In Mount Wellington Mine Ltd v Renewable Energy Co-Operative Ltd [2021] EWHC 1486 (Ch), the English High Court considered a challenge to the jurisdiction of an arbitrator under s. 67 of the Arbitration Act 1996 (the Act). The Claimant, a landlord, sought to challenge an arbitral award which upheld the jurisdiction of the arbitrator in a dispute concerning a lease for roof space for photo-voltaic panels (the Lease) on the grounds that (i) the Defendant was not a party to the Lease, (ii) the arbitrator could not determine the matters in the arbitration because they had been compromised by way of a Part 36 offer, and (iii) some of the issues before the arbitrator were beyond the scope of the request for arbitration.
Background
The Lease was signed in 2012 between the Claimant and the Defendant, which at that time was registered as a company but subsequently converted into a registered society under the Co-operative and Community Benefit Societies Act 2014 (the 2014 Act). A dispute arose in relation to rent payments and alleged damage to the roof during the installation of the photo-voltaic panels. The Claimant served a first notice of forfeiture in 2014 for which the Defendant obtained relief in 2017. The Claimant then served a second notice of forfeiture, which the parties settled through a Part 36 offer (the Part 36 offer) in 2018. Separately, the Defendant commenced arbitration proceedings in 2016 to stop the transfer of the feed in tariff account from the Defendant to the Claimant and to obtain access to the photo-voltaic panels. The arbitrator issued an award upholding his jurisdiction in November 2020 which is being challenged in the current proceedings.
The Claimant raised various arguments to challenge the award. First, it argued that by converting into a registered society, the Defendant became a different legal entity. Consequently, the Defendant would not be entitled to exercise any rights granted (including the right to arbitrate) under the Lease.
The Claimant also argued the dispute had been settled through the Part 36 offer and was therefore res judicata or subject to the principle in Henderson v Henderson. The Defendant, on the other hand, argued that only part of the dispute (the question of relief from forfeiture – as this was outside the arbitrator's jurisdiction) had been settled and that the rest of the dispute remained undecided.
Finally, the Claimant argued that some issues were not within the scope of the arbitration because they were not raised at the time of the original reference to the arbitrator but rather in subsequent correspondence.
Decision
Defendant was not a party to the lease
The Court rejected the Claimant's argument that the Defendant was not party to the lease and instead compared the conversion from a company into a registered society to a change of status, such as a change of status from a private company to a public company under s. 89 of the Companies Act 2006. As a consequence, the legal regime governing the legal entity changes, but the entity (and its assets and liabilities) remain the same. The Court found support for its finding in Re London Housing[1], in which a society was converted into a limited company. The court in Re London Housing found that there was no dissolution of the society. Rather, the only practical way of dealing with this question was to treat "the registered society and the limited company as the same thing in [a] different costume."
Res judicata / Henderson v Henderson
In relation to this issue, the Claimant relied on Ovlas Trading[2], where the court held that it would be an abuse of process to allow a party to settle a claim and then subsequently reintroduce factual elements from the settled claim in another claim. Ovlas Trading was appealed to the Court of Appeal[3], which did not decide on this specific point. However, one of the appellate judges raised doubts that the decision on abuse of process in Ovlas Trading was correct as a matter of law.
In response, the Defendant sought to rely upon Marathon Asset Management[4], where the court held that a party is usually not prevented from relying on factual allegations which formed part of a settled claim in support or defence of some other claim. Marathon Asset Management distinguished Ovlas Trading on the basis that no abuse of process arguments arose.
In the present case, the Court held that the Part 36 offer only settled the forfeiture of the lease claim and that all other issues between the parties were left untouched. Any factual allegations made in the claim for relief from forfeiture were for the purpose of explaining the context of the claim and not for the purpose of it being decided by the court. Accordingly, they were not compromised by the Part 36 offer.
The Claimant also raised a Henderson v Henderson argument that the Defendant should have amended their relief from forfeiture claim to include the underlying issues. The Court rejected this argument as those issues were already pending in the arbitration, which was issued prior to the relief for forfeiture claim.
Scope of the arbitration
The Court accepted the Claimant's argument in relation to this issue, noting that the request for arbitration did not contain any general words such as "all disputes between the parties" or "all future disputes". Instead, the request only referred to certain specific issues. Accordingly, the arbitrator had jurisdiction to determine the issues initially referred to arbitration, but not the later issues.
Comment
This case raises three important practical points. First, when a company converts into a registered society, it remains the same entity, keeping all of its assets and liabilities without a need for assignment. Accordingly, it will continue to be party to the arbitration agreements in any contracts previously entered into.
Second, any factual allegations made in a claim which is later settled are not res judicata if they are merely made in support of that claim. As such, it is possible to rely on those factual allegations in a subsequent arbitration.
Finally, this case highlights the importance of a carefully drafted request for arbitration. The Court found that certain issues were beyond the scope of arbitration because they had not been raised in the request for arbitration and the request for arbitration did not contain the usual catch-all language. Even where no further disputes are envisaged at the time an arbitration is commenced, it is usually prudent to make provision in the request for issues arising subsequently.
For more information, please contact Craig Tevendale, Partner, or your usual Herbert Smith Freehills contact.
The author would like to thank Jonas Thierens for his assistance in preparing this blog post.
[1] Re London Housing Society's Trust Deeds [1940] Ch 777.
[2] Ovlas Trading SA v Strand (London) Ltd [2009] EWHC 1564 (Ch).
[3] Ovlas Trading SA v Strand (London) Ltd [2009] EWCA Civ 250.
[4] Marathon Asset Management LLP v Seddon [2016] EWHC 2615 (Comm).
