Sabah Shipyard (Pakistan) Ltd v Islamic Republic of Pakistan
| Jurisdiction | England & Wales |
| Judge | Lord Justice Waller,Sir Martin Nourse,Lord Justice Pill |
| Judgment Date | 14 November 2002 |
| Neutral Citation | [2002] EWCA Civ 1643 |
| Docket Number | Case No: A3/2002/0367; 0367C; 0367D; 0367E |
| Court | Court of Appeal (Civil Division) |
| Date | 14 November 2002 |
[2002] EWCA Civ 1643
Lord Justice Pill
Lord Justice Waller and
Sir Martin Nourse
Case No: A3/2002/0367; 0367C; 0367D; 0367E
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr Justice David Steel
Timothy Young QC (instructed by Messrs Amhurst Brown Colombotti) for the Defendant/Appellant
Timothy Saloman QC and Mr Simon Picken (instructed by Messrs DLA,) for the Claimant/Respondent
Introduction
This is an appeal from a judgment of Mr Justice David Steel given on 6 th February 2002. He continued an injunction granted by him without notice on 11 th December 2001, restraining the Appellant State (The Islamic Republic of Pakistan referred to hereafter by the initials GOP) from continuing with proceedings commenced by them on 31 st October 2001 in the Court of the Senior Judge, Islamabad. He also ruled against the GOP's application to stay the English proceedings. The judge gave limited permission to appeal on "the State Immunity Issue", but this court on 24 th April 2002 gave permission to appeal on all aspects. The essential issues which arise on the appeal relate to (1) whether under a guarantee given in favour of Sabah Shipyard (Pakistan) Ltd (Sabah), the GOP, in waiving sovereign immunity consented to this court having jurisdiction to grant the injunction which the judge granted; (2) the proper construction of the jurisdiction clause of the same guarantee (clause 1.9.1) under which:
"….
Each Party consents to the jurisdiction of the Courts of England for any action filed by the other Party under this Agreement to resolve any dispute between the Parties and may be enforced in England except with respect to the Protected Assets, as defined in the Implementation Agreement of the Guarantor."
and (3) whether the circumstances are such that if the court has jurisdiction to grant an injunction it should do so, in particular in the context of the GOP having obtained an injunction with the effect of restraining Sabah commencing proceedings in England, (although there is a dispute as to whether the same was actually in force when David Steel J granted the injunction).
The facts
Sabah is a limited company incorporated in Pakistan. It was incorporated by its Malaysian parent for the sole purpose of entering into certain agreements with the GOP and a state owned corporation, the second defendant, the Karachi Electrics Supply Corporation Limited (KESC). Those agreements related to the design, construction, operation and maintenance of a barge-mounted electric generation facility at Karachi. Various agreements were signed in 1996 including the Implementation Agreement (the IA) between Sabah and the GOP, and the Power Purchase Agreement (the PPA) between Sabah and KESC. In accordance with the terms of the IA, Article 22, GOP also entered into a guarantee dated 5 th May 1996, in favour of Sabah. Clause 1 of the guarantee provided as follows:—
"1.1 Guarantee
In consideration of the Company having entered into the Power Purchase Agreement with KESC and the Fuel Supply Agreement with the Fuel Supplier, the Guarantor hereby irrevocably and unconditionally guarantees and promises to pay the Company any and every sum of money KESC and the Fuel Supplier are obligated to pay to the Company under or pursuant to the Power Purchase Agreement and the Fuel Supply Agreement that KESC or the Fuel Supplier has failed to pay when due in accordance with the terms of those agreements, which obligation of the GOP shall include monetary damages arising out of any failure by KESC or the Fuel Supplier to perform its obligations under the Power Purchase Agreement or the Fuel Supply Agreement, respectively, to the extent that any failure to perform such obligations gives rise to monetary damages."
Disputes arose in relation to the reasons why the project was delayed. KESC drew down on certain letters of credit provided by Sabah pursuant to the PPA on the basis that the delay was due to Sabah being in breach of contract. Sabah asserted that the delay was due to force majeure, that KESC should have granted an extension of time and thus that KESC had acted wrongfully and in breach of contract. On 7 th December 1998 Sabah commenced arbitrations against the GOP under the IA, and against KESC under the PPA. The arbitration under the PPA took place in Singapore, and the arbitrator, Sir David Tompkins QC, made an award in Sabah's favour in the sum of US$6.84m together with interest and costs.
Sabah demanded payment from KESC by letter dated 27 th June 2001. KESC responded by fax of 7 th July 2001 denying liability. By letter dated 7 th September 2001, Sabah made a demand under the guarantee on the GOP. The GOP responded by letter dated 11 th September 2001 asserting (1) that the GOP was not bound by the findings in the arbitration as between KESC and Sabah; (2) that Sabah had in any event not established the liability of KESC, who were challenging the award [KESC have challenged the award in the Sindh High Court in Karachi]; (3) that because the IA had terminated, the PPA had ceased to exist, and (a) the demand was premature because the legality of the basis on which the PPA had been terminated was still subject to arbitration, and (b) was not maintainable for failure of consideration; (4) no demand could be made until the award was made a rule of court; (5) the demand had not been made in accordance with the guarantee.
On 31 st October 2001 the GOP issued proceedings in the Court of the Senior Civil Judge, Islamabad, describing the proceedings as "Suit for a declaration & permanent injunction". The pleading asserted the points set out in the letter of 11 th September but also asserted that the award had been obtained by fraud, and claimed a declaration to that effect in addition to declarations that the demand was based on an award not binding on the GOP, that the guarantee was invalid due to failure of consideration, and that Sabah should be "permanently restrained by injunction from making any demand under the guarantee."
Also on 31 st October 2001, the GOP applied ex parte for an injunction pending trial of the action restraining Sabah from making any demand whatsoever under the guarantee. It is common ground that the form of words had the effect, and was intended to have the effect, of preventing Sabah commencing proceedings in England despite clause 1.9 1 of the guarantee. On the documents that this court has, there is no indication that clause 1.9.1 was drawn to the attention of the Islamabad court. The application simply asserted the strength of the GOP's case. The guarantee was appended as a document, but it seems most unlikely that clause 1.9.1 was drawn to the attention of the court in any detail because there is no mention of the clause in the record of argument and decision (pages 197/8), and whether or not that clause is exclusive, it seems to provide a complete answer to any assertion that Sabah should be subjected to an injunction which has the effect of preventing them commencing proceedings in England.
Mr Gruder QC, who appeared for the GOP before David Steel J, told the judge on instructions that the judge in Islamabad "was specifically told about these matters" (see judgment page 24 line 29). It is difficult to accept that the judge in Islamabad fully appreciated the effect of clause 1.9.1, because if he had, I cannot think he would have granted an interim injunction ex parte in the terms he did i.e. "until the next date of hearing defendant is hereby restrained to demand/recover any amount from the plaintiff on the basis of guarantee."
The history of the proceedings thereafter was that on 5 th November representatives of the GOP appeared again before the judge. The documents for one reason or another had not been served on Sabah, and an order was made for re-service "for 15 th November". On 15 th November counsel for both sides appeared and counsel for Sabah asked for time to file a written statement and counter affidavit, and the case was adjourned until 13 th December 2001. There is a dispute as to whether the injunction granted ex parte continued after that date. Those acting for the GOP say that their representative checked with the judge that the injunction continued and assert that the judge said "that continues." They assert further that as a matter of Pakistan law the injunction would continue automatically. Those representing Sabah say that the injunction does not continue automatically and that, although Mr Naqvee representing the GOP made an oral request for the injunction to continue, since the judge did not respond to that request they believed the injunction was not continuing.
David Steel J did not feel it necessary to resolve either the issue as to whether under Pakistan law the injunction automatically continued, or as to what precisely transpired before the judge in Islamabad on 15 th November. He accepted that Mr Talibuddin "was firmly of the view that the order needed to be renewed at the hearing of 5 th November, and that it had not been by reference to the express terms of the order". He also accepted that he "did not appreciate that Mr Naqvee thought otherwise, given his request for a extension on 15 th November". He accepted he was unaware of any different view "because it was not expressed or because it was not heard."
In any event Sabah made their application to the English court on 11 th December 2001. They set out...
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