Unilever Plc v ABC Intl

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 19 February 2008
• Court: Grand Court (Cayman Islands)
• Date: 19 February 2008

Grand Court

(Smellie, C.J.)

UNILEVER PLC

and

ABC INTERNATIONAL

MOLSON COORS BREWING COMPANY

and

ABC INTERNATIONAL

P. Brook Smith, Q.C. and Ms. J. Stewart for the plaintiffs;

The defendant did not appear and was not represented.

Cases cited:

(1) Airbus Indus. G.I.E. v. Patel, [1999] 1 A.C. 119; [1998] 1 Lloyd”s Rep. 631; [1998] C.L.C. 702, referred to.

(2) Bonython v. Commonwealth of Australia, [1951] A.C. 201; (1950), 94 Sol. Jo. 821, followed.

(3) Catanho v. Brown & Root (U.K.) Ltd., [1981] A.C. 556; [1980] 3 W.L.R. 991; [1981] 1 All E.R. 143; [1981] 1 Lloyd”s Rep. 113; (1981), 124 Sol. Jo. 884, referred to.

(4) Insurco Intl. Ltd. v. Voluntary Purchasing Group Inc., 1994–95 CILR 402, referred to.

(5) KTH Capital Management Ltd. v. China One Fin. Ltd., 2004–05 CILR 213, referred to.

(6) Kitts v. Moor & Co., [1895] 1 Q.B. 253; (1894–95), 39 Sol. Jo. 96, referred to.

(7) Leco Instruments (UK) Ltd. v. Land Pyrometers Ltd., [1982] R.P.C. 133, referred to.

(8) Liberia (Republic) v. Gulf Oceanic Inc., [1985] 1 Lloyd”s Rep. 539, applied.

(9) Metal Scrap Trade Corp. Ltd. v. Kate Shipping Co. Ltd. (The ‘Gladys’), [1990] 1 W.L.R. 115; [1990] 1 All E.R. 397; [1990] 1 Lloyd”s Rep. 297; (1990), 134 Sol. Jo. 261, referred to.

(10) Peterson Farms Inc. v. C & M Farming Ltd., [2004] 1 Lloyd”s Rep. 603; [2004] EWHC 121 (Comm), referred to.

(11) Shell-Mex & B.P. Ltd. v. Manchester Garages Ltd., [1971] 1 W.L.R. 612; [1971] 1 All E.R. 841; (1971), 115 Sol. Jo. 111, referred to.

(12) Société Nationale Indus. Aerospatiale v. Lee Kui Jak, [1987] A.C.

871; [1987] 3 W.L.R. 59; [1987] 3 All E.R. 510; (1987), 131 Sol. Jo. 842, referred to.

(13) Zuiderent v. Christiansen, 2004–05 CILR N[23], referred to.

Civil procedure-judgments and orders-summary judgment-summary judgment may incorporate declaration that plaintiff not bound by agreement to arbitrate and injunction restraining defendant from further vexatious and oppressive efforts to compel arbitration

The plaintiffs sought a declaratory order and injunctive relief in respect of ongoing litigation between themselves and the defendant.

In consolidated actions, the plaintiffs applied for a declaratory order, under the Grand Court Rules, O.14, to the effect that none of them was bound by an agreement, allegedly between themselves and the defendant, Arab Business & Commerce International (‘ABCI’), nor were they bound to engage in arbitration in respect of contractual disputes, and for injunctive relief restraining ABCI from further attempts to compel them to arbitrate.

ABCI, a company incorporated and registered in the Cayman Islands, had made several attempts to enter into arbitration with the plaintiffs, a group of well-known international companies, under an arbitration clause in an agreement made between the defendant and Diversey Ltd. (a company not itself party to these proceedings, then part of the Diversey division of the Molson Group, which was party to the present proceedings) in 1988. Diversey Ltd. had, in the early 1980s, sought to sell its products in Saudi Arabia but in order to trade there foreign companies needed a local sponsor. Diversey Ltd. had, therefore, reached an agreement in 1983 with a Prince Bandar, who traded under the name of Arab Business & Commerce Saudi (‘ABCS’). ABCI was also party to this agreement, under which it undertook to assist and oversee ABCS in its sponsorship of Diversey Ltd., for a commission payable back to ABCS. In 1988, a new agreement, very similar to the 1983 agreement, was made between Diversey Ltd. and ABCI which contained the arbitration clause the subject of the present proceedings. This agreement made ABCS the local sponsor of Diversey Ltd., responsible for its running, while ABCI was to oversee the whole operation and monitor the performance of ABCS, which was then headed by a Dr. Bouden, to whom Prince Bandar had delegated responsibility.

By 1991, ABCS, and in particular Dr. Bouden, had been failing to perform its obligations for some time, culminating in the dismissal of Dr. Bouden by Prince Bandar. However, by this time Diversey Ltd. considered the 1988 agreement to have been terminated and the Diversey division of the Molson Group confirmed this position in a letter dated July 19th, 1992. After that, the ownership of Diversey Ltd. was transferred several times, with the Molson Group selling the company to Unilever, resulting in the creation of DiverseyLever, which was subsequently bought by the Johnson Group. ABCI had, since 1998, attempted to commence arbitration with these companies, the plaintiffs, in respect of their failure to perform their obligations, pursuant to the arbitration clause in the 1988 agreement, which it believed was never terminated.

The plaintiffs submitted that (a) the agreement was considered by Diversey Ltd. to have been terminated in 1991 and evidence, dated 1992, existed which established this position; (b) as the agreement ceased to exist, any transfer of the ownership of Diversey Ltd. between the plaintiffs was irrelevant and this was so even if it were held that the agreement still operated, as any obligations under it had not been transferred or assigned in any way to any of the plaintiffs upon any transfer of ownership since the agreement, and mere ownership was not enough to bind them to any clause of the agreement in the absence of privity; since ‘group enterprise theory’ was not a doctrine recognized by either Cayman or English law, there was no basis for any contractual relationship between ABCI and the plaintiffs; and (c) ABCI clearly wished to extend its claim to any entity even remotely linked to Diversey Ltd., many of which did not even exist at the time of the agreement, and an injunction against it was necessary to prevent further vexatious arbitration attempts.

The defendant made no submissions, filed no evidence, despite three separate opportunities to do so, and was unrepresented, all of which was unexplained. However, its previous defence had been that (a) the 1988 agreement had not been terminated and was therefore still in operation; (b) under the ‘group enterprise theory,’ the plaintiffs were bound to the arbitration agreement as a result of the various transfers of the ownership of Diversey Ltd. and re-assignments of the obligations under the agreement since 1988; and (c) the court did not have jurisdiction to adjudicate in the dispute.

Held, granting the applications:

(1) A declaratory order would be made to the effect that the plaintiffs were not bound by the arbitration clause of the 1988 agreement and were therefore not bound to arbitrate in regard to disputes under the agreement. There was no jurisdictional reason why summary judgment containing a declaration of this nature could not be given under the Grand Court Rules, O.14. As ABCI had filed no evidence, in contrast to the array of evidence filed by the plaintiffs, the court had to proceed on the basis of that unchallenged evidence alone. The agreement had been terminated by 1991 and there was in any case no basis for alleging any contractual relationship

between the plaintiffs and ABCI, since none of them had been privy to the agreement, no obligations under the agreement had been transferred or assigned in any way to any of the plaintiffs upon any transfer of ownership of Diversey Ltd., and ‘group enterprise theory’ was not a doctrine recognized by either Cayman or English law. The appropriate doctrine was that of privity and there was no privity in this case (para. 5; paras. 21–22; para. 40; para. 48; para. 50; para. 54).

(2) An injunction would be granted to restrain ABCI from attempting to force further arbitration upon the plaintiffs as it had shown no substantial case against them and clearly wished to pursue any entity even remotely linked to Diversey Ltd. with vexatious and oppressive attempts to force them into arbitration. The court had inherent jurisdiction to grant summary judgment incorporating such an injunction, since such injunctions could be granted when appropriate and necessary to avoid injustice, as was the case here, provided that the court was satisfied that the defendant was unable to establish a proper defence. Although ABCI did retain the right to apply to stay the proceedings under the Foreign Arbitral Awards Enforcement Law (1999 Revision), it had failed to do so (para. 20; paras. 40–41; para. 44; para. 47; para. 52; para. 54).

1 SMELLIE, C.J.: I have before me two applications, one in each cause, which were directed by an order made on June 6th, 2007 to be heard together. In them, the plaintiffs (that is, all the plaintiffs except the Kimberly-Clark Corporation) seek judgment under the Grand Court Rules, O.14, for declaratory and injunctive relief against the defendant, ABC International (‘ABCI’). The declaratory order sought would be to the effect that none of the plaintiffs is bound to arbitrate, in the context of several attempts by ABCI (through the International Chamber of Commerce in Paris) to arbitrate against them. The injunctive orders would restrain ABCI from further attempts to arbitrate about the same or similar allegations of contractual obligations on the part of the plaintiffs to submit to arbitration.

2 The plaintiffs are companies which are variously and disparately part of well-known and substantial international commercial organizations (the Molson, Unilever, Johnson and Nalco groups of companies, based in various parts of the world), and four individuals associated...