The English Court of Appeal is the latest court to weigh in on this long-running dispute spanning multiple jurisdictions between Messrs Emmott and Wilson, relating to an agreement to establish a “quasi-partnership”. Following an appeal brought by Mr Emmott against the High Court’s decision (which we reported here), the question for the Court of Appeal was whether to uphold the anti-suit injunction granted by the High Court preventing Michael Wilson & Partners, Limited (“MWP”) from pursuing proceedings in the Australian courts in light of the London-seated arbitration agreement between them.
The Court of Appeal allowed the appeal in part, issuing a substitute injunction against MWP advancing only the claims which the court deemed to be vexatious and oppressive in undermining the arbitration agreement and process. This judgment helpfully clarifies the circumstances in which the English Court will issue an anti-suit injunction in order to safeguard the integrity of an English-seated arbitral process, and confirms that the court will not permit arbitral proceedings or awards to be undermined by parties against whom adverse findings have been made. However, it also demonstrates that the question of whether proceedings fall within the scope of an arbitration agreement can be a complex and controversial one.
The background to the dispute is summarised in our previous blogpost on the High Court’s decision here.
In short, MWP and Mr. Emmott had engaged in lengthy arbitration proceedings arising from an agreement to establish a “quasi partnership” (the “MWP Agreement“). Following the arbitral tribunal’s award on liability, MWP commenced two sets of proceedings in New South Wales (the “First” and “Second” “NSW Proceedings”) relating to a Co-Operation Agreement with two other MWP employees providing for the establishment of a consultancy operated by two associated companies known as Temujin. The Second NSW Proceedings were brought under certain deeds of assignment made by the liquidators of Temujin and the trustees in bankruptcy of the other former partner in favour of MWP as the assignee.
On 25 February 2017, Mr Emmott commenced proceedings in England, seeking, amongst other things, an anti-suit injunction restraining MWP from continuing its claims in the Second NSW Proceedings. On 2 March 2016, anti-suit relief was granted without notice. On the return date, the High Court continued the anti-suit injunction. The court’s decision rested on the following findings:
(i) the Second NSW Proceedings fell within the ambit of the arbitration clause in the MWP Agreement;
(ii) if this was incorrect, the assigned claims in respect of the other two MWP employees would fall into the arbitration clause in the Co-Operation Agreement;
(iii) there was issue estoppel in respect of breaches of contractual and fiduciary duties; and
(iv) the Second NSW Proceedings constituted a clear abuse of process which was intended to defeat the arbitration award by way of collateral attack.
Permission to appeal was granted in respect of all four of these findings.
The Court of Appeal considered each of the High Court’s findings in turn:
- On (i), it disagreed that the claims in the Second NSW Proceedings fell within the ambit of the arbitration clause. As MWP was an assignee under assignments, it was not advancing its own claims as a quasi-partner. Instead, MWP was seeking to enforce the rights of the two former partners and Temujin, none of whom were parties to the MWP Agreement or bound by the arbitration. Relying on the reasoning given by Lord Hoffman in Fiona Trust v Privalov, and in particular, that the interpretation of an arbitration clause should start from the assumption that the parties are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal, the Court held that it was highly unlikely that, at the time they entered into the MWP Agreement, Mr Emmott and MWP had any intention to include such claims within the arbitration clause.
- On (ii), the Court found that it was not in a position to conclude that the Second NSW Proceedings fell within the arbitration clause in the Co-Operation Agreement. Mr Emmott had consistently argued that he was not bound by the arbitration clause in the Co-Operation Agreement. Therefore his reliance on it for the purposes of the English proceedings was entirely contrary to the position he had adopted thus far in the Australian proceedings, and would adopt in the Second NSW Proceedings. He was not a party to the First NSW Proceedings, and there was therefore no determination binding on him that he was a partner in the Temujin business. There could therefore be no confidence that the arbitration clause in the Co-Operation Agreement covered any of the claims in the Second NSW Proceedings.
- On (iii), the parties in the arbitration in the Second NSW Proceedings and the arbitration were not the same, as the assigned claims were not brought by MWP in its own right. This could not therefore give rise to issue estoppel, an essential requirement of which is that the parties are the same.
- On (iv), the starting point for the Court of Appeal was that the concept of “abuse of process” was confusing in this context. It did not refer to the present English proceedings, and the question of whether the Second NSW Proceedings were an abuse of process was a question for the NSW Court, not the English Court. Rather, the issue was whether the English Court, as the “judicial guardian” of the integrity of the arbitral process in London, ought to exercise its discretion in favour of an anti-suit injunction because the Second NSW Proceedings were vexatious and oppressive in undermining that arbitration agreement and process. In this regard, the Second NSW Proceedings were partly vexatious and oppressive, as MWP intended to both challenge adverse findings and raise challenges which it had made a conscious decision not to advance in the arbitration relating to fraud and conspiracy. That oppression and injustice did not extend to the claims relating to Temujin, however.
The scope of the substituted injunction
Although counsel for MWP had offered an undertaking not to advance certain claims in the Second NSW Proceedings, the Court of Appeal deemed this undertaking deficient in scope. In any event, the fact that MWP was a BVI company with no assets or presence in the jurisdiction was also a factor which made it preferable to grant an injunction rather than to accept an undertaking.
Instead, the Court of Appeal substituted the injunction granted by the High Court for a more limited injunction against MWP advancing in the Second NSW Proceedings (i) claims which it had lost in the arbitration (ii) matters contrary to findings in the arbitration that were adverse to MWP and (iii) claims for fraud and conspiracy.
This judgment provides welcome guidance as to how the English Court will approach the question of granting an anti-suit injunction relating to an English-seated arbitration. In particular, it held that the question is not whether there has been an “abuse of process”, but rather whether the foreign proceedings were vexatious and oppressive, confirming that a party that seeks to overturn claims that it has lost, or claims which it decided not to advance, should not be entitled to a second bite at the cherry. As a practical matter, it is also interesting to note the English Courts’ willingness to issue injunctions restraining particular claims, even where a blanket anti-suit injunction is not justified.
The fact that the Court of Appeal chose to limit the scope of the injunction also demonstrates the complexities that can arise when seeking to determine whether there is an overlap in scope between court proceedings and matters which fall within an arbitration agreement. Here, the Court of Appeal’s key point of departure from the High Court was its conclusion regarding the legal character of the Australian claims and in particular, its finding that claims brought by MWP in its capacity as assignee could not fall within the relevant arbitration clause as they were between different parties. Therefore, the presumption in the Fiona Trust must be carefully applied to the particular facts of the case at hand.
For more information, please contact Craig Tevendale, Partner or Elizabeth Kantor, Senior Associate, or your usual Herbert Smith Freehills contact.