Claim No: ARB 005/2016
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE COURT OF FIRST INSTANCE
BEFORE JUSTICE ROGER GILES
Hearing: 8 September 2016
Counsel: Yacine Francis (Allen & Overy) for the Claimant
Tom Montagu-Smith instructed by Al Tamimi & Co for the Defendant
Submissions: 27 September 2016
Judgment: 11 October 2016
JUDGMENT OF JUSTICE ROGER GILES
UPON hearing Counsel for the Claimant and Counsel for the Defendant on 8 September 2016
AND UPON reading the submissions and evidence filed and recorded on the Court file
IT IS HEREBY ORDERED THAT:
1.Dismiss the Defendant’s Application Notice ARB-005-2016/3 for further information.
2. Dismiss the Defendant’s Application Notice ARB-005-2016/2 for a stay.
3. Order that the final arbitral award dated 5 November 2014, as amended on 27 January 2015, in ICC Case No XXX be recognised and enforced.
4. Judgment for the Claimant for JPY 3, 715, 272, 550 and interest on that amount from 5 November 2014 at the Japanese long term prime lending rate compounded on a 90 day period.
5. Subject to order 6, order the Defendant to pay the Claimant’s costs of the Claimant’s claim and the applications in orders 1 and 2, such costs to be assessed if not agreed.
6. Liberty to the Defendant to apply within 14 days for a costs order other than that in order 5.
Date of Issue: 11 October 2016
1.The Claimant obtained an arbitral award in its favour. Its application for recognition and enforcement of the award was met by an application for a stay of the application or of execution of any judgment, together with an application for an order that the Claimant provide information pursuant to Part 19 of the Rules. The stay application brought in turn a claim to without prejudice privilege by the Claimant.
2 .The applications were heard together, on the understanding that an adjournment and a supplementary hearing might be necessary if provision of the information was ordered for the purposes of the stay application.
3. The Claimant is a substantial Japanese company, whose activities include the manufacture of thermal power generation equipment. The Defendant, a Sharjah company, was responsible for procuring equipment for an Indian power production project.
4. In December 2010 the Claimant and the Defendant entered into a contract for the design, manufacture and delivery of two steam turbine generators for the Indian project. As subsequently amended, the purchase price was USD 156,854,000.
5. There were substantial delays to the Indian project. The Defendant was obliged to provide letters of credit, but did not do so. In January 2013 the Claimant terminated the contract for repudiatory breach by the Defendant.
6. The contract contained an ICC arbitration clause. In March 2013 the Claimant commenced arbitration proceedings. They were conducted in London, and a final award was issued on 5 November 2014.
7. The learned arbitrators held that the termination had been valid and that the Claimant was entitled to damages, essentially reliance damages for its expenditure in performing the contract. An award was made for JPY 3,760,375,889 (approximately USD 35.7 million), plus interest from the date of the award.
8. One issue was whether the Claimant had failed to mitigate its loss by failing to re-sell the turbine generators or their components. The arbitrators held that it had not, while recording that efforts to re-sell the turbine generators were ongoing and that the Claimant “accepted…that the re-use or re-sale of part completed works was not impossible”. However, in arriving at the award amount the arbitrators had noted that the Claimant “gives credit for JPY 199,300 for the resale of certain parts”.
9. What of the possibility of re-use or re-sale? The arbitrators said –
“311. On the final day of the hearing the Tribunal requested the Parties to address the Tribunal in their post-hearing submissions on whether or not there should be a provision in the final award to take account of any possible future sale of the turbine generators or any of the components.
The Claimant’s position
312. Having accepted in its Post-Hearing Submissions that the re-use or re-sale of the part-completed works was not impossible, albeit it considered it unlikely, the Claimant indicated that it was prepared to give an undertaking to account to the Respondent for any future re-use or re-sale of the works completed under the Purchase Order that would result in the Claimant securing a double recovery of any part of its claimed wasted expenditure.
313. However, to reduce the risk of any such undertaking undermining the enforceability of any final award made in its favour, the Claimant submitted that any such undertaking should be made effective only after the Respondent had satisfied any award made in the Claimant’s favour.
314. The Claimants submitted that if the Tribunal were to accept an undertaking with such restrictions, it should be made on the following terms:
‘[The Claimant] has provided an undertaking that, subject to [the Defendant] having satisfied all of its obligations to make payments to [the Claimant] under this award, [the Claimant] shall:
(a) disclose to [the Defendant] the net value of any re-use or re-sale of the works done under the Purchase Order; and
(b) order the Claimant to account to the Respondent for the proceeds of any future sale or other realisation of a benefit from the goods.’ [sic]
The Respondent’s position
315. The Respondent contended that, in circumstances where the Claimant asserts that the goods it had manufactured had no value and where the Respondent has already paid the Claimant US$13 million for works done under the Purchase Order, if further damages were to be awarded to the Claimant in a final award, the Tribunal should either:
(a) order that the Respondent “take title and possession” of the goods; or
(b) order the Claimant to account to the Respondent for the proceeds of any future sale or other realisation of a benefit from the goods.
The Tribunal’s decision
316. The Tribunal considers that the inclusion of an undertaking in its final award upon the terms proposed by the Claimant may have the unintended consequence of inducing the Claimant to dispose of the goods at any price, however low.
317. The Tribunal further considers that the Respondent’s proposal, referred to at paragraph 315 above, for the transfer of the title and possession of the goods to the Respondent or an order to account for a future sale or other realisation of a benefit from the goods, is not workable as it would give rise to numerous issues upon which the Parties have not addressed the Tribunal.
318. The Tribunal notes that both parties accept that an account of any double recovery from the Claimant to the Respondent would be appropriate in circumstances outlined by the Tribunal.
319. The Tribunal agrees with this proposition and considers that in circumstances where:
(a) the award of damages in favour of the Claimant has been satisfied by the Respondent; and
(b) the turbine generators or any other materials manufactured or procured under the Purchase Order in respect of which the Tribunal has awarded the Claimant damages are subsequently sold or re-used by the Claimant, the Claimant ought to account to the Respondent for any double recovery it has gained.
320. However, whether any duty to account arises and, if so, the extent of any such duty will depend on circumstances that may or may not arise in the future. These are not matters that fall to be determined in this reference and the Tribunal therefore makes no finding in this regard. For the avoidance of doubt, the Tribunal makes no order in respect of such circumstances.”
10. The Defendant subsequently applied for correction of the award in certain respects, and an addendum to the award was issued on 27 January 2015. The award amount was varied to JPY 3,715,272,550. The Defendant had requested that the arbitrators clarify paras 317 and 320 of the award by identifying the “issues” and enlarging on the “circumstances” there referred to. The arbitrators said that they considered that their decision was sufficiently clear, repeated para 320 of the award, and said –
“38.The Tribunal does not consider it either necessary or appropriate to enumerate the issues upon which the parties did not address the Tribunal, as referred to at paragraph 317 of the Final Award, or the circumstances that may not arise in the future, as referred to at paragraph 320 of the Final Award.”
11.The Claimant wrote to the Defendant on 11 November 2014, requesting payment. There was subsequent correspondence, to which I will come. The Defendant did not pay, and has not paid.
12. On 29 March 2016 the Claimant filed an application for recognition and enforcement of the award. After some skirmishing over jurisdiction, the Defendant filed an unconditional acknowledgement of service on 10 July 2016.
13. On 4 August 2016, the Defendant filed an application for a stay of the proceedings, alternatively a stay of execution of the judgment in the proceedings –
“…until 1 month after the final award is issued in arbitration proceedings to be brought by the Defendant against the Claimant by which the Defendant seeks an account and other remedies from the Claimant.”
14. In submissions, the Defendant added fall-back applications that the Claimant provide security for repayment of the award amount, alternatively that it be permitted to pay the award amount into court.
15. On 10 August 2016 the Defendant filed an application for an order that the Claimant provide a response to a request for information made on 1 August 2016. I describe the request and the response thereto later in these reasons.
16. The Defendant made a request for the second arbitration on 16 August 2016, apparently served on the Claimant on 29 August 2016. Any progress towards an arbitration was not disclosed in the evidence.
The Defendant’s position
17. The Defendant did not take issue with the award. It said, however, that –
(i) it was common ground in the arbitration that the Claimant should not have double recovery, and should account to it for the proceeds of sale of the turbine generators or their components (“the equipment”);
(ii) the Claimant had sold equipment at least to the value of the award and “in effect, [the Claimant] has already been paid”;
(iii) it had commenced a second arbitration claiming an account of the proceeds of sale or other benefits realised by the Claimant in selling the equipment and an order that the amount be deducted from the award or paid to it; and
(iv) the award should not be enforced until the second arbitration had been completed, as there was no point in the Defendant paying to the Claimant money which it immediately claimed back.
18. The Defendant sought to rely for proof of sale of equipment and the amount realised on a witness statement of Mr S, and also on its request that the Claimant provide information.
The witness statement and the without prejudice objection
19. The first witness statement of Mr S dealt with discussions between the parties, and more particularly correspondence between them, in the period from 13 November 2014 to 12 August 2015, plus a singleton letter dated 15 June 2016. The Claimant objected to these materials on the ground that the discussions and correspondence were or were evidence of without prejudice communications.
20. A witness statement of Mr D on behalf of the Claimant and a second witness statement of Mr S were before me for the purposes of the objection, but not otherwise for the purposes of the applications.
21. The materials began with a telephone conversation on 13 November 2014, plainly enough sparked by the request for the payment of 11 November 2014. Mr S did not participate in the conversation, but said that the Defendant’s participant:
“… told me that, during the course of that call, it became clear that the Claimant had entered into a contract for the sale of one 660MW steam turbine generator for a project in South-East Asia. This was subsequently referred to by the parties as ‘Project A’. The Claimant wanted to use equipment produced under the Contract for Project A.”
22. An email from the Claimant dated 28 November 2014 referred to this conversation, and proposed a face to face meeting in Japan “in terms of our request for payment as per the final award of ICC arbitration”.
23. There was incidental correspondence about visa requirements. On 3 March 2015 the Claimant sent a “specification comparison” between the Indian project and project A, as requested by the Defendant, saying that it would like to explain it at the forthcoming meeting.
24. The meeting took place on 27 March 2015. Mr S said that the specification comparison showed that the specification for project A was very similar to the specification under the contract, and that at the meeting the Defendant asked for a more detailed explanation of what equipment could be diverted to the new contract and, where equipment could not be used, for an explanation of why not.
25. In an email dated 15 April 2015 the Claimant said, referring to the meeting, that subject to subsequent checking it was preparing an itemised list of the parts of the Indian project which could be used for project A. A list was sent on 14 May 2015, incomplete in some respects, and a complete list was sent on 26 June 2016.
26. The email accompanying the latter list included, in part repeating what had further been said in the email of 15 April 2015 –
“Again, let me inform you that the finalization of re-use will be made after (a) visual and/or detail checking at warehouse and/or our factory and (b) receipt of confirmation with our venders regarding warranty extension.
If the above (a) and (b) conditions will be clear, total amount of re-use to project A is approximately 2,400 million Japanese Yen.
On the other hand, additional cost will be incurred as informed you before. The summary of the cost as follows;
(1) 50 million JPY for Visual/Detail checking
(2) 50 million JPY for Transportation fee from warehouse to our factory
(3) 50 million JPY for Warranty extension fee to be charged from our venders
(4) 200 million JPY for Storage fee for 26 months from Nov 2014 to 2016 End (Note: We need to storage the parts until FOB date of project A)
In total, it will be approximately 350 million Japanese Yen to be paid by you to us for re-use.
We finished all of things what we can do at the moment for study of re-use. It’s your turn.
Please immediately discuss with [the Indian project contractor] in terms of payment by [the Defendant/the Indian project contractor] for (a) the above additional fee in order to finalize re-use and (b) balance amount of final award of ICC arbitration which will be reduced to 1,360 million JPY (Note: 3,760 million JPY minus 2,400 million JPY).
First, please reply in writing your confirmation of payment for the (a) additional fee 350 million JPY by [the Defendant/the Indian project contractor] in order for us to start checking. The deadline of the confirmation is 20th JULY 2015, and payment due is 31st JULY 2015. Otherwise, we will have to start procurement work for project A without re-using [Indian project] parts so as to keep the delivery date agreed with the client of project A.
Your prompt action would be highly appreciated and I personally hope your kind understanding for this amicable settlement.”
27. The Defendant replied on 2 July 2015, acknowledging the list and saying it would “come back to you by 31st July 2015”. It added, “In the meantime as requested by telephone please provide us the details”. This was followed by a conversation on 29 July 2015, recorded in an email from the Defendant of that date –
“As per our discussion today, W[sic: we] once again request you to provide us the item wise details along with cost break up. This will enable us to take it up with our management. Please note that our idea is to settle the matter amicably.”
28. The Claimant responded to that email on 30 July 2015 –
“As we requested and you accepted to reply by email at the telephone conference with you on 29th July 2015, before we reply to your request mentioned in your email below [the email of 29 July 2015], please make your stance clear to the acceptance of Arbitration Award by [the Defendant] by return.
Once we receive your confirmation, we will immediately do as per your request for amicable solution.”
29. The Defendant’s reply, also on 30 July 2015, was perhaps less than direct, namely –
“Kindly refer to Contract Clause no. 43.3 which in itself is self explanatory and a comprehensive answer to all your queries pertaining to Arbitration award.
Once better wisdom prevails at your end subsequent to attainment of clear understanding of [the Defendant] intent behind seeking of detailed price breakup, we can focus on working in close co-operation towards an amicable solution of re use of equipment and systems in Project A by joint and synergized effort of [the Claimant] and [the Defendant].
Humbly solicit your better understanding, trust, co-operation and support.”
30. In reference to Clause 43.3 of the contract, the reply gains some content. It provided, “The arbitration award shall be final and binding on the Parties. Judgment thereon may be entered in any Court having jurisdiction thereof for enforcement.” The Defendant was affirming the award; but it said nothing about payment.
31. There was then a telephone conversation, recorded in the Claimant’s email of 7 August 2015 together with further reference to payment of the additional JPY 350 million –
“Thank you very much for your answer to our queries.
We can confirm that you honored Arbitration Award as per the last telephone conversation and your email below [the email of 30 July 2015]. Now, as per your request, we will provide you the detailed price breakup at the earliest.
For our purpose to make final decision whether we will transfer the products, you are kindly requested to reply in writing your confirmation of payment for the additional fee 350 million JPY by [the Defendant/the Indian project contractor] by 17th August 2015. We strongly hope not to miss this last opportunity for re-use to project A.”
32. The “detailed price break up” was provided on 12 August 2015. Figures were put on items of equipment, and a second list of items which could not be used for project A was also provided so that there were now a re-use list and a non-reuse list. Some minor parts were deleted from the re-use list, but the total value of JPY 2,216,822,000 was little changed from the previous approximation. The non-reuse list totalled JPY 2,886,180,000. The accompanying email included, “Awaiting for your confirmation of payment by 17th August 2015”.
33. Save for the letter of 15 June 2016, there the evidence of the conversations and correspondence ended. It was not disclosed whether payment of the JPY 350 million was accepted, or whether payment was made, in time for re-use for project A or at all.
34. Mr S said that in addition to project A, he was “aware that [the Indian project contractor] is now in a position to restart” the Indian project, and that it would continue with the original project specification. He referred in that connection to the letter of 15 June 2016; so far as appears it or the meeting to which it referred was the sole source of his awareness. The letter referred to and commented on a meeting on 20 May 2016 which was expressly on a without prejudice basis. To put it to one side, the Defendant accepted that the letter might attract without prejudice privilege; in my view it did, and it is not necessary to elaborate.
35. Absent disclosure of any other source of Mr S’s awareness, in my view the evidence of his awareness is inadmissible. However, in my opinion the preceding materials are admissible.
36. Under the without prejudice rule, also described as a privilege, evidence of communications made in genuine negotiations to settle a dispute is not admissible. There must be a dispute and an attempt to settle it, and it is not sufficient that there are communications as to how an admitted liability is to be paid: Bradford & Bingley plc v Rashid [2006 UKHL 37; (2006) 1WLR 2066 at [72-3], . Commercial discussions to that end, even when one party seeks a concession from the other as to payment of the liability, generally do not qualify.
37. At least until sometime after August 2015, there was no relevant dispute. The Claimant requested payment. There were commercial discussions in contemplation of giving credit to the Defendant of approximately JPY 2,400 million for equipment which might be used for project A, provided the JPY 350 million was paid. Some concern in the Claimant underlying its request on 30 July 2015 that the Defendant “make [its] stance clear to the acceptance to the Arbitration Award” was assuaged by the reference to Clause 43.3 of the contract and a telephone conversation in which the Defendant “honored Arbitration Award”: clearly enough an acknowledgement of liability, since the Claimant then proceeded with the detailed price break up.
38. The Defendant relied on the references to amicable settlement or solution in the emails of 26 June, 29 July and 30 July 2015. It is quite clear that these were not references to settlement of a dispute. Rather, they were references to arriving at agreed re-use of equipment and a credit in the Defendant’s favour in partial satisfaction of the award: as the email of 30 July 2015 said, a cooperative amicable solution of re-use of equipment in project A.
39. Nothing in the witness statement of Mr D changes this position. He set out further communications from 19 August 2015 onwards, at least initially still commercial discussions towards payment of the award amount. The relationship became strained. In October 2015 the Claimant presented an ultimatum to the Defendant, saying to the effect that the Defendant had refused to honour the award and it would “take other measures for the settlement” (i.e. payment). So far as appears, only on 20 May 2016 did a without prejudice stipulation appear. Whatever without prejudice communications there were in 2016, they do not reflect back upon the communications in 2014/15.
40. Mr S stated the belief that at least JPY 2,400 million of equipment had been re-used for project A, and that almost all the rest of the equipment had been re-used or would be capable of re-use very soon. He gave no basis for his belief other than the preceding materials; I do not think that this evidence can rise above what the materials properly show.
41. What do they show? As proof of sale of equipment, not much. Nothing as to re-use of equipment beyond project A. As to re-use for project A, and recalling the dog that did not bark (Sherlock Holmes in “Silver Blaze”), there is significant absence of evidence. The Claimant was prepared to reduce the award amount by JPY 2,400 million, but that was subject to prior payment of the JPY 350 million, or at the least acceptance of responsibility for payment, as the condition for re-use of equipment for project A. It was made very clear that the equipment would not be re-used for project A unless that happened (see the email of 26 June 2015, “otherwise, we will have to start procurement work for project A without re-using…” and the email of 7 August 2015, “we strongly hope not to miss this last opportunity for re-use…”). Had the JPY 350 million been paid or responsibility for payment been accepted, no reason appears why the Defendant could not have given evidence so stating. The inference is that, the condition being unsatisfied, equipment was not re-used for project A. On the evidence before me, I so conclude.
The request for information
42. Under Part 19 of the Rules, the Court may –
“…at any time order a party to:
(1) clarify any matter which is in dispute in the proceedings.; or
(2) give additional information in relation to any such matter; whether or not the matter is contained in or referred to in a statement of case.” (RDC 19.1)
43. The party seeking clarification or information must first serve a written request (RDC 19.5), and if the party requested objects to providing clarification or information he must give reasons (RDC 19.19). The clarification or information which may be sought, and so which may be ordered, is conditioned by RDC 19.6 –
“19.6 A request should be concise and strictly confined to matters which are reasonably necessary and proportionate to enable the first party to prepare his own case or to understand the case he has to meet.”
44. On 1 August 2016 the Defendant served on the Claimant a written request which, after referring to the equipment and the lists sent by the Claimant on 30 August 2015, asked for –
“(1) A list of all equipment which has now been sold or re-used. If more convenient, a modified version of the attached list would be acceptable.
(2) A statement of the proceeds of sale or other benefit received or agreed in respect of that equipment.
(3) A breakdown of those proceeds or other benefits, by reference to each piece or category of equipment.”
45. The Claimant’s response was provided on 23 August 2016, and was relevantly –
“The Claimant objects to the Defendant’s Part 19 Request for Further Information on the following bases:
- it is not in accordance with the requirements of RDC 19.6 since the requested information is not “strictly confined to matters which are reasonably necessary and proportionate to enable the first party to prepare his own case or to understand the case he has to meet”;
- it concerns an issue that has already been considered resolved by the Tribunal in the Award, i.e. the Tribunal considered that the Claimant should only account to the Defendant for any double recovery that it has gained “[…] in circumstances where: […] the award of damages in favour of the Claimant has been satisfied by the Respondent” (paragraph 319 of the Award). There is no obligation on the Claimant to account in the present circumstances, where the Defendant has not paid any sum due under the Award;
- It is irrelevant and disproportionately prejudicial to put the Claimant to the cost, delay, and inconvenience, of providing the requested information to the Defendant in circumstances where the Defendant has demonstrated that it has no intention to pay the sums due under the Award; and
- The Defendant delayed making its Part 19 Request for Further Information until some four months after the Claimant served its DIFC Court Arbitration Claim Form on the Defendant. The Claimant is concerned that the late timing of the Defendant’s Part 19 Request for further Information and related application could cause substantial further delays to these proceedings (which have already been delayed unnecessarily as a result of the Defendant’s previous application to contest the jurisdiction the DIFC Courts).”
46. For convenience, I will call these grounds 1, 2, 3 and 4 respectively. In submissions a further ground of objection was added (ground 5), arising from the service of the request for the second arbitration on 29 August 2016. It was submitted that the application for an order was now the subject of arbitration proceedings and should be dismissed pursuant to Article 13 of the DIFC Arbitration Law, Law No 1 of 2008.
47. I pass over ground 1 for the present. In my opinion, none of the other grounds has substance.
48. Ground 2 is essentially a relevance ground: that the information is not relevant because, even if the Claimant has benefited from the sale of equipment, it need not account because the arbitrators said so. The short answer is that the arbitrators expressly made no order and, although stating a view in para 319 of the award, declined to make a finding as to whether any duty to account arose and the extent of any such duty. The arbitrators’ view may have assumed that, as the facts before them suggested, any sale or re-use would be distant in time and after satisfaction of the award; but whether or not that be so, no determination as to an accounting by the Claimant was made.
49. Ground 3 appears to rest upon ground 2, being qualified by the Defendant’s failure to pay the award amount: hence the asserted irrelevance. So far as it goes further, the Claimant brought no evidence of the cost, delay or inconvenience in providing the information to the Defendant. In the absence of evidence, I would not decline to order that the information (or at least that in (1) and (2)) be provided solely because of asserted cost, delay and inconvenience. However, later in these reasons these will be relevant considerations.
50. As to ground 4, the Defendant made the request for information about three weeks after its acknowledgment of service and a few days before it filed the stay application. The preceding skirmishing over jurisdiction does not make this late timing. So far as delay be relevant to a discretion, I do not think that the Claimant should be relieved of an obligation to provide the requested information if it should otherwise be provided.
51. Ground 5 rested upon Article 13 (1) of the Arbitration Law, which provides –
“13(1) If an action is brought before the DIFC Court in a matter which is the subject of an arbitration agreement, the DIFC Court shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, dismiss or stay such action unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.”
52. The ground is misconceived. I express no view on whether the second arbitration comes within the arbitration clause in the contract. The application for recognition and enforcement and the stay application are not part of the arbitration, nor is the associated application for an order that a response to the request for information be provided. More widely, as perhaps the ground was intended, while an element in the stay application is re-use of equipment and a potential accounting, decision of the application will not bring a final determination of those matters or an order for an accounting. If the matters are the subject of the arbitration clause, the application for an order is not an action in those matters.
53. I return to ground 1. Part 19 of the Rules is materially the same as Pt 18 of the CPR and its accompanying Practice Direction. Part 18 of the CPR was intended to replace the two separate regimes for further and better particulars and interrogatories, and “to impose a more restrictive and disciplined regime than the previous rules” (Halsbury’s Laws of England, 5th ed, vol 32, p457). In the present case the Defendant’s request is in the nature of interrogatories, but under the tighter regime.
54. Interrogatories could be administered in order to obtain admissions. But they were not ordered routinely, and it had to be shown that they were necessary for disposing justly of the case or saving costs. In National Grid Electricity Transmission Plc v ABB Ltd  EWHC 869 (Ch) (“National Grid”) at  the Court cited from the judgment of Lord Woolf MR in Hall v Sevalco Ltd  PIQR 344 –
“Necessity is a stringent test. It cannot be necessary to obtain information or admissions which are or are likely to be contained in pleadings, medical reports, discoverable documents or witness statements unless, exceptionally, a clear litigious purpose will be served by obtaining such information or admissions on affidavit.”
55. In National Grid this was regarded (at ) as applicable, mutatis mutandis, to a request for information under Pt 18. The Practice Direction, and RDC 19.6 taken from it, call for a no less stringent approach: necessity and proportionality are required, both with strictness.
56. Relevantly to the present case, the matters requested must be “to enable the first party to prepare his own case”. The word “prepare” is important. No doubt it can extend to obtaining an admission to be used in the party’s case, but it indicates a process which can also be satisfied by calling evidence of the matter the subject of the desired admission. Necessity and proportionality must take account of other sources and ability to provide other evidence, and of the prospect of the desired admission being made.
57. I do not accept the Claimant’s submission to the effect that the application for recognition and enforcement is the “case” in RDC 19.6 and there can be no necessity where the Defendant does not challenge the award. Nor, as submitted by the Claimant, does “case” mean “Statement of Case” as defined in the Rules. A request for information can be made in relation to an interlocutory application. But the power to order that information be provided, like the power to order production of documents, should be exercised sparingly in relation to such an application: Harris v Society of Lloyds  EWHC 1433 (Comm) at  (in relation to disclosure of documents).
58. The occasion for the request for information is the stay application, and necessity is not affected by information contained or likely to be contained in pleadings etc. as referred to in Hall v Sevalco Ltd. But the matters mentioned in relation to “prepare” come into play in considering, in an interlocutory application, the stringent test of necessity and proportionality.
59. The Defendant sought to provide evidence of re-use of equipment through Mr S’s witness statement, but I have noted how little the materials showed and concluded that, to the contrary of the Defendant’s case, equipment was not re-used for project A. If the dealings between the Claimant and the Defendant with which those materials dealt had matured into re-use of equipment for project A, I see no reason why the Defendant could not readily have provided evidence of that outcome. Similarly, in my view a company in the Defendant’s position could readily provide better evidence that the Indian contractor was in a position to restart the Indian project to support Mr S’s awareness. Even if Mr S’s evidence in that regard were admitted or other evidence brought, it would say little if anything about actual re-use of equipment for a revived Indian project. Any re-use would be on an unknown time-scale, and evidence of now being in a position to restart the Indian project is in fact against any re-use of equipment to the present time – any re-use will be after the project has restarted.
60. On the evidence before me, it seems to me quite unlikely that there has yet been significant sale or re-use of equipment, or receipt of any significant proceeds of sale or other benefit. It would perhaps be too much to say that the Defendant is fishing, in the time honoured language, in making the request for information, but it was within the Defendant’s ability otherwise to demonstrate re-use or likely re-use of equipment. There would be some time, expense and diversion of resources if the Claimant were required to provide the requested information, albeit I do not have evidence of their extent, which should not be imposed on it without good reason. In this respect I note the Defendant’s submission that, by asserting cost, delay and inconvenience of providing the requested information, the Claimant has acknowledged that equipment has been sold. I do not think that is so; proper investigations to confirm no or insignificant re-sales, or identify incidental re-use, would be required.
61. I am conscious that sale of equipment to the value of the award is central to the Defendant’s application for a stay. I am conscious also that the Claimant seems to continue to accept that it should not have double recovery, and has not provided a straight-forward denial of any re-use of equipment; but it was entitled to leave the burden of proof with the Defendant, and the co-operation of 2015 appears to be long past. I am not satisfied that the requested information is reasonably necessary and proportionate to enable the Defendant to prepare its case on the stay application.
The stay application
62. The power to grant a stay is found in RDC 4.2, which provides in sub rule (6) that the Court may “stay the whole or part of any proceedings or judgment either generally or until a specified date or event”. The Rule confers an unfettered discretion, to be exercised taking into account all relevant circumstances and with a view to achieving justice between the parties.
63. Mr Montagu-Smith for the Defendant referred to Workspace Management Limited v YJL London Limited  EWHC 2017 (TCC) (“Workspace”). Under an adjudication decision, an amount was payable by Workspace to YJL. Under a subsequent provisional arbitral award, an amount was payable by YJL to Workspace. On an application to enforce the award, could the former amount be set off against the latter? Coulson J held that it could, there being mutual debts arising out of the same building contract attracting the principles of equitable set-off; but his Lordship said that if he had entered judgment for Workspace, he would have stayed execution pending the outcome of the ongoing arbitration because it would “be inequitable for any sums to be paid to either party at this stage of their many and various disputes”, and because an award in the arbitration was imminent and “the overall accounting position between the parties is very likely to change within the course of the next few weeks” (at ).
64. The present case is nothing like Workspace. There is no equivalent to the prior adjudication decision. While there is the second arbitration, it is in its infancy and the outcome is distant and speculative; speculative because the Defendant has not made out, for the purposes of a stay, that equipment has been sold to the value of the award, or even part thereof; rather, the evidence indicates that it has not.
65. I have no doubt that a stay of the application for recognition and enforcement should be refused. The award is not challenged, and the Claimant is entitled to have it recognised and enforced pursuant to Article 42 of the Arbitration Law, and to have a judgment of this Court for the award amount.
66. Mr Francis for the Claimant first submitted that a stay of execution of the judgment should be refused because the entitlement pursuant to Article 42 would otherwise be negated; it was said that the stay application was effectively an impermissible challenge to the award. I do not accept the submission. It is unsound in principle, because any stay would be temporary and distinct from setting aside. It is also contrary to authority. In Far Eastern Shipping Co v Sovcomflot (1995) 1 Lloyds Rep 520 Potter J held that once a Convention award was converted into an English judgment, it was open to the exercise of the power to stay enforcement of the judgment and the New York Convention did not preclude this. This has been followed or endorsed in Continental Transfer Technique Ltd v The Federal Government of Nigeria  EWHC 780 (Comm) and H & CS Holdings Pte Ltd v RBEG Trading (UK) Ltd  EWHC 1665 (Comm).
67. The Claimant otherwise relied on the approach described by Diplock J in Margulies Bros Ltd v Dafnis Thomaides & Co (UK) Limited  1 Lloyds Rep 250 –
“No authority has been cited to me in which the existence of a counterclaim has been held to be a good reason for refusing to allow an award to be enforced as a judgment. I do not think that the existence of a counterclaim is a good reason. I think that it would be contrary to the purpose of Sect. 26 of the Arbitration Act, 1950, if, in a case where the validity of the award and the right to proceed upon it is beyond doubt, it should be given less effect than a judgment. I think that the cases in which an award will not be enforced as a judgment are correctly set out in Russell on the Law of Arbitration, 16th ed., at pp. 269 to 271, and that the existence of a prima facie counterclaim is not one of them. Even, therefore, if I thought that a prima facie counterclaim were established, I should not regard it as a good ground for refusing to allow the applicants to enforce the award in the same manner as a judgment, and, fortiori, as a good ground for refusing to remit the award to the Board of Appeal so that it may be amended to a form in which the applicants can apply to some other Judge for leave to enforce it in that manner.”
68. An illustration of this approach is found in Far Eastern Shipping Co v Sovcomflot. The award was for money due under a loan agreement, and the debtor had brought court proceedings against the creditor over disputes which had not been within the arbitration agreement. The proceedings had not yet been served. The judge refused a stay, describing the proceedings as “no more than a remote and uncertain prospect of recovery at best”, and said that it would “rarely, if ever” be appropriate to stay enforcement of a judgment on a Convention award. A further case is H & CS Holdings Pte Ltd v RBEG Trading (UK) Ltd, where a stay by reason of a pending second arbitration was refused because the second arbitration was a belated claim and the tactical purpose of the stay was to give the judgment creditor an incentive not to delay the new arbitration; the rarity of a stay of a judgment on a Convention award was endorsed. In this respect, a variant of the Claimant’s first submission can be seen. The rationale of the New York Convention is that a foreign arbitral award should be enforced save in very limited circumstances; and the Arbitration Law is modelled on the Convention.
69. In Burnet v Francis Industries Plc (1987) 1 WLR 802, in the context of special circumstances making it inexpedient that a judgment be enforced, Bingham LJ listed relevant circumstances where a stay is sought on the basis of a cross-claim. Adapted to the present case and briefly stated, they were the nature of the claim; the relationship between the claim and the cross-claim; the strength of the cross-claim; the size of the cross-claim (although that was said to be rarely, if ever decisive); the likely delay before determination of the cross-claim; the prejudice to the judgment creditor if a stay were granted; and the likely prejudice to the judgment debtor if a stay were refused. These can provide a framework for the exercise of the discretion under RDC 4.2.
70. The judgment on the award commands respect; it flows from a lengthy arbitration and the award is not challenged. The Claimant’s entitlement under the award has been affirmed by the Defendant, and the Defendant has put off payment for some time. While it was recognised in the arbitration, and apparently still is, that the Claimant should not have double recovery, absent proved or likely double recovery execution of the judgment should not lightly be refused.
71. There is a close connection between the judgment and the second arbitration; if the Defendant is successful in the second arbitration, the recognised avoidance of double recovery will be enlivened. But on the evidence before me the prospects in the second arbitration are quite speculative, and there is likely to be considerable delay before any determination in the second arbitration.
72. There was no evidence that payment now would be a hardship to the Defendant. I was informed, in a non-responsive answer to my enquiry whether it was prepared to provide security as a condition of a stay, that it was “not in a position to provide substantial security”. Impecuniosity had not been part of its case for a stay, and this was rather coyly phrased. As later noted, the Defendant said that any money it paid was likely to be repatriated to Japan and it would encounter difficulty in recovery in Japan, but any difficulty was not made clear.
73. If a stay be granted, the Claimant will be held out of its money for a further indeterminate time, against the speculative prospects in the second arbitration. The answer to my enquiry hints that this might be detrimental to ultimate recovery.
74. These considerations are of varying weight, but there is little in them to favour a stay when the second arbitration is such an uncertainty. I do not suggest that the Defendant had to prove re-sale or re-use of equipment on the balance of probabilities, but it has fallen far short of even likely re-sale or re-use. In my opinion, a stay of execution of the judgment should not be ordered.
The fallback: security from the Claimant or payment into court
75. The Defendant submitted that, if a stay was refused so the award amount had to be paid, the Defendant should be required to provide security for its repayment. It was said that it appeared that the Claimant had received more than the award amount from the sale of equipment, and that security should be ordered because money paid by the Defendant was likely to be repatriated to Japan and the Defendant would encounter difficulty in enforcing recovery in Japan.
76. The source of a power to order security is unclear, but may be passed over. As appears from these reasons, I do not accept the submission’s foundation of a finding, or a likelihood, that the Claimant has received more than the award amount or even in the order of JPY 2,400 million part of that amount. Further, neither by evidence nor in submissions was any difficulty in enforcing recovery in Japan explained. Assuming a power, I decline to order security.
77. For like reasons, I decline to order payment into court as a means of satisfying the award. The Claimant will have a judgment, which can be enforced as appropriate.
78. My present view is that, having failed in the applications and despite being largely successful in relation to the claim to without prejudice privilege, the Defendant should pay the Claimant’s costs. I will so order, but will reserve liberty to apply if the Defendant wishes to submit that some other order should be made. There is some complexity whereby I cannot confidently make an immediate assessment, and the costs will be subject to a detailed assessment.
79. I make the following orders –
(1) Dismiss the Defendant’s application ARB-005-2016/3 for further information.
(2) Dismiss the Defendant’s application ARB-005-2016/2 for a stay.
(3) Order that the final arbitral award dated 5 November 2014, as amended on 27 January 2015, in ICC Case No XXX be recognised and enforced.
(4) Judgment for the Claimant for JPY 3, 715, 272, 550 and interest on that amount from 5 November 2014 at the Japanese long term prime lending rate compounded on a 90 day period.
(5) Subject to order 6, order the Defendant to pay the Claimant’s costs of the Claimant’s claim and the applications in orders 1 and 2, such costs to be assessed if not agreed.
(6) Liberty to the Defendant to apply within 14 days for a costs order other than that in order 5.
Date of Issue: 11 October 2016