Tor Corporate A.s. V. Sinopec Group Start Petroleum Company Limited
| Jurisdiction | Scotland |
| Judge | Lord Menzies |
| Neutral Citation | [2012] CSOH 112 |
| Date | 03 July 2012 |
| Docket Number | CA115/00 |
| Court | Court of Session |
| Published date | 03 July 2012 |
| OUTER HOUSE, COURT OF SESSION [2012] CSOH 112 | |
| CA115/00 | OPINION OF LORD MENZIES in the cause TOR CORPORATE A.S. Pursuer; against SINOPEC GROUP STAR PETROLEUM COMPANY LIMITED Defender: ________________ |
Pursuer: Howie QC; M Ross; Tods Murray LLP
Defender: Wolffe QC; McBrearty; Simpson & Marwick, WS
3 July 2012
Introduction
[1] This is the latest round in a protracted dispute. The defender is the owner of the semi submersible drilling rig Kan Tan IV. On 14 June 1999 the defender entered into a Management Agreement with the pursuer whereby the pursuer undertook to act as the exclusive manager of the rig and the defender undertook to pay to the pursuer certain sums of money. On 30 March 2000 the defender repudiated the agreement, and on 24 May 2000 the pursuer accepted that repudiation, and on or about the same day the pursuer raised these proceedings, in which it seeks payment of a sum claimed to be due in terms of the contract, and various sums by way of damages for breach of contract. For further background details, I refer to my Opinion dated 22 June 2010, [2010] CSOH 76, and the Opinion of the First Division dated 16 August 2011 in the ensuing reclaiming motion [2011] CSIH 54.
[2] After the opinion of the First Division was issued, the defender lodged a Minute of Amendment which sought to add two further pleas-in-law, in the following terms:
"2. It having been competent for the pursuer to seek to prove before the arbiters that the pursuer could have remedied any material breaches of the Management Agreement, and the pursuer having omitted to do so, the averments to the effect that the pursuer could have remedied the material breaches should not be remitted to probation.
3. Esto the averments to the effect that the pursuer could have remedied the material breaches of the Management Agreement are not subject to the plea of competent and omitted (which is denied), they are in any event matters relating to the fulfilment of the Management Agreement, and the action should be sisted in order that they may be determined by arbitration."
[3] The pursuer answered this Minute of Amendment by adding averments which focus on Clause 1 of the Management Agreement, which contains the following provision:
"For the avoidance of doubt, the Agreement cannot be terminated solely with the intent to award the management of the Vessel to another contractor".
The pursuer maintains that even if the defender had attempted to terminate the contract at a later date, as it avers that it would, any such attempt would have been invalid, because the defender's sole purpose in doing so was to change the Manager.
[4] Following a period of adjustment, the Closed Record was allowed to be amended in terms of the defender's Minute of Amendment and the pursuer's Answers thereto (numbers 53 and 54 of process), and a debate was allowed on the defender's second and third pleas-in-law and the pursuer's fifth and sixth pleas-in-law (each in the principal action). In summary, the issues argued before me at debate were as follows:-
(1) The defender's plea of competent and omitted.
(2) The defender's plea that the action should be sisted for arbitration.
(3) The pursuer's argument based on the sole intent clause.
Submissions for the defender
[5] Senior counsel for the defender moved me to sustain the defender's second plea-in-law by excluding from probation the averments mentioned at paragraph 9.1 of his written Note of Arguments (number 55 of process), and to sustain the second plea-in-law for the defender to the extent of refusing the second and fourth conclusions and refusing to admit to probation certain averments of loss. His motions to the court were as set out in section 9 of his Note of Arguments. That Note of Arguments helpfully summarises the position adopted by the defender at debate, and I do not seek to rehearse it in detail here.
[6] Under reference to the summary of the essentials of the plea of competent and omitted given in McPhail on Sheriff Court Practice (3rd Edition) at paragraph 2.112, senior counsel submitted that the question of whether it would have been possible for the pursuer to cure its material breaches within three months was an issue which arises in connection with the "fulfilment" of the contract and was accordingly within the terms of the arbitration clause. It would have been competent for the pursuer to have advanced this as a defence to the defender's argument that it was entitled to terminate the Agreement in terms of Clause 1(D). The pursuer did not advance such an argument before the arbiters, and it is not open to it to do so now. The pursuer cannot now argue that it would not have been competent to advance such an argument before the arbiters - some time was taken in evidence in the arbitration as to how long it would have taken to cure the defects complained of, and it was an important part of the pursuer's position before the arbiters that any breaches could have been cured within a short period of time (see paragraphs (319) to (323) of the arbiters' Note of Reasons, number 6/24 of process). If the question of how long it would have taken to cure the defects was properly within the terms of the arbitration clause, it was competent and necessary for the pursuer to raise the issue of whether the defects could have been cured within three months for the purpose of Clause 1(D).
[7] Mr Wolffe accepted that his plea of competent and omitted could only be sustained if the court was satisfied that it would have been competent for this issue to have been raised before the arbiters. Although the question had a bearing on the assessment of any claim for damages (which was a matter not before the arbiters), it was also relevant to fulfilment of the contract, so it could and should have been raised at that time. Senior counsel for the pursuer expressly refrained from doing this (see pages 957/958 of the transcript of counsels' oral submissions to the arbiters). The question of whether the breaches of contract by the pursuer which the arbiters found established could have been cured within three months was a matter properly included within the arbitration, notwithstanding that it arises incidentally in the context of the assessment of damages.
[8] There was a body of evidence, both factual and expert, from several witnesses (e.g. Mr Guy, Mr Moore, Mr Stevenson and Mr Krahn) as to how quickly particular breaches could be remedied. It would have been convenient and competent to have considered the three month time limit at the same time; one of the purposes of the plea of competent and omitted is to avoid duplication of effort and wasted time and costs in looking at substantially the same material on more than one occasion. It was correctly accepted by the pursuer before the arbiters that the question of whether the pursuer was in material breach was a question of fulfilment of the agreement for the purpose of Clause 9(a) of the Management Agreement; equally, the question of how quickly a breach could be cured was also a question of fulfilment. It therefore fell within the terms of the arbitration clause, and within the material to be considered by the arbiters in terms of the interlocutor of the court dated 3 May 2001. The pursuer did raise the issue of how quickly defects could have been cured in its Answer Four to the defender's counterclaim in the arbitration (see pages 88 and 104/5 in the record in the arbitration, number 7/2 of process), but the pursuer did this only in the context of its argument that any breaches were not material. It would have been competent and proper for the argument to have been developed to the effect that, standing the mechanism in Clause 1(D), any material breach should not of itself be regarded as a repudiation of the contract.
[9] Mr Wolffe submitted that the underlying rationale and purpose of the plea of competent and omitted was twofold - (a) to protect the integrity of the previous proceedings, and (b) to avoid prejudice both to the parties and to the efficient and effective resolution of the dispute arising from wasted time and costs and duplication of effort. The natural place to deal with this issue would have been in the context of the counterclaim in the arbitration (in which context the present pursuer was in the capacity of defender); the plea of competent and omitted is accordingly available against the pursuer now - Earl of Perth and Melfort v Lady Willoughby de Eresby's Trustees (1875) 2 R 538 at 545. I was referred to passages in the institutional writers, namely Stair, IV.I 50, and Bankton IV.xxxvi.17, but it was submitted that the modern law has expanded on Stair's statement and that it was now necessary to look to the particular circumstances of the case - Murray v Seath 1939 SLT 348.
[10] The rationale behind the Scots plea of competent and omitted is essentially the same as that behind what is known in England as the "rule in Henderson" (Henderson v Henderson (1843) 3 Hare 100); some light on the considerations held to be relevant to that rule is shed by British Airways Plc v Boyce 2001 SC 510 (at 513), (although that case was itself concerned with res judicata), and by Mustill & Boyd, The Law and Practice of Commercial Arbitration in England (2nd Edition) at page 412. Mr Wolffe also referred to Dickson v United Dominions Trust Limited 1988 SLT 19, and adopted Lord McCluskey's approach to the plea of competent and omitted at page 24 of that report. That decision was reclaimed, and the Second Division approved the Lord Ordinary's disposal on this point (19/12/86, unreported except in 1987 GWD 2-67). It should, however, be noted that that case was concerned with the protection of a prior decree in foro, in contrast to the present case. Mr Wolffe accepted that if the court did not give the plea a wider ambit, his submission must fail. However, having regard to the considerations outlined in British Airways v Boyce and in Mustill &...
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...22. McBryde, Bankruptcy, Second Edition, Chapter 6. 23. I also considered Tor Corporate A.S. v Sinopec Group Petroleum Company Limited [2012] CSOH 112 in relation to the fifth plea-in-law for the defenders, competent and omitted. Res judicata: 4th plea-in-law for defenders [10] At section 4......