AdActive Media Inc v Ingrouille

A contractual arbitration clause is not ineffective merely because the agreement also identifies courts with jurisdiction. The contract should be read as a whole, giving effect to each term where possible; a court clause may govern claims expressly excluded from arbitration. Where foreign proceedings include claims which the agreement requires to be arbitrated, the English court must examine the claimant’s case as formulated when proceedings were brought, rather than only the claims supporting the foreign judgment. Subject to the statutory conditions, enforcement is then barred by Civil Jurisdiction and Judgments Act 1982, section 32(1)(a). Abandonment of arbitration requires either an implied agreement necessarily inferred from conduct or estoppel supported by reasonable reliance and significant alteration of position.

AdActive Media Inc sought in England to enforce a United States judgment for US$11 million against Mark Ingrouille, arising from a consultancy agreement governed by Californian law. Clauses 15 and 16 selected Californian courts for legal proceedings, while clause 17 required arbitration except for company claims under clauses 7 and 8.

The United States proceedings included claims concerning confidential information, misappropriation of funds and interference with the company’s business. The High Court, on an application for summary judgment, held that the proceedings could be brought in the United States because they included claims within the clause 17 exception, and alternatively that the arbitration clause was unenforceable because of inconsistency with clauses 15 and 16: [2020] EWHC 2266 (Comm). The appeal concerned the effectiveness and scope of clause 17, the application of section 32, and whether later conduct had abandoned the arbitration agreement.

1. Disposition. Lord Justice David Richards, with whom Lord Justice Henderson and Lady Justice Carr agreed, allowed the appeal. The United States judgment could not be enforced in England, and summary judgment was entered for Mr Ingrouille. The company’s application for permission to serve a Respondent’s Notice out of time was refused.
2. Effectiveness of the arbitration clause. The judge had approached the construction issue through section 32(2) of the Civil Jurisdiction and Judgments Act 1982. The correct question arose under section 32(1)(a): if clause 17 had no contractual effect because of irreconcilable inconsistency, there was no arbitration agreement, rather than an existing agreement which was void or unenforceable.
3. The parties are presumed to have intended the contract to operate as a whole. Courts should examine the precise drafting carefully and strive to give effect to every term. A term should not be rejected unless it is manifestly inconsistent with or repugnant to the remainder. This purposive approach was supported by Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38; [2020] 1 WLR 4117.
4. Clauses 15 to 17 could operate consistently. Clause 15 selected the relevant federal and state courts, clause 16 concerned court proceedings, and clause 17 required arbitration for claims arising from the agreement except company claims under clauses 7 and 8. The exception did not permit other claims to be brought in court merely because proceedings also included claims under clauses 7 or 8. The court left open the wider question of how composite claims containing both categories should be managed.
5. For section 32(1)(a), the decisive matter was whether bringing the foreign proceedings breached the agreement. The focus was therefore on the claims as formulated by the claimant when proceedings were commenced, not solely on the causes of action or relief ultimately reflected in the judgment. The United States proceedings went beyond clause 7 claims and included misappropriation and conspiracy allegations. Their commencement was contrary to the arbitration agreement, so the resulting judgment could not be recognised or enforced in England.
6. Abandonment by conduct required either conduct necessarily implying an agreement to abandon, or conduct leading one party reasonably to believe in abandonment followed by significant alteration of position in reliance on that belief, applying Paul Wilson & Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854. The Thai proceedings did not satisfy either route: the first were against non-parties to the arbitration agreement, the proceedings were criminal defamation claims outside clause 17, they responded to publication rather than the United States proceedings, and there was no evidence of reliance by the company.

1. Court of Appeal (Civil Division): In [2021] EWCA Civ 313, the appeal was allowed, the company’s late Respondent’s Notice application was refused, and summary judgment was entered for Mr Ingrouille.
2. High Court of Justice, Business and Property Courts at Bristol, Circuit Commercial Court: HH Judge Russen QC granted summary judgment enforcing the United States judgment against Mr Ingrouille in [2020] EWHC 2266 (Comm).