U&M Mining Zambia Ltd v Konkola Copper Mines Plc
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr. Justice Teare,Mr. Justice Teare |
| Judgment Date | 10 October 2014 |
| Neutral Citation | [2014] EWHC 3250 (Comm) |
| Docket Number | Case No: 2014 FOLIO 733 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 10 October 2014 |
[2014] EWHC 3250 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
Mr. Justice Teare
Case No: 2014 FOLIO 733
Derrick Dale QC and Christopher Langley (instructed by Clyde & Co LLP) for the Claimant
Graham Dunning QC, Rebecca StripeandLouis Flannery (instructed by Stephenson Harwood LLP) for the Defendant
Hearing dates: 18 & 19 September 2014
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
On 17 June 2014 Eder J. granted the Claimant a world wide freezing order ("WFO") ex parte. The Claimant has now applied inter partes to continue the WFO. The Defendant opposes the continuation of the WFO. The WFO was granted in support of sums awarded by a London arbitration tribunal so there is no dispute either as to the Claimant's cause of action or as to this court's jurisdiction. The Defendant has taken three points. First, the Claimant has not established a risk of dissipation. Second, it is not just and convenient to grant a WFO. Third, the Claimant failed in its duty of full and frank disclosure.
Before considering each of these points it is necessary to say something about the parties and the disputes between them.
Both the claimant and the defendant are companies incorporated under the laws of Zambia.
The claimant, U&M Mining Zambia Limited ("U&M"), is a subsidiary of a substantial Brazilian mining conglomerate and carries on business as a mining equipment contractor.
The defendant, Konkola Copper Mines PLC ("KCM"), is owned, as to 79.4%, by Vedanta Resources Holding Limited which in turn is owned, as to 100%, by Vedanta Resources PLC, a resources and mining company listed on the London Stock Exchange (FTSE 250). The remaining interest in KCM is owned by a company which, as to 87.6%, is owned by the Zambian government. In addition the Zambian government has a "special share" which entitles it to certain rights. Three of the 8 directors of KCM are government appointees.
KCM is one of the two largest mining and metals companies in Zambia and one of the largest copper producers in Zambia. It is the largest private sector employer in Zambia with 18,000 employees. Its assets are almost exclusively held in Zambia. This at any rate is apparent from the assets disclosed by KCM pursuant to the WFO. It appears from that disclosure and from further information provided after the hearing that apart from three bank accounts with very modest balances its assets are held in Zambia.
Pursuant to certain contracts U&M mined one of KCM's mines. These contracts provided for arbitration in London and for the proper law of the contracts to be that of Zambia. The contracts provided for the High Court of Zambia to have exclusive jurisdiction to execute the arbitration award.
Disputes arose between the parties. These, or some of them, were settled by a Settlement Agreement dated 26 October 2012. However, KCM did not pay the amounts it had agreed to pay pursuant to the Settlement Agreement. Instead, by letter dated 28 January 2103, it purported to rescind the Settlement Agreement on the ground that it had been induced by misrepresentation. At the same time KMC purported to terminate the remaining contract between the parties and sought and obtained from the High Court of Zambia an order requiring the immediate removal of U&M from the mine. In response U&M applied to the English court seeking relief pending the constitution of an arbitration tribunal. When that tribunal was constituted (Edwin Glasgow QC, Stuart Isaacs QC and Michael Lee) it granted interim relief to U&M allowing it 90 days to demobilise and vacate the U&M compound.
In March, April and May 2013 U&M commenced several arbitrations against KCM. In June 2013 the arbitration tribunal directed a trial of a preliminary issue, namely, whether the Settlement Agreement was valid and binding. If it was binding then the defences sought to be raised by KCM to U&M's claims would fail (because of the terms of a release provision in the Settlement Agreement).
The preliminary issue was heard over 5 days starting on 30 September 2013. Oral evidence was adduced by both parties.
By an award dated 7 November 2013 ("the first award") the arbitration tribunal found that there had been no misrepresentation and that the Settlement Agreement was valid and binding. KCM was ordered to pay some US$13m. to U&M. Nothing has been paid. Unlike the mining contracts between the parties the Settlement Agreement does not provide for exclusive enforcement in Zambia. However, no doubt because KCM's assets are almost all in Zambia, U&M are seeking to enforce the first award in Zambia. KCM are resisting enforcement in Zambia and a ruling by the High Court of Zambia is expected shortly on the matter. Mr. Dale QC, counsel for U&M, has submitted that the grounds on which KCM are seeking to resist enforcement are "spurious and dishonest". However, in circumstances where the matter has been debated before the Zambian High Court and judgment is awaited it is inappropriate for this court to enter into that debate.
In November 2013 U&M made a number of applications to the arbitration tribunal. KCM did not respond to these applications and on the eve of a hearing withdrew instructions from its solicitors and sought a three month adjournment to permit alternative representation. The arbitration tribunal refused the application for an adjournment and considered U&M's applications at the hearing on 9 December 2013. By an award dated 7 January 2014 ("the second award") it made certain orders which would become final in the event that U&M failed to show cause within a 14 day period why they should not be made. KCM failed to show cause and accordingly the orders became final. Pursuant to the second award KCM was ordered to pay some US$40m. to U&M. Nothing has been paid.
By an award dated 24 March 2014 ("the third award") the arbitration tribunal ordered that KCM pay the costs of the first award on an indemnity basis. It considered that KCM's conduct in attempting to re-open the Settlement Agreement on the grounds of misrepresentation had been unjustified and that resisting the application for the issue to be determined as a preliminary issue had been obstructive. Furthermore the evidence of its principal witness was not credible. Costs were assessed in the sum of £1,260,385.19. Those costs have not been paid.
KCM applied to the English High Court to challenge the second award pursuant to sections 67 and 68 of the Arbitration Act 2014. Eder J. acceded to an application that KCM provide security for the costs of its challenge to the second award. KCM provided that security.
On 15 July 2014 Cooke J. held that KCM's challenge to the second award was untenable and dismissed it. He awarded U&M 75% of their costs on an indemnity basis and Eder J awarded U&M 65% of its costs of the application for security on an indemnity basis. Interim payments were ordered and they have been paid.
Risk of dissipation of assets
It was common ground that what had to be shown was correctly stated by Flaux J. in Congentra v Sixteen Thirteen Marine [2008] 2 CLC 51 at para.49 as follows:
"(i) there is a real risk that a judgment or award will go unsatisfied, in the sense of a real risk that, unless restrained by injunction, the defendant will dissipate or dispose of his assets other than in the ordinary course of business………; or
(ii) that unless the defendant is restrained by injunction, assets are likely to be dealt with in such a way as to make enforcement of any award or judgment more difficult, unless those dealings can be justified for normal and proper business purposes……..".
Mr. Dale QC, on behalf U&M, submitted that there were, in broad terms, two reasons why the court should infer that there was such a risk. The first was the manner in which KCM had conducted the arbitration hearings and the second was KCM's attitude to its unsecured creditors. Before Eder J. Mr. Dale described those two points as the "twin pillars" upon which his application was based.
KCM's conduct of the arbitration hearings
In essence Mr. Dale submitted that KCM had acted in a dishonest, unacceptable and extraordinary manner with a view to avoiding its legal obligations to U&M. He submitted that such behaviour is or can be evidence that KCM is the sort of company which will stop at nothing, including dissipation of its assets, to prevent U&M from making any substantial recovery.
The conduct of KCM upon which Mr. Dale relied in this regard was:
i) making threats to U&M in October 2012;
ii) refusing to pay the sums due under the Settlement Agreement and seeking to justify that refusal by putting forward "a dishonest" basis for suggesting that the Settlement Agreement was not binding upon it;
iii) obtaining an urgent ex parte mandatory injunction from the Zambian High Court that U&M leave its compound immediately;
iv) "dishonestly" obtaining an order from the arbitration tribunal in March 2013 that U&M keep its equipment at a particular site to secure a damages claim to be brought by KCM against U&M (at the rate of US$1.5m. per day) based upon the proposition that KCM was to work the mine when in fact KCM had decided in December 2012 not to work the mine;
v) refusing to return equipment to which U&M was lawfully entitled;
vi) seeking to advance "dishonest and untenable arguments" in the Zambian High Court in an attempt to resist enforcement of the First Award;
vii) advancing arguments before the English...
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