Dadourian Group International Inc & Ors v Simms & Ors

On an interlocutory application for a worldwide freezing injunction, the court may take an arbitration award into account against a person who was not formally a party where there is a good arguable case that the person was privy to the arbitration. Final determination of privity is unnecessary at that stage. A close connection may be shown by representing the party in the arbitration, giving evidence, conducting its case and sharing the same central subject matter. A real risk of dissipation may be established by serious dishonesty findings reinforced by disciplinary findings. The protected amount may include continuing interest and costs.

Dadourian Group International Inc brought proceedings against four individuals after an arbitration between it and Charlton Corporation Plc. The arbitrator awarded approximately $5 million for breach of contract and fraudulent misrepresentations allegedly made by Mr Simms and Mr Rahman. The claimants relied on the award and, alternatively, on the underlying misrepresentations.

Following a without-notice worldwide freezing order made by Mr Justice Lindsay on 3 February 2004, Mr Justice Lewison continued the order on 13 February 2004. Mr Simms sought permission to appeal, arguing that the arbitration materials were confidential, inadmissible and not binding on him because he was not a party. The issues were whether the award could be considered, whether there was a real risk of dissipation, and whether the amount could include further interest and costs.

The Court of Appeal, per Lord Justice Dyson, dismissed Mr Simms’s application for permission to appeal. The formal order was: application dismissed.

1. Arbitrations and documents arising from them are generally confidential. In Ali Shipping Corporation v Shipyard “Trogir” [1999] 1 WLR 314, Lord Justice Potter had identified an exception permitting disclosure where reasonably necessary to protect an arbitrating party’s legitimate interests, including establishing or protecting rights against a third party. The court held that the lower-court judges were entitled to have regard to the award.

2. Whether a non-party is privy to an arbitration is a difficult and uncertain question. As stated in Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510, citing Carl Zeiss Stiftung v Rayner & Keeler (No 3) [1970] Ch 506, privity is not established merely by an interest in the outcome of earlier litigation. Here, however, there was a very close connection: Mr Simms had represented Charlton in the arbitration, given evidence, conducted its case, and the central subject matter was identical. The case was materially different from the Gibraltar case relied on by Mr Simms.

3. It was unnecessary finally to decide whether Mr Simms was privy to the arbitration. The relevant interlocutory question was whether there was a good arguable case that he and the other defendants were privy. In the unusual circumstances, that threshold was satisfied.

4. The evidence also justified a finding of a real risk of dissipation. The arbitrator’s findings of dishonesty were reinforced by the Law Society’s upholding of serious allegations and striking Mr Simms off the Solicitors Roll. The additional sum secured by the order was proper because interest continued to run and costs had to be allowed for.

1. Court of Appeal (Civil Division): Lord Justice Dyson dismissed Mr Simms’s application for permission to appeal and upheld the continuation of the worldwide freezing injunction.
2. High Court, Chancery Division: Mr Justice Lewison continued the worldwide freezing injunction on 13 February 2004.
3. High Court, Chancery Division: Mr Justice Lindsay granted the initial without-notice worldwide freezing order on 3 February 2004.