Integrated Power Technologies -Powertech SAL v Hits Telecom Holding Co KSG

This is an application by the Claimant (“IPT”) for summary judgment under CPR Part 24. The application is supported by statements from Mr Ahmed Nabil Haddad, IPT’s Chairman and General Manager, Mr Gabriel Bou Gebrael, a telecoms engineer employed by IPT, and Av Michael Ferrand, a French lawyer. The claim arises under a deed of guarantee and indemnity (the “Guarantee”) dated 12 February 2009 signed by the Defendant (“Hits”) as guarantor. The Guarantee was entered into following a Letter of Intent dated 26 January 2009. It has an English law and jurisdiction clause (Clause 13) and obliges Hits to finally and irrevocably guarantee “each and every financial liability” of two other companies (ie Hits Africa and Hits EG) arising out of the supply and installation of telecom equipment “….as detailed thereafter in the Agreement to be entered into by the Parties”. The Guarantee provides in material part “…[the] Guarantor hereby finally and irrevocably undertakes to pay to the Beneficiary from time to time upon Beneficiary’s first demand the unpaid balance of every sum (of principal, interest or otherwise) now or hereafter owing, due or payable by any Principal to the Beneficiary in respect of any such liability”. The anticipated Agreement referred to in the Guarantee was subsequently entered into by IPT and Hits Africa/Hits EG (“the Principals”) and dated 6 April 2009 (the “Purchase Agreement”). The Purchase Agreement is governed by French law (Clause 24). In broad terms, the Purchase Agreement provided for the supply of equipment and services (including installation services) in Equatorial Guinea.

Pursuant to the Purchase Agreement, IPT duly carried out its work in Equatorial Guinea supplying equipment and providing construction and installation services in relation to a commercially operational mobile network in that country including 18 transmitting sites.

It is common ground that a considerable amount of equipment was supplied and work done pursuant to the Purchase Agreement and that the Principals have already paid a sum in excess of $3.5m under the Purchase Agreement. The present claim relates to outstanding amounts allegedly due under the Purchase Agreement and for which Hits is liable as guarantor under the Guarantee. The total amount claimed is $8,964,897.21 and €728,521.85 broken down as follows:

Following various demands, the present proceedings were commenced by issuance of a Claim Form and service of Particulars of Claim in July 2010. After some considerable delay, the Defence was served almost a year later on 2 June 2011. The Defence put IPT to proof of each element of its claim and raised certain general points of principle but did not advance any positive case with regard to any specific individual claim or amount of money. The relevant issues became a little (but not much) clearer with the service of the witness statement of Mr Varghese Pallath, Hits’ Group Chief Financial Officer, which was served on behalf of Hits in response to the present application for summary judgment. However, at the commencement of the hearing it was still difficult if not impossible to identify the relevant issues and to assess the impact of points raised by Hits on the actual amounts claimed notwithstanding the skeleton arguments served by Counsel. I am pleased to say that the mist cleared somewhat further in the course of the hearing.

I deal below with the specific points which now arise for consideration. However, I should mention at the outset one general point relied upon by Mr Haydon on behalf of Hits viz that on 9 February 2010 the Principals gave notice purporting to bring the Purchase Agreement to an end. IPT disputes that the Principals were entitled to do this or that this was effective to bring an end to the Purchase Agreement. However, for present purposes only, Mr Sinclair on behalf of IPT accepts that this is an arguable point which the Court cannot determine on an application for summary judgment. Thus, I proceed on the basis that the Purchase Agreement was (at least arguably) validly terminated and brought to an end by the Principals on that date.

As I have stated, this is an application for summary judgment. The grounds for summary judgment and applicable principles are set out in CPR Part 24.2. As set in CPR 24.2 PD 4, where it appears to the Court possible that a claim or defence may succeed but improbable that it will do so, the court may make a conditional order including an order requiring a defendant to pay a sum of money into court. This was accepted by Mr Haydon on behalf of the defendant.

Against that background, I turn to consider the individual heads of claim. I shall then consider the further arguments raised by Mr Haydon on behalf of Hits with regard to “set-off”.

This claim is for US $478,967.92 and €86,550.78. As a claim, it is undisputed, - although Mr Haydon submitted that it is subject to a cross-claim and set-off on the basis that given the valid termination of the Purchase Agreement on 9 February 2010, it is “wasted expenditure.” In my view, such assertion is not supported by any credible evidence. In any event, given that this is a claim for freight, it is trite law that such claim is not subject to any set-off.

This claim is for US $3,989,089.47. Of this sum, it is said by Hits that US $244,360 is in respect of “stolen” equipment and, under the terms of the Purchase Agreement, the risk falls on IPT. In the event, Mr Sinclair on behalf of IPT accepted that this was at least arguable and did not press this part of the claim at this stage. That leaves a balance claimed under this head of US $3,744,729.47.

As to such claim, Mr Haydon on behalf of Hits raised two main points. The first turned on the proper construction of Clause 14.2.1 of the Purchase Agreement which provided in material part as follows:

“14.2.1

Terms of Payment concerning the supply of Equipment

a.

20% of the overall Equipment value shall be paid within (30) thirty days after acceptance of the detailed quotation (Annex 3) by the Company

b.

40% of the value of Equipment delivered shall be paid with 6 (six) months after arrival of said Equipment in the Territory

c.

40% of the value of Equipment delivered shall be paid within 12 (twelve) months after the arrival of said Equipment in the Territory. ”

In essence, it was Mr Haydon’s submission that the word “delivered” in Clause 14.2.1 (b) and (c) meant installed which in turn requires completion of the Services (Installation of Equipment) and the issue of a FAC (Final Acceptance Certificate); that there was therefore no obligation to pay the last two 40% tranches in respect of equipment under this clause until the relevant equipment had actually been completely installed in that sense including the issuance of a FAC; and that the sum claimed was therefore irrecoverable because the entire amount claimed under this head related to equipment which had not been installed in that sense and, in particular, in respect of which there had been no FAC. In support of that submission, Mr Haydon referred to the Project Implementation Plan and various other clauses of the Purchase Agreement, in particular clauses 11 and 12. I do not accept Mr Haydon’s submission. In my view, quite apart from the wording of the clause itself, that submission is wholly inconsistent with the parallel provision in Clause 14.2.2 setting out the terms of payment concerning services in relation to the installation of equipment. This makes plain that the obligation to pay for the last two 40% tranches in respect of such services is linked to the issuance of either a Provisional Acceptance Certificate (“PAC”) or FAC. However, Clause 14.2.1 is not so linked. If the parties had wanted to link payment for equipment to a period after complete installation and issuance of a FAC they could easily have done so; but they did not. In my view, this points conclusively against Mr Haydon’s construction.

A further point dealt with by Mr Sinclair under this head is that, of the sum claimed, US $3,054,853.65 relates to invoices falling due after 9 February 2010. This is because, although these invoices were all issued before 9 February, the trigger date for payment under clause 14.2.1 (i.e. 60 days after arrival in the country) occurred after 9 February and in its Defence, Hits denied liability for debts not due at the time of termination. I agree with Mr Sinclair that the sums claimed in these invoices are nevertheless recoverable. Even assuming that the Purchase Agreement came to an end on 9 February 2010, it is trite law that IPT would in principle still be entitled to recover any amounts which had accrued due at that stage. The fact that the time of payment may be postponed is in my view irrelevant in accordance with the principle debitum in praesenti solvendum in futuro. The foregoing is certainly the position as a matter of English law and there is no suggestion that the position under French law is any different. On this basis, it is my view that the amount set out above is in principle recoverable.

The claims under this head fall into two limbs.

The first limb relates to services provided in respect of what has been described as “complete sites” ie where a FAC has been issued. The total claim under this limb is US $2,013,566.59. As to such claim, the following points arise.

First, Mr Haydon relies on a specific cross-claim in respect of the value of services provided in the sum of US $332,676.56 as summarised in paragraph 100 of his skeleton argument. I have considerable doubts about the basis of this claim but somewhat reluctantly it seems to me that this is a matter which cannot be dealt with by way of summary judgment. It will have to be dealt with at trial.

Second, Mr Haydon, submits that of the sum claimed US $1,039,322.03 is in respect of services provided and covered by relevant PACs/FACs which all post-date 9 February 2010. Unlike the position in relation to equipment, it seems to me arguable (at least as a matter of English law) that the issuance of an PAC/FAC under Clause 14.2.2 is a necessary prerequisite to the accrual of a cause of action in relation to the obligation to pay for such services; and that, if that is right, then these claims would not be recoverable in debt. It would, of course, be open for the court to determine these issues on this hearing. However, having regard to the authorities, I recognise that the position is not entirely straightforward and, again somewhat reluctantly, I have decided that the better course is to allow the matter to proceed to trial in the ordinary way. Nevertheless, on the basis that relevant PACs/FACs were issued albeit after 9 February 2010 it seems to me highly improbable that the IPT will not be entitled to recover this sum under the Purchase Agreement and hence under the Guarantee. For that reason, it seems to me that I should make a conditional order requiring Hits to make a payment into Court of this sum ie US $1,039,322.03 subject of course to any other points. The same point applies in relation to invoices for extra works which according to paragraph 60 of Mr Gebrael’s written statement would be paid by Hits based on the same payment terms as the provision of services. For that reason, the sums of US $325,391.16 and €43,396.17 under the heading extra works are to be treated in the same way.

Third, of the sum claimed under this limb, US $ 1,881,246.20 is in respect of invoices either raised or falling due after 9 February 2010. For the same reasons as stated above, these sums are nevertheless recoverable.

Fourth, Mr Haydon raised a number of small points in respect of sums totalling US $59,548.00 as referred to in paragraph 52 of Mr Pallath’s statement. Although these points were addressed in paragraph 27 of Mr Gebrael’s written statement, it seems to me that they give rise to issues which cannot properly be dealt with summarily under CPR Part 24.

The second limb in respect of services relates to what are described as “incomplete sites” ie sites in respect of which there has been neither PAC nor FAC albeit a document entitled “Bill of Quantities” (“BOQ”) signed by the parties. The claim under this limb is US $766,868.53. For reasons similar to those stated above, it is my view that this claim cannot be dealt with summarily. Moreover, since there has been no PAC or FAC even after 9 February 2010, I feel unable to express a view whether it is probable or improbable that Hits’ defence on this issue will succeed. On this basis I do not consider that it is appropriate to make a conditional order; and it is therefore unnecessary to deal with other possible defences raised by Mr Haydon under this limb.

The sums claimed under this head are US $626,706.56 and €445,990 (of which US $20,435.50 and €55,591 relates to stolen equipment). They are claimed by IPT under Clause 13.1 of the Purchase Agreement which provides in effect that the total contract price will be adjusted “according to the re-measured Bill of Quantities prepared on a site by site basis, according to the mutual written agreement of the parties.” All the claims under this head are supported by Bills of Quantities signed by or on behalf of the parties to the Purchase Agreement.

Despite these signed BOQs, Mr Haydon submits that these sums are in respect of works that are properly described as “changes” falling within Clause 6 of the Purchase Agreement and, notwithstanding the terms of Clause 13.1, are irrecoverable because the procedure laid down in Clause 6.5 was not followed. I am unable to accept that submission. Clause 6 is concerned with (minor) changes to the Technical Requirements requested by the Principals (6.3) or changes in IPT’s Scope of Supply as proposed by IPT (6.4). There is nothing in the evidence before me to suggest that the sums now claimed under this head were of such a type. On the contrary, there is no dispute that the parties agreed and signed the BOQs as referred to above. On this basis, it seems plain that these sums are in principle recoverable under Clause 13.1 subject to the further “queries” raised by Mr Haydon as referred to below. Further, for reasons similar to those stated above, I do not consider that this conclusion is in any way affected by the fact that invoices in respect of these sums were either raised or fell due after 9 February 2010. That these sums are recoverable under French law is also confirmed by the unchallenged evidence of Av. Ferrand.

In addition, Mr Haydon relies on certain “queries” (totalling US $556,881.54 and €270,353.18) with regard to the sums claimed under this head as set out in paragraph 54 of Mr Pallath’s witness statement. These queries are all addressed by Mr Gebrael in his second witness statement. Subject to one important caveat, it seems to me that Mr Sinclair is right to say that these “queries” provide no real defence. The one caveat relates to those claims in respect of cancelled or incomplete sites where there is neither a PAC nor a FAC. These total US $17,590.60 / €30,442.62 and US $21,776 / €231,827.87 respectively. Although it is not entirely clear, I assume (in favour of Hits) that these claims relate to services (as opposed to equipment) provided by IPT under the Purchase Agreement. On this basis and consistent with my earlier conclusions, it seems to me that these claims cannot be dealt with on a summary basis.

Under this head, IPT claims US $14,396 and €100,392.12. As I understand, these sums are not disputed.

The total sums claimed under this head are US $1,262,520.67 and €95,588.95. These sums are based on the total principal claimed by IPT and it is common ground that they need to be recalculated based upon the amount of principal which I conclude is recoverable. With regard to the calculation, it seems to me that under the Purchase Agreement, IPT is only entitled to simple (not compound) interest at the contractual rate. It will thus be necessary to recalculate the appropriate amount of interest on this basis. I hope that this can be agreed.

This amounts to US $187,218.53.

Four main cross-claims have been raised. First, there is an amount described by Mr Pallath in paragraph 58 of his witness statement as being “in respect of 20% first instalments on goods and services not installed or provided” for which, says Mr Pallath, IPT has given no credit. This figure is not quantified and is otherwise unparticularised. The fact is that, as stated above, some credit has been given in the sum of approximately US $ 187,000. However, Mr Haydon submitted that IPT was obliged to give further credit. In support of that submission, he relies in particular on a detailed spreadsheet entitled “IPT – Material/Invoices- BOQ” exhibited to the witness statement of Mr Pallath. However, as explained by Mr Gebrael and as appears from an amended version of that spreadsheet exhibited to the second witness statement of Mr Gebrael, it is plain that Mr Pallath’s original spreadsheet contains numerous omissions and errors. Furthermore, at the end of the day, Mr Haydon was unable to identify a particular sum due by way of credit (in excess of the sum of US $187,218.53) which might form the basis of an arguable cross-claim and set-off. Notwithstanding, Mr Haydon submitted that Mr Gebrael’s evidence did not make it “immediately clear” that Mr Pallath was wrong and that it merely raised issues of fact that can only be resolved at trial. I am, of course, very conscious of the fact that an application for summary judgment is not a summary trial; that, on such application, it is impermissible for the Court to carry out a mini-trial or a “trial on affidavits”; and that the criterion is not one of probability but the absence of reality: see CPR Part 24.2.3 and, in particular, Three Rivers DC v Bank of England No. 3[2001] 2 ALL ER 513 HL. However, in my judgment, the points raised by Mr Pallath in respect of this part of the claim have no real prospect of success. At the most basic level, it is manifest that Mr Pallath has simply ignored a number of sites. The explanation for such error may well be that Mr Pallath would appear to have no direct knowledge himself of the relevant matters. I do not know and it does not seem to matter. However, for present purposes, what does matter is that the evidence adduced by Mr Pallath in relation to this point at least is that it lacks reality.

Mr Haydon, also relied on two further alleged cross-claims in respect of (i) alleged cost of demolition work and (ii) delay. However, both these claims were unparticularised and unquantified. In such circumstances, it seems to me impossible to take these matters into account.

The fourth cross-claim related to what was described as “snagging” in the total sum of US $359,894.05. As to this cross-claim, Mr Sinclair raised two points. First, he submitted that IPT had no liability under the Purchase Agreement for snagging costs. However, in my view this point raises issues of both fact and law which cannot properly be dealt with at this stage. Second, Mr Sinclair submitted that whatever may be the position under the Purchase Agreement, this cross-claim for “snagging” costs could not be relied upon by way of set-off under the Guarantee. Mr Sinclair raised a further point viz in any event any such set-off cannot be raised against sums which are otherwise due and owing and in respect of which IPT is otherwise entitled to summary judgment. Mr Sinclair may well be correct in both these submissions but they raise issues which, in my view, cannot properly be dealt with at this stage.

Thus, it is my view that there is an arguable set-off in the sum of US $359,894.05.

Drawing all these points together, it is my conclusion that IPT is entitled to summary judgment in respect of the following sums:

In addition, I intend to make a conditional order in respect of the sum referred to in paragraph 15 above ie requiring Hits to pay into Court the sums of US $1,039,322.03 plus US $325,391.16 and €43,396.17. This produces an overall amount of US $1,364,713.19 and €43,396.17.

With respect to all other claims Hits shall have unconditional leave to defend.

In light of the above, Counsel are requested to seek to agree an order (including costs) failing which I will deal with any outstanding issues.