BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Rolls Building, Fetter Lane, London EC4A 1NL |
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B e f o r e :
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DAELIM CORPORATION |
Claimant |
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- and - |
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BONITA COMPANY LIMITED EASTERN MEDIA INTERNATIONAL CORPORATION FAR EASTERN SILO & SHIPPING (PANAMA) S.A. |
Defendants |
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Stephen Phillips QC and Wei Jian Chan (instructed by MFB Solicitors)
for the First Defendant
Nicholas Kazaz of Holman Fenwick Willan LLP for the Second and Third Defendants
Hearing date: 16 March 2020
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Crown Copyright ©
Mr Justice Andrew Baker :
Introduction
i) c.US$6 million, directly to Daelim; andii) c.US$½ million, to Bonita;
as a "full and final indemnity and settlement to any and all claims of loss, damage and/or incidental expenses with regard to the charter hire payable at the rate specified in the respective charter party and for the charter period not performed by EMIC and Bonita, and the costs of drydocking and damage repairs, if any, turned out to be required in respect of the Vessel's physical conditions upon its redelivery …" (TSA, Clause 6).
"Disputes and Claims if any the parties may have which are arising out of and/or in connection with performance and enforcement of this Agreement shall be submitted to and settled by a single arbitrator appointed by the Hong Kong International Arbitration Center ("HKIAC"), to that English law and the rules and practice of the HKIAC shall be adopted and apply."
i) EMIC was ready, willing and able to pay whomever it was obliged to pay; howeverii) Daelim and Bonita each asserted an entitlement to be paid, in Daelim's case by virtue of what it said was an assignment to it, under or pursuant to the terms of the head charter, of Bonita's rights, of which EMIC had notice; and
iii) Daelim wished to pursue its asserted right as assignee since Bonita had not paid the April and May hire originally due under the head charter.
i) A claim by Daelim against Bonita for the unpaid April and May hire was a claim to be brought in London arbitration under the head charter.ii) A claim by either Daelim or Bonita against EMIC for the TSA debt was a claim to be brought in Hong Kong arbitration under the TSA, Daelim being bound as assignee (as it asserted) to pursue EMIC, if at all, only in accordance with the arbitration clause that bound Bonita and also being bound by that arbitration clause directly as a party to the TSA.
There are complications, to some of which I shall have to return below, in relation to both of those basic propositions.
i) restrained EMIC from paying the Disputed Sum to Bonita, pending further order of the court (paragraph 5.1 of the June Order);ii) required EMIC to pay the Disputed Sum by 4 pm on 21 June 2019 (a) if possible into an agreed account subject to the joint control of Daelim's and EMIC's solicitors or as otherwise agreed by the parties, failing which (b) into court (paragraph 5.2 of the June Order); and
iii) restrained Bonita, in these terms (paragraph 5.3 of the June Order), from pursuing EMIC under the TSA: "[Bonita] shall not, until further Order of the Court, demand and/or take any steps to demand or to recover the Disputed Sum from [EMIC]".
Section 44(3)
i) EMIC was a debtor under the TSA facing competing claims from Daelim and Bonita to be paid under the TSA. It decided to pay Bonita, at risk as to whether that would be a good discharge, rather than interplead (the obvious forum for interpleader being Hong Kong under the HKIAC Rules, in particular Article 23 (Interim Measures) and Schedule 4 (Emergency Arbitrator Procedures));ii) there was no case put forward that EMIC could not or would not pay Daelim, if held to have been the proper payee, if it had first paid Bonita but ex hypothesi failed by doing so to obtain a good discharge (there was a passing observation ex parte that Daelim did not know anything about EMIC's financial position, but that is not the same thing at all);
iii) Daelim's concern was that the proceeds of a payment by EMIC to Bonita would disappear (not in the ordinary course of business) before Daelim had a final arbitration award to enforce (if it had a good claim for the unpaid head charter hire), but that concern (if well-founded) should have been addressed, one might think, by a freezing order or other relief against Bonita (and indeed a freezing order was later obtained by Daelim against Bonita in Hong Kong), and not by an injunction against EMIC;
iv) it is not easy to see how ordering EMIC not to pay Bonita preserved any relevant asset, so as to bring that order within s.44(3) of the 1996 Act, but it is only that interference (telling EMIC not to pay Bonita) that might arguably justify requiring EMIC to pay into court, and it is only that requirement that has been said to justify, as quid pro quo, the further injunction stopping Bonita from pursuing EMIC in Hong Kong. I shall have to consider this aspect further because whether that last injunction was needed for the purpose of preserving assets cannot be considered meaningfully without an identification of the asset that the primary relief under s.44(3) was designed to preserve.
The July Order
i) By Recital (6), Daelim's acceptance was said to be conditional upon the Recital (3) undertaking remaining until the dispute between Daelim and Bonita over which of them was "entitled to the Sum Received" had been resolved, and so without prejudice to certain rights asserted in two identified emails. Those were, essentially, rights asserted by Daelim to pursue EMIC (or even HFW) if by reason of the undertaking being released the funds were not in HFW's client account when, if it did, Daelim in due course established in arbitration that EMIC had been its debtor.ii) By Recital (7), Bonita's acceptance was said to be "without prejudice to any of its rights under the TSA." That would seem to include the right to be paid the TSA debt by EMIC if Daelim had not been entitled to that debt as assignee and EMIC's payment to HFW's client account together with its and HFW's undertaking had not discharged the debt apart from Recital (5) (as indeed, I apprehend, it had not).
A Necessary Quid Pro Quo?
i) If the injunction were perceived to be in support of Daelim's intended London arbitration claim, on the basis that a question as to that asset would arise there because Daelim would refer the assignment dispute and not just its head charter hire claim, it was an injunction granted to preserve an asset at the behest of a claimant wishing to pursue a claim to prove that the asset did not exist, and it was an injunction sought and granted against a third party not privy to the arbitration agreement.ii) If the injunction were perceived to be in support of an intended Hong Kong arbitration claim concerning that asset, paragraph 5.3, in theory ancillary to that injunction and serving the same purpose, in fact prohibited Bonita from bringing exactly that claim, i.e. exactly the claim the primary injunction was supposed to support.
iii) The purpose stated by Daelim (for the ex parte application generally and therefore, implicitly, for paragraph 5.3 in particular) was not the preservation of that asset (the TSA debt, if owed to Bonita), it was "to protect Daelim's argument that it is entitled to [that debt]" (and then "to hold the ring" pending its resolution). But EMIC paying Bonita at risk that it should have been paying Daelim could not harm the argument that it should have paid Daelim (see paragraph 37 above); and no explanation to the contrary was given to Jacobs J.
iv) There was no discussion in Mr Leabeater QC's ex parte skeleton of the limited nature of the jurisdiction of s.44(3); Cetelem v Roust Holdings was not cited; and as a result, no proper asset-preservation analysis was attempted. The nearest the skeleton got was an argument that:
a) the power the court could exercise here in support of arbitration, via s.44 of the 1996 Act, was the power under CPR 25.1(1)(l);b) Daelim accepted, citing Myers v Design Inc (International) Ltd [2003] EWHC 103 (Ch), [2003] 1 WLR 1642, that CPR 25.1(1)(l) required the target of the order (here, EMIC) to have title to, or possession or control of, an identifiable fund where there was a dispute as to a party's proprietary entitlement to or interest in that fund; andc) "In this case there does not seem to be any doubt that there is an actual identifiable fund, because EMIC has agreed to pay it into an escrow account" and then "… there is a dispute about Daelim's and Bonita's proprietary entitlement or interest to that fund."But that is, with respect, hopeless. Any agreement by EMIC to make a payment was conditional upon Bonita and Daelim both agreeing, and Bonita had not agreed. Had there been an agreement to make a payment into an escrow account, it would not bring any identifiable fund into existence prior to payment. Jacobs J seems to have been persuaded by Mr Leabeater's oral submissions to contemplate that there might have been already an identifiable fund over which Daelim might somehow have acquired rights if (as it claimed to be) the TSA debt had been assigned to it by Bonita. But there was no basis for any such analysis. (Certain uses of language by HFW in correspondence as to EMIC's willingness to fund an escrow account were alighted upon by Mr Leabeater, but they do not begin to demonstrate the existence of an earmarked, specific fund, let alone one over which Daelim or Bonita might arguably have rights.)
Unfair Presentation?
"JACOBS J.: Is there anything in the termination and settlement agreement which refers to, if you like, the obligation to pay outstanding hires?
MR LEABEATER QC: No, I don't think there is."
Continued Purpose?
i) EMIC's debt under the TSA would have been extinguished;ii) there would have been no need to stop Bonita from pursuing a claim against EMIC in arbitration under the TSA in order to preserve the new asset that had come into existence, namely the proportionate share in the credit balance standing on HFW's client account representing the Sum Received (plus accrued interest), held by HFW on trust for EMIC (the client in question) but subject to the undertaking under Recital (3); and so
iii) I may well have had sympathy with the submission that paragraph 5.3 was no longer required or justified.
Conclusion