The respondent, Guinness was the majority shareholder in a UK company, CPL. The appellants, Kanoria commenced arbitration proceedings in India against Guinness and CPL, claiming that CPL had failed to pay a sum of money to Kanoria under a business agreement subject to Indian law.
At the time Kanoria commenced arbitration proceedings, Guinness was seriously ill and unable to attend the arbitration hearing. During the arbitration hearing, Kanoria made allegations of fraud on the part of Guinness as justification for holding Guinness rather than his company personally liable. However, no notice was given to Guinness about the allegation of fraud.
In the arbitration award, the arbitrator directed Guinness to pay the sum of money owed by CPL to Kanoria. Kanoria sought to enforce the arbitration award in the UK under the Arbitration Act 1996. Guinness relied on clause 103(2)(c) of the 1996 Act, which provides that enforcement may be refused if the party to an arbitration "was not given proper notice of… the arbitration proceedings or was otherwise unable to present his case."
Had Guinness been properly informed of the case against him?
Reference
The court decided that a party to an arbitration is "unable to present his case" if he is never informed of the case that he is called upon to meet. The allegation against Guinness appeared to be that he was personally liable for the debt of the company. However, it subsequently turned out that the case Guinness had to meet was in fact fraud and he was never given notice of it. The court therefore held that this was a breach of natural justice and an order enforcing the award was refused.
*Full case details
Kanoria & Others vs Guinness, Court of Appeal, Lord Phillips LCJ, Sir Anthony Clarke MR, May LJ, [2006] EWCA Civ 222
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Postscript
The court made it clear that not every case where facts have not been brought to the attention of someone who had not turned up to arbitration proceedings would escape enforcement. However, this was an "exceptional" case where no notice was given of an allegation of fraud leading to an extreme case of potential injustice. Nonetheless, the case underlies the general importance of giving proper notice of what your case is in order to give the other side a fair chance to respond to your case and thereby avoiding future difficulties.
