Mabey and Johnson Ltd v Danos & Ors

An arbitration clause covering disputes arising out of or connected with an agency contract is construed broadly. Where a party invokes Arbitration Act 1996, section 9 requires a stay of proceedings within the clause unless the agreement is defective.

A non-party to the arbitration agreement will not ordinarily obtain a stay merely because related claims against another defendant are stayed. Such a stay is exceptional and requires rare and compelling circumstances. The court should consider the interests of justice, including the desirability of one public trial of connected claims and the appropriate forum for the dispute.

Mabey and Johnson Ltd brought claims in fraud and conspiracy against two former employees, a Jamaican company and its principal, arising from an alleged inflation and diversion of commission under a Jamaican bridge project.

The company invoked an arbitration clause in its agency agreement. The principal, who had signed the agreement for the company but was not personally a party to it, sought either to set aside permission for service out of the jurisdiction on the ground that Jamaica was the proper forum, or to stay the English proceedings pending arbitration.

The issues were whether the proceedings against the company had to be stayed, whether England was the appropriate forum for the personal claims, and whether those claims should also be stayed pending arbitration.

1. Stay against DAG. The arbitration clause covered all disputes arising out of or connected with the agency contract. Its wording was very wide and was to be construed liberally, consistently with Fiona Trust and Holdings Corporation v Privalov [2007] EWCA Civ 20. Since DAG invoked section 9 and there was no suggestion that the clause was null, void, inoperative or incapable of performance, a stay was mandatory under sections 9(1) and 9(4) of the Arbitration Act 1996.
2. Forum. England was clearly the appropriate forum for the claims against Mr Gibson. The relevant factors included Mabey’s English incorporation and headquarters, the alleged deception in England, the agreement’s English governing law, the location of most witnesses and documents, and the fact that the claims against the other human defendants would proceed in England. The assessment was objective and concerned the forum with the most real and substantial connection. Mr Gibson’s residence and personal inconvenience in Jamaica did not outweigh those factors.
3. Stay against Mr Gibson. The inherent jurisdiction and case-management powers permitted a stay of claims not covered by an arbitration agreement, but the discretion was not to be exercised lightly. Reichhold Norway ASA v Goldman Sachs International [2000] 1 WLR 174 demonstrated that such stays were confined to rare and compelling circumstances. That case was distinguishable because it involved only one defendant in the English proceedings. Here, staying Mr Gibson’s claims would fragment the allegations of fraud and conspiracy, delay the claims against the other human defendants, and deprive Mabey of the benefits of a single public trial. The circumstances fell far short of the required threshold.
4. The action was stayed against DAG. Mr Gibson’s application to set aside service out was refused, and the action proceeded against him and the two former employees. Mabey was ordered to pay DAG’s costs on the standard basis, including the costs of the application.