Dtek Trading S.A. v Mr Sergey Morozov and Another
| Jurisdiction | England & Wales |
| Judge | Ms Sara Cockerill QC |
| Judgment Date | 27 January 2017 |
| Neutral Citation | [2017] EWHC 94 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 27 January 2017 |
| Docket Number | Case No: CL-2016-000679 |
[2017] EWHC 94 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Ms Sara Cockerill QC
(sitting as a Deputy Judge of the High Court)
Case No: CL-2016-000679
Mr Chris Smith (instructed by DLA Piper LLP) for the Claimant
The Defendant did not appear and was not represented
Hearing dates: 20 January 2017
This is an application made by the Claimant ("DTEK") for permission to serve the Arbitration Claim Form of 8th November 2016 on the Defendants out of the jurisdiction in Ukraine. It arises in the context of an ongoing arbitration between Steel Mont Trading S.A. ("Steel Mont") qua claimant and DTEK qua respondent ("the Arbitration"). The Defendants are not parties to the arbitration.
The relevant background is set out in some detail in the statement of Mr Choo in support of the application. For present purposes it suffices to say that the arbitration concerns a question of whether a cargo of coal was or was not on specification, in particular as regards calorific value. It is DTEK's case that a report numbered No.1411501UA Yu produced by the Second Defendant at point of sale ("the Discharge Certificate"), which stated that the calorific value was within contractual parameters, erred on this issue.
It relies (and relied in refusing to make a final payment to sellers for the coal) on a number of other tests of the same cargo which produced rather different (non-contractual) results. Those tests include further tests by the Second Defendant under certificate numbers No. 1412194UA and 1412195UA.
DTEK has also deployed in the arbitration a settlement agreement concluded between it and the Second Defendant ("the DTEK Settlement Agreement"). That document states inter alia:
"[the Second Defendant] shall pay compensation to [DTEK] for the incorrect indication of the coal quality indicators in qualitv certificate No. 1411501UA Yu dd 7 December 2014 while accepting coal ftom the Republic o(South Attica in the port of Yuzhny (TIS Terminal) during the unloading of MV "MBA ROSARIA" in the amount of USD 215,000…".
In the arbitration the claimant sellers have served a witness statement from the First Defendant defending the accuracy of the original testing. He also comments on the DTEK Settlement Agreement and says that the agreement related to inaccuracies in the subsequent testing, and not to the Discharge Certificate. In support of that evidence he appends to his statement a document which purports to be a settlement agreement between DTEK and the Second Defendant ("the Morozov Settlement Agreement"). The section quoted above however differs from the DTEK Settlement Agreement in that it does not refer to the Discharge Certificate at all, but instead states:
"[the Second Defendant] agress that at the moment of the actual Agreement signing it shall and obliged to pay compensation to [DTEK] for the coal quality indicators In quality certificates No. 1412194UA, 1412195UA during the unloading of coal from the wagons at the Pridneprovskaya Thermal Power Plant, Ukraine and also at Krivorozhskaya Thermal Power Plant. Ukraine, in the amount of USD 215,000 …"
There is therefore obviously an issue as to the integrity of one of these documents. The First Defendant will be cross examined on the copies of the documents in the arbitration; however it is unsurprising that DTEK in this application wishes to ensure that the original of the Morozov Settlement Agreement is preserved, and indeed produced for examination by them. The issue, of course, is that the Defendants are not parties to the arbitration and are resident in the Ukraine.
In the Arbitration Claim Form, DTEK is therefore seeking relief against the Defendants pursuant to section 44 of the Arbitration Act 1996 ("the Act"). Specifically, DTEK is asking the Court for an order that the Defendants be required to preserve and allow DTEK to inspect the original version of the Morozov Settlement Agreement.
This application is made with the consent of the arbitration Tribunal and was not opposed by the arbitration claimants. The question is purely a matter of the Court's power and discretion to order service of proceedings against third parties outside the jurisdiction pursuant to section 44 of the Arbitration Act.
Section 44 of the Act provides as follows:
"44.—Court powers exercisable in support of arbitral proceedings.
(1) Unless otherwise agreed by the parties, the court has for the purposes of and in relation to arbitral proceedings the same power of making orders about the matters listed below as it has for the purposes of and in relation to legal proceedings.
(2) Those matters are—
(a) the taking of the evidence of witnesses;
(b) the preservation of evidence;
(c) making orders relating to property which is the subject of the proceedings or as to which any question arises in the proceedings—
(i) for the inspection, photographing, preservation, custody or detention of the property, or
(ii) ordering that samples be taken from, or any observation be made of or experiment conducted upon, the property;
and for that purpose authorising any person to enter any premises in the possession or control of a party to the arbitration;
(d) the sale of any goods the subject of the proceedings;
(e) the granting of an interim injunction or the appointment of a receiver.
(3) If the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets.
(4) If the case is not one of urgency, the court shall act only on the application of a party to the arbitral proceedings (upon notice to the other parties and to the tribunal) made with the permission of the tribunal or the agreement in writing of the other parties.
(5) In any case the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively.
(6) If the court so orders, an order made by it under this section shall cease to have effect in whole or in part on the order of the tribunal or of any such arbitral or other institution or person having power to act in relation to the subject-matter of the order.
(7) The leave of the court is required for any appeal from a decision of the court under this section."
The powers of the Court to serve proceedings out of the jurisdiction in support of this section are set out in CPR 62.5. This provides as follows:
"(1) The court may give permission to serve an arbitration claim form out of the jurisdiction if –
(a) the claimant seeks to –
(i) challenge; or
(ii) appeal on a question of law arising out of,
an arbitration award made within the jurisdiction;
(The place where an award is treated as made is determined by section 53 of the 1996 Act.)
(b) the claim is for an order under section 44 of the 1996 Act; or
(c) the claimant –
(i) seeks some other remedy or requires a question to be decided by the court affecting an arbitration (whether started or not), an arbitration agreement or an arbitration award; and
(ii) the seat of the arbitration is or will be within the jurisdiction or the conditions in section 2(4) of the 1996 Act are satisfied."
In the present instance, the Claimant is seeking the permission of the Court to serve the Claim Form on the Defendants out of the jurisdiction pursuant to CPR 62.5(1)(b), i.e. on the basis that the present claim is for an order under section 44 of the Act.
This is a controversial question which has been touched on over the years in a number of decisions without being addressed head on. The Court of Appeal in declining to consider the issue in one case have reportedly described the issue as "not straightforward" (see Cruz City paragraph 41). But the principal hurdle faced by DTEK is that Males J held (albeit obiter) only recently, and following full argument, that orders under section 44 of the Act cannot be made against non-parties to the arbitration agreement, and hence that permission to serve out cannot be given against non-parties pursuant to CPR 62.5(1)(b): Cruz City 1 Mauritius Holdings v Unitech Ltd [2014] EWHC 3704 (Comm) [2015] 1 Lloyd's Rep. 191— to which I shall return below.
DTEK in this application has submitted that I should hold either that the decision in Cruz City is wrong; or at the very least, that DTEK has a good arguable case that it is entitled to serve the Claim Form out of the jurisdiction pursuant to CPR 62.5(1)(b) and that is all that it is required to show for present purposes.
It is fair to say that DTEK principally urged me to pursue the second course. They acknowledged that, as Males J noted at [14] in Cruz City following Altimo Holdings & Investment Ltd v Krgyz Mobil Tel Ltd [2011] UKPC 7, [2012] 1 WLR 1804 at [81], when a question of law goes to the court's jurisdiction, the court will normally decide that question. However they submitted that this was a case where it was appropriate to take a different course, since the Defendants were unrepresented, and if I made the order it would be open to the Defendants to challenge that decision and have the point decided with full argument on the application to set aside. In Cruz City, it should be noted, Males J had the benefit of three sets of leading and junior counsel.
Tempting as it is to follow this course, it seems to me that the authorities, including Altimo and the recent restatement of the principles applicable in AK Investment CJSC v Kyrgyz Mobile Tel Ltd [2011] UKPC 7; [2011] 1 CLC 205 at paragraphs 71,...
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