Paris Court of Appeal, No. 12-08.610 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 3 September 2013, No. 12-08.610

SOCIETE A BV (ABV)

SOCIETE F LIMITED

SOCIETE G LIMITED

SOCIETE BOSWORTH CONSULTANTS LIMITED

SOCIETE TRUELINK SERVICES LIMITED

SOCIETE FLOWERWALK LIMITED

(The SUBSIDIARIES)

Vs.

SARL CABINET PATRICK B (CABINET B)

A BV (ABV), a company incorporated under Dutch law, is the parent company of the English companies’ F LIMITED, G LIMITED, BOSWORTH CONSULTANTS LIMITED, TRUE LINK SERVICES LIMITED, FLOWER WALK LIMITED and Z H (hereinafter the SUBSIDIARIES) which operate golf resorts acquired from the Blue-Green company

By an exchange of letters dated 3 August and 21 September 2000, F entrusted SARL CABINET PATRICK B with an accounting assignment. This mission was extended to the other SUBSIDIARIES by five letters dated 25 October 2000. These six agreements included an arbitration clause. Finally, in a letter dated 23 March 2001, which did not include an arbitration clause, ABV, acting on behalf of the SUBSIDIARIES, entrusted the same accounting firm with an assignment to audit the terms and conditions of the acquisition of the golf resorts.In May 2003, CABINET B filed a request for arbitration before the Ile-de-France Regional Council of the Order of Chartered Accountants concerning unpaid invoices under the engagement letters of 21 September, 25 October 2000 and 23 March 2001. It sought a solidary liability of SUBSIDIARIES and ABV. In two partial awards dated 12 June 2007, Mr. C, the sole arbitrator, ruled on jurisdiction. As his mission had ended in the absence of a decision on the merits within the time limit, a new arbitrator, Mr. X, was appointed.

In an award issued in Paris on 4 June 2010, Mr. X, has, in a substance:

conﬁrmed the partial awards and, as a result, declared itself incompetent concerning ABV under the 2000 engagement letters, and decided to examine the disputes arising from the engagement letter of 23 March 2001,

dismissed the applications for joint and several liability on the grounds of the existence of a group of companies

charged ABV to the debt of Z which had meanwhile been liquidated,

decided, with provisional execution, on the total compensation due to CABINET B, by each of the SUBSIDIARIES and ABV in respect of Z, for a total amount of EUR115,990 plus interest at the legal rate as from 12 March 2012.

ABV and the SUBSIDIARIES filed an action on 28 December 2010 to set aside the award of 4 June 2010.

The case was removed from the docket at the request of the parties on 7 February 2012. It was reinstated on May 10, 2012.

By submissions dated 21 May 2013, ABV and the SUBSIDIARIES request the court to set aside the award issued on 4 June 2010, to declare CABINET B’s actions for annulment and reversal of the partial award of 12 June 2007 inadmissible and unfounded, to declare CABINET B’s claims on the merits inadmissible and unfounded, to order CABINET B to return the sums it has been awarded by way of garnishments, with interest at the legal rate as from the date of garnishments and anatocism, and finally to order CABINET B to pay each of them the sum of EUR10,000 pursuant to Article 700 of the Code of Civil Procedure.

Based on the former Article 1484 of the Code of Civil Procedure, and subsidiarity of Articles 1502 and 1504 of that Code, the SUBSIDIARIES and ABV claim that the arbitrator ruled without an arbitration agreement, that he did not comply with the mission that had been entrusted to him, that he disregarded the principle of due process and violated public order.

In its submissions of 29 May 2012, CABINET B asks the court to declare the appeal and the opposing claims inadmissible and unfounded, to declare its cross-appeal admissible, to reverse the validity' of partial award no. 1, to declare the existence of a group of companies and to reverse the award in so far as it dismisses this existence and rejects the request for solidarity between ABV and the SUBSIDIARIES, to reverse the award in so far as it dismisses its claims for damages and compensation for its procedural costs, to order ABV and the SUBSIDIARIES jointly and severally to pay the fees due, to declare that these sums will produce interest at the legal rate as from the date of the award, to declare that the award is not valid, to declare that it is not valid, to declare that the award is not valid and that it rejects the application for solidarity between ABV and its SUBSIDIARIES, to order ABV and the SUBSIDIARIES jointly and severally to pay the fees due, to declare that these sums will produce interest at the legal rate as from 12 March 2002 with capitalization, in the alternative to conﬁrm the judgment referred to order in solid the claimants to pay the sum of 50,000 euros as damages for improper resistance and 100,000 euros for the costs of the proceedings

UPON WHICH:

On the classification of the arbitration:

Whereas under the terms of Article 1492 of the Code of Civil Procedure, in the version applicable to the case in point: ‘An arbitration involving the interests of international trade is an international arbitration'; whereas this classification covers all operations that are not economically resolved in a single State;

Whereas this is the case in the present situation regarding accounting assignments relating to golf resorts located on French territory, assignments entrusted to a French firm by English companies and paid for by cheques drawn on the NatWest bank in Leeds (appendix to exhibit B n° 5)

Whereas the grounds for annulment will therefore be examined in the light of Article 1502 of the Code of Civil Procedure in its applicable version at the date of the award of 4 June 2010;

On the ground for annulment based on the absence of an arbitration agreement in respect of claims arising from the letter of engagement of 23 March 2001 (Article 1502-1 of the Code of Civil Procedure):

The claimants argue that the engagement letter of 23 March 2001 does not contain any arbitration clause, and that it cannot be covered by the effects of the arbitration clauses stipulated in the 2000 contracts, which relate to entirely separate services. They add that the award of 4 June 2010 must be set aside in its entirety since it imposes global sentences for services which were provided under both the 2000 agreements and the letter of 23 March 2001.

Whereas on 3 August 2000, CABINET B sent the Chairman of F LIMITED a proposal for an assignment involving (1) the drawing up of the balance sheet and annual accounts, (2) the current social and tax accounting advice, (3) the study of forecasting and analysis tools, (4) auditing and management control, and (5) assistance in social matters. The proposal indicated that the contract could only be terminated each year on its anniversary date with three months' notice. The proposal also set out the conditions for remuneration of the services listed and it specified that ‘any exceptional services would be subject to a prior amendment and additional invoicing’. Finally, the proposal granted jurisdiction to the President of the Ile-de-France Regional Council of the Order of Chartered Accountants in the event of a dispute. This document was returned signed by the representative of company F. On the same model, the engagement letters sent to them by CABINET B on 25 October 2000 were signed by the Chairman of the other SUBSIDIARIES;

Whereas by a letter dated 23 March 2001, ABV, acting on behalf of the SUBSIDIARIES entrusted the CABINET B with the task of (1) examining the contractual and accounting documents related to the acquisition of the golf resorts from the company Blue Green and (2) looking for possible anomalies in the documents communicated by the seller;

Whereas this letter, the sole purpose of it being to clarify the terms of an exceptional service, falls within the framework defined by the contracts of the year 2000, and can be analyzed as a rider to them; whereas the letter is, therefore, subject to the arbitration clause stipulated in the framework contracts;

Whereas the ground based on the fact that the arbitrator would have ruled without an arbitration agreement in respect of claims arising from the letter of engagement of 23 March 2001 must therefore be dismissed;

On the ground for annulment based on the arbitrator’s failure to comply with his mission, as well as his failure to observe due process (in French Principe de la contradiction) (Article 1502-3 and -4 of the Code of Civil Procedure):

The appellants claim that the arbitrator, by ordering ABV to pay the sums owed by Z in its capacity as main partner of this dissolved subsidiary, -when the claim brought by CABINET B against the parent company for payment of all the fees owed by all of its SUBSIDIARIES was based on the allegation of the existence of a single de facto company-, has, automatically and without inviting the parties to explain themselves, substituted one legal basis for another, and thus disregarded its mission and due process.

Whereas it follows from the brief filed on 3 September 2009 before the Arbitrator X that CABINET B has based the challenge against ABV on the allegation of the existence or at least the appearance of a corporate group and that it has justified this qualiﬁcation by the following circumstances:

a common leader to all companies,
an agreement made on behalf of the group
an invoice issued on the letterhead of another company in the group

Whereas the arbitrator did not accept this analysis; that he only condemned the SUBSIDIARIES, each of them for the fees that were personally attributable to them; that the arbitrator nevertheless substituted ABV for Z on the grounds that the decision to sell the shares in this subsidiary ‘could not have been taken without a commitment to assume the liabilities that could arise from the outcome of the dispute (in respect of the services of CABINET B);

By substituting a legal basis for the one upon which the claim was based, without inviting the parties to explain themselves on this point, the arbitrator misunderstood his mission as well as the principle of due process;

That the award should be reversed on that account, but only in so far as it orders ABV to pay the sum of EUR 14 607 instead of Z;

Whereas Article 14 of the Rules of Arbitration of the Order of Chartered Accountants provides that in the event of the award being set aside, the dispute shall be brought again before the Order’s Regional Council; whereas there is, therefore, no need to invite the parties to conclude on the merits;

On the grounds based on the fact that the arbitrator ruled against ABV without an arbitration agreement and violated public policy (Article 1502-1 and -5 of the Code of Civil Procedure):

First of all, the appellants claim that the arbitrator ruled without an arbitration agreement in respect of ABV, which did not enter into any contract with CABINET B stipulating an arbitration clause and was moreover exonerated by the partial award issued by arbitrator C on 12 June 2007.

The appellants further claim that the arbitrator violated public order by sentencing ABV, despite the res judicata authority of this partial award.

Whereas, supposedly well-founded, these grounds could lead to the annulment of the award only in so far as they condemn ABV; that, since such annulment could be possible on another ground, these grounds need not be examined;

On the request for restitution by CABINET B of the sums received in the execution of the award:

Whereas it is up to the parties to draw all the consequences of the partial annulment pronounced without having to make their account in the context of annulment proceedings

On the application submitted by CABINET B for the annulment of the partial award of 12 June 2007:

Whereas this award has not been the subject of any appeal,, the application is inadmissible;

On the request of CABINET B, firstly, to reverse the award of 4 June 2010, insofar as the arbitrator declares himself incompetent with regard to ABV, dismisses the joint and several liability and rejects CABINET B’s claims for damages and compensation for its procedural costs, secondly, to order the appellants to pay damages on the merits of the case;

Whereas CABINET B, which does not raise any grounds for setting aside the award, seeks a revision of the award which is not permitted by this court; whereas its requests must be rejected

On the claim for damages for abuse of process;

Whereas, having regard to the spirit of the judgement, CABINET B’s claim for damages for abuse of process must be rejected

On Article 700 of the Code of Civil Procedure

Whereas equity would not require that this provision be applied to benefit of any of the parties;

FOR THESE REASONS:

Reverses the award rendered on 4 June 2010 between the parties but only in so far as it condemns the company A BV to pay to the SARL CABINET PATRICK B the sum of 14,607 euros, including the share of arbitration costs.

Rejects all other requests.

Condemns in solidum SOCIETY F LIMITED, SOCIETY G LIMITED, BOSWORTH CONSULTANTS LIMITED, TRUE LINK SERVICES LIMITED and FLOWER WALK COMPANY LIMITED to the costs.