England and Wales Court of Appeal (Civil Division) Decisions

Neutral Citation Number: [2017] EWCA Civ 32

Case No: A3/2016/3916 & A3/2016/3916(A)

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM HIGH COURT, QBD, COMMERCIAL COURT

HHJ WAKSMAN QC

CL-2016-000572

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 25/01/2017

Before:

LORD JUSTICE LEWISON
and

LORD JUSTICE CHRISTOPHER CLARKE

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Between:

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Jonathan Gaisman QC, Michael Bools QC, Joanne Box (instructed by Clyde & Co LLP ) for the Appellant

(i) Akhil Shah QC (instructed by Addleshaw Goddard LLP) for the First Respondent and

(ii) Mark Howard QC, Richard Eschwege, Edward Ho (instructed by Stephenson Harwood LLP) for the Second and Third Respondents

Hearing date: 7 ^th December 2016

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Judgment Approved

Lord Justice Christopher Clarke:

1.                   After our judgment had been circulated in draft we received extensive submissions over the course of the following week as to the form of the order that we should make. In particular POS invited us to make an injunction precluding PDVSA or PVSA Services

2.                   The application of 10 November 2016 was an application to amend PDVSA's statement of case in the arbitration so as to seek an interim injunction prohibiting POS from making demands under the SBLC save in respect of invoices which had satisfied the Article 141 requirements or had been held to be payable by the Tribunal, and for directions for the determination of that application. By Procedural Order 22 of 16 November 2016 the Tribunal permitted the amendment but said that it would not deal with the request for interim relief at that stage. On Friday13 January 2017 our judgment was handed down in draft on the usual conditions. On the same day PDVSA's solicitors sought the agreement of POS that the parties should send a joint note to me seeking permission to release the draft judgment or the substance of it to the Tribunal and that any payment pursuant to the judgment should be made within 5 Lisbon banking days from the date of hand down so as to enable the orderly resolution of the application by the Tribunal, or, if that was not possible, the court. That was a reference to the French court.

3.                   On Monday 16 January 2017 PDVSA's solicitors asked this court to lift the embargo on communication imposed by CPR 4OE para 2.4 so as to permit PDVSA (i) to inform the Tribunal in advance of the handing down of our judgment of the fact that the appeal had succeeded and that the court was presently intending to order the bank to make payment forthwith of the demands presented on 19 September 2016; and (ii) to use that information to update and renew the 10 November 2016 application in advance of that handing down.

4.                   We did not think that we should lift the embargo. Judgments are, usually, handed down in draft in order to allow for typographical corrections or the correction of obvious errors. We do not think that, in the present case, should mean that one party to the appeal should be allowed, by way of a partial (or complete) lifting of the embargo, to make use of the result contained in the draft judgment in order to seek relief designed to avoid POS obtaining the fruits of its success. It also seems to us undesirable for the arbitrators to be asked to make some interim ruling without the full judgment containing both the result and the reasoning before them.

5.                   We recognize that, as thing stand, this will mean that PDVSA will not be able to apply to the Tribunal or the French courts and present either this judgment, or the result of the appeal, before this judgment is handed down; and that there is likely to be no practical impediment to POS recovering from the bank under the SBLC pursuant to an order requiring payment within 2 business days. We do not, however, regard it as appropriate for this court to provide a further opportunity for an application for injunctive relief on account of the fact that in PO 16 the Tribunal declined to grant PDVSA any relief and that, so far, it has failed to deal with the request for interim relief sought on 10 November 2016, even though one possible result of the appeal has always been the one which we have reached.

6.                   There remains for consideration whether we should, as POS asks us to do, ourselves make some injunction of the sort sought by POS. As to that the salient facts are as follows. On 23 September 2016 PDVSA sought, in its skeleton of that date, as an alternative to reliance on the fraud exception, an interim injunction restraining the bank from paying out in respect of the demands under the SBLC on the basis that the drilling contract clearly precluded POS from making the demands. Judge Waksman ordered that PDVSA's entitlement to interim relief should be determined at trial.

7.                   PDVSA submits that POS' skeleton for trial reflects the fact that POS did not think that the judge was finally deciding the parties rights under the drilling contract. The skeleton addressed the test applied in MW High Tech Projects UK v Biffa Waste Services [2015] EWHC 949 ( TCC) for determining whether an interlocutory injunction should be granted on the grounds that the beneficiary was precluded from calling on the letter of credit under the terms of the underlying contract. PDVSA had referred to this case in its 23 September skeleton. That test was whether the underlying contract clearly established that demands under the letter of credit were prohibited. That is not the test which would be applied under Article 26 UNCITRAL rules, or by the arbitrators under the 10 November application.

8.                   However paragraph 25 of PDVSA's skeleton for trial said that:

9.                   In paragraph 2 (3) of its trial skeleton PDVSA submitted that the demands were presented contrary to the clear terms of the contract. At trial it adduced the evidence of Professor Iribarren to the effect that, if POS submitted a demand for payment of disputed invoices which had not been the subject of the Article 141 procedure or an award, it would be acting in violation of Article 1160 of the Venezuelan Civil Code and, thus, of a contractual stipulation. Article 1160 provides that:

10.               The judge did not accept the validity of the breach of contract point. He said that he could "see no clear evidence of breach of one or other of the two limbs of 1160 as identified by Professor Iribaren" and that:

"... had it been necessary, I would not have restrained collection by [POS] or payment by the Bank under the [SBLC] by reason of the good faith arguments. In the event, of course, for the earlier reasons given, there will be no payment out by the Bank under the [SBLC]".

PDSVA/PDSVA did not seek to appeal that part of the judgment.

11.               POS submits that it is not now open to PDVSA to raise the breach of contract point; and that it is estopped from doing so per rem judicatam or under the principles in Henderson v Henderson [1844] 6 QB 288 as interpreted by the House of Lords in Johnson v Gore Wood [2002] 2 AC 1. We are not persuaded that any issue estoppel or its Henderson v Henderson equivalent arises. Judge Waksman's observations were obiter.

12.               In addition, POS submits that, in the particular circumstances of the present case, it would be an abuse of the process of the court, vexatious and oppressive, for PDVSA:

13.               PDVSA submits that what it seeks to do is in no way abusive or vexatious. The breach of contract question arose on an application for an interlocutory injunction. Any decision of Judge Waksman could (if favourable to PDVSA) only have been to make some form of interlocutory order, pending the determination by the arbitrators of a point which it was for them to decide. The English court has no supervisory jurisdiction over the Tribunal and cannot intervene to restrain PDVSA's breach of contract claim. The advancement of such a claim is not vexatious, oppressive or unconscionable. PDVSA only seeks to have the breach of contract case considered by the Tribunal, which is the relevant body for that purpose. It does not seek to overturn or sidestep any binding finding of the English court. Judge Waksman made none and PDVSA did not appeal. The Court of Appeal has decided whether the demands were valid under the SBLC, which is not the same issue as the breach of contract point.

14.               In our judgment POS' submission is well founded. PDVSA sought to persuade Judge Waksman to decide that the breach of contract point was good and to grant an injunction, preferably on a final basis. When that failed it chose not to appeal that aspect of Judge Waksman's decision. Now that it has lost the appeal it seeks, in effect, to deny POS the fruits of its success by seeking an injunction (again) from the arbitrators. We regard it as an abuse of process and oppressive, to invoke the court's jurisdiction to determine whether the demands were fraudulently presented and, if not, whether POS should be enjoined from presentation or receipt; but then not to seek to appeal Judge Waksman's finding on the breach of contract point or his refusal of injunctive relief; and then, when the appeal succeeds, to seek to go back to the arbitrators to apply for injunctive relief - the claim to which PDVSA had not sought to pursue before this court - which application, if successful, would mean that the entire proceedings, which were expedited for PDVSA's benefit, will have been an exercise in futility. We do not regard this position as affected by the fact, if it be such, that any injunction ordered by Judge Waksman would have been interlocutory and that the arbitrators would or might apply a different test in relation to any interlocutory order of theirs.

15.               In addition it is, as we have said in the judgment, the practice of the court to " make consequential orders as nearly as is reasonably possible to achieve the restitution which the result requires". The suggestion that PDVSA should be the subject of an injunction was not argued before us. The result of our decision is that POS was entitled to the sum demanded on 26 September 2016 and, but for the actions of PDVSA, POS would have received it. Accordingly, in what we regard as exceptional circumstances, we propose to grant injunctive relief in the form set out in the order. This is limited to restraining PDVSA/PDVSA Services from seeking to restrain POS from seeking or receiving payment under the September 2016 demand and our order giving effect to it.

16.               POS invited us to make a declaration that:

"Subject to the terms of the SBLC, the Appellant is entitled to make further demands on the SBLC if it can honestly certify that the Second Respondent is obligated to pay the sums demanded, as that phrase has been interpreted by the Court of Appeal in its judgment ([2017] EWCA Civ 9)"

We do not think it necessary or appropriate to do so. Our judgment speaks sufficiently for itself. We think it unwise to make a declaration which, by its own terms, involves consideration of the judgment to discern what it means; and relates to demands as yet unmade in circumstances as yet unknown. Especially is this so when Judge Waksman's unappealed decision on the breach of contract point is itself obiter and what we have decided is POS' rights under the SBLC.

17.               The other provisions of the order give effect to the decision which we have reached providing for appropriate declarations as to entitlement to recover under the SBLC and for payment of principal and interest. PDVSA and PDVSA Services must pay the costs of the appeal on the standard basis. We decline to make a summary assessment in the light of the size of the costs, particularly those of the appeal. Costs of well over £ 500,000 for a one day appeal appear to us plainly excessive, notwithstanding the sizeable, but not enormous, sums involved and the serious consequences which failure on the appeal would entail both for POS and Mr Buckland. POS' claim to costs is for over £ 300,000 more than the costs of PDVSA/PDVSA Services and included two Leading Counsel (costing over £ 350,000), two partners, 3 senior associates, 3 associates, a trainee, two paralegals, two costs lawyers and a costs clerk. The submissions made to us were of admirable quality but the cost sought to be charged - for a one day appeal in large measure on a point of law - is excessive and disproportionate. The amount of work said to have been done on documents appears also to be disproportionate.

18.               We also think it inappropriate to set aside the order made by Judge Waksman that POS should pay the bank's costs at first instance. The more appropriate order is the one originally suggested by POS namely that PDVSA/PDVSA Services should pay to POS the £ 70,000 which POS paid to the bank pursuant to Judge Waksman's order.

19.               I agree.