QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| Mid-East Sales Limited
|- and -
|(1) United Engineering and Trading Company (PVT) Limited
(2) The Islamic Republic of Pakistan
Alexander Layton QC and Mahnaz Malik (instructed by Thomas Eggar LLP ) for the Second Defendant
Hearing dates: 7, 8, 9 and 10 April 2014
Crown Copyright ©
Mr Justice Burton :
"In the end, we agreed that with payment being guaranteed via letter of credit to be confirmed by the paying bank, the contract for the power stations would specify neither law nor jurisdiction. However I knew that in a contract of this type it was certain that KRL would require further services and spares. I therefore insisted and Mr Bhatti agreed that the Claimants would draw up Special Conditions of Contract specifying English law and jurisdiction and that these would apply, as well as the Claimant's general conditions, to any further transactions not paid in advance or covered by reconfirmed letters of credit."
This is corroborated by the preamble and the terms of a Modification to [Claimant's] General Conditions of Sale, signed by Mr Rafiuddin on 5 March 1995. He says he delivered the Purchase Contract for the plant (dated 6 March 1995) together with the Special Conditions to Mr Bhatti on 5 March (although the Particulars of Claim at paragraph 3 erroneously recite 5th May) 1995. The General Conditions provide for English law, but not jurisdiction. The Special Conditions provided as follows:
"Unless it is specifically mutually agreed otherwise in writing any questions relating to any quotation, contract or supply made subsequent to the completion of deliveries of stores/goods/services ordered under [the Purchase Contract] shall be subject to the [Claimant's] General Conditions of Sales (November 1994) and to the above-mentioned Special Conditions of Sale or agreed written amendments of these conditions and shall be determined in all respects by the laws of England, and any dispute(s) incapable of amicable resolution shall be tried and adjudicated in the appropriate UK Court irrespective of where the cause for action may arise. Jurisdiction for the said action will rest in the UK."
(i) Modified fuel inlet nozzles for the units at $7,500;
(ii) The supply of resident technical experts in the sum of $535,029;
(iii) Subsequent repair works at $11,250.
"4. . . In about May or June 2001 I attended a meeting at Dr AQ Khan's office, attended by Dr AQ Khan and Mr Mohammed Fahim, KRL's member of Finance. At that time Dr Khan no longer headed KRL but he worked for the President of Pakistan as Chief Scientific Advisor with special responsibility for KRL affairs.
5. As I was well aware, at that time Pakistan had difficulties finding foreign currency to meet its foreign currency obligations. An organisation like KRL could not simply pay my company out of its own resources. It needed to apply to the Special Projects Directorate for funding out of the Ministry of Defence budget. Nevertheless, because of its importance to the Ministry as the source of nuclear weapons, such applications by KRL were always granted.
6. At that meeting it was agreed between the Claimant and the Defendants that KRL would apply to the Special Projects Directorate of the Ministry of Finance for funds to pay the sums outstanding and that in return the agreement of 18th February 2001 would be varied so as to provide that payment would only fall due when budget approval for the payment had been given by the Directorate.
7. I recall that in front of me Dr Khan instructed Mr Fahim to write the letter and put it up to him for signature. However, [I] did not expect this to happen immediately. In Pakistan things move slowly and I would not have regarded KRL as being in breach of its obligation until the end of 2001. I believed (and believe now) that if KRL had done what it promised and made the application, payment would have been made shortly thereafter."
On 9 January 2002 he received a fax from KRL, which is exhibited, which he submits made it clear that it had no intention of applying for payment of the sum due to the Claimant. Paragraphs 17 to 21 of the Particulars of Claim therefore plead that payment was required to be made, pursuant to the agreement as varied, by a reasonable time after May 2001, and in any event by or before such repudiatory fax.
(i) This case is an afterthought, and untrue, and is only now put forward to seek to substantiate a case that the Claimant's cause of action only arose upon KRL making it clear in January 2002 that it was not going to comply with the alleged agreement of May/June 2001, and thus in an attempt to solve what would otherwise be a limitation problem for the Claimant if the 6 years ran from 18 February 2001, because the application for service out was 3 May and the Claim Form was issued on 11 June 2007.
(ii) Mr Rafiuddin's fax of 7 June 2001 makes no mention of the alleged meeting in May/June 2001, nor does that of 13 June or 1 July 2001.
"29. The Pakistan action . . . was commenced in June 2004, presumably with the object of pre-empting the English proceedings. It has not progressed beyond the exchange of pleadings, in which the Claimants have challenged the jurisdiction of the Pakistan courts. No directions have been given in this case and there have already been a number of adjourned procedural hearings, and I believe that the Defendants intend, and will be able, to spin the proceedings out indefinitely so as to prevent any adjudication on the Claimant's claim. This can easily be done in Pakistan, where delays in court proceedings are notorious."
(i) As for the First Defendant, UETC, the Claimant had discovered that it had never been registered as a company in Pakistan. With regard to KRL, that too is not a registered company, and in his second witness statement Mr Rafiuddin explained as follows:"21. The basis for the addition of the Islamic Republic is that the principal party to the contract sued on would have been KRL, had KRL been a legal entity. Furthermore the Pakistan proceedings were brought in the name of (inter alia) KRL. I believe that KRL is not a legal entity but (as pleaded) is simply an emanation of the Government of Pakistan. KRL is controlled and funded by the . . . SPD, controlled by the Joint Chiefs of Staff Headquarters located at Chaklala Cantonment, Rawalpindi. If this is correct, the proper defendant is the Islamic Republic Pakistan."
(ii) Mr Rafiuddin gave further information as to the contractual history, much as I have set out above. He explained that not all documents he would have wished were available to him, as there had been a theft of his documents in Islamabad on 18 November 1998 in circumstances which he described.
(i) The First Defendant and KRL (not IRP) brought the proceedings on 11 June 2004 against the Claimant and Mr Rafiuddin.
(ii) Once the existence of those proceedings had been discovered and they were in a position to respond to them, the Claimant and Mr Rafiuddin served a defence which denied that KRL is a legal entity with capacity to sue, and incorporated a set off and counterclaim against the First Defendant and KRL for US$7 million, expressly without prejudice to their case that the Pakistan courts had no jurisdiction:"10.1 It is most respectfully submitted that the present written and counter claim are without prejudice to the rights of the Defendants to initiate and prosecute redress and relief against the Plaintiffs, appropriate proceedings in a Court of Competent jurisdiction.. . .12. Paragraph 12 of the aforetitled Suit is denied. This Honourable Court does not have the jurisdiction to adjudicate upon the aforetitled Suit, as both the Defendants have their place of business / residence beyond the jurisdiction of this Honourable Court. The Contract was also not executed within the jurisdiction of this Honourable Court. It was signed in Dubai, U.A.E.. . .14. The Defendants very respectfully submit to this Honourable Court, that without prejudice to the plea of lack of jurisdiction, in accordance with Clause l7 of the Defendants' General Conditions of Sale, the dispute raised in this Suit, inclusive of counter claim, is to be governed and determined by and under English Law."
(iii) Preliminary issues were formulated by the Civil Judge, Judge Tarrar, including the issue of the challenge to jurisdiction. By order dated 6 February 2007 Judge Tarrar rejected the jurisdictional challenge.
(iv) The Claimant and Mr Rafiuddin filed a Civil Revision Petition (i.e. an appeal) against Judge Tarrar's order in May 2007 and Judge Paracha on 4 May 2007 stayed the civil action pending that appeal. The statement of KRL's law officer, Mr Piracha, in paragraph 30 of his second witness statement, that there have been no applications by the Claimant to challenge the jurisdiction is plainly incorrect.
(v) No material activity has taken place, save that in early 2009 the case, and the pending appeal, were transferred to the Islamabad High Court, and thereafter, although there were one or two adjournments, there had still been no further action until 18 March 2011, when the Claimant and Mr Rafiuddin filed a motion for dismissal of the proceedings against them on the basis of the lack of capacity of both Pakistani claimants. This motion has not yet been heard, now 3 years on.
The English proceedings
"My client company, Hugo Page QC (counsel advising) and I have spent much time trying to resolve the issues raised by the Commercial Court Judge. Additionally, and more important than the four reasons put forward by the Commercial Court, has been counsel's concern over the limitation period."
"8. I asked Mr Basit if he would confirm in writing that the High Commission had received the claim and passed it on to the concerned authorities. Mr Basit said that he would ask IA Solicitors whether he should. Mr Basit called Mr Ahmed while I was in his office. The call was not on speaker but I could hear Mr Ahmed's voice from Mr Basit's receiver. I could clearly hear both sides of the conversation. They used both English and Urdu, which I also speak. Mr Basit explained what I had asked for. Mr Ahmad told him that he must not acknowledge the Claimants' solicitors' letter or admit that it had been passed on. He said he had the matter in hand. He said that the best thing to do was to ignore the case.
9. Mr Ahmed added that even if the claimant obtained judgment against the Pakistan government it could not be enforced in the UK as there were no vulnerable assets there. The Claimant would have to apply to Pakistan and the Court there would not recognise a default judgment. He then used an Urdu phrase which meant that the Claimant would be forever beating staves around uselessly. Afterwards Mr Basit turned to me and said 'you heard what he said. My hands are tied. I can't give you anything'.
10. I called Mr Dudley and gave him IA Solicitors' details and suggested to him that he should write to IA Solicitors to confirm that they are acting. Mr Dudley did so on 9th June 2008."
"It would be recalled by those instructing me that by way [of] defence strategy it was decided that the Defendants would under no circumstances appear before a High Court in London and defeat the service invoking Article 13 of the [Hague] Convention. This would instantly stay the proceedings and Claimants would have no further forum in England and Wales to file this claim. It was a position adopted after incisive deliberations when I briefed both clients in person last year. The seriousness and the imminent fall-out . . . of Defendant's appearance or acknowledging the service would inevitably open doors of intentional mischief on the part of British media and invite serious consequences for the State of Pakistan."
This clearly suggests that what Mr Page for the Claimant calls the Defendants' "defence strategy" was indeed in place as from March 2008, i.e. before the conversation recounted by Mr Rafiuddin as having taken place on or about 28 May 2008, of which Mr Rafiuddin could have had no other source of knowledge.
"According to the position taken by the Claimant in proving both Defendants to be the State of Pakistan, we would require the full compliance with Rule 6.44 of the Civil Procedure Rules as updated in October 2008. We do not consider this purported service by the Solicitors for the Claimant, through an agent in Pakistan, and service required under the Rules and consequently return hereby the document sent by you."
This is a clear and correct reference to CPR Rule 6.44, which governs the service on a State, in accordance with the provisions of the State Immunity Act 1978 ("the 1978 Act") .
"We understand that all service to the State of Pakistan is done under the provisions of the Hague Convention . . . We have checked the position with the [FPS] who confirm that it is perfect for us to use 'the Hague Service Convention' for our response."
"1) An appointment was scheduled with Mr Mubeen Mehr on 3 September 2012 to serve the documents.
2) On 3 September 2012, the Senior Consular Officer gave his details to the reception at the Ministry of Foreign Affairs and was escorted to [Mr Mehr's] office. [Mr Mehr] was in a meeting and the Officer was asked to wait. The Officer waited 30 minutes.
3) The Officer handed the documents to [Mr Mehr] explaining the reason for the visit, i.e. to serve the documents.
4) [Mr Mehr] accepted the documents and quickly flicked through them. He kept the documents with him.
5) [Mr Mehr] and the Officer discussed other consular matters and the meeting ended after about 1 hour."
In a witness statement in response, Mr Mehr notes what the FCO say, and does not contradict any of it, in particular the suggestion that he "flicked through" the documents served. He simply repeats (at paragraph 6) that "the documents relating to the said case were received by myself in my office in September 2012". It seems to me clear that, notwithstanding that there was no note verbale, the default judgment and the other papers came sufficiently to the attention of the relevant Officer of the Defendant, Mr Mehr, on 3 September 2012, and that, despite what he says in paragraph 18 of his second witness statement about it being difficult to establish which claim the documents related to, or requiring time to ascertain which Ministry dealt with them, there is an insufficiently explained delay between 3 September and 7 October, which is glossed over by the original suggestion that it took time for the papers to come to his attention at all, which is not consistent with the account of the FCO, which he has not challenged.
"41. During November 2012, the Ministry of Law and Justice and MOFA sought to obtain information in relation to the Claim from SPD and in December 2012, the Ministry of law and Justice directed MOFA to instruct a London based law firm to set aside the Default Judgment. The appointment of a lawyer necessitated the involvement of all of the relevant parties including the High Commission. . . . KRL, SPD and their own lawyers.
42. At the end of February 2013, the High Commission of Pakistan was informed by our bankers that the High Commission's accounts were being closed as a consequence of the Respondent's proceedings.
43. Having received SPD's recommendations, the MOFA sent the recommended panel of lawyers to Pakistan's High Commission in London for their review at the beginning of March 2013. The High Commission recommended Thomas Eggar LLP, the solicitors on record for the Government of Pakistan.
44. The High Commission received the Ministry of Law and Justice's approval to appoint Thomas Eggar LLP on 8 March 2013. The Applicant's Solicitors (Thomas Eggar LLP) filed the Application to set aside the Default Judgment on 10 April 2013."
"115. For the reasons set out above, the Second Defendant considered that it had not been properly served, and therefore did not take any steps to set aside the default judgment at that time.
116. It was only after the Interim Third Party Debt Order . . . was made and the Second Defendant's bank accounts were frozen that the Second Defendant considered it necessary or appropriate to make the present application and . . . then did so promptly."
(i) as to whether IRP is a proper defendant. It has become clear now that UETC is not incorporated as a company or other entity in Pakistan (albeit that it is a claimant in the Pakistani proceedings and that the Purchase Contract is in its name): but this was not the basis upon which the case for joinder of and service on IRP was made before Gloster J and is sought to be supported before me, but rather by reference to the position of KRL. Mr Layton submits that KRL is a legal entity in Pakistan and one not to be treated within Trendtex Trading Corp v Central Bank of Nigeria  1 QB 529 and La Générale des Carrières et des Mines v F.G. Hemisphere Associates LLC ("GCM")  UKPC 27 as a department or organ of the State of Pakistan, such as to render IRP contractually liable, and that there is no serious issue to the contrary: and he also denies that IRP was bound by the contract, by virtue of the provisions of Article 173(3) of the Constitution of Pakistan, whereby:"All contracts made in the exercise of the executive authority of the Federation or of a Province shall be expressed to be made in the name of the President or, as the case may be, the Governor of the Province, and all such contracts and all assurances of property made in the exercise of that authority shall be executed on behalf of the President or Governor by such persons and in such manner as he may direct or authorize."
(ii) in respect of enforcement of the contract upon which the Claimant relies, by virtue of an accrued limitation defence: indeed he submits that the Claimant's case on limitation is a "palpable nonsense".
(iii) also by virtue of a doubt as to whether the Claimant company has a right to enforce the contract, because it has turned out that, although incorporated in Liberia (a matter that had previously been put in issue by IRP on this application), it was incorporated only on 13 March 1995, eight days after the date of the 5 March agreement relied upon for the purpose of incorporating the Conditions into the subsequent contract, and seven days after the Purchase Contract. Given the clearly arguable availability of ratification, this is not a point which has merited material consideration on this application.
(i) The existence of parallel proceedings in Pakistan brought by UETC and KRL was disclosed, as set out in paragraph 13 above (together with the assertion of the Claimant's extreme concern that they would not get a fair trial in Pakistan, not least by reference to what Dr Khan himself had said in 2001 (referred to in paragraph 8 above), and again in his second witness statement). In neither statement however did the Claimant say that he had counterclaimed in those proceedings, as set out in paragraph 15(ii) above.
(ii) Mr Layton also ran a number of other points which seem to me to be makeweights:a) The non-disclosure of clause 20 referred to in paragraph 4 above.b) The weak – or he would say the non-existent – case on limitation – but this was plainly discussed with Gloster J, as appears from the transcript, where she expressed her reservations.c) The position as to the Claimant company, which does not appear to have become apparent until later, and in any event is subject to the ratification question.
None of these latter points either individually or collectively appear to me to be worthy of further consideration.
"(1) . . . the court may set aside or vary a judgment entered under Part 12 if –
(a) the defendant has a real prospect of successfully defending the claim; or
(b) it appears to the court that there is some other good reason why –
(i) the judgment should be set aside or varied; or
(ii) the defendant should be allowed to defend the claim.
(2) In considering whether to set aside or vary a judgment entered under Part 12, the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly.
(Rule 3.1(3) provides that the court may attach conditions when it makes an order)."
(i) He has a real prospect of success of defending the claim by reference to (a) the identity of KRL and the liability of IRP as alleged party to the contract (b) the issue of the incorporation into the contract(s) of the General and Special Conditions, (giving rise to an alleged contractual rate of interest), (c) limitation, (d) (possibly) the status of the Claimant's company, though I refer to paragraph 38(iii) above.
(ii) The delay or passage of time from 3 September 2012 (with an allowance of 2 months after service) until 10 April 2013 should not be adjudged to be a failure to make the application promptly and/or can be otherwise surmounted or excused.
(iii) There are again elements of non-disclosure, none of which seem to me to be substantial, or in any event material. Although there was some discussion before me in January 2011 of the nature of the case, I am satisfied that there is no obligation upon the Claimant to prove its case on such a default application. Mr Layton suggests that there should have been some reference to the fact of the Claimant's motion for dismissal of the case in Pakistan in March 2011 (referred to in paragraph 15(v) above), and that more should have been made of the fact that the Hague Convention was apparently being relied upon by IRP in its response to the service in January 2009, as referred to in paragraph 30 above. As to the latter, Mr Dudley did exhibit the letter of 27 May 2009, and it is clear from the transcript before me that there was reference to it: and the address for service was drawn from it. Mr Dudley's first affidavit, at paragraph 15, referred to IA's reliance on Article 13: while stating, incorrectly, that Pakistan was not a party to the Hague Convention (the CPR Rule he cites does, but not very clearly, explain that, although not a member of the Hague Convention Organisation, Pakistan does regard itself as bound by the Convention), he nevertheless correctly points out that "service was in any event effected through diplomatic channels and not through the Hague Convention".
"(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order the court will consider all the circumstances including –
(a) the interests of the administration of justice;
(b) whether the application for relief has been made promptly;
(c) whether the failure to comply was intentional;
(d) whether there is a good explanation for the failure;
(e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant pre-action protocol;
(f) whether the failure to comply was caused by the party or his legal representative;
(g) whether the trial date or the likely trial date can still be met if relief is granted;
(h) the effect which the failure to comply had on each party; and
(i) the effect which the granting of relief would have on each party.
(2) An application for relief must be supported by evidence."
(i) In Reynolds v Coleman  36 Ch D 453 CA it was held too late after a year, to set aside service out of the jurisdiction.
(ii) In Rayner v Republic of Brazil  2 Lloyd's Law Rep 750 CA an application to set aside judgment in default after 7 years was permitted. Waller LJ concluded that arguable defences had been shown, and that the presence of a defence on the merits was the "major consideration" (768) and that "the passage of time alone should [not] preclude a defendant having a judgment in default set aside" (763).
(iii) In Regency Rolls Ltd v Carnall  EWCA Civ 379, 30 days was "altogether too long a delay" (per Simon Brown LJ) but, centrally, there was a "lack of any worthwhile case on the facts".
(iv) In Nolan v Devonport  EWHC 2025 (QB), there was a delay of 11 years, and, whether or not there was merit, HH Judge Grenfell concluded that he would strike out as an abuse an application to set aside judgment, where he was satisfied that the defendants had no intention of bringing the set aside application to court until the claimant started attempts to enforce it.
(v) In Khan v Edgbaston Holdings Ltd  EWHC 2444 QB, HH Judge Coulson QC (as he then was) referred to a case of Hart Investments Limited v Fidler  EWHC 2857 TCC, where a delay of 59 days had been found to be "very much at the outer edge of what could possibly be acceptable"; he concluded that 6 months was unjustifiable delay, but in any event concluded that there was no real prospect of success.
(vi) In Berezovsky v Russian Television and Radio Broadcasting Co  EWHC 1733 (QB) Eady J allowed an application where there was a 3 months delay but an arguable defence.
(vii) The Court of Appeal (per Ward LJ) in Mullock v Price  EWCA Civ 1222 concluded that 2 years was not prompt, and dismissed the application even though there were apparent merits.
(viii) Finally in Standard Bank Plc v Agrinvest International Inc  2 CLC 886, Rayner, and its allowing of an application after 7½ years, was addressed, but Moore-Bick LJ said:In that case the application was refused after a delay of one year. There were concluded to be no merits, but the words of Moore-Bick LJ are relevant, with regard to refusal of relief notwithstanding the "possibility" in such a case that the defendant might succeed at trial."22. The Civil Procedure Rules were intended to introduce a new era in civil litigation, in which both the parties and the courts were expected to pay more attention to promoting efficiency and avoiding delay. The overriding objective expressly recognised for the first time the importance of ensuring that cases are dealt with expeditiously and fairly and it is in that context that one finds for the first time in rule 13.3(2) an explicit requirement for the court to have regard on an application of this kind to whether the application was made promptly. No other factor is specifically identified for consideration, which suggests that promptness now carries much greater weight than before. It is not a condition that must be satisfied before the court can grant relief, because other factors may carry sufficient weight to persuade the court that relief should be granted, even though the application was not made promptly. The strength of the defence may well be one. However, promptness will always be a factor of considerable significance . . . if there has been a marked failure to make the application promptly, the court may well be justified in refusing relief, notwithstanding the possibility that the defendant might succeed at trial."
(i) There was no express provision in the Rules whereby if a defence is not served within the period specified it cannot be served at all without permission. Hence there had not been at the time of the issue of the application any express or implied sanction from which relief was required.
(ii) He referred to Rule 26.6, which is the equivalent of our CPR Rule 3.8, which reads (in material part) as follows:"(1) Where a party has failed to comply with a rule, practice direction or court order, any sanction for failure to comply imposed by the rule, practice direction or court order has effect unless the party in default applies for and obtains relief from the sanction."
He considered that the two Rules must be read together. It is difficult to see why this should be so, because, as can be seen from the two Rules, they deal with different situations. Rule 3.8 applies where the rule, practice direction or court order with which the party has failed to comply expressly imposes the sanction: and plainly that was not the case in relation to the facts being considered in Matthews, and indeed is not the case on the facts of our case. Rule 3.9 (and Rule 26.7) however deal with the different situation, in which the sanction has not been imposed by the very rule which has been contravened, namely with "relief from a sanction imposed for any failure to comply with a rule, practice direction or court order", including of course a subsequent sanction, such as an entry of judgment in default on a later occasion. Nevertheless, on the facts of Matthews, it was obviously the case that no sanction had been imposed either by the Rule itself which had been breached or indeed at all, given the contrast which, by reference to (i) above, Lord Dyson drew between the facts of Matthews and the facts of a case in which a party, having failed to comply with a time limit for putting in an appeal, did require the permission of the court to surmount what could be interpreted as an implied sanction.
(iii) Thirdly, Lord Dyson considered (paragraph 18) that "it cannot have been intended that, where a defendant wishes to set aside a default judgment, it must satisfy the conditions of both rule 13.3 [also our 13.3] and 26.7 [our 3.9] . . . It cannot have been intended that a defendant who wishes to set aside a default judgment must satisfy the requirements of both rules." Whether or not that is right in Trinidad, in England and Wales there is Court of Appeal authority to the contrary, and there seems nothing lacking in commonsense about it. In Khan, reference was made to Hussain v Birmingham City Council & Ors  EWCA Civ 1570, where the Court of Appeal (per Chadwick LJ) plainly considered (at paragraph 30) that CPR 3.9 was also relevant to the Court's consideration of an application to set aside judgment under CPR 13.3. As will be seen, Silber J in Samara v MBI & Partners UK Ltd  EWHC 563 (QB) had no difficulty in cross-applying the consequences of the two Rules.
"The Board certainly has no wish to impede the court's commendable desire to encourage a new litigation culture or to undermine the steps that it is taking to rid Trinidad and Tobago of the 'cancerous laisser-faire approach to civil litigation'."
(i) CPR 3.9(1) now provides, in a very much more shortened form than that set out in paragraph 44 above, with which it must be contrasted:"On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need –(a) for litigation to be conducted efficiently and at proportionate cost; and"(b) to enforce compliance with rules, practice directions and orders."
There is no change either to Rule 3.8 or to Rule 13.3.
(ii) There is an important amendment to the Overriding Objective in CPR Rule 1.1 so as to add a new (f) of "enforcing compliance with rules, practice directions and orders."
"40. We hope that it may be useful to give some guidance as to how the new approach should be applied in practice. It will usually be appropriate to start by considering the nature of the non-compliance with the relevant rule, practice direction or court order. If this can properly be regarded as trivial, the court will usually grant relief provided that an application is made promptly. The principle "de minimis non curat lex" (the law is not concerned with trivial things) applies here as it applies in most areas of the law. Thus, the court will usually grant relief if there has been no more than an insignificant failure to comply with an order: for example, where there has been a failure of form rather than substance; or where the party has narrowly missed the deadline imposed by the order, but has otherwise fully complied with its terms. We acknowledge that even the question of whether a default is insignificant may give rise to dispute and therefore to contested applications. But that possibility cannot be entirely excluded from any regime which does not impose rigid rules from which no departure, however minor, is permitted.
41. If the non-compliance cannot be characterised as trivial, then the burden is on the defaulting party to persuade the court to grant relief. The court will want to consider why the default occurred. If there is a good reason for it, the court will be likely to decide that relief should be granted. For example, if the reason why a document was not filed with the court was that the party or his solicitor suffered from a debilitating illness or was involved in an accident, then, depending on the circumstances, that may constitute a good reason. Later developments in the course of the litigation process are likely to be a good reason if they show that the period for compliance originally imposed was unreasonable, although the period seemed to be reasonable at the time and could not realistically have been the subject of an appeal. But mere overlooking a deadline, whether on account of overwork or otherwise, is unlikely to be a good reason. We understand that solicitors may be under pressure and have too much work. It may be that this is what occurred in the present case. But that will rarely be a good reason. Solicitors cannot take on too much work and expect to be able to persuade a court that this is a good reason for their failure to meet deadlines. They should either delegate the work to others in their firm or, if they are unable to do this, they should not take on the work at all. This may seem harsh especially at a time when some solicitors are facing serious financial pressures. But the need to comply with rules, practice directions and court orders is essential if litigation is to be conducted in an efficient manner. If departures are tolerated, then the relaxed approach to civil litigation which the Jackson reforms were intended to change will continue. We should add that applications for an extension of time made before time has expired will be looked upon more favourably than applications for relief from sanction made after the event."
(i) (Paragraph 36) "the new regime has universal application to all rules in the CPR . . . it is based on and underpinned by the changes to the overriding objectives which apply to all parts of the CPR" and he recited in particular the new subparagraph (f) which I have set out at paragraph 54(ii) above.
(ii) (Paragraph 37) "there is no express statement that CPR Part 13 or that any part of it is excluded from these provisions and I have found nothing in the rules or in the decided cases to show expressly or impliedly that this is so . . . Lord Dyson, described the effect of the new regime in very general terms and as being of universal application".
(iii) (Paragraph 38) "It is very clear that in the new regime, the need for promptness has even greater significance than it had previously and that relief will be granted much more sparingly than hitherto".
(i) On the narrow question of 'implied sanction', of which he found there was none in the relevant Trinidad and Tobago Rules, there is plainly a sanction here, in that judgment in default has been entered from which relief is sought.
(ii) The concentration on CPR 3.8 (Rule 26.6) is of no materiality. Just as in Matthews there was no sanction contained in Gloster J's order. However the sanction is the subsequent default judgment entered by me as a result of the failure to comply with Gloster J's order.
(iii) Insofar as both in Matthews and in Universal Projects the Privy Council appeared to find some difficulty with the fact that both (the equivalent of) CPR 3.9 (or 3.8) and 13.3 would apply to the same application, namely applying to set aside a judgment in default which had been imposed as a sanction for non-compliance with an earlier Rule, Silber J found no difficulty with that, and, although not cited to him, Hussain would in any event have been binding Court of Appeal authority in that regard.
(iv) What Silber J called the universal approach of the Court of Appeal in Mitchell, by reference inter alia to the new amended overriding objective, does indeed seem likely to be what was intended by Mitchell, whatever the proper construction of the Trinidad and Tobago Rules may now be.
(i) IRP knew from March 2008 about the Order of Gloster J, and prepared themselves shortly afterwards with the advice of Mr Ahmed.
(ii) The advice recommended and implemented the defence strategy, which was "not to partake in the proceedings". It is noteworthy that in the Advice of 17 March 2009, when Mr Ahmed thought that he had noticed that there was a defect in the service (understandably not knowing about the order of Christopher Clarke J extending time for that service on 30 January 2009) which would have meant that the deadline of 11 January had expired before the service of 15 January 2009, he said that "as our intention is not to partake in the proceedings wherein we would have joined issue with the technical failings including the challenge to jurisdiction, I would advise that we merely refer to this breach by the Claimant by way of a point raised". The same plainly applied to any other matters of which they either knew as a result of having seen those proceedings, albeit informally, or could have known.
(iii) Insofar as the Hague Convention advice, (referred to in paragraphs 27 to 29 above) was wrong, and insofar as it was given by an independent lawyer, the deletion of CPR 3.9(1)(f), apparent from paragraphs 44 and 54 above, since 1 April 2013, would be material. However, given the context of the advice, in which Mr Ahmed expressly recorded the unhappiness of both the Ministry of Law and the Ministry of Foreign Affairs with such advice, and that it seems obvious that, to the knowledge of his client, Mr Ahmed was simply giving advice which was as helpful to the client's interests as possible, but was obviously far from foolproof, it seems somewhat self-serving for Mr Piracha in paragraph 18 of his second witness statement to state that he does "not disagree with [the] characterisation of [such] advice as 'extraordinarily incompetent'". One thing is clear and that is that Mr Ahmed was not saying that the service under Rule 6.44 and the 1978 Act (and not within the Hague Service Convention) was not good service. As he said in his Advice of 24 March 2009:"I have previously dilated on the provisions of both the Convention and the said Act so I do not feel the necessity to repeat it here. Chiefly, the fact is that the Convention is NON-MANDATORY: the party states may use this or another agreed method of service as they deem fit.The use of State Immunity Act is provided for in the Rule 6.44 and it is intended to provide such privileges and treatment to states and the heads of states, notwithstanding the commercial nature of the proceedings, which are not touched by the Convention. Suffice it to say that use of the Act in sending this service to the foreign office and not using the Convention is no ploy to avoid or by-pass the Convention on the part of the high court in London."
Whatever may have been the perceived advantages following Mr Ahmed's suggestion of purporting to reject that service by reference to the Hague Convention, what cannot be supported is the submission in paragraph 68(c) of Mr Layton's skeleton that IRP had a "good faith belief that it had not been validly served with the process".
(iv) IRP says that it believed that the judgment was stayed, but no order was made to that effect, whether to its knowledge or at all, and the cavalier attitude was signified by the fact that they instructed no English solicitor from September 2008 onwards.
(v) There was plainly delay by the Claimant after January 2011, caused by the inapt service upon Mr Ahmed in accordance with my Order, and then no doubt by the Claimant looking for assets; but the delay by IRP from 3 September 2012 seems to me to show that the defence strategy was still in operation, and that, as in Nolan and indeed Mullock, activity only began once the execution started to 'bite'. There is clearly a very inadequate and unpersuasive explanation of the passage of time after September 2012, as set out in paragraphs 32 to 36 above. The extra period of time allowed for a State to respond (the 2 months provided by s12(5) of the 1978 Act) is not intended simply to amount to a period of limbo, but specifically provides the additional time which a Government bureaucracy might require, and so it is obvious that the entirety of the period including that 2 months needs to be explained.
The Gloster J Order
"[UETC] is an associated undertaking engaged in allied ventures for and in collaboration with [KRL], an Autonomous Body established by the Federal Government of Pakistan."
"Whereas, after the successful nuclear tests the [NCA] was established in year 2000 . . . Also being mindful of Pakistan as a responsible state and considering the obligations under international law particularly under UNSC Resolution 1540, it is in order to re-demonstrate through the present law the resolve of the Government of Pakistan to continue to exercise full and complete control and security and safety measures over all matters concerning nuclear and space technologies, nuclear establishments, nuclear systems, nuclear materials, relevant personnel and related information etc."
"'Strategic Organisation' means such body notified by the [NCA] to be a Strategic Organisation and includes Pakistan Atomic Energy Commission, Dr A.Q. Khan Research Laboratories (KRL) and Space and Upper Atmosphere Research Commission."
At paragraph 56 of Mr Cheema's expert report he is of the view that "this is one of the methods through which a legal entity with separate legal personality can be created in Pakistan". To the contrary, Mr Raza in paragraph 42 of his first report concludes that it is pertinent that a Strategic Organisation is defined as a 'body', being a reference to admittedly non-incorporated Government-controlled entities, and points out that s8 refers to the Strategic Organisations as "all the Organisations working under the control, regulations and directions of the [NCA]". In any event, as he points out, if it is the nomination of KRL as a Strategic Organisation by NCA which makes it a legal entity, then there is certainly no evidence of it having been a legal entity prior to 2007.
"The Central Government may, from time to time, issue to the Commission such directives and orders as it may consider necessary for carrying out the purposes of this Ordinance and the Commission shall follow and carry out such directives and orders".
In relation to the NCA Ordinance and Act, apart from s8 (above) Mr Raza points also to the provision of funds to NCA by the Ministry of Finance, through the SPD (s17).
(ii) Other matters
(i) The 8 May 2001 meeting and agreement concerned sensitive and confidential matters regarding "SPD funding for clandestine KRL projects" in the context of the Pakistani nuclear programme.
(ii) Dr Khan was being "moved on" by the Pakistani Government, because of demands by the United States that he be removed from the nuclear programme, and, unlike the meeting of 18 February, there was nothing in writing.
(iii) He did not trust IRP or the SPD to provide the monies, and determined in these circumstances to proceed on what he called "two tracks" to push hard for payment.
(iv) The obligation as to interest was in any event only suspended by the agreement of 8 May 2001, so that it was, in any event, due and owing.
It remains the case that there is no evidence to contradict that of Mr Rafiuddin from Dr Khan or any other witnesses for the Defendants either said by the Claimant to have been present at it or to have known of it.
(i) The significant fact was that there were parallel proceedings, and the proof of the pudding as to their immateriality is that now, 10 years on, those proceedings have gone nowhere.
(ii) The existence of the counterclaim did not constitute a submission to the Pakistani jurisdiction, as Mr Layton contends. There is dispute between the experts as to this, but Mr Raza's explanation for the Claimant, supported as I see it by his account of the Pakistani court procedures, is that it is necessary, when challenging the jurisdiction in Pakistan, for a defendant to set out his case in full, including any cross claim, or the opportunity to pursue that case would be lost if the jurisdiction challenge fails: of course it is necessary to put forward such case without prejudice to the jurisdiction, which the Claimant did here, as set out in paragraph 15(ii) above, albeit not by reference to the Special and General Conditions, for the reasons set out in paragraph 65 above. This putting forward of a full case in the foreign court while challenging the jurisdiction, where such is required by the foreign jurisdiction, were found not to amount to a submission in AES Ust-Kamenogorsk v Ust-Kamenogorsk  2 Lloyd's Rep 233 CA at paras 186, 200 (not revisited in the Supreme Court).
(i) Although IRP did not know precisely what was disclosed to Gloster J, it plainly made a decision not to challenge her order on any basis (see paragraph 63(ii) above).
(ii) The material matter of the existence of the Pakistani proceedings was disclosed, and IRP, the Defendant now challenging that order, was on any basis not a party to those proceedings either as claimant or defendant to the counterclaim. Mr Raza's advice (again contested) is that if the Claimant's challenge to the jurisdiction is eventually upheld in Pakistan, then its counterclaim falls away also. In any event any election as to which course to follow (see for example Australian Commercial Research & Development Ltd v ANZ McCaughan Merchant Bank Ltd  3 All ER 65) can be made at a later stage.
(iii) The discretion would fall to be exercised by me now, 10 years later, and the Pakistani proceedings have still not gone forward or the jurisdictional challenge been finally resolved.
(iv) There is a statement in Gee: Commercial Injunctions (5th Ed) at 9.028 that an allegation of non-disclosure should be made without unnecessary delay. A reference in a footnote is to a case which does not seem to me to support that proposition. However it seems to me, even without reference to authority, that such statement is correct. It is the court which is to be invited to exercise possibly draconian powers to enforce the court-made rule, and after 7½ years its appetite to do so must have waned. In any event, Reynolds v Coleman is exactly on point: it is too late now to set aside the order on that ground.
(iii) Forum non conveniens
My January 2011 order
(i) There was substantial delay by IRP, though nothing like of the order of that in applying to set aside the Order of Gloster J.
(ii) It is plain that it was only the Third Party Debt Order applications which roused IRP into action.
(iii) I do not consider that there was any arguable material non-disclosure, and certainly none which should be permitted to be raised after such delay.
(iv) IRP would have a real prospect of success in defending the claim if judgment was set aside, particularly as to:a) the defence of limitationb) the defence as to the liability of IRP on the contract(s).
(i) The passage of time was 7½ months, though IRP was entitled to 2 of those months, so the delay was 5½ months.
(ii) IRP plainly has arguable defences, such as more than to satisfy the first condition in CPR 13.3(1).
(iii) There is in this case the important issue of allowing the claim of immunity to be resolved on the balance of probabilities.
a) as to costs, to be argued:
b) as to the continuation of security in respect of the full amount of monies caught by the interim Third Party Debt Orders, until further order.