjectival phrase “not otherwise in the public domain” does not apply to an award. However, it is difficult to see why the adjectival phrase should not have been intended to apply also to an award. I consider that the meaning of the rule which it would be reasonably understood by the parties to bear is that their undertaking "to keep confidential" applies to all awards, materials in the arbitration created for the purpose of the arbitration and all other documents produced by another party so long as such awards, materials and documents are not otherwise in the public domain. Since the Award is in the public domain the express contractual obligation to keep it confidential no longer exists.

I am however troubled by the suggested conclusion that the Claimants should therefore be able to do with the Award as they wish; especially in circumstances where the court does not know what the Claimants intend to do with the Award. The Award was a confidential document and has only entered the public domain because the court considered, having regard to the principle of open justice, that the section 68 challenge should be heard in public.

I consider that the court has an inherent jurisdiction to regulate the consequences of its order that the section 68 challenge be heard in public. It does not appear to me to follow that where the Award has entered the public domain because of the court’s own order the Claimants should be free to do what they like with the Award. Some uses of the Award (for example, showing it to a business associate) would be inimical to the confidentiality which normally attaches to awards. When making the order that the section 68 challenge be heard in public I was not considering the uses to which the Award could be put after the hearing. Just as CPR 31.22(2) provides that the court may restrict the use of a document which has been disclosed in proceedings even when it has been read out in a public hearing so I consider that the court has an inherent jurisdiction to regulate the consequences of its decision to order that the section 68 application be heard in public.

I have concluded that in circumstances where the Claimants have not told me what use they wish to make of the Award it is just and appropriate to make the order sought by the Grigorishin Respondents. If the Claimants have a particular use in mind to which they wish to put the Award (other than those specifically permitted by Article 30 of the LCIA Rules) they can make an appropriate application to the court. I recognise that this leads to increased costs but that seems to be me to be inevitable if the court’s order that the section 68 application be heard in public is not to be abused.

If I am wrong in my construction of Article 30 and the adjectival phrase "not otherwise in the public domain" does not apply to an award then there is further reason to make the order suggested, namely, to uphold the parties' agreement.

I record two matters. I understand that there is no dispute that the judgment of the court, the transcripts of the hearing and the parties’ skeleton argument may be used by the Claimants as they wish. I also understand that there is no dispute that paragraph 260 of the Award may also be used without restriction because it is set out in the order made pursuant to section 66 of the Arbitration Act.

I ask the parties to agree an order giving effect to these rulings.