Proceedings not abuse of proceedings despite prior adverse arbitration decision
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The appellant company, Michael Wilson & Partners Ltd (MWP), sought to recover assets, which, it said, a former partner (Mr Emmott) acquired in breach of his contractual and fiduciary obligations in the names of the respondents (Sinclair). There had been an arbitration hearing between MWP and Mr Emmott, which MWP had lost.
In the High Court, the Judge noted that Sinclair, who was seeking to take a benefit of the arbitration award by claiming abuse of process, had not been a party to the earlier arbitration, and so would not have been bound by any detriment had the arbitration been decided differently. Nonetheless, the High Court found that it was an abuse of process for MWP to pursue Sinclair now, due to a number of 'special circumstances', which included:
● The intent for the arbitration to have effect between the parties involved, including Sinclair
● MWP being estopped from being able to make out its central allegation and necessary pre-condition of the claim (that Mr Emmott had received the shares in breach of his fiduciary duty)
● The "unusual unfairness" in permitting MWP to have a second opportunity to make the same allegations against Mr Emmott, who had successfully defended himself in the arbitration.
On appeal, the Court considered there was indeed a jurisdiction for a court to take account of an earlier arbitration (as opposed to a court) award, when considering whether proceedings were an abuse.
In particular, the Court noted that under the 'special circumstances' test, the Judge placed too much weight on:
● The intent of arbitration and award, to which Sinclair was not a party
His view that, because MWP was inviting the Court to come to a different view to the arbitrators in relation to the nature and discharge of Mr Emmott's obligations, MWP was mounting an illegitimate collateral attack on the award
The position of Mr Emmott in the Court proceedings. It would not be manifestly unfair for Mr Emmott to face MWP's allegations for a second time, as MWP was not seeking any relief against Mr Emmott and he would be treated no more than a potential witness.
The Court also noted that the party making an application of abuse had the burden of proof in establishing that an order should be made. Consequently, the Court of Appeal overturned the decision to strike out the action.
(The same parties are also litigating issues in New Zealand: see Michael Wilson & Partners Ltd v Thomas Ian Sinclair [2016] NZCA 376.)
Graeme Hall & Hugo Snell
ReSolution | Nov 2017 22
In Michael Wilson & Partners Ltd v Sinclair and Another [2017] EWCA Civ 3, the Court of Appeal for England and Wales considered whether it was an abuse of process to bring proceedings in relation to issues that had previously been decided in an arbitration involving the plaintiff (but not the defendant).
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About the author
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eter Hirst
will or without its consent. In fact, this was recently affirmed by the Singapore Court of Appeal in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2016] 1 SLR 373, where the Court held that an arbitral tribunal's jurisdiction is based on the consent of the parties, as manifested in the arbitration agreement.
While it has been well-established that Singapore courts are deferential to the courts of the place of the seat of arbitration when enforcing an award, it remains to be seen whether Singapore courts will take a different approach when deciding on whether the arbitral tribunal should pierce the corporate veil so as to join a non-signatory party to the arbitration, when Singapore is the seat of the arbitration.
D. Implications for Businesses
If you are being joined as a party to the arbitration agreement, please seek legal advice. This is to ascertain your rights and position and address the issue of whether the arbitral tribunal indeed has jurisdiction to allow such joinder, despite the lack of your express consent. As explained above, whether the arbitrator has jurisdiction to pierce the corporate veil will depend on the laws of incorporation of the signatory company. This may in turn raise complex choice of law issues. If an award has already been rendered against you even though you are a non-signatory to the arbitration agreement, it may be possible to set aside the award or challenge the enforcement of the arbitration award.
If you intend to join a party to an arbitration that has not explicitly signed the arbitration agreement, it is prudent to consider whether (a) the laws of incorporation of the company being joined would support such a position and (b) whether the laws of the seat of arbitration support the position that arbitral tribunals have the jurisdiction to pierce the corporate veil.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Extending Your Reach To The "Invisible Parties"... - Cont.