Seven companies have a claim against their former director for breach of fiduciary duties. Three of those companies have an arbitration agreement.
All seven companies bring a claim in the English court against the former director who applies to have the court proceedings stayed in favour of arbitration.
The three claimants with an arbitration agreement concede that they must sue in arbitration, and the question then becomes whether the court claims by the other claimants should be stayed in favour of the arbitration or not.
This was the factual scenario in NTT Limited & others v Jason Goodall [2024] EWHC 445 (Comm).
The court was urged to find that a stay should be granted in “rare and compelling” circumstances, but held instead that the test is simply one of determining whether or not a stay is in the interests of justice.
The court also held that because the parties in the arbitration and the court would be different, and with no overlap, there would be no issue estoppel.
Nonetheless, the court ordered a stay of the court proceedings in favour of arbitration. This was for various reasons. Firstly, that there was no exclusive jurisdiction clause in favour of the English courts or a statutory scheme for the allocation of jurisdiction. Secondly, all the Claimants were in the same corporate group and the vast majority of the claims made, although each Claimant had its own losses, would be determined in the arbitration and indeed that if the defendant lost the arbitration this would already be ruinous to him financially such as to make further litigation uncommercial. Thirdly, as such there was only a minor risk of inconsistent decisions. Fourthly, if both sets of proceedings were to run in parallel this would create an “inequality of arms” for the individual defendant. Fifthly, there was no argument that any delay could not be adequately compensated in interest.
The case provides welcome guidance on the test to be applied when the court is using its discretionary powers to impose a stay on itself in favour of a related arbitration, and the factors that can weigh in that decision.