S.E.T. Select Energy GMBH v F & M Bunkering Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Blair |
| Judgment Date | 06 February 2014 |
| Neutral Citation | [2014] EWHC 192 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2013 Folio 877 |
| Date | 06 February 2014 |
[2014] EWHC 192 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Blair
Case No: 2013 Folio 877
Mr Chris Smith (instructed by Pinsent Masons LLP) for the Claimant
Ms Rani Noakes (instructed by Holman Fenwick & Willan LLP) for the Defendant
Hearing date: 31 January 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.
The claimant S.E.T. Select Energy GmbH ("S.E.T.") is a German company, and the defendant F&M Bunkering Limited ("F&M") is a Cyprus company. S.E.T. claims $1.2m together with interest from F&M in respect of the supply of bunkers for vessels on the River Danube. The contracts are expressed to be subject to English law, and the parties submit to the jurisdiction of the London High Court.
There are two applications for decision. The first is F&M's application dated 3 May 2013 for a stay under CPR Pt 11 in favour of prior proceedings begun in Cyprus on 4 December 2012. The second application is that of S.E.T. dated 15 May 2013 for judgment in default of defence. Since a party challenging the court's jurisdiction does not have to file a defence before the hearing of the application, the fact that there are two apparently inconsistent applications before the court is an indication of the odd path that these proceedings have followed.
In essence, the issue is whether F&M is now barred from pursuing its challenge to the jurisdiction, because its application was late, and it is deemed to have submitted to the court's jurisdiction. The challenge to the jurisdiction raises the question of the relationship between proceedings in one member state under a first demand bank guarantee, and in another member state in relation to the underlying supply contract for the purposes of Articles 27 and 28 of Council Regulation (EC) No 44/2001, the Judgments Regulation.
The English proceedings
It is convenient to start with the English proceedings. S.E.T.'s straightforward claim for the cost of goods sold and delivered was begun in the High Court on 21 February 2013. Unusually, the proceedings were issued in the Chancery Division by S.E.T.'s then solicitors. The proceedings were served on F&M on 12 March 2013.
On 15 April 2013, S.E.T. issued an application for judgment in default of acknowledgment of service. However, that is not pursued. This is because on 18 April 2013, F&M did acknowledge service indicating an intention to challenge jurisdiction (I have taken the dates from a summary in S.E.T.'s skeleton argument).
F&M duly filed an application contesting jurisdiction on 3 May 2013. The application under CPR Pt 11 was for a stay of proceedings pending the outcome of the Cyprus proceedings. The application was supported by a witness statement made by a solicitor with Hill Dickinson, the solicitors then acting for F&M.
Under CPR Pt 11(4)(a), an application disputing the court's jurisdiction must be made within 14 days after filing an acknowledgment of service. F&M's solicitors may have been confused by the fact that in the Commercial Court, where one would have expected this case to have been brought, an application to dispute the court's jurisdiction must be made within 28 days after filing an acknowledgement of service (rule 58.7(2)) rather than 14, (but this is not something that is explored in the evidence filed for this hearing).
However, it is not in dispute that the Pt 11 application contesting jurisdiction was out of time. According to S.E.T.'s evidence, the "very short answer" to the matters the court has to decide is that the application was late by a day. On the basis that the acknowledgement of service was filed on 18 April 2013, F&M was indeed a day late, though it was suggested by S.E.T. in argument that the 14 days ran from the date on which acknowledgement of service should have been filed, in which case it was 16 days late.
On 15 May 2013, S.E.T.'s then solicitors filed an application seeking judgment in default of defence. This is the application which S.E.T. pursues at this hearing in support of its application that judgment be entered against F&M. However, it is to be noted that the application notice filed by S.E.T.'s solicitors (or to be precise its then solicitors since the claimants have also changed solicitors) does not accurately state the position. It states that "… the defendant has not made an application to the Court within the 14 day time period as set out in CPR Part 11". It does not state that an application to the court had in fact been made by the defendant, albeit a day (or 16 days) late. I was told that the reason for this was that S.E.T.'s then solicitors were not aware that the application had been issued. On 26 June 2013, Master Teverson transferred the matter to the Commercial Court.
The evidence does not explain what (if anything) happened to the litigation over the next few months. On 31 October 2013, however, Hill Dickinson notified S.E.T.'s then solicitors that they were no longer instructed by F&M.
On 16 November 2013, the applications were listed for hearing on 31 January 2014. On 22 January 2014, S.E.T. gave notice of change of solicitor. Its evidence was filed on 28 January 2014. A few days later, notice of change of solicitor was filed on behalf of F&M, and its evidence was filed on 30 January 2014. The solicitor formerly acting for F&M at Hill Dickinson is now with Holman Fenwick & Willan, which now acts for F&M.
The Cyprus proceedings
As part of the commercial arrangements between the parties, F&M provided S.E.T. with a demand bank guarantee. This guarantee was issued by Bank of Cyprus on 12 October 2011. The guarantee is in the amount of US$1 million, and is subject to the Uniform Rules on Demand Guarantees (URDG ICC No 758).
The evidence shows that S.E.T. made demand under the guarantee on 30 November 2012. On 4 December 2012, F&M began proceedings in the Limassol District Court in Cyprus, and applied for, and was granted, an interim injunction restraining payment under the guarantee. The basis was that on its true construction, the guarantee only covered debts arising after the date of issue of the guarantee, and that since (it was alleged) no goods had been delivered by S.E.T. to F&M after that date, the demand was made based on fabricated transport documents.
The Statement of Claim was filed by F&M on 14 May 2013. S.E.T. has not participated in these proceedings. However, Bank of Cyprus has participated, and by defence filed on 4 September 2013 asserts that the documents forwarded to the bank were correct. It is not evident on the evidence precisely what the current status of the Cyprus proceedings is, though the interim injunction has (so far as S.E.T., but not Bank of Cyprus is concerned) become absolute.
The contentions of the parties
F&M seeks a stay of the English proceedings under Article 27 or Article 28 of the Judgments Regulation. The Cyprus proceedings came first and, it is submitted, will determine the matters in dispute in these proceedings, namely F&M's alleged liability to S.E.T. under the contracts for unpaid invoices. Proceedings are already on foot between the parties in Cyprus, and hence the court should decline jurisdiction or stay its proceedings.
F&M submits that the proceedings are within Article 27 of the Judgment Regulation, because the claim in the English proceedings is the mirror image of the claim in the Cyprus proceedings, which were started first. Alternatively, the court should exercise its powers to stay the English proceedings under Article 28 because of the risk of inconsistent judgments.
S.E.T. maintains that a stay is inappropriate. The English proceedings concern a claim to recover the cost of bunkers supplied to F&M. Each contract is governed by English law, and the London High Court has exclusive jurisdiction. The Cypriot proceedings, on the other hand, involve a completely different transaction, namely a bank guarantee.
There is then the procedural argument which took up much of the time at the hearing. In support of its application for judgment in default of defence, S.E.T. relies on the fact that the application under CPR Pt 11 disputing the court's jurisdiction was made late. As noted above rule 11(4), which applies in the Chancery Division where these proceedings were commenced, provides that the application has to be made within 14 days after filing an acknowledgment of service. The application made by F&M was either a day late, or 16 days late, depending on whether time starts from the date of filing the acknowledgement of service, or the date when the acknowledgement of service should have been filed. (This is not a matter I have to determine in this case.)
Since the application was late, it follows, S.E.T. submits, that rule 11(5) applies. By this rule, if the defendant does not make the application within the period specified in rule (4), "he is to be treated as having accepted that the court has jurisdiction to try the claim". Therefore, S.E.T. submits, rule 11(9), by which a defendant who makes an application disputing the court's jurisdiction need not serve a defence before the hearing of the application, does not apply. Consequently, S.E.T. submits, the court should not hear the challenge to its jurisdiction, and S.E.T. is entitled to succeed on its application for judgment in default of defence.
On its part, F&M makes three responses to S.E.T.'s procedural submission:
(1) First, it is submitted that as a matter of law Article 27 of the Judgments Regulation is mandatory, and procedural time...
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