X v Y (Defendant/Applicant) Y X
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr. Justice Teare,Mr. Justice Teare |
| Judgment Date | 07 May 2013 |
| Neutral Citation | [2013] EWHC 1104 (Comm) |
| Docket Number | Case No: 2012 FOLIOS 1720 and 1321 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 07 May 2013 |
and
[2013] EWHC 1104 (Comm)
Mr. Justice Teare
Case No: 2012 FOLIOS 1720 and 1321
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building 7 Rolls Buildings
Fetter lane London EC4A 1NL
Jeffrey Gruder QC and Henry Ellis (instructed by Bentleys Stokes and Lowless LLP) for X
Charles Kimmins QC and Patricia Edwards (instructed by Holman Fenwick Willan LLP) for Y
Hearing dates: 26 April 2013
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.
This is an application in connection with an arbitration application concerning a dispute which has engaged the attention not only of London arbitrators but also of the courts of India, Australia and England. The application is brought by Y for an order (pursuant to section 70 of the Arbitration Act 1996) that X provide security for Y's costs of resisting X's challenges (pursuant to sections 67 and 68 of the Arbitration Act 1996) to an award of London arbitrators and make a payment into court of the sum awarded by the arbitrators. The application requires the court to have regard to the course of the arbitration and of the multi-jurisdictional litigation in which the parties have engaged since 2010.
On 16 October 2007 the parties entered into a contract of affreightment under which X agreed to ship and Y agreed to provide tonnage to carry, six cargoes of coal for the years 2008–201Only the first five shipments in 2008 were performed. The freight market crashed in late 2008 and there were no further shipments. In 2009 Y became insolvent and was placed under judicial management in Singapore. The parties have been in dispute ever since. The contract of affreightment provided for disputes to be resolved by arbitration in London.
On 15 March 2010 Y referred to arbitration "their claim for damages (and all disputes arising out of or under this COA)". Since then the London arbitration tribunal have issued four awards. The first was issued on 28 January 2011 and concerned jurisdiction and proper law. The second was issued on 31 October 2011 and held that X had acted in breach of contract by refusing to perform during 2009 and 2010.
On 28 November 2011 X sought leave to appeal from the second award pursuant to section 69 of the Arbitration Act 1996. On 27 February 2012 X applied for and obtained an order from the Indian court restraining Y from taking any steps to enforce the second award "in India". On 28 February 2012 X abandoned its application for leave to appeal from the second award.
On 5 April 2012 the tribunal issued its third award in which it awarded Y damages in the sum of US$7.8m. in respect of the 2009 and 2010 shipments. On 31 July 2012 X procured the extension of the Indian court injunction to cover the third award.
In May 2012 Y obtained a freezing order and anti-suit injunction against X in Australia, where X owns coal mines and subsidiary companies.
In August 2012 X alleged in India that Y and its judicial managers were in contempt of court by seeking to enforce the tribunal's awards in Australia. In December 2012 X was ordered to remove this allegation from its pleading.
An arbitration hearing to assess Y's claim for damages in respect of the 2011 shipments was fixed for 10 and 11 October 2012. On 5 October 2012 X informed Y that it had issued an application in India seeking an order restraining Y and the tribunal from participating in the hearing. On 6 October 2012 Y obtained an anti-anti-suit injunction from the English court. Fresh proceedings were commenced by X in India and so on 9 October 2012 Y obtained a further anti-anti-suit injunction against X. This was continued by Hamblen J. on the return date, 26 October 2012.
On 30 November 2012 the tribunal made its fourth award. It held, contrary to the submissions made on behalf of X, that it had jurisdiction in respect of the 2011 shipments. It further held that X was in breach of contract by not performing in 2011 and awarded Y further damages and costs totalling over US$6m.
Thus the present position is that in respect of the 2009 and 2010 shipments X has been adjudged liable to pay several millions of dollars to Y but has paid nothing. The time for any challenge has long since expired. In respect of the 2011 shipments X has been adjudged liable to pay several more millions of dollars. It has paid nothing but has sought to challenge the fourth award pursuant to section 67 of the Arbitration Act 1996 (a jurisdictional challenge) and pursuant to section 68 of the Act (a challenge based upon an alleged serious irregularity). It is in relation to those challenges that Y seeks an order that security in the sum of £120,000 be provided in respect of Y's costs of resisting such challenges and that X pay into court the sum of £3,814,673.43, being the total of the sums awarded to Y under the fourth award.
The application for security for costs
Pursuant to section 70(6) of the Arbitration Act 1996 the court may order an applicant to provided security for the costs of its application under sections 67 or 68 of the Act.
The court's jurisdiction in this regard was considered by Longmore J. (as he then was) in Azov v Baltic [1999)] 2 Lloyd's Reports 39. He held that there was no formal fetter on the court's discretion to order security for costs but that regard must be had to section 1(a) of the 1996 Act which provides that
"The object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense."
He therefore held that that cases will be rare in which security for costs would be ordered if the applicant has sufficient assets to meet any order as to costs and if those assets are available for satisfaction of any such order for costs. I infer that the reason for that proposition is that if the applicant has sufficient assets to meet any order as to costs and if those assets are available for satisfaction of any such order for costs then an order for security for costs would be an unnecessary expense.
Mr. Kimmins QC, on behalf of Y, submitted that a second subsidiary point of relevance was whether or not an applicant, by challenging the jurisdiction, was seeking to have a second bite at the cherry by re-arguing the question of jurisdiction on which it had lost. Longmore J. described this as "a potentially relevant matter" whilst adding that it is relevant where "there is no cogent reason" for saying that the tribunal had reached the wrong conclusion. However, he did not consider it right to give "excessive weight" to the factor because it was not nearly as important as the question whether the applicant had sufficient assets which are available for the purposes of execution. It would only "tip the scale" if the court was uncertain on that question.
I consider it appropriate to follow the guidance of Longmore J. which has stood for some time. I must therefore consider the question whether X has assets which are available for the purposes of execution.
Mr. Kimmins submitted that "given the history of this dispute, it is obvious that that there are no assets readily available to satisfy any court order." However, Mr. Gruder QC, on behalf of X, has drawn attention to affidavit evidence filed in Australia by X in response to the freezing order to the effect that X has an unencumbered holding of 76m. shares in a subsidiary worth AUS$42,217,489. He submitted that it is "clear" that X has substantial unencumbered assets in Australia against which any order for costs in the region of £120,000 could be enforced and that therefore "there is simply no reason" for an order for security for costs.
It appears to be the case, and the contrary is not suggested, that X is a substantial concern in India with considerable assets in Australia. However, X has plainly set its mind against honouring any of the awards made against it, including the orders for costs made against it. The substantial sums due under the now unappealable third award remain unpaid. That award was issued over a year ago. The costs payable by X pursuant to the second award, issued about 18 months ago, also remain unpaid. Had X any intention to pay the sums awarded against it under those awards they would have been paid some time ago. In those circumstances it is to be...
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