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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Cetelem SA v Roust Holdings Ltd  EWCA Civ 618 (24 May 2005)
Cite as:  2 Lloyd's Rep 494,  4 All ER 52,  1 CLC 821,  1 WLR 3555,  EWCA Civ 618,  2 LLR 494,  2 All ER (Comm) 203,  WLR 3555,  2 Lloyds Rep 494
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
The Hon Mr Justice Beatson
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE CLARKE
LORD JUSTICE NEUBERGER
| CETELEM S.A.
|ROUST HOLDINGS LIMITED
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Graham Dunning QC and Vernon Flynn (instructed by Jones Day) for the Defendant/Appellant
Crown Copyright ©
Lord Justice Clarke :
Grounds of Proposed Appeal
The 1996 Act
"1. The provisions of this Part are founded on the following principles, and shall be construed accordingly –
(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;
(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest;
(c) in matters governed by this Part the court should not intervene except as provided by this Part.
44(1) Unless otherwise agreed by the parties, the court has for the purposes of and in relation to arbitral proceedings the same power of making orders about the matters listed below as it has for the purposes of and in relation to legal proceedings.
(2) These matters are -
(a) the taking of the evidence of witnesses
(b) the preservation of evidence
(c) making orders relating to property which is the subject of the proceedings or as to which any question arises in the proceedings -
(i) for the inspection, photographing, preservation, custody or detention of the property, or
(ii) ordering that samples be taken from, or any observation be made of or experiment conducted upon, the property
and for that purpose authorising any person to enter any premises in the possession or control of a party to the arbitration
(d) the sale of any goods the subject of the proceedings
(e) the granting of an interim injunction or the appointment of a receiver.
(3) If the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets.
(4) If the case is not one of urgency, the court shall act only on the application of a party to the arbitral proceedings (upon notice to the other parties and to the tribunal) made with the permission of the tribunal or the agreement in writing of the other parties.
(5) In any case the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively.
(6) If the court so orders, an order made by it under this section shall cease to have effect in whole or in part on the order of the tribunal or of any such arbitral or other institution or person having power to act in relation to the subject-matter of the order.
(7) The leave of the court is required for any appeal from a decision of the court under this section."
The Supreme Court Act 1981
"37(1) The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so."
(2) Any such order may be made either unconditionally or on such terms and conditions as the court thinks just."
"The parties will make their best efforts and provide mutual assistance so that the principal and other conditions precedent are satisfied as rapidly as practicable."
By article 3.5, the SPA was to be null and void in the event that the approval of the Russian Central Bank was not forthcoming by 31 January 2005. By 21 December 2004 the approval of the Russian Central Bank had not yet been obtained. Cetelem had earlier asserted in correspondence with RHL that the latest possible date for submitting documents to the Central Bank to secure approval of the transaction by 31 January 2005 was 10 December 2004. There is no express timetable or deadline in the SPA for submission of documents to the Russian Central Bank, although article 6.8 of the SPA provided:
"The parties hereto shall sign up and deliver all the documents, provide all information, and take all reasonable and lawful measures that may be necessary or appropriate to the achievement of the purposes of this agreement."
Applications made on 23 December 2004
"1. a without notice application pursuant to section 44 of the 1996 Act for a freezing order, restraining RHL from disposing or otherwise dealing with its assets, including in particular its shareholding in RTL;
2. a with notice application pursuant to section 44 for an order requiring RHL by 1600 GMT on 29 December 2004 to procure that:
(1) all documents to be produced by RHL or on its behalf necessary to accompany the application for the authorisation by the Central Bank of the Russian Federation (the "CBR"):
(a) the transfer by RTL of all of its shares in RSC to RCL; and
(b) the acquisition by Cetelem and the sale by RHL of 499,500 shares in RCL representing 49.5% of the outstanding share capital and voting rights in RCL,
are delivered to the offices of Gide Loyrette Nouel Vostok of [an address in Moscow]; and
(2) the application is signed by it or on its behalf by its duly authorised representatives and also delivered to the offices of Gide Loyrette Nouel Vostok; and
3. an application for permission to serve the application at sub-paragraph 2 above out of the jurisdiction or, alternatively to effect alternative service on RHL's London-based lawyer."
Beatson J granted the application for the freezing order on 23 December at a without notice hearing at which RHL was not represented.
The order of 29 December
The proposed appeal
Jurisdiction of the Court of Appeal
"(7) The leave of the court is required for any appeal from a decision of the court under this section."
This court has considered the meaning of "the court" in equivalent sub-sections on three previous occasions and has held that it means the court of first instance and not the Court of Appeal. They are Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd  QB 388, Athletic Union of Constaninople v National Basketball Association (No 2)  1 WLR and Virdee v Virdi  EWCA Civ 41, in which the court considered sections 67(4), 68(9) and 18(5) respectively.
"(6A) Unless the High Court gives leave, no appeal shall lie to the Court of Appeal from a decision of the High Court – (a) to grant or refuse leave under subsection (3)(b) …"
It was submitted that the ouster of the jurisdiction of the court was subject to what Sir John Donaldson MR called (at page 657C) a concealed exception which comes into play if the judge failed to exercise his discretion judicially. Reliance had been placed upon a principle known as "the Scherer principle" (after Scherer v Counting Instruments Ltd (Note)  1 WLR 615). By that principle, section 18(1)(f) of the SCA 1981, which provides that no appeal shall lie to the Court of Appeal without the leave of the lower court "relating only to costs which by law are left to the discretion" of the lower court, has no application if this court is able to say that the judge in the lower court did not really exercise his discretion at all or based his discretion upon an inadmissible reason.
Jurisdiction of the High Court in cases of urgency
"(3) If the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets."
The question is whether in a case of urgency, as Cooke J held and Mr Black submits, the subsection is simply permissive and does not in any way restrict the circumstances in which the court can exercise the powers conferred upon it by subsections 44(1) and (2) or, as Mr Dunning submits, the subsection restricts the powers of the court to making such orders as it thinks fit for the purpose of preserving evidence or assets.
"(4) If the case is not one or urgency, the court shall act only on the application of a party to the arbitral proceedings (upon notice to the other parties and to the tribunal) made with the permission of the tribunal or the agreement in writing of the other parties.
(5) In any case the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively."
"214. This provision corresponds in part to Article 9 of the Model Law. As part of the redefinition of the relationship between arbitration and the Court, which was mentioned above, the powers we have given the Court are intended to be used when the tribunal cannot act or act effectively, as sub-section (5) makes clear. It is under this Clause that the Court has power to order Mareva or Anton Piller relief (ie urgent protective measures to preserve assets or evidence) so as to help the arbitral process to operate effectively. Equally, there may be instances where a party seeks an order that will have an effect on a third party, which only the Court could grant. For the same reason the Court is given the other powers listed.
215. In order to prevent any suggestion that the Court might be used to interfere with or usurp the arbitral process, or indeed any attempt to do so, we have stipulated that except in cases of urgency with regard to the preservation of assets or evidence, the Court can only act with the agreement of the parties or the permission of the tribunal. We have excepted cases or urgency, since these often arise before the tribunal has been properly constituted or when in the nature of things it cannot act quickly or effectively enough.
216. Furthermore, under sub-section (6) the Court, after making an order, can in effect hand over to the tribunal the task of deciding whether or not that order should cease to have effect. This is a novel provision, but follows from the philosophy behind these provisions: if a given power could possibly be exercised by a tribunal, then it should be, and parties should not be allowed to make unilateral applications to the Court. If, however, a given power could be exercised by the tribunal, but not as effectively, in circumstances where, for example, speed is necessary, then the Court should be able to step in."
"In case of urgency the court may act ex parte, ie without notice to the other parties or the tribunal, but only where the order sought is 'necessary for the purpose of preserving evidence or assets': subsection 44(3). This expression is apt to cover Mareva injunctions and Anton Piller orders, as well as the appointment of a receiver."
As can be seen, that precisely reflects Mr Dunning's argument on this point. See also to the same effect the 22nd edition of Russell on Arbitration at paragraph 7-132 and Merkin on Arbitration Law, 1991, at paragraph 12.53.
"to order Mareva or Anton Piller relief (ie urgent protective measures to preserve assets or evidence) so as to help the arbitral process to operate effectively".
Mr Dunning submits that an order of the kind made here is not such an order.
Section 37 of the SCA 1981
i) that a decision of a judge which the court had no jurisdiction to make is not a decision "under the section" within the meaning of section 44(7) of the 1996 Act;
ii) that, on the true construction of section 44(3) of the 1996 Act, if the case is one of urgency the court only has jurisdiction to make such orders as it thinks necessary for the purpose of preserving evidence or assets;
iii) that the judge purported to make an order under section 44(3) on a wider basis and thus had no jurisdiction to make it on that wider basis;
iv) that the judge did, however, have jurisdiction to make the order under section 44(3) if he thought that it was necessary to do so for the purpose of preserving assets;
v) that the judge would have concluded that it was necessary for preserving assets, namely Cetelem's rights under the SPA and would have made the same order on the narrower basis if he had been asked to do so; and
vi) that in all the circumstances leave to appeal should be granted but the appeal dismissed.
Lord Justice Neuberger
The Vice Chancellor
ORDER: Leave to appeal against the order of Beatson J, made on 29th December 2004, is granted, but appeal is dismissed; appellant to pay half the respondent's costs of the appeal; permission to appeal to the House of Lords refused.