Patley Wood Farm LLP v Brake & Anor

Under section 44 of the Arbitration Act 1996, the court has a wider discretion to support arbitral proceedings than its power under section 42 to enforce a peremptory order. The court should adopt a non-interventionist approach and should not rehear or review the arbitrator’s decision. It must nevertheless decide whether court intervention is appropriate and whether the proposed order is workable and serves the arbitral process. The court should not act as a rubber stamp. Where an arbitrator’s directions are unclear, impose a practical disadvantage, or require a mechanism which has not been defined, the court may refuse to give them the force of a court order backed by a penal notice.

The claimant partnership sought committal orders against the defendants for breaches of a freezing order and an order under section 44 of the Arbitration Act 1996 to support directions made by the arbitrator during the winding up of the partnership. The defendants had made payments said to be outside normal partnership expenditure and had failed to provide information required by the freezing order. They also opposed enforcement of directions restricting dealings with, and negotiations concerning, the partnership property.

The defendants had withdrawn a separate application concerning charges over their partnership interests and payments from partnership funds. The court therefore also determined the costs of that application.

1. Costs. The withdrawn application had been, on the material before the court, highly optimistic. The defendants were ordered to pay the claimant’s costs. Indemnity costs were justified from the appointment of the receivers, when the application had become doomed, but not for the earlier period.
2. Contempt. Payments to solicitors pursuing claims against a co-partner were not partnership business expenditure and, in any event, were not normal day-to-day business expenditure permitted by clause 7(a) of the freezing order. Payments concerning a horse box were also within the express exclusion of equestrian expenditure. The defendants had further breached clause 14 by failing to provide the required payment lists and red sales ledger entries. The breaches were established, but the court was not presently inclined to impose a fine or imprisonment if they were remedied. The wrongful payments were to be restored and the outstanding information supplied.
3. Section 44. The court distinguished the narrower enforcement jurisdiction under section 42 from the wider power under section 44 to support arbitral proceedings. The court should not review whether the arbitrator ought to have made the order, but should consider whether intervention is appropriate in support of the arbitration. That required more than automatic endorsement of the arbitrator’s directions.
4. The arbitrator’s directions concerning the defendants’ possible purchase of the partnership property were insufficiently workable. Although intended to secure transparency and protect the partnership, they prohibited negotiations and bidding unless the claimant or arbitrator gave consent, without identifying a workable mechanism for resolving the conflict between commercial confidentiality and transparency. They also placed the defendants at a disadvantage in competing to purchase their former home.
5. The court therefore declined to make the requested order under section 44. The application to support the arbitrator’s directions was dismissed.