Melford Capital Partners (Holdings) Llp & Ors v Digby

Parties who have agreed exclusive jurisdiction or arbitration clauses will ordinarily be held to that bargain. Limited proceedings seeking urgent protective relief do not, without more, waive those agreed dispute-resolution mechanisms. Where contractual dispute-resolution clauses appear inconsistent, the agreement should be construed as a whole so far as possible, giving effect to each provision. A broad arbitration clause may coexist with an English jurisdiction clause, the latter operating to confer supervisory jurisdiction on the court. Under Arbitration Act 1996, section 9, the court must identify the matters raised and then determine whether each falls within the arbitration agreement. A stay is required unless the agreement is null and void, inoperative or incapable of performance.

The claimants obtained urgent English injunctions restraining the defendant from misusing confidential information, convening an investors’ meeting and retaining a laptop. The defendant then brought counterclaims concerning his alleged expulsion from two limited liability partnerships and the valuation of his interests.

One partnership agreement was governed by Guernsey law and contained an exclusive Guernsey jurisdiction clause. The other was governed by English law and contained both an exclusive English jurisdiction clause and a compulsory LCIA arbitration agreement. The claimants sought a stay or dismissal of the counterclaim concerning the Guernsey partnership and a stay under section 9 of the Arbitration Act 1996 of the counterclaim concerning the English partnership.

1. Guernsey jurisdiction. The English proceedings were a limited and urgent response to alleged misuse of confidential information, the threatened investors’ meeting and the laptop. They did not seek to litigate the wider partnership dispute. Bringing them did not amount to waiver of the exclusive Guernsey jurisdiction clause. The defendant could raise matters concerning his expulsion and the valuation issues by way of defence if necessary, but was not entitled to introduce them as counterclaims in the English proceedings.
2. The counterclaim against the Guernsey partnership was stayed. Permitting it to proceed in London would broaden the dispute, create a risk of fragmented proceedings and expose the parties to inconsistent findings. The court was entitled to hold the parties to their agreed forum.
3. Arbitration agreement. The English jurisdiction clause and the compulsory LCIA arbitration clause in the MCP agreement could be read harmoniously. The arbitration agreement was separable and effective. The English courts retained supervisory jurisdiction over the arbitration.
4. Under section 9 of the Arbitration Act 1996, the court first identifies the matter or matters raised by the proceedings and then determines whether each falls within the arbitration agreement on its true construction. If it does, the court must grant a stay unless the agreement is null and void, inoperative or incapable of performance.
5. The defendant’s membership, expulsion and auditor-valuation disputes were substantial matters falling within the broad clause covering any dispute arising out of or connected with the MCP agreement, including questions concerning the legal relationships established by it. The claimants’ limited injunction proceedings did not constitute a clear and unequivocal election to abandon arbitration or a repudiation of the arbitration agreement.
6. The counterclaim against MCP was therefore stayed under section 9. The court recognised that fragmentation between Guernsey proceedings and arbitration was undesirable, but the parties had agreed those forums and had not agreed that the dispute should be determined in London.