Artemis Trustees Ltd and Others v KBC Partners LP and Others [Eastern Caribbean Supreme Court]
| Jurisdiction | British Virgin Islands |
| Judgment Date | 12 March 2013 |
| Court | High Court (British Virgin Islands) |
| Docket Number | CLAIM NO. BVIHC (COM) 137 OF 2012 |
| Date | 12 March 2013 |
THE EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
COMMERCIAL DIVISION
CLAIM NO. BVIHC (COM) 137 OF 2012
Mr. Ian Mill QC for the Applicants, the first to third Defendants
Mr. Jonathan Russen QC for the Respondents, the Claimants
(Stay of proceedings under s 6(2) Arbitration Ordinance (Cap 6) — claim for winding up and dissolution of and appointment of liquidators to first and second Defendants (‘Defendants’) — Defendants limited partnerships formed under Part VI Partnership Act 1976 (‘the Act’) — Defendants Articles of Limited Partnership containing similar arbitration clauses under LC1A Rules — Claimants relying upon ss 37 and 108 of the Act — whether dispute within scope of arbitration agreements — whether LCIA arbitrators have power to dissolve limited partnership — whether LCIA arbitrators have power to appoint liquidators to limited partnership — In the Matter of Wine Inns1 and Stillman v Attorney General2 considered)
Bannister J [Ag]: This is an application made by the first three Defendants to these proceedings, in which the Claimants seek the winding up and dissolution of the first and second Defendants (respectively ‘KBC’ and ‘SCI,' together ‘the Partnerships’) and the appointment of a liquidator over each of them, for the grant of a stay in favour of arbitration.
Each of KBC and SCI are limited partnerships formed under Part VI of the Partnership Act, 1976 (‘the Act’). Each of the Claimants is a limited partner of one or other of the Partnerships. Each Partnership has other limited partners who are not party to these proceedings. The third Defendant (‘Safford’) is a BVI incorporated company which is said to be wholly owned by the fourth Defendant (‘Mr. Jaffe’). Its directors are Mr. Jaffe and the fifth Defendant (‘Mr. Bedineishvili’). Salford is the general partner of each of the Partnerships. Each of the Partnerships and Salford has been served here in the BVI. They have acknowledged service, admitting no part of the claim and indicating an intention to defend. Neither Mr. Jaffe nor Mr. Bedineishvili has been served. If this application fails and the claim is not stayed, the Claimants have expressed their intention to apply for permission to serve each of them out of the jurisdiction. In what follows I shall refer to the first to third Defendants simply as ‘the Defendants.’
The Claimants hold their limited partnerships pursuant to consultancy agreements into which they have entered with Salford (‘the Consultancy Agreements’), which are incorporated into the Articles of Limited Partnership of each of KBC and SCI (‘the Articles’) and which prevail in case of any inconsistency between them.
Each of KBC and SCI is a special limited partner in a third BVI established limited partnership, Value Discovery Partners (‘VDP’). Salford is also the general partner of VDP. VDP holds a number of trading interests in the CIS and Balkans. They are of considerable value, although their precise value is a matter of dispute. The Claimants and the other limited partners in the Partnerships are entitled to what are described as ‘Carried Interests’ (as I understand it, income distributions) derived from the underlying businesses owned by VDP and passed up through the chain which I have attempted to describe above.
On 23 October 2012 Salford put VDP into what is described in the statement of claim as ‘solvent voluntary liquidation.’ That event seems to have prompted the present proceedings.
There are two limbs to the claim for the appointment of liquidators. First, it is said that each of the Partnerships has ‘terminated’ in accordance with its Articles. Broadly speaking, termination, in the case of KBC and SCI, must be followed by the discharge of ail the liabilities of the Partnership and distribution of the surplus, after payment of the costs of dissolution, to the limited partners and the general partner in proportion to their entitlements to Carried Interest. There are no provisions in the Articles of KBC or SCI for realization of assets or indeed for any other of the incidents which might be expected t o follow dissolution of a partnership, no doubt because those Partnerships were nothing more than limited partners in VDP, the asset holding partnership. VDP's Articles, as might be expected, contain more elaborate provisions dealing with liquidation. On the basis, which I understand not to be common ground, that the Partnerships have terminated within the meaning of their respective Articles, it is said that it is just and equitable that a liquidator be appointed to wind down the Partnerships’ affairs.
The other allegations are of mismanagement on the part of Mr. Jaffe/Salford of the affairs of the group of partnerships, in particular mismanagement of VDP, to the consequential detriment of the Claimants' indirect interests in VDP. It is not necessary for the purposes of this judgment for me to go into any detail about those allegations, except to say that they are said to have involved breaches of fiduciary duty, acts prejudicially affecting the carrying on of the business of the Partnerships, and conduct making it unreasonable for the Partnerships to carry on in partnership with Salfbrd. I should mention, however, that the appointment of a liquidator to VDP is itself alleged to have been an act of mismanagement and in breach of the Articles of each of KBC and SCI and, secondly, that many other of the allegations are said to have involved breaches of the Articles of the Partnerships and/or of the Consultancy Agreements,
The Consultancy Agreements (which are subject to BVI law) contain, at clause 13.2 and 13.2.1, provisions in the following form:
“13.2 The parties agree to resolve any dispute, claim or counterclaim arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, or the legal relationships established by this Agreement, by arbitration conducted in accordance with this Clause 13.2 and the Rules of the London Court of International Arbitration current at the time when the arbitration proceedings are commenced (“the LCIA Rules”), which Rules are deemed to be incorporated by reference into this Clause (save in so far as the LCIA Rules are inconsistent with the express terms of this Agreement or as expressly varied below). References to Articles below shall be references t o Articles in the LCIA Rules and terms used in this Clause 13.2 that are defined in the LCIA Rules shall have the same meaning as in the LCIA Rules. With respect to an arbitration under this Clause 13.2:
13.2.1 The parties agree to fast-track the arbitration so that it is concluded as is reasonably practicable, and in any event within 60 (sixty) calendar days commencing with the appointment of the Arbitral Tribunal and expiring on the date that the Arbitral Tribunal's award (“the Award”) is made (“the 60 Day period”).
The Articles of KBC and SCI each contain a provision to the following effect:
“Any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, or the legal relationships established by this Agreement, shall be referred to and finally resolved by arbitration under the Rules of the London Court or International Arbitration, which Rules are deemed to be incorporated by reference into this clause.”
it was not suggested that for present purposes there was any material distinction to be made between the two clauses and discussion focused on the terms of the arbitration clause in the Articles. I shall do the same in this judgment.
The Defendants rely upon subsection 6(2) of the Arbitration Ordinance 1976 (Cap 6) (‘the Ordinance’), which provides as follows:
“6(2) If any party to an arbitration agreement, other than a domestic arbitration agreement, or any person claiming through or under him, commences any legal proceedings in any court against any other party to the agreement or any person claiming through or under him, in respect of any matter agreed to be referred, any party to the proceedings may at any time after appearance, and before delivering any pleadings or taking any other steps in the proceedings, apply to the court to stay the proceedings; and the court, unless satisfied that the arbitration agreement is null and void, inoperative and incapable of being performed or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings.”
it is not in dispute that none of the arbitration clauses set out above is a domestic arbitration agreement within the meaning of section 2 of the Ordinance.
It was not disputed that if and to the extent that the dispute constituted by the challenged 3 allegations in the statement of claim falls within the scope of the arbitration clauses, and unless the arbitration agreements are themselves null, void, inoperative or incapable of being performed, the Court has no discretion in the matter, but must stay the claim (or part of the claim),
Mr. Russen QC, appearing for the Claimants, submitted that the claim made in the statement of claim does not fall within the scope of the arbitration provision. He says that there is no dispute ‘arising...
To continue reading
Request your trial