Socadec SA v Pan Afric Impex Company Ltd

JUDGMENT

MR. JUSTICE MACKAY:

1. The claimant company, Socadec S.A., is a Swiss company which is at least partly owned, and I am assuming, for the purposes of this application, is controlled by a Mr. Timothy Espir. The defendant is a company whose seat is in Uganda and is a coffee trading company privately owned, and claims to be the second largest exporter from that country. The last financial information available indicates that it has a turnover of some US$1.25 million and that it had, at the time of those accounts, fixed assets of US$1.75 million, and a profit for the year of US$0.75 million. In the year to December 2001 it exported about 25,000 metric tonnes of this particular commodity.

2. Two disputes arose between these two companies who were dealing with each other trading coffee. Each of those disputes led to an arbitration award under the rules of the contract by which the parties traded. The first dispute, 1000Q, resulting in an award on 7th February of 2003, was a dispute over the quality of a particular consignment, culminating in an award against the defendant of $US64,800 and fees of some £1,625. It was an arbitration on written representations, contracts being made under the European Contract for Coffee 1998 edition and it took place in London under the rules of the Coffee Trade Federation.

3. The defendant was unhappy with this result and sought to appeal, as is allowed by r.32 of those rules. There was a time limit of 30 days within which the appeal and the appropriate fee had to be lodged, with a power to extend that period where the justice of the case required it. There was apparent confusion between the defendant and its bankers. Be that as it may, the result was that the requisite fee of £1,000 was paid 16 days late, and the Tribunal declined to exercise its discretion in favour of extending the time limit. That appeal therefore failed.

4. In its written material to the court the defendant says that it intends to challenge that decision and still today, though not with the vigour with which she presented the rest of her case, the defendant's counsel, Miss Masters, said that was still her instructions. It is hard for me to see on what basis it could be challenged. No grounds exist for a s.68 challenge that I can see, certainly not at this distance in time. Subject to the matter of non disclosure with which I will deal later, I see no reason to set aside or suspend the order of Morison J. of 1st July of this year when he ordered that this particular award should be enforced as a judgment of the High Court under s.66 of the Arbitration Act 1996.

5. The second dispute was a more complicated and serious affair and was a dispute over price of some 35 or 36 contracts for trades in the period of May to August 2001. It resulted in an award in favour of the claimant of $646,000 and within the time allowed, and this time successfully, the defendant has exercised its right to appeal.

6. In the meantime, on 1st July Morison J., on a "without notice" application by the claimant, ordered that these awards both be enforced as a judgment of the High Court. The defendant's appeal against the second award (as I shall call it) was lodged on 7th July. The defendant says it has a strong case for overturning that award; the claimant says it is one that will probably fail.

7. The principles I should apply in this application to set aside or suspend the order of Morison J. are helpfully set out in the decision of Judge Raymond Jack Q.C. (as he then was) in Apis AS v. Fantazia Kereskedelmi KFT [2001] 1 All E.R. (Comm. cases) 348. Relying on an earlier decision of Staughton L.J. in Soleh Boneh International v. Government of the Republic of Uganda [1993] 2 Ll. Rep, 208, which he thought gave him relevant guidance, the learned judge held that there were two factors to be considered. Firstly the strength of the argument that the award in question was invalid, which could be assessed and had to be assessed on what was called a "brief consideration" only; certainly no mini-trial on the merits is either appropriate or possible in an application such as this. If it is plainly a valid award, then immediate enforcement should follow or at the least there should be substantial security. If it is plainly not valid, there should be no enforcement and no security would be appropriate. In the intermediate positions it is a matter for the judgment of the court.

8. The second factor was the court has to consider is the ease or difficulty of the enforcement of the award and, for example, whether if enforcement was withheld or delayed it could become more difficult by the movement of assets, problems of trading, the disappearance of the defendant and so forth.

9. It is necessary, first, to look at the merits of the proposed appeal against the second award which really fall to be considered under two headings. The first is a claim by the defendant, launched for the first time in these proceedings and not argued below, that the claim leading to the second award was itself time-barred.

10. Article 22 of the European contract reads as follows:

"22. Claims (delay). Claims must be clearly formulated within the following limits unless otherwise stipulated:

(i) Quality claims: not later than 21 calendar days from the final date of discharge at the port of destination;

(ii) Other claims: not later than 4-5 calendar days from:

- the final date of discharge at the port of destination provided all documents are available to buyers;

- the last day of the contractual shipping period if the coffee has not been shipped."

Under sub-clause (c) there is power to extend the time for such period as the arbitral body thinks fit if "not to do so would cause undue hardship to a party".

11. The first notification of a claim here is said to have been made on 6th November 2001. The defendant says, there are 35 discrete or separate contracts, all of which were either FOB or FOT (that is free on truck) contracts. Their obligations were complete, their argument runs, at the latest when the consignment was loaded at Mombasa, the nearest port to Uganda (which is of course itself a land-locked country) for onward transport to Europe. Mombasa then became the "port of destination" within the meaning of the article I have cited above. That being so, since the last of the shipments appears to have been loaded on 19th August 2001, 45 days would take one to early October and would make all these claims out of time.

12. The counter-argument for the claimant is that the words "port of destination" or more particularly "discharge at the port of destination" should be given their ordinary and natural meaning and that the defendant's construction is unworkable in practice. For example, although this is not a quality claim, if it had been and if the defendant is right, all quality claims would be lost, when the coffee was approximately half way between Africa and Europe, or at the least the buyer would be dependent upon the mercy of the arbitral body for an extension. They say that if there is ambiguity here it should be construed against the party putting it forward; and that if this is, as they argue, a single contract rather than 35 separate ones, the time limit has been missed only by a matter of days and it is at least strongly arguable that the panel would extend the time in their favour and there would be no prejudice to the defendant. This, as I have said, was not a point taken before the application to this court, but those are the competing contentions on the time bar point.

13. Secondly, as to the general merits of the appeal, there was a core dispute of fact as to whether these contracts or this contract included a term introduced by an orally agreed variation, giving the buyer a right to roll over fixation of the price to a time which effectively suited him. Classically, it would seem, this type of dispute is highly suited to a trade arbitration of this nature.

14. The claim was for US$646,000 odd and the counterclaim was for $230,000. The defendant relied on a series of faxes running through the contract period in which it sought to challenge the claimant's invoices based on the claimant's view of its roll-over right, none of which was answered on paper - though it is the defendant's case broadly that they were fobbed off by oral reassurances and intimations of comfort.

15. The claimant relied on the fact, principally, that the defendant continued to trade in contract after contract, or consignment after consignment, notwithstanding the invoices which made it clear as to what the basis was on which the claimant said it was entitled to pay.

16. The award cited all the relevant documents that went to this issue and set out the competing considerations. No complaint is made as to their having ignored or overlooked anything of relevance in this regard. In their decision the arbitrators said:

"The Arbitrators, on review of all the evidence, conclude that Pan Afric were aware of the rolling forward of the position. This was accepted by Pan Afric as evidenced in their making and accepting payment against an invoice basis (sic) a roll forward differential a month to be fixed against."

Later on they concluded:

"The Arbitrators have, however, gone through the evidence presented as though it was all true and had shown that Pan Afric knew all along that the fixations were for sellers' options open and that they were being rolled forwards."

17. Another part of this award is specifically challenged by Miss Masters for the defendant. There are before me two sets of the faxes from the defendant to which I have referred. In front of the arbitrators these faxes had printed on them a UK fax number, which was in fact the fax number of one of the English arbitrators. Having noticed this, they called for sworn statements as to the authenticity of these documents, and received them. They described this state of affairs as "astounding" and effectively accused the defendant of fraud in that regard, albeit they went on to say that they put that matter to one side and did not use it as the basis of their final decision. This is criticised by the defendant who says that if given the chance to answer this it would have explained the position. Because they did not trust the claimant to produce documents on an open and straightforward basis, they did so themselves, retrieving their own copies and then typing on to them the arbitrator's fax number so as to send it to him - and there is nothing sinister in this. Indeed, when I took

Miss Masters up on this she said the signatures were the signature of the writer of each fax, because these were almost certainly photocopies kept in hard copy form by the defendants. So there is nothing sinister in this, say the defendants, and they have been evidently damned for doing something which must have discredited them in the arbitrators' eyes, wrongly and unfairly - and this will be material they can use in the appeal.

18. The claimant points out that in their appeal documents the defendants in fact say these documents were generated and faxed directly from the computer. They make the point: how can this be so when each fax on the face of it bears what is palpably and plainly a manual signature? Therefore these documents were generated as some rather clumsy fraud by the defendant company. This is of course an impossible issue for me to resolve today. Though it is clearly the case that the arbitrators were very much struck by this, describing it as "astounding", as I have said, they said in terms that they did not decide the case on this basis, but accepted all the evidence "as though it was true".

19. So what overall view should be formed as to the merits of this prospective appeal? What can be said with certainty is that this is not an award which is manifestly invalid and which will be overturned on appeal. Both sides agree that the best that can happen is that some security should be ordered as a condition of suspension of enforcement.

20. The broad view which I form, without being any more specific than I will be, without putting percentages on the odds which would be a bogus exercise, in my judgment, is that the claimant is right to the extent that they say that there is, as judged from this point of time, and on the evidence which I have seen (which I hasten to say is not the whole of the evidence that was before the arbitrators) that the defendant enjoys a prospect of success which is something less than an even chance.

21. The second question: will enforcement be made more or less easy if it is delayed by any order granted today, such as by the movement of assets or financial instability of the paying party, I have also to consider. The claimant is the second largest trader in its country with a reasonably substantial turnover and with certain fixed assets, principally in the form of buildings and equipment; and that in all the circumstances it is unlikely to disappear into thin air merely to avoid an award of this size. Uganda is a civilised country which subscribes to the rule of law and specifically subscribes to the New York Convention.

22. The claimant says I should not leap to conclusions that it is a corrupt and unreliable jurisdiction for the enforcement of any award. The claimant's argument is that quite evidently the defendant on any view is strapped for cash, the best evidence of which is that the small award has not been paid after many months in circumstances where it is difficult to see what reason there can be for not doing so; that the financial position may be overstated; that the liabilities exceed the fixed assets that appear on the balance sheet that has now been obtained;

and that despite its adherence to the Convention, Uganda is a difficult country in which to enforce a judgment. I take that last argument with caution. I think it is based on a rather wide allegation by the claimant's solicitor and also on Mr. Espir's personal difficulties, relating to a complex matter to which I shall refer later, involving HSBC, the facts of which are such that it is not surprising he has had a difficult time in the Ugandan courts.

23. Next I have to consider certain allegations of non-disclosure by the claimant on the occasion of their application to Morison J. If these arguments are good, it is said that I should simply set aside the whole of his order. It is, of course, normal for such s.66 applications to be made without notice to the paying party, but that being so the usual principles apply; that the applicant has to make full and frank disclosure of all matters which might be relevant to the judge, considering whether to exercise his powers to grant an order and in what terms that order should be.

24. The evidence before the judge came from the claimant's solicitors, Mr. Walker, in his witness statement. He said in it various things. First that the defendant had "no fixed assets of which Socadec is aware". The defendant says if he had checked the Ugandan Companies Register he would have seen that it had, and I have already cited to what extent they were.

The claimant says this failure was not culpable and in any event is not likely to have made a significant difference to the judge's decision.

25. Secondly, he relied on difficulties in enforcement in Uganda with which I have dealt. I believe he overplayed his hand a little here, but no more than is forensically acceptable. Again, I do not regard this as likely to have been material to any measurable degree. He thought there was a real risk that the defendant might disappear to frustrate the awards. So he did, and I do not for my part consider that that was an improper opinion for him to have expressed on behalf of his client in those circumstances where of course he had to justify the use of the "without notice" procedure. The facts that speak best for this are the difficulties in paying the first award; and, albeit since his witness statement, what is apparent today, and last Friday when this matter was before Cooke J., that the defendant professed to be in grave difficulties in putting up, in cash terms at least, more than a fraction - something like 10 per cent - of the value of these awards.

26. It is said that he should have enquired into the finding which the defendant strongly challenges about the fabricated faxes. I am unable to accept that argument. The claimant was in possession of the award and was not under any obligation to seek to undermine it unless there was something known to them which operated to that effect. It was indeed a vivid and probably rather unusual finding for an arbitration of this nature, but that did not impose any obligation on the claimant or his solicitor to dig for reasons militating against it being valid. I do not consider the claimant or its advisers are under any obligation to do so.

27. Of more difficulty is the fact that Mr. Espir was, at about the time this dispute first arose, involved in criminal proceedings in Switzerland to which he is still subject which have not, as

I understand, yet been resolved. He is alleged in those to have been involved in an attempt to defraud HSBC in 1999 or 2000 in collusion with another Ugandan coffee trader, and to have done so by fabricating forms of coffee contract. He appears to have made an admission to that effect to Swiss police and to have appeared next day in court and denied his involvement. There is a curious document which is, I think, best understood as a record of his being produced before the judge, his denying the charge, the admission to the police being put to him and his reverting again to a denial of the charge. He has, it seems, obtained an order excluding or striking out from the record his police admission on the grounds of some irregularity under Swiss law. Be that as it may, although he is charged with a serious offence of fraud, he denies it and is entitled to a presumption of innocence.

28. The claimant says notwithstanding all that that he is to be regarded as the fountain of all documents, all the evidence of the claimant that won them the arbitration and therefore it was relevant for the English judge to know that there were doubts as to his probity. The defendant counters that by saying nothing has been proved against him. It would not influence a judge of this court to know that a charge was made against him now nearly two years ago and had not yet been proved.

29. That really is a summary of the issues under this heading and I have to decide whether individually or taken together they amount to the sort of non-disclosure which ought to be marked by a depriving by the court of the claimant of the fruits of the ex parte application in the circumstances of the case. My judgment is that these allegations fall well short of that and that either they are not made out or to the extent that they are, they fall short of the level of materiality which would lead to that conclusion.

30. I therefore have to take a step back from this dispute and look at the matter broadly. As I have said, there is no case for setting aside or suspending the enforcement or permission to enforce the first award, and the order in respect of it must stand, and that may be enforced in the normal ways.

31. On balance it would be right to suspend enforcement of the second award on terms which broadly reflect my views of the strength of the arguments available to the defendant and the other factor that I have to have regard to under the Apis decision as to the impact of this on ease of difficulty of enforcement.

32. I therefore make the following order which should be put into appropriate terms by counsel. I would suspend Morison J.'s order, in so far as it relates to the second award, for 28 days. If within that time the defendant provides security in the sum of US$400,000, either by a payment into court to abide the results of their appeal, or into a suitable escrow or joint account, or in some other form agreeable to the parties, then that suspension shall continue. If that security is not provided within that time then the suspension shall lapse and the enforcement shall revive.

33. I am grateful to the parties for their assistance. I apologise for the brief nature of this judgment, but given the urgency with which it was needed I have delivered it today, rather late in the day, rather than wait and give a better version of it tomorrow.

MISS MASTERS: My Lord, one point on your order: presumably the suspension will terminate on the determination of the appeal.

MR. JUSTICE MACKAY: Yes. If the appeal is determined adversely to you, then there is no case for the continuation of the suspension.

MISS MASTERS: That presumably leaves the question of costs open for today and also for the adjournment on Tuesday for which costs were reserved.

MR. JUSTICE MACKAY: Yes.

MISS MASTERS: There have been "without prejudice" negotiations.

MR. JUSTICE MACKAY: I am sure there have, yes.

MISS MASTERS: And my learned friend's position has remained that she wanted full security. We made an offer - I have got something in the correspondence - offering $300,000 worth of security. So it is true to say that ----

MR. JUSTICE MACKAY: Can I just read this? (Pause)

MISS MASTERS: My Lord, on the basis then that the guillotine has come down closer to me than my learned friend, I would submit that I should be awarded my costs - also, my Lord, the costs of Tuesday, though I do have a bit of sympathy with the fact that Mr. Walker was indisposed.

MR. JUSTICE MACKAY: I cannot remember what I said on Tuesday. Did I say reserved?

MISS MASTERS: You said you reserved them.

MR. JUSTICE MACKAY: In reserved them, yes. What do you say about these costs?

MISS AMBROSE: My Lord, they quite plainly failed to meet the amount of security that has been ordered by a very substantial amount. I would also add that they did not agree that the smaller order, the order in respect of the smaller award, be enforced. They wanted to hold their position on it.

MR. JUSTICE MACKAY: They wanted to pay that into court pending the outcome of any appeal in that arbitration.

MISS AMBROSE: Yes, they were not willing ----

MR. JUSTICE MACKAY: It was not an offer to pay that up.

MISS AMBROSE: No.

MR. JUSTICE MACKAY: Well, I think you are the winner in costs terms. I would have been interested if there had been a Part 36 offer more on the button than this - I was wondering what there might have been - but no, I think you should have your costs. What are you asking for? Today, Tuesday and ----

MISS AMBROSE: Friday.

MR. JUSTICE MACKAY: This Friday as well. Today certainly. Friday, I think so. Tuesday?

MISS AMBROSE: Should I put down Tuesday on this?

MR. JUSTICE MACKAY: You have not?

MISS AMBROSE: My Lord, I should pass this up. It is a schedule of costs.

MR. JUSTICE MACKAY: Miss Masters, are you asking for your costs on Tuesday - whatever I say about these other days?

MISS MASTERS: Yes, my Lord. The fact is the reason we had to adjourn was owing to ----

MR. JUSTICE MACKAY: It certainly was not anything to do with you.

MISS MASTERS: Nothing to do with my firm.

MISS AMBROSE: My Lord, I do not think Tuesday has been included on this.

MR. JUSTICE MACKAY: No, it has not but the point is being made,

I am afraid, in the other direction.

MISS MASTERS: I see, yes.

MR. JUSTICE MACKAY: The misfortune, and it is a misfortune, has to be paid for by somebody. It is unfair that either side should pay for it in a sense, but it is the visitation of nature, but that if anyone should pay for the costs of Tuesday, it ought to be your side.

MISS MASTERS: The whole reason why we were there on Tuesday ----

MR. JUSTICE MACKAY: Well, I know. So this schedule relates to today and the 15th (that was Friday) and today.

MISS AMBROSE: Yes, my Lord.

MR. JUSTICE MACKAY: As a schedule do you have any observations on it?

MISS MASTERS: My Lord, we have not seen it.

MR. JUSTICE MACKAY: Oh.

MISS MASTERS: My Lord, I am not really in a position to make any submissions on it.

MR. JUSTICE MACKAY: Not if you have not seen it, no.

MISS MASTERS: We have just been handed it now, I am afraid, and so I submit it is not appropriate for summary taxation at this stage. It may be we can agree it. Unfortunate that we could not have had it before, but there it is.

MR. JUSTICE MACKAY: Because I am going to give you your costs of Tuesday and order them to be set off, I would have thought detailed assessment is a better route. You can put in your suggestions and no doubt your solicitors will agree it at the end of the day. I will say the claimant's costs of Friday the 15th and today, the defendant's costs of Tuesday - both detailed assessment, set off one against the other.

MISS MASTERS: Would your Lordship mind repeating the order. I know that we are drafting the details.

MR. JUSTICE MACKAY: It is asking a bit much this time of night for me to say the same thing twice. You mean the operative part of the order.

MISS MASTERS: The suspension.

MR. JUSTICE MACKAY: I suspended the order of Morison J. in so far as it related to the second award for 28 days from today. If, within that time, the defendant provides security in the sum of US$400,000 either by payment into court to abide the result of the appeal in the second arbitration, or into an escrow or joint account, or by some other form of security agreeable to the parties, that suspension shall continue. If the appeal is determined in favour of the claimant, the suspension shall cease. I think that is what I said. If it is not, someone will tell me.

MISS MASTERS: Thank you, my Lord. Are there any other matters?

MISS MASTERS: I do not think so, my Lord.

MR. JUSTICE MACKAY: Thank you very much for the clear way you put your respective cases.

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