Friday Law Report: Court had power to grant ancillary relief

19 March 1999

Re Q's Estate

Queen's Bench Division, Commercial Court (Mr Justice Rix) 12 March 1999

IN THE absence of express language in an arbitration clause, the court was not deprived of jurisdiction to grant ancillary relief such as a Mareva injunction in support of arbitration proceedings.

The Court of Appeal discharged an ex parte Mareva injunction which had been granted to the plaintiffs to protect their claim to a contingency fee under a retainer agreement with the defendant.

The defendant sought to challenge her father's will by bringing proceedings against other members of her family in the foreign country in which she lived. She entered into a retainer with a leading firm of lawyers in that country on the basis of a contingency fee. The beneficiaries of her father's estate agreed to settle her claim for a very large sum of money. The completion took place in London, and the money was paid into an account in Jersey.

The lawyers feared that they would not be paid their fee, and brought proceedings in England for, inter alia, a Mareva injunction over the proceeds of the settlement. They were granted an ex parte injunction.

The retainer agreement contained an English law and London arbitration clause. The defendant applied to have the Mareva injunction discharged and to stay the proceedings for arbitration. She argued that the court lacked all jurisdiction to grant a Mareva injunction because the parties had agreed that all disputes deriving from their agreement, including a dispute relating to such an ancillary remedy, should be within the exclusive jurisdiction of the arbitral tribunal, and that in any event the lawyers had failed to show a real risk that she would not pay any award against her.

Nicholas Hamblen QC (Ince & Co) for the plaintiffs; Thomas Beazley (Peters & Peters) for the defendant.

Mr Justice Rix said that section 44 of the Arbitration Act 1996 confirmed that the court had the same power of making orders in relation to arbitral proceedings about, inter alia, the preservation of evidence and the granting of an interim injunction as it had in relation to legal proceedings "unless otherwise agreed by the parties".

It was submitted for the defendant, relying on Mantovani v Caparelli [1978] 2 Lloyd's Rep 63, that the parties had "otherwise agreed" because the words in the arbitration clause "any dispute deriving [from] or in connection with" the retainer agreement embraced a dispute as to the granting of a Mareva agreement.

Mantovani v Caparelli was not, however, authority for the proposition that ancillary proceedings in the courts were always a breach of an arbitration clause, merely that they were in that particular case by reason of the wide language of the arbitration clause in question. In the absence of similar language the court was not deprived of jurisdiction to grant a Mareva injunction in support of arbitration between the parties to the proceedings.

Furthermore, the use of the word "exclusive" in the arbitration clause was merely intended to underline the general rule that substantive proceedings had to be by way of arbitration, rather than to introduce the exceptional situation where the parties were barred from ancillary proceedings in court. Had the parties wanted to exclude the right to resort to the court under section 44 of the 1996 Act for assistance in ancillary matters, they could and should have done so by more specific wording.

The court did not, therefore, lack jurisdiction to make a Mareva in the present case, but declined to do so on the merits.

A plaintiff could not obtain a Mareva injunction before his cause of action had accrued. In the present case, counsel had informed the court the day before the completion of the settlement of the defendant's claim that he would be seeking an injuction, i.e. before the plaintiffs' cause of action for their contingency fee had materialised. It had been possible to grant the injunction on the following day, with counsel's assurance that the completion had taken place and that nothing material had otherwise changed. That procedure, athough unorthodox, was none the less valid.