Integral Petroleum S.A. v Scu-Finanz AG
| Jurisdiction | England & Wales |
| Judge | Lord Justice Floyd,Lord Justice Kitchin,Lord Justice Jackson |
| Judgment Date | 26 February 2015 |
| Neutral Citation | [2015] EWCA Civ 144 |
| Docket Number | Case No: A3/2014/1085 |
| Court | Court of Appeal (Civil Division) |
[2015] EWCA Civ 144
Lord Justice Jackson
Lord Justice Kitchin
and
Lord Justice Floyd
Case No: A3/2014/1085
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
MR JUSTICE POPPLEWELL
Royal Courts of Justice
Strand, London, WC2A 2LL
Stephen Cogley QC and Peter Ferrer (instructed by Gentium Law Group) for the Appellant
James Collins QC (instructed by Thomson Webb & Corfield) for the Respondent
Hearing date: 30 January 2015
Introduction
This appeal raises an issue of conflict of laws in the context of an oil trading agreement.
On 17 July 2013 the claimant and appellant Integral Petroleum SA ("Integral") entered judgment in default of defence in its action for damages for breach of contract against the defendant and respondent SCU-Finanz AG ("SCU") in the sum of US$ 1,078,547 plus costs. On 24 December 2013 SCU applied under CPR Part 13 to set that judgment aside. By his order of 28 March 2014 Popplewell J granted SCU's application on the basis that SCU had a defence with real prospects of success, and it was appropriate to exercise the court's discretion to do so. Integral appeals against that order, contending that the defence does not have a real prospect of success. Alternatively, even if the defence has a real prospect of success, Integral contends that the judge wrongly assessed the potency of the defence, and ought not to have exercised his discretion to allow SCU to raise it. This, says Integral, is particularly so in view of a period of unexplained delay on the part of SCU in applying to set the default judgment aside.
Integral and SCU are both Swiss companies engaged in the business of trading in oil. By a supply contract dated 18 October 2011 ("the supply contract") SCU purportedly agreed to sell and Integral purportedly agreed to buy up to 400,000 metric tons per year at the seller's option of " gasoil, fuel oil, naphtha, gasoline, jet, kerosene (to be specified) as usually produced by Turkmenbashi complex of refineries". The supply contract provided that it would be governed by English law and that the English High Court was to have exclusive jurisdiction. A number of matters were left to be specified in separate addenda to the supply contract, such as the precise product, the lifting quantities and the refinery prices on which the contract prices were to be based.
Integral claimed that there had been a failure to deliver any product pursuant to the supply contract. The judge described the evidence as to what actually happened pursuant to the contract as extremely sparse. In the end I have not found it necessary for the purposes of this judgment to delve further into that aspect of the case.
The two officers of SCU were at the material time Albert Bass and Marine Vartanyan. Their names were registered and published in the Swiss Register of Commerce as prokurists, a term I explain further below. The entry in that Register made it clear that their power of signature was joint. However, the supply contract was signed by Ms Vartanyan alone. It was not signed by Mr Bass, or by anyone else on behalf of SCU. Ms Vartanyan's initials were on each page and her full signature appears on the final page under the words "FOR SCU-FINANZ AG". Next to her signature is a stamp which reads "SCU SWISS CREDIT UNION". The main issue in this case is: which system of law should be applied to determine the consequences, if any, of the facts which I have just recited?
CPR Part 13
CPR Part 13 contains the rules for setting aside or varying judgments entered under Part 12. Part 13.2 identifies cases where a party is entitled to have the judgment set aside. Although SCU contended before the judge that irregularities in service brought it within CPR Part 13.2, it no longer so contends. Part 13.3 then provides for other cases:
(1) In any other case, the court may set aside or vary a judgment entered under Part 12 if –
(a) the defendant has a real prospect of successfully defending the claim; or
(b) it appears to the court that there is some other good reason why –
(i) the judgment should be set aside or varied; or
(ii) the defendant should be allowed to defend the claim.
(2) In considering whether to set aside or vary a judgment entered under Part 12, the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly.
The rule was considered by this court in Standard Bank Plc v Agrinvest International Inc. [2010] EWCA Civ 1400. Moore Bick LJ said at paragraph 23:
"The CPR were intended to introduce a new era in civil litigation in which both the parties and the courts were expected to pay more attention to promoting efficiency and avoiding delay. The overriding objective expressly recognised for the first time the importance of ensuring that cases are dealt with expeditiously and fairly and it is that context that one finds for the first time in rule 13.3(2) an explicit requirement for the court to have regard on an application of this kind to whether the application was made promptly. No other factor is specifically identified for consideration, which suggests promptness now carries much greater weight than before. It is not a condition that must be satisfied before the court can grant relief, because other factors may carry sufficient weight to persuade the court that relief should be granted, even though the application was not made promptly. The strength of the defence may well be one. However, promptness will always be a factor of considerable significance, as the judge recognised in paragraph 27 of his judgment, and if there has been a marked failure to make the application promptly, the court may well be justified in refusing relief, notwithstanding the possibility that the defendant might succeed at trial."
Thus although promptness is to carry "considerable significance", a lack of promptness may be outweighed by other factors. Mr Cogley QC, who appeared for Integral, did not seek to persuade us that the potency of the defence was not a relevant factor. It is.
This court will not interfere with the exercise of a judge's discretion to set aside, or to refuse to set aside a default judgment if he or she applies these principles.
The defences relied on and the issues in the appeal
SCU relied on three defences for the purposes of its application. These were:
Defence (i): that the contract was not binding on SCU because it bears only one of the two authorised signatures required by Swiss law;
Defence (ii): that Integral had failed to open a letter of credit as required by the contract which was a condition precedent to any liability on the part of SCU to deliver the product; and
Defence (iii): that the loss claimed raises issues of quantification, or is excluded by a limitation of liability clause in the contract.
Popplewell J found that SCU's defence (i) was, on the evidence of Swiss law available, a defence which was bound to succeed. Integral says that the judge was wrong to conclude that SCU was bound to succeed on this issue. It contends, to the contrary, that Integral will succeed on this issue, or alternatively that the judge assessed the strength of the defence too generously. Defence (i) is thus the main focus of the argument in the present case. As to defence (ii) the judge found that the time for Integral to open a letter of credit had not yet arisen. SCU do not seek to disturb the judge's conclusion on this point in this appeal. In relation to defence (iii), the judge held that it justified setting aside the judgment and entering instead judgment for damages to be assessed "if it be appropriate to exercise discretion to grant relief under CPR 13.3 at all".
In exercising his discretion under rule 13.3, the judge took account of the following factors:
i) The potency of defence (i), namely that he considered it bound to succeed on the evidence before him.
ii) The fact that in order to obtain the judgment in default, Integral had themselves acted in breach of the rules. In particular they had filed a certificate of service stating that the Particulars of Claim had been served in accordance with the rules, when this was not true. Although no conscious impropriety was involved, it was a culpable error. Integral had also served the Particulars of Claim by email, which was also in error, as its representatives should have known. The judge found that, in the circumstances of this case, the claimant could not and would not have obtained the judgment if it had complied with the rules.
iii) The unexplained delay by SCU in making its application. The judge had earlier found that SCU became aware of the default judgment on 13 September 2013, but its solicitors had not written to Integral's solicitors until 6 December 2013: a period of nearly 3 months.
By a respondent's notice SCU seeks to uphold the decision of Popplewell J on the basis of an additional defence not raised before the judge, namely that the supply contract was incomplete and insufficiently certain to give rise to a binding contract. Mr Collins QC recognises that he can only deploy this further defence if we were to decide that the judge's exercise of discretion was flawed and we embarked on the exercise of discretion de novo. This might be the case, for example, if we considered that the judge had materially erred in his assessment of the potency of defence (i). In the event I have not found it necessary to...
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