Home Information Cases SEB Trygg Holding Aktiebolag v Manches & Others (2005)

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SEB Trygg Holding Aktiebolag v Manches & Others (2005)

Summary

Arbitration proceedings brought in the name of a non-existent company were not a nullity since the mistake was one of misnomer and the proceedings had been authorised or ratified by the company's successor.

Facts

The claimant (S) sought a declaration that the fourth defendant (AMB) was a party to certain arbitration proceedings. The shareholders in an insurance company, Interlife, had sold their shares to S. Vendors of Interlife shares commenced an arbitration claiming the balance of the purchase price from S and S counterclaimed. By universal succession under German law AMB had succeeded to the assets and liabilities of the seller of 12.65 per cent of the shares in Interlife and the seller had been dissolved as a corporate entity. The solicitors for the arbitration claimants at that time had no knowledge of the merger and transfer and the arbitration proceedings against S were brought and continued in the name of the old company. After preliminary issues of liability had been heard in the arbitration AMB took the point that neither it, nor the old company, was or had ever been a party to the arbitration proceedings and that the solicitors had never been authorised to act for it or for the old company, since the latter had been non-existent at the time when the proceedings were initiated. AMB also denied that the previous solicitors, who had acted for the arbitration claimants, had ever been authorised to act on behalf of the old company or AMB. S issued proceedings against the solicitors for damages for breach of warranty of authority and those proceedings were consolidated with S's claim that AMB was a party to the arbitration proceedings. AMB submitted that (1) the arbitration proceedings were a nullity because those who acted for the claimants and the defendants in the arbitration thought that the old company still existed and intended to refer to that entity; (2) the arbitration proceedings were not started with AMB's authority; (3) AMB had not ratified the proceedings.

Held

(1) The continental process of universal succession was recognised by the English courts as being a special case, distinct from the dissolution of an English company and from the assignment of rights, so far as the correct constitution of an arbitration was concerned. Where a party had ceased to exist by reason of universal succession, the arbitration did not lapse and the tribunal was entitled to continue with the reference, Eurosteel Ltd v Stinnes AG (2000) CLC 470 applied. Objectively viewed, the facts surrounding the initiation of the arbitration proceedings clearly supported the contention that the mistake was one of misnomer, and not as to the identity of the party bringing the claim. The arbitration proceedings were not a nullity on the grounds of the old company's non-existence, Sardinia Sulcis (1991) 1 Lloyd's Rep 201 applied. They had been brought, and had throughout been continued, purportedly on behalf of AMB, notwithstanding that the old company’s name remained listed as the fourth arbitration claimant and that the successive firms of solicitors were not aware of the old company's merger with AMB and subsequent dissolution. (2) As a matter of German law the director of the old company entrusted with pursuing performance of the Interlife sale agreement retained express or implied authority to deal with that matter after the merger and transfer. Whilst still a director he had authority to commence proceedings and when he ceased to be a director of the old company he continued to have actual authority to handle the dispute. He also retained, as incidental to that function, the implied actual authority to instruct English solicitors to commence proceedings. If that was wrong the director had ostensible authority as a matter of English law. Official notification that he had ceased to be a director of the old company did not mean that he could not be held out as its agent. Before his resignation he was held out as having the relevant authority and that representation was binding on AMB. (3) AMB's acts clearly amounted to ratification of the proceedings and AMB failed to show that it lacked knowledge of material circumstances such as would render the ratification ineffective. (4) Although the solicitor defendants were actually authorised to act, they were nonetheless in breach of a more limited warranty, namely that the fourth claimant in the arbitration proceedings existed and bore the name of the old company, Nelson v Nelson (1997) 1 WLR 233 applied. The last solicitors acting were in breach of warranty of authority after AMB made it clear that they were no longer authorised to represent AMB in the substantive arbitration proceedings other than under a limited retainer for the purposes of applying for a change of name.

Preliminary issues determined.

Queen's Bench Division
Gloster J
Judgment date
21 February 2005
References

​[2005] EWHC 35 (Comm), LTL 23/2/2005