Stemcor UK Ltd v Global Steel Holdings Ltd and Another

JurisdictionEngland & Wales
JudgeMr Justice Hamblen
Judgment Date20 February 2015
Neutral Citation[2015] EWHC 363 (Comm)
Docket NumberCase No: 2013-1062
CourtQueen's Bench Division (Commercial Court)
Date20 February 2015
Between:
Stemcor UK Ltd
Claimant
and
(1) Global Steel Holdings Ltd
(2) Pramod Mittal
Defendants

[2015] EWHC 363 (Comm)

Before:

Mr Justice Hamblen

Case No: 2013-1062

2012-631

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Rolls Building, Fetter Lane, London, EC4A 1NL

Conall Patton (instructed by Clyde & Co LLP) for the Claimant

Simon Browne-Wilkinson QC and Alexander Milner (instructed by Harold Benjamin) for the Defendants

Hearing dates: 3 and 4 February 2015

Mr Justice Hamblen

Introduction

1

The Claimant ("Stemcor") applies for summary judgment against the Defendants ("GSHL" and "Mr Mittal") in respect of sums allegedly due pursuant to two guarantees provided by them in relation to the liabilities to Stemcor of Global Ispat Koksna Industrija Lukavac ("GIKIL"). The Defendants make a cross-application for a stay of proceedings pending the outcome of the LCIA arbitration between Stemcor and GIKIL.

Factual Background

2

Stemcor is an English company and is one of the world's largest traders in steel products. GIKIL is a Bosnian company which produces metallurgical coke for steel production. GSHL is a 51% shareholder in GIKIL and Mr Mittal is a director of GSHL.

3

Between 2004 and 2013, GIKIL and Stemcor traded with one another in accordance with contractual arrangements including a Prepayment Agreement dated 11 October 2004 and a Coke Sales Contract dated 15 October 2004 (both of which were amended on 7 May 2005).

4

The trading between Stemcor and GIKIL involved, in overview:

(1) GIKIL and Stemcor agreeing a Coal Supply Contract for the sale by Stemcor to GIKIL of a consignment of coal (which is the main raw ingredient for the manufacture of coke);

(2) Stemcor and GIKIL agreeing a "Delivery Protocol" setting out terms for the sale by GIKIL to Stemcor of a particular consignment of coke;

(3) Stemcor making a prepayment to GIKIL (an Advance Payment) in respect of the price for the coke specified in the Delivery Protocol pursuant to the Prepayment Agreement;

(4) GIKIL using the Advance Payment to buy coal from Stemcor; and

(5) GIKIL manufacturing and delivering the coke to Stemcor (for on-sale to an end buyer) pursuant to the Coke Sales Contract.

5

The Coke Sales Contract provided (in clause 2.1) that Stemcor had the exclusive right to purchase coke from GIKIL. The price of the coke would be determined by reference to the price Stemcor agreed with the final buyers, less Stemcor's costs and a commission of 2.5%. The price clause provided that:

"The Buyer will pay the Seller a price equivalent to the gross sales price to any other customer, less a deduction made up of all costs incurred by the Buyer in effecting the sale (including freight, interest, handling, bank and any other charges or costs incurred) and a fixed commission equal to 2.5% of the net Ex-Works Lukavac Sale Price."

6

Over time, GIKIL accumulated debts towards Stemcor largely as a result of two factors. First, the Advance Payments made by Stemcor were not sufficient to enable GIKIL to purchase sufficient coal to manufacture the coke that it had contracted to produce. Secondly, the prices at which Stemcor sold coke (which in turn determined the prices that it paid GIKIL for the coke) were too low to discharge the Advance Payments in full. Stemcor terms the debts that resulted from these factors the "Coal Debt" and the " Coke Debt" respectively.

7

In May 2013 Stemcor notified GIKIL that it was not in a position to provide further funding to GIKIL in accordance with the Prepayment Agreement. GIKIL contends that this was a renunciation of the Prepayment Agreement and the Coke Sales Contract for which it claims substantial damages.

8

Stemcor claims that GIKIL owes it approximately US$160 million and that the Defendants are liable to pay this debt under the guarantees provided by the Defendants.

9

The Defendants each gave guarantees and indemnities in respect of GIKIL's obligation to Stemcor. GSHL's obligations are as set out in a Deed of Guarantee and Indemnity for Obligations under a Facility Agreement dated 13 July 2006 and a Deed of Guarantee and Indemnity of the same date as amended on 31 December 2008. Mr Mittal's obligations are as set out in a Deed of Guarantee and Indemnity dated 24 January 2006 as amended on 14 January 2009.

Procedural Background

10

Stemcor issued these proceedings on 6 August 2013. Its case is that, at that time, GIKIL was indebted to Stemcor in the total sum of around US$150 million, and that the Defendants were liable to pay this debt under the guarantees.

11

The Defendants served defences on 21 October 2013.

12

On 4 November 2013 GIKIL started LCIA arbitration proceedings against Stemcor. In the arbitration, GIKIL asserts three cross-claims against Stemcor, as follows:

(1) First, GIKIL alleges that Stemcor was under an obligation under the Coke Sales Contract to sell coke produced by GIKIL at the best price reasonably obtainable, and that Stemcor consistently failed to do this. The value of this claim has been estimated at US$153 million (Cross-Claim 1).

(2) Secondly, GIKIL claims damages for what it says was Stemcor's wrongful renunciation of the Prepayment Agreement and the Coke Sales Contract in May 2013. It is GIKIL's case that Stemcor was not entitled simply to walk away from the arrangements, by refusing to make any further prepayments in respect of coke sales, without giving reasonable notice to GIKIL. GIKIL claims that Stemcor's conduct in this regard has caused it damage of around US$134 million (Cross-Claim 2).

(3) Thirdly, GIKIL claims damages of US$13 million in respect of a delivery of coal in May 2011 which was of unsatisfactory quality. (This claim was previously compromised for US$3 million but GIKIL contends that the settlement agreement is voidable for duress.) (Cross-Claim 3).

13

The arbitral tribunal, which was appointed in early 2014, consists of Mr Gary Born, Lord Hoffmann and Dr Julian Lew QC. On 21 November 2014 the tribunal made its Procedural Order No.3 which lays down directions leading to a final hearing in August 2016.

14

On 17 December 2014 Stemcor issued its application for summary judgment on that part of the alleged debt referable to purchases of coal by GIKIL (the Coal Debt), amounting to US$74,995,691.86 (before interest).

15

On 19 December 2014 the Defendants issued their application to stay the action pending the outcome of the arbitration. They contend that they are entitled to the benefit of GIKIL's cross-claims and that they will give rise to a defence of equitable set off which will extinguish or reduce the Defendants' liability to Stemcor under the guarantees.

16

The Defendants submitted that the stay application should be considered before that for summary judgment because the main purpose of the stay application is to ensure that the court does not determine GIKIL's cross-claims (summarily or otherwise) before the arbitral tribunal has had an opportunity to consider them, thereby avoiding the risk of inconsistent decisions. However, whether or not this is an appropriate case for summary judgment is highly relevant to the Defendants' application for a stay. If the court concludes that there is no real prospect of Cross-Claims 1 and 2 succeeding then duplicative proceedings in respect of the same issues may be considered unlikely. Conversely, if there is no such judgment then duplicative proceedings on the merits are likely and the application for a stay becomes much stronger. I therefore propose to consider the summary judgment application first.

The Summary Judgment application

17

The relevant principles in relation to applications for summary judgment are helpfully summarised by Lewison J in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15]:

i) The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 2 All ER 91;

ii) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]

iii) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman

iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]

v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;

vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;

vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to...

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