Pioneer Freight Futures Company Ltd v TMT Asia Ltd [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | MRS JUSTICE GLOSTER, DBE,Mrs Justice Gloster, DBE |
| Judgment Date | 21 July 2011 |
| Neutral Citation | [2011] EWHC 1888 (Comm) |
| Docket Number | Case No: 2010 Folio 559 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 21 July 2011 |
[2011] EWHC 1888 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Gloster, DBE
Case No: 2010 Folio 559
Charles Kimmins Esq, QC & Luke Pearce Esq (instructed by Holman Fenwick & Willan LLP) for the Claimant
Jonathan Crow Esq, QC & James Leabeater Esq (instructed by Ince & Co) for the Defendant
Hearing dates: 1 st & 7 th April 2011
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.
Introduction
On 1 April 2011, I handed down judgment in this action 1 ("the First Judgment"), following Pioneer's application for summary judgment on its claim. The definitions used in that judgment are used in this judgment. The result of the First Judgment, on the basis of the parties' pleaded cases as they stood at that date, was that Pioneer was entitled to judgment against TMT in the sum of US ("") 26,088,865.94. Most of the necessary background facts for the purposes of this judgment are set out in the First Judgment, and I do not repeat them here.Following the handing down of the First Judgment, I gave TMT permission to amend its defence so that it could argue a new point, the effect of which, TMT claimed, was to reduce Pioneer's claim to 16,557,594.10. I considered it appropriate that TMT should have the opportunity to argue this new point of law and construction, notwithstanding that it had been raised so late, and that it could have been raised earlier, following the decision of Briggs J in Lomas v JFB Firth Rixson [2010] EWHC 3372 (Ch) (" Lomas"), in relation to which I had given the parties an opportunity to present further argument prior to the delivery of the First Judgment. My reasons for allowing this late amendment included the facts that:
i) there are a number of cases where similar issues arise, which are of wider importance to the market, than this case alone;
Accordingly, on 1 April 2011, I gave an immediate interim judgment in the sum of 16,557,594.10, pending argument in relation to the new point on quantification.
I heard detailed oral argument on the new point on 7 April 2011. For the purposes of that hearing, the parties presented a further 30 pages of written arguments, together with a bundle of further authorities. The parties were told by me that there would be some delay in the preparation of my further judgment because of my absences on leave, and that it was likely that judgment would be handed down in the Trinity term. On 3 June the parties informed me by letter that they had agreed to resolve their disputes in accordance with the terms of a confidential settlement dated 27 May 2011. However, I was told that both parties had agreed that the proceedings would be formally withdrawn upon the handing down of my further judgment. I was told that that was because Pioneer had various cases where similar issues arose and it was hoped that my judgment in relation thereto might enable the parties to settle those further disputes. In particular, I was told that similar issues arose in a case that was due to be heard in the Commercial Court in June 2011, namely Pioneer Freight Futures Company Ltd v COSCO BulkCarriers Company Ltd2. In the event, however, due to priority that had to be afforded to other cases, I was not in a position to deliver this judgment before Flaux J handed down his judgment in that case: Pioneer Freight Futures Company Ltd v COSCO Bulk Carriers Company Ltd [2011] EWHC 1692 (Comm) (" COSCO"). That judgment addresses some of the same issues that arise in this case. I am informed that COSCO is also being appealed to the Court of Appeal, Flaux J having granted leave.
Because Pioneer and TMT had settled this case, I did not consider it appropriate to invite counsel to make further submissions in relation to Flaux J's decision. Some of the arguments which found favour with him, were not arguments which counsel had presented in argument to me.
I have given anxious consideration as to whether, in the circumstances, it is appropriate for me to give any judgment in this case at all, given that, in the light of the parties' settlement, the issues raised are moot. In effect the Court is being asked to give an advisory opinion, in order to assist Pioneer and the market (not merely limited to the FFA market, but also the wider financial market), in relation to the construction and application of important provisions of ISDA 92. Although, no doubt, I have a discretion to do so in the particular circumstances of this case, where I have heard argument on the relevant issues and they are of such obvious concern to the market, I nonetheless have to bear in mind that the Court's resources have to be deployed as effectively as possible. I have to consider the overriding objective set out in Part 1 of the Civil Procedure Rules. 3 That consideration is particularly pertinent in circumstances where at least two of the three issues raised in this case are likely to be determined by the Court of Appeal in both the Lomas and COSCO appeals later this year in any event. Were I to agree with the views taken by Briggs J and/or Flaux J in relation to the second and third issues, the utility of a further judgment from me arriving at the same result would be questionable. Were I to disagree with their views (the result sought by Pioneer), again, the utility and status of a judgment from me on an advisory basis, and without hearing argument in relation to Flaux J's reasoning, would also be questionable, although it might of course provide Pioneer or other parties with a useful negotiating tool in the context of other disputes. Two further factors are also relevant. First, the first issue (as defined below), if it were to be decided in Pioneer's favour, would be determinative of the only question left in the action prior to settlement (viz. the quantification of TMT's liability), without the need to resolve the second and third issues. Second, the pressure of work in the Commercial Court is such that the efficient deployment of its judges in the interests of all its users is critical to the effective functioning of that court. It is these considerations which have resulted in the approach which I have adopted to this judgment, as appears below.
TMT's new point
The Amended Defence, so far as relevant, now pleads as follows:
"13A. Alternatively, the amount of the claim is in any event overstated. The contracts numbered 5, 6, 7, 8, 11, 12, 13, 15 and 16 in Schedule 1 to the Amended Particulars of Claim ('the 2008 Contracts') all terminated according to their terms at the end of December 2008. In the premises set out in paragraphs 6.6 and 6.7 above, and on the true construction of the ISDA Master Agreement –
13A.1 no Settlement Sums fell due for payment from the Defendant to the Claimant under any of the 2008 Contracts in respect of the Contract Months of November or December 2008, and
13A.2 on the termination of the 2008 Contracts, any liability on the Defendant to pay any Settlement Sums to the Claimant in respect of the 2008 Contracts was extinguished once and for all.
13B. In the premises pleaded in paragraph 13A above, the amount that should be credited to the Defendant is understated by a sum of US4,568,754.39 in respect of November 2008 and by US4,962,517.47 in respect of December 2008. Even if the Claimant is otherwise entitled to judgment against the Defendant, the correct sum would accordingly be US16,557,594.10, not US26,088,856.94."
Thus TMT's position, as a result of the Amended Defence, is that it denies that it is liable to Pioneer in respect of sums which it would have had to pay Pioneer in respect of three of the 2008 Contracts 4 had Pioneer not, in November and December 2008, been subject to an Event of Default. That, TMT claims, is because Pioneer's inability to satisfy the conditions precedent in section 2 (a) (iii) of ISDA 92 was not rectified, nor was it affected by the Event of Default which occurred in December 2009 and which gave rise to Automatic Early Termination of other relevant FFAs. TMT contend that is so for two reasons:
i) First, the 2008 Contracts were not subject to Automatic Early Termination because by December 2009 they had already expired, in the sense that the last Contract Month in respect of which payments had to be made, had passed. Under section 1 (c) of ISDA 92, Automatic Early Termination applies to "all outstanding Transactions" 5. Where Transactions are no longer "outstanding" they cannot be the subject of Early Termination (whether automatic or elective).
ii) Secondly, and similarly, as held by Briggs J in paragraphs 75–79 of his judgment in Lomas, where the conditions precedent to payment under section 2 (a) (iii) (1) of ISDA 92 remain unsatisfied at the natural expiry of the contract, any liability to pay the Defaulting Party is extinguished.
As a result, and based on the decision in Lomas, TMT contended that, if the 2008 Contracts were not the subject of Automatic Early Termination, then Pioneer was only entitled to the judgment entered on 1 April 2011, in the sum of US$16,557,594.10, and nothing more. This calculation involves, in effect, stripping from the section 6 closing calculation of "Loss" that occurred on Automatic Early Termination in December 2009, sums ostensibly due to Pioneer in respect of Contract Months November and December 2008 relating to three of the 2008 Contracts (Contracts 5, 6 and 11), on the grounds that, by the date of Automatic Early Termination, they had expired. TMT contends that its re-quantification produces the following result:
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