COT v COU & 2 Ors

Facts

The parties are anonymised. COU (the Claimant) supplied high-value industrial modules for an infrastructure project in a country called Gondor through a chain of contracts: it sold them to the Rohan Group's procurement arm, which sold them to COW (the EPC Company), which sold them to COT (the Project Company). COV (the Shareholder Company) then held almost all the shares in the other two. By March 2016 several invoices to the procurement arm were unpaid, and the Claimant said it would suspend deliveries. In negotiations on 15 to 18 March 2016, Rohan Group executives drafted a non-disposal undertaking (NDU) by which the Shareholder Company would not dispose of a stated percentage of its Project Company shares until the invoices were paid. Four versions passed between the parties, each with an arbitration clause; only the third was signed. On 18 March 2016, after a phone call, the Claimant dropped its proposed further changes and released the remaining modules.

The Claimant later began arbitration against the three companies for ₴7.35m still owing. The tribunal found a partly written, partly oral agreement that included the signed NDU and its arbitration clause, binding all three, and allowed the claim. The three companies applied in separate originating summonses to set the award aside, arguing no contract had been concluded, excess of jurisdiction and breach of natural justice. The High Court dismissed the applications, and they appealed in Civil Appeals Nos 12, 13 and 15 of 2022.

Issues

1. How far a seat court reviewing jurisdiction may examine the merits where the challenge is that no contract was concluded.
2. Whether a binding contract containing a valid arbitration agreement was concluded between the Claimant and all three appellants.
3. Whether the tribunal exceeded its jurisdiction by finding a part-oral, part-written agreement not pleaded.
4. Whether the tribunal breached the rules of natural justice.

Holding

The Court of Appeal, in a judgment delivered by Steven Chong JCA, dismissed all three appeals. The Project Company was ordered to pay the Claimant costs of $80,000, the Shareholder Company $50,000 and the EPC Company $70,000, each inclusive of disbursements, with the usual consequential orders.

Reasoning

The court restated the policy of minimal curial intervention. Where a party says no contract was concluded, the seat court reviews that question afresh, but it need only decide whether a contract existed and, on a prima facie basis, who the parties were. It should not interpret the full terms, the parties' liability or the authority of officers to assume substantive obligations, which are merits questions for the tribunal. The separability principle concerns validity, not formation.

Applying an objective test, the court held that a binding contract was concluded on 18 March 2016. The negotiations aimed to secure release of the modules in exchange for added payment comfort, and the signed NDU was an appendage to that wider agreement. Its terms named all three appellants, contemplated payment by the EPC Company or Shareholder Company, and gave the appellants a joint right to appoint an arbitrator, which made no sense unless they had obligations. The Claimant's representative abandoned his further changes after the call, the modules were released the same day, and part payment followed. An executive's email promising payment once the loan was drawn down was reasonably read as speaking for the Project Company, the only borrower under the facility. Authority to bind was a merits question. The tribunal had not relied on a group of companies doctrine. The court called it disingenuous for the appellants, having obtained the modules, to disown the agreement.

The tribunal did not exceed its jurisdiction: from the notice of arbitration onward, the Claimant had said the obligations were contained in or evidenced by the NDU. There was no breach of natural justice, since that case was pleaded and the appellants suffered no prejudice; the complaint about loss was in substance an attack on findings of fact.

From the judgment