ICBC Standard Bank Plc & Ors v Erdenet Mining Corporation LLC (EMC)

This is the hearing of the claimants’ application for an order declaring the defendant, “EMC”, to be in contempt of court. The contempt in question is of an order of this court made by Robin Knowles J on 25^th July 2017, by which the defendant was ordered to provide an affidavit giving full details of all assets exceeding $500,000 by 4p.m. on 22^nd August 2017. Secondly, the claimants seek an order permitting them to issue a writ of sequestration; and, thirdly, to the extent necessary, granting permission to dispense with service of the application notice in the order and for substituted service of any order made on this application.

Before I go on any further, I should just mention one point, which is that the name of the defendant in the heading of this order appears in quotation marks. That is because the defendant is a Mongolian company whose name is not exactly that, but that is how they have appeared in the arbitration and how they are designated in the awards which underpin this application.

With that introduction, I turn to the background. The present proceedings are supportive of two LCIA arbitrations, both of which were determined in favour of the claimants. LCIA arbitration case no.132455, which is known as “the 455 arbitration”, is between the first to third claimants as claimants and EMC and another Mongolian company, Just Group LLC, as respondents. It arose under a Surety and Undertaking Agreement dated 9^th July 2009, pursuant to which EMC guaranteed and indemnified the obligations of Just in an underlying trade finance facility.

Mr Thomas H. Webster was appointed as presiding arbitrator of the Arbitral Tribunal. Mr Christopher Lau SC of Singapore and Mr Dominic Spencer Underhill of London, United Kingdom, were appointed as co-arbitrators.

The second arbitration is LCIA arbitration case no.132445, referred to as “the 445 arbitration”. That is between the first, second and fourth claimants as claimants and EMC and Just Group LLC as respondents. That arose out of a facility agreement dated 5^th August 2010, pursuant to which EMC guaranteed and indemnified the obligations of Just in an underlying trade finance facility. Mr Thomas H Webster was appointed as sole arbitrator in that arbitration.

In both arbitrations, EMC put forward a defence that it and the claimants were all victims of a wide-ranging fraud conducted over many years by a single Mongolian businessman, Mr Batkhuu. The tribunal has found, on the contrary, that EMC, through its principal senior officers, together with Mr Batkhuu, were responsible for executing the transactions. Specifically, the tribunal found that one of the defendant’s principal officers had signed the facility in question in the first arbitration and had approved the facility in question in the second arbitration and that EMC received the benefit thereof and was bound by the terms.

The defence advanced by EMC was, therefore, comprehensively rejected on the facts. The tribunal in the 445 arbitration made a final partial award in favour of the claimants in the amount of $14,988,425.60, plus interest thereon. The tribunal in the 455 arbitration made a final partial award in favour of the claimants in the amount of $36million, plus interest thereon.

On 22^nd May 2017, the hearing on contractual costs and interest was held and on 20^th July 2017 the tribunals rendered second final partial awards in respect of costs, expenses and interest. In the 445 arbitration, the tribunal made a second final partial award in the amount of $13,495,265.20 by way of costs and expenses plus interest and £67,340.39 in respect of the costs of the arbitration.

The tribunal in the 455 arbitration made a second final partial award in the amount of $27,725,280.57 by way of costs and expenses plus interest and $409,491.36 in respect of the costs of the arbitration.

The result of the awards today, therefore, is that EMC’s liability to the claimants is in excess of $90 million and interest continues to accrue.

Requests for payment were made following the first final partial awards on 3^rd October 2016.

On 17^th October 2016, EMC issued challenges under s.67 and 68 of the Arbitration Act 1996 against the awards.

On 2^nd December 2016, in the light of the risk of prejudice in enforcement, in particular by EMC’s dissipation of assets, the claimants requested EMC to provide it with basic financial information and when that was refused in EMC’s reply of 12^th December 2016, they issued applications under s.76 and 77 of the Arbitration Act 1996 on 23^rd December 2016, for security for costs and security for the awards.

Following a contested hearing, Sir Jeremy Cooke (sitting as a Judge of the High Court) found in a judgment dated 12^th May 2017: (1) that EMC’s challenges to the awards were “flimsy or otherwise lacking in substance”, given inter alia the extent of the dissonance between EMC’s case and the evidence that had been produced on both sides; and (2) that there was a real risk of dissipation of assets. Therefore, he ordered (“the Cooke Order”) security in the total amount of the awards to be provided by 16^th June 2017 and that the defendant’s applications under s.67 and 68 be dismissed if the order was not complied with. It was not complied with.

On 13^th June 2017, EMC filed appellant’s notices in the Court of Appeal. It is, as I understand matters, pursuing an application for a stay before the Court of Appeal. In support of its stay of the application before the Court of Appeal, EMC has filed a witness statement from its accountant general setting out its position that it is unable to pay the sums due.

On 14^th June 2017, EMC wrote to the Commercial Court, applying for a stay of the Cooke order from that court, though that application was later withdrawn.

The claimants’ solicitors, Clifford Chance, wrote to EMC’s solicitors on 19^th June 2017 opposing the grant of a stay and requiring answers to a series of questions on the identity and location of EMC’s assets and the source of payment of certain material transactions. Meanwhile, EMC has failed to provide security and its challenges have therefore been dismissed. Thus, the claimants say that they are entitled to proceed to enforce the awards.

On 19^th July 2017, the claimants applied under CPR 62.2(1)(d) for an asset disclosure order and ancillary provisions. The application was made by way of arbitration claim form and, as EMC is not resident in the jurisdiction, included an application for service by an alternative method under CPR62.5(1)(c), namely upon EMC’s solicitors, Taylor Wessing LLP, who are on the record both in the arbitrations and the Commercial Court and Court of Appeal proceedings.

On 25^th July 2017, a hearing, which was ex parte on short notice, took place, at which all parties were represented by leading and junior counsel. At that hearing, Knowles J granted the application and ordered inter alia that EMC provide an affidavit, which I shall refer to as “the disclosure affidavit”, giving full details of all assets exceeding $500,000 by 4p.m. on 22^nd August 2017. That order I shall refer to as “the Knowles order”.

Knowles J also made an order for substituted service of that order and other documents. That order is significant to this application.

The specific date for compliance with the asset disclosure order was, I am told, included specifically on the basis that the next step in these proceedings was a contempt application. Paragraph 10 of the Knowles order provides:

“10.

The Applicants have permission to serve this Order (together with any further document required to be served on the Respondent pursuant to this Order or in relation to these proceedings):

a.

Out of the jurisdiction by post to Amariin Square 1, Bayan-Undur soum, Orkhon Province 61027, Mongolia.

b.

By way of service by courier, first class post and/or email on the Respondent’s Solicitors Taylor Wessing LLP at 5 New Street Square, London EC4A 3TW.

Service on Taylor Wessing LLP as aforesaid shall be deemed to be good service.”

As is usual with orders for asset disclosure, the Knowles order was endorsed with a penal notice in the following form as directed by the Judge:

“PENAL NOTICE

IF YOU ERDENET MINING CORPORATION LLC, OR YOUR DIRECTORS, DISOBEY THIS ORDER YOU MAY BE HELD TO BE IN CONTEMPT OF COURT AND MAY BE IMPRISONED, FINED OR HAVE YOUR ASSETS SEIZED.”

The Knowles order was served on Taylor Wessing on 1^st August 2017, pursuant to para.10 of the order and CPR81.8(2)(b). There is a certificate of service before me which has been drawn to my attention. EMC has not filed any appeal against the Knowles order.

On 22^nd September 2017, EMC, through Taylor Wessing, filed a supplemental note in respect of its application for permission to appeal against the Cooke order – that is the order for security – in which EMC said:

“it is right that EMC is currently in breach of an asset disclosure order of Knowles J dated 25 July 2017 … However, no committal proceedings have been commenced and no contempt has yet been established;”

This application was served on Taylor Wessing on 28^th September 2017. Again, there is a certificate of service before me, although it is stamped 12^th October 2017. It states that the application was served on 28^th September.

On 10^th October 2017, Taylor Wessing responded stating that they did not consider that EMC had been served on the basis that paragraph 10 of the Knowles order:

“… does not dispense with the requirements under CPR 81.5, 81.10, 81.21 and 81.26 for personal service of (1) the committal application … for a writ of sequestration of … the order.”

On 12^th October 2017, Clifford Chance responded stating that the order itself had been served pursuant to CPR81.5(3) and 81.8(2)(b), by which the court had dispensed with personal service and had permitted service by an alternative method. The committal application was made pursuant to CPR81.10(1), being an application in the proceedings in which the order was made, and that para.10 of the order permits service by an alternative method of the committal application pursuant to CPR81.10(5)(b). The same applied mutatis mutandis in respect of the application for a writ of sequestration, pursuant to CPR81.26(2) and 81.26(5)(b).

On 13^th October, Taylor Wessing returned the application and stated:

“As stated in our letter of 10 October, the Order of Mr Justice Knowles does not apply to committal proceedings. If you wish to involve EMC in your committal proceedings, it will be necessary for you to serve EMC.”

On 18^th October 2017, Clifford Chance wrote to the court, copying Taylor Wessing, summarising the issues on service between the parties and seeking clarification as to whether para.10 of the Knowles order did indeed extend to service of the application.

On 23^rd October 2017, Taylor Wessing again wrote saying that they were:

“… not instructed by EMC to represent EMC in the above captioned proceedings.”

On 26^th October 2017, Clifford Chance wrote to the court to update it following the receipt of Taylor Wessing’s letter, again seeking confirmation as to the position on the ambit of para.10 of the Knowles order.

On 7^th November 2017, the clerk to Knowles J sent an email to the parties as follows:

I am told that five further letters have been sent this week reminding the defendant, through Taylor Wessing, of this hearing.

One further background point arises. It appears that the application notice, as opposed to the order, does not contain the penal notice required by para.13(2)(4) of Practice Direction 81.

There are, therefore, a number of issues before me this morning: (1) service of the application; (2) proceeding in the absence of the defendant; (3) dispensing with the penal notice; (4) determination of contempt; and (5) writ of sequestration.

As stated above, the claimants have affirmed through Mr Yates that service has been effected upon Taylor Wessing by an alternative method and, indeed, also by post. The issue before me is whether, in the context of committal proceedings, that constitutes good service, given that CPR81.6 states:

“Subject to paragraph 5, the application notice and the evidence in support must be served personally on the respondent.”

A similar paragraph exists in relation to sequestration at CPR81.26(4).

The claimants submit that para.10 of the Knowles order permits service of the order and any other document in relation to these proceedings upon Taylor Wessing. They submit that this application is an application made in relation to these proceedings, as the relevant provision of CPR81.10(1) requires. They say that the relevant provisions of the CPR envisage that applications for committal can be served by an alternative method and there is no special exclusion for committal applications. On the contrary, there are relevant provisions specifically within Part 81 which provide a comprehensive procedural code governing committal and that, accordingly, Taylor Wessing’s assertion that para.10 does not permit substituted service in respect of committal proceedings is misconceived.

The claimants have directed my attention to Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd [2013] EWHC 987 (Comm) where Andrew Smith J reached a similar conclusion to that which they urge on me. In that case, the claimants had brought an application for committal and for a writ of sequestration against a director and a company, neither of whom appeared at the hearing. At para.3 the court recorded that Burton J in making the original order:

The claimants have also very properly drawn my attention to the decision of Andrew Smith J in Dar Al Arkan Real Estate Development v Al Refai & Ors [2013] EWHC 4112 (QB). In that case, the court considered the requirement for permission to serve out an application for the committal against a non-party. At para.70, the court held that the application notice under Part 23 was a claim form for the purposes of CPR6.3(6) and, on that basis, it was issued in order to commence proceedings. This would perhaps indicate that such an application should not be considered as falling within the ‘any other document’ rubric.

However, the claimants say the issue there was only relevant for the purposes of service and the gateway provision relied upon by the claimants in that case. The claimants contend that no such issue arises in this case and the case is not authority for a general proposition that an application brought by an application notice under Part 23 in the proceedings in which the judgment or order was made should nevertheless be treated as constituting a fresh action for all purposes. Indeed, they say that if that had been so the view of Andrew Smith J would not have treated service in the Hin-Pro case as constituting good service.

On this issue, I have been troubled as to whether the correct analysis is that the Knowles order is not sufficient to dispense with personal service of the application notice. In that connection, I note that although Andrew Smith J did accept in the brief judgment in the Hin-Pro case that such an order covered service of committal proceedings, the relevant point does not appear to have been flagged to him by reference to the relevant provisions of CPR Part 81. Also, in that case the order in question by Burton J did specifically deal with the question of personal service, at least in relation to the individual, pursuant to CPR81.8. It is noted that there was an order dispensing with personal service for the purposes of CPR81.

In the result, such an order as the one made by Knowles J, in my view, certainly extends to all other orders and documents in the proceedings itself, but the question remains as to whether it should properly be regarded as extending to committal proceedings. Although I am told that the provision for alternative service was made specifically with committal in mind, that is not apparent, as it was on the face of the order in the Hin-Pro case, and there was no anticipatory order specifically for the purposes of committal proceedings.

I am, therefore, particularly with the possibility of this approach being applied to true committal proceedings, unwilling to follow the Hin-Pro decision, particularly bearing in mind that when one moves into the regime of committal/sequestration, one moves into a different regime which has specific rules. There is no exception made within that regime for orders made under CPR 6.2(7). CPR 6.1 specifically says that it applies to service, except where another part or any other enactment or a Practice Direction makes different provision. Part 81 does just this because it seems to me it is a distinct regime.

Indeed, the claimants themselves have referred to it as a complete code and that is consistent with its extreme significance for those subjected to it. Under its rules, there must be personal service of the application or an order dispensing with service or an order specifically permitting alternative service. It seems to me that that is designed to ensure that a court has considered that such an approach is appropriate, given the potential sanctions under CPR Part 81, which are of course particularly significant when one comes to the personal aspect of it, where sanctions such as imprisonment may well follow.

In the alternative, if, as I have concluded, the Knowles order did not prospectively give permission for service by an alternative method of this application, the claimants ask that the court either dispense with service or treat service on Taylor Wessing LLP as constituting good service in accordance with CPR81.10(5) and 81.26(5).

In this respect, they pray in aid the judgment of Mostyn J in Al-Baker v Al-Baker [2015] EWHC 3229 (Fam) where he considered the application of rule 37.10 of the Family Procedure Rules. This is a rule which covers the service of applications to commit for contempt of court in that regime and is thus equivalent to CPR81.10. It provides:

“(1)

A committal application is made by an application notice using the Part 18 procedure in the proceedings in which the judgment or order was made or the undertaking was given …

(4)

Subject to paragraph (5), the application notice and the evidence in support must be served personally on the respondent.

(5)

The court may –

(a)

dispense with service under paragraph (4) if it considers it just to do so; or

(b)

make an order in respect of service by an alternative method or at an alternative place.”

In that case, the order giving rise to the contempt application had been served by email in accordance with the terms of an earlier order and Mostyn J held:

“6.

… Subparagraph (b) presupposes that an order will be made before an alternative method of service is effected. Subparagraph (a) presupposes that dispensation with service will take place when the court was satisfied that service has, in effect, been achieved. So that is the first issue: Should the court dispense with service in circumstances where, as I will explain, it is clear that the respondent has been in reality served with this application?...

7.

In this case the application notice has not been personally served, but it has been sent by email to the respondent's Gmail address — the same Gmail address for which the orders themselves provide for service — and it has also been sent by email to his lawyers in Lisbon who have been communicating with the court in relation to the freezing orders and who have been corresponding with the wife's solicitors. In those circumstances it is plain beyond any doubt that the respondent is fully aware of the application. If the court felt it appropriate to provide for email service on him of the original orders then, to my mind, it would be unreal if the court was not to reach the conclusion that email service of the application to commit was just as effective. At the end of the day the point of the service rules are to ensure that the respondent to any application knows what is happening and has a reasonable opportunity to present his case: see Abela & Ors v. Baadarani [2013] UKSC 44 at para 37 per Lord Clarke. I am satisfied in this case that the respondent has had such a reasonable opportunity notwithstanding that he has had only thirteen days rather than the fourteen days mentioned in para.12.2 of Practice Direction 37A. So I therefore dispense with the need for personal service of the committal application, pursuant to Rule 37.10(5)(a)…”

In particular, the claimants say the letter from Taylor Wessing LLP to the Court of Appeal of 22^nd September 2017 makes it clear that EMC knows of the Knowles order and is prepared for Taylor Wessing to continue to act and, in fact, EMC, whilst in contempt, have specifically instructed Taylor Wessing and its existing counsel team to seek to persuade the Court of Appeal to grant permission in respect of the judgment of Cooke J.

Further, they say that, as recognised by Knowles J in his judgment, a principal justification for the original service provisions in the Knowles order was that Taylor Wessing LLP was acting for EMC throughout the arbitration proceedings and elsewhere and this continues to be the case. Indeed, the clear inference, they say, is that the decision to disinstruct Taylor Wessing for this committal hearing, when they had appeared with counsel at the injunction hearing, is to be concluded to be tactical and intended to frustrate the claimants’ attempts to secure compliance with the court’s order. Therefore, they have invited me to dispense with service, in so far as it is necessary to do so.

On this issue, I am more sympathetic to the claimants. Taylor Wessing have been acting for the defendants throughout. They plainly continued to act generally, though they have said, after service on them of the application notice, that they are not instructed to act in this matter. They have, however, engaged on the merits of the first point and it would be entirely artificial to say that the defendant does not know what is going on in these circumstances. It would also be artificial to require some different mode of alternative service.

I can be satisfied that, in the words of Mostyn J, service has, in effect, been achieved. Therefore, I order that the court dispenses with service of the application notice under para.4 of CPR81.26, or, so far as is relevant, CPR 81.10.

I should also mention that a similar issue might be said to arise in relation to the service of a copy of the order, because the provisions of CPR81 make specific provision for personal service of a copy of the order. Similar issues arise in relation to that and the same conclusion would therefore follow, but in relation to the copy of the order, one might say that the position is a fortiori the position as regards the application notice, because it is clear that Taylor Wessing were definitely on the record at the time of the service of the order and have acknowledged the breach of the order, so it is absolutely clear that that has come to the attention of the defendant. Therefore, so far as necessary, I add to the order that I am making in relation to dispensing with service of the application notice an order to dispense with service of the Knowles order, save in so far as it has already been done.

That brings me to the question of the substantive application and whether it should be proceeded with in the absence of the respondent. The claimants submit that I can and should do so. They refer me to Navig8 Chemicals Pools Inc. v Nu Tek (HK) PVT Ltd [2016] EWHC 1790 (Comm) where Flaux J (as he then was) set out the principles to apply whether to proceed in the absence of the respondent. The court in that case adopted an approved checklist set out by Cobb J in the case of Sanchez v Oboz [2015] EWHC 235 (Fam). This checklist runs as follows:

“(i)

Whether the respondents have been served with the relevant documents, including notice of this hearing;

(ii) Whether the respondents have had sufficient notice to enable them to prepare for the hearing;

(iii) Whether any reason has been advanced for their non-appearance;

(iv) Whether by reference to the nature and circumstances of the respondents’ behaviour, they have waived their right to be present; [i.e. is it reasonable to conclude that the respondents knew of or were indifferent to the consequences of the case proceeding in their absence?]

(v)

Whether an adjournment would be likely to secure the attendance of the respondent or facilitate their representation;

(vi) The extent of the disadvantage to the respondents in not being able to present their account of events;

(vii) Whether undue prejudice would be caused to the applicant by any delay;

(viii) Whether undue prejudice would be caused to the forensic process if the application was to proceed in the absence of the respondents;

(ix) The terms of the ‘overriding objective’ [including the obligation on the court to deal with the case justly, including doing so expeditiously and fairly and taking any step or making any order for the purposes of furthering the overriding objective].”

As to these factors, the claimants submit firstly that EMC has been served, as permitted by the order, with the documents, including the notice of hearing endorsed on the application notice or, alternatively, has been served in effect.

Secondly, EMC, through Taylor Wessing, has had more than sufficient notice of the hearing. In particular, I have had my attention drawn to the fact that the gap between service and today in this case is greater than that which pertained in the Navig8 case.

Thirdly, no reason has been advanced for EMC’s non-appearance and the claimants know of no good reason for EMC’s non-appearance. There is, therefore, no suggestion that EMC wishes to put in evidence or apologise to the court.

Fourthly, it is reasonable to conclude that EMC knew and was indifferent to the consequences of the case proceeding in its absence and so the court can, they say, conclude that the defendant has chosen to take a chance on a procedural objection.

Fifthly, an adjournment will not secure EMC’s attendance or facilitate representation. On the contrary, EMC has apparently specifically disinstructed Taylor Wessing solely for this committal application, despite the fact that they continue to act otherwise. The reality in this case, as in Navig8, say the claimants, is that any adjournment will result in the court being in precisely the same position when the matter returns to court.

Sixthly, there is no disadvantage to EMC and it has had ample opportunity and time to challenge the claimants’ evidence. I am reminded it had liberty to come back to court under the terms of the order.

Seventhly, there would be substantial prejudice to the claimants in further delay. The claimants say that while the defendant has strong cash flows as one of the largest copper mines in the world, two High Court Judges have now found that there is a real risk of dissipation of assets. Large payments out are apparently being made, though not to the claimants. The particular delay is most apparent, they say, from the judgment of Sir Jeremy Cooke, in relation to the material further deterioration of EMCs financial position, which justifies security to the awards. Here they say, as in Navig8, the asset disclosure is a critical element in securing enforcement of the underlying award and they adopt the learned judge’s finding at para.34 that any delay in the order for committal of the respondent for contempt and, therefore, any delay in bringing home to the respondents the importance of complying with the court order is obviously a matter which would cause considerable prejudice to the claimants in its attempts to enforce the award generally.

Eighthly, they say there is no undue prejudice to the forensic process if the application were to proceed. The possible answers to contempt are set out in the skeleton argument, but none are sufficient to prevent a finding of contempt.

Ninthly, the overriding objective points firmly towards dealing with the matter in the absence of EMC.

The discretion to proceed with a committal application in the absence of a defendant is not one the court will exercise often, bearing in mind the quasi-criminal nature of the proceedings; see JSC BTA Bank v Stepanov [2010] EWHC 794 (Ch) and the principles outlined by Rose LJ in R v Hayward & Ors [2001] QB 862, where the court said:

“[The discretion to proceed without a defendant] must be exercised with great care and it is only in rare and exceptional cases that it should be exercised in favour of a trial taking place or continuing, particularly if the defendant is unrepresented.

In exercising that discretion, fairness to the defence is of prime importance but fairness to the prosecution must also be taken into account. The judge must have regard to all the circumstances of the case …”

However, I am satisfied, bearing in mind the factors which the court must consider as listed in Sanchez, that this is a case where it is appropriate to proceed in the defendant’s absence. Running through the relevant checklist:

Accordingly, I am prepared to consider the committal application in the absence of the defendant.

Turning then to breach and contempt of court, there is a preliminary point here. CPR PD 81.13(4) states:

“[T]he application notice must contain a prominent notice stating the possible consequences of the court making a committal order and of the respondent not attending the hearing. A form of notice which may be used is annexed to this Practice Direction at Annex 3.”

The notice at Annex 3 says:

“IMPORTANT NOTICE

The Court has power to send you to prison, to fine you or seize your assets if it finds that any of the allegations made against you are true and amount to a contempt of court. You must attend court on the date shown on the front of this form. It is in your own interest to do so. You should bring with you any witnesses and documents which you think will help you put your side of the case. If you consider the allegations are not true you must tell the court why. If it is established that they are true, you must tell the court of any good reason why they do not amount to a contempt of court, or, if they do, why you should not be punished. If you need advice, you should show this document at once to your solicitor or go to a Citizens’ Advice Bureau or similar organisation.”

This notice was, by oversight, not placed on the application notice served. The claimants are inviting me to dispense with the requirement for the use of that notice, pursuant to para.16(2) of PD81, which permits the court to waive any procedural defect in the commencement or conduct of a committal application if satisfied that no injustice has been caused to the respondent by the defect.

The claimants say that the court can be satisfied that no injustice has been caused to EMC, for similar reasons which pertain to those in relation to proceeding in absence. In particular, EMC has at all times been represented by experienced commercial solicitors – Taylor Wessing LLP – who continue to act for it, save in respect of this committal application. It is fully aware of the fact of this hearing, the obligations under the order, the consequences of non-compliance in the committal, which were set out in the penal notice affixed to the order, which was served and was ordered at a hearing at which EMC were represented by counsel.

The claimants also submit that EMC have elected to ignore the order and not to participate in the committal hearing and note that on 14^th November 2017 Clifford Chance wrote to Taylor Wessing in relation to the procedural defect and on 15^th November Taylor Wessing stated that they do not represent EMC in the above captioned proceedings and are not on the court record and are not instructed to accept service.

The claimants direct my attention to the recent case of Bunge SA v Huaya Maritime Corp [2017] EWHC 90 (Comm). In that case, Cranston J considered an application made in similar circumstances, in that there was also in that case no penal notice endorsed on the application notice. The defect in that case concerned an application for committal to prison, brought against a director who was in breach of an asset disclosure order. The court quoted guidance from Lord Woolf MR in Nicholls v Nicholls [1997] 1 WLR 314 326-327, where he said:

“1.

As committal orders involve the liberty of the subject it is particularly important that the relevant rules are duly complied with …

2.

As long as the contemnor had a fair trial and the order has been made on valid grounds the existence of a defect either in the application to commit or in the committal order served will not result in the order being set aside except insofar as the interests of justice require this to be done.

3.

Interests of justice will not require an order to be set aside where there is no prejudice caused as a result of errors in the application to commit or in the order to commit. When necessary the order can be amended.”

In the light of that, Cranston J held as follows on the fact in that case:

“23.

At the hearing I formed the view that, notwithstanding that Mr Hua was aware of the general nature of the disclosure orders and of the committal application, it would not be right to waive immediately the failure of the application notice to contain the penal notice. At that hearing I was not persuaded that there was no prejudice when there was no evidence as to Mr Hua’s facility in the English language and his access to advice on English law.

24.

Moreover, I wanted to give Mr Hua a final opportunity to take steps to meet the requirements of the orders with the knowledge that the court was actively considering his case. Consequently, I ordered that he be warned expressly along the lines of the penal notice. As I have said that was done over the weekend before the resumed hearing. At that point I was prepared to order that the requirement be waived. All that could be done had been done to warn Mr Hua of the serious consequences of non-compliance.”

Comparing that case to this, Mr Joseph QC for the claimants says that it was a very different case and none of the factors which give rise to possible prejudice are present in this case. He submits the court can be satisfied here that no adjournment is required, particularly given that EMC has had access to English law from a substantial city firm; there is no issue of liberty of the respondent, as there is no individual respondent to the application; there is no doubt that EMC is aware that it is in breach of the order, the consequences of non-compliance with the order and the effect of the application itself; there is no prospect that a short adjournment would make any difference at all; and this is a case in which the court can be satisfied that no injustice has been caused to EMC and that it is appropriate to hear the application.

I concur with these submissions. This is not a case particularly similar to the case considered by Cranston J, where he was considering not only the liberty of the subject, but the liberty of somebody whose access to legal advice was potentially in question, so also was their facility with the English language (both of these being factors to which the Court is enjoined under para 15 of the PD to have regard).

Further, it seems to me very significant that the letter sent by Clifford Chance on 14^th November 2017 not only reiterates the hearing date, but also sets out on p.1 of that letter the text of the missing penal notice very clearly and then specifically notifies the defendant that there is a procedure for waiving the defect in the application notice and that the court would be asked to exercise its discretion to do so at the hearing today. There is, therefore, no likelihood that EMC were labouring under a misapprehension that the absence of a penal notice would be the end of the matter and that they could, therefore, safely ignore the hearing.

I should also note at this point that during the course of the hearing I raised the matter of Practice Direction 81.15(6) as to the regard which the court should have to the possibility of access to criminal legal aid. This has not been done in this case, but I am satisfied that this need not be a factor in this case, since the matter is essentially one in relation to the sequestration and also it is plain that the defendant has access to legal advice. They have obviously been taking advice from Taylor Wessing. If they choose not to take advice from Taylor Wessing in relation to committal they are plainly capable of taking legal advice from someone else.

Turning then to the substance of the application for a writ of sequestration and the declaration in relation to contempt, the claimants make the following submissions. They say that in breach of the Knowles order EMC has failed to serve the disclosure affidavit by 4p.m. on 22^nd August 2017, or at any point since then. The court can be satisfied to the criminal standard that EMC is in contempt of court and the claimants seek a declaration as to contempt accordingly.

The claimants remind me that the court has frequently explained the importance of compliance with asset disclosure orders in contempt cases and they have drawn my attention in particular to the judgment of Popplewell J in Asia Islamic Trade Finance Fund Ltd v Drum Risk Management Ltd & Ors [2015] EWHC 3748 (Comm) where Popplewell J said:

“A breach of a freezing order, and of the disclosure provisions which attach to a freezing order is an attack on the administration of justice which usually merits an immediate sentence of imprisonment of a not insubstantial amount.”

He then went on to say that the alleged contempt in that case was undoubtedly a serious one and it is in accordance with the public interest that a hearing of this committal application should proceed within a reasonable time, because the purpose of committal is only in part to punish. One of the major purposes of committal, as can be seen from the authorities, is to encourage compliance with the order which has been breached to give effect to the purpose for which it was originally made.

Thus Flaux J (as he then was) in Navig8 said, at para.34:

“… the disclosure of assets by the respondent in such a case is a critical element in ensuring the efficacy of the court’s order.”

Similarly, Whipple J in Vis Trading Co. Ltd v Nazarov & Ors [2015] EWHC 3327 (QB) at para.58 said, in respect of a respondent outside the jurisdiction of the court:

“I do not accept that the imposition of a sentence is futile. The Court cannot just stand by in the face of disobedience to its orders, just because the contemnor is outside the jurisdiction. The fact that a committal order has been made will be public, and may have reputational or business consequences for the First Defendant and his companies; it will not be meaningless. Further still, the Claimant is entitled to point to the breaches of the … Order, and to seek committal as a step towards eventual compliance, which still remains possible. This is not a redundant exercise.”

The claimants say they know of nothing which would prevent the conclusion that the defendant is in contempt of court.

Rightly, however, they draw my attention to the fact that Taylor Wessing, in their supplemental note to the Court of Appeal, which was settled on behalf of the defendant by counsel, stated as follows:

“(3)

the asset disclosure order of Knowles J is in any event premised upon the Arbitral Awards being valid. By the claims in these proceedings, EMC challenges the Arbitral Awards for (amongst other things) lack of jurisdiction. By the present appeal, EMC seeks to set aside the order of Cooke J so that its s.67 challenges may proceed to trial;

(4)

If those challenges succeed (as EMC contends they will) then the asset disclosure order of Knowles J, and the basis for any allegation of contempt, will fall away. That is another powerful reason (if one were needed) to hear EMC and to determine the present appeal on its merits.”

This requires me to consider whether it might be said that there is no contempt pending that determination, or that there might be no contempt if the Court of Appeal is with the defendant on its application.

The claimants say, and I agree, that there is nothing in this point. Court orders require compliance for as long as they remain in force, irrespective of any pending appeal against that order (see the decision of the Court of Appeal in VTB Capital plc v Malofeev [2011] EWCA Civ 1252). There, the Court of Appeal refused to suspend compliance with an asset disclosure order, pending challenge to a freezing order and asset disclosure order itself. It is no answer, therefore, to compliance with an order requiring an act to be done by a specific date that there may be some collateral challenge to that order, which may or may not succeed.

I am, therefore, satisfied to the criminal standard that the defendant is in contempt of court. The order is plain. There is no suggestion that it has been complied with. Indeed, the defendant’s own counsel have recently confirmed to the Court of Appeal that:

“EMC is currently in breach of an asset disclosure order of Knowles J dated 25^th July 2017.”

Therefore, it seems there can be no other conclusion but that the defendant is in contempt of court and I so declare.

In addition to a declaration, the claimants seek permission to issue a writ of sequestration. The relevant principles are set out at CPR81.20, 81.21, 81.22 and 81.24 and 81.25.

“81.20

(1)

If – (a) a person required by a judgment or order to do an act does not do it within the time fixed by the judgment or order; or (b) a person disobeys a judgment or order not to do an act, then, subject to the provisions of these Rules and if the court permits, the judgment or order may be enforced by a writ of sequestration against the property of that person.

(2)

....

(3)

If the person referred to in paragraph (1) is a company or other corporation, the writ of sequestration may in addition be issued against the property of any director or other officer of that company or corporation.

81.21

(1)

Unless the court dispenses with service under rule 81.24, a judgment or order may not be enforced by writ of sequestration unless a copy of it has been served on the person required to do or not do the act in question, and in the case of a judgment or order requiring a person to do an act –

(a)

the copy has been served before the end of the time fixed for doing the act, together with a copy of any order fixing that time;

(b)

where the time for doing the act has been varied by a subsequent order or agreement under rule 2.11, a copy of that subsequent order or agreement has also been served; …..

81.22

Subject to rules 81.23 and 81.24, copies of judgments or orders and any orders or agreements fixing or varying the time for doing an act must be served personally.

81.24

…

(2)

In the case of any judgment or order the court may – (a) dispense with service under rules 81.21 to 81.23 if the court thinks it just to do so; or (b) make an order in respect of service by an alternative method or at an alternative place ...

81.25

(1)

Subject to paragraph (2), a judgment or order to do or not do an act may not be enforced by a writ of sequestration unless there is prominently displayed, on the front of the copy of the judgment or order served in accordance with this Section, a warning to the person required to do or not do the act in question that disobedience to the order would be a contempt of court punishable by imprisonment, a fine or sequestration of assets”

Taking the points in turn, my conclusion on contempt carries with it a determination that EMC has not done the act required of it by the court, which is a requirement under CPR81.21(a).

CPR 81.21 requires that unless the court dispenses with service under rule 81.24, a judgment or order may not be enforced by writ of sequestration unless a copy of it has been served on the person required to do or not do the act in question and then 81.22 prima facie requires that service to be personal.

For the reasons that I gave earlier, I have dispensed with personal service under CPR81.24 and there has been service by an alternative method. Therefore, the requirements of that order have been dispensed with by the court the reason being that service had, in effect, been done. The order was affixed with a penal notice, as required by CPR81.25.

Thus, the requirements which are necessary before I can exercise the discretion to issue a writ of sequestration have been fulfilled. It is, therefore, open to me to exercise that discretion.

There are no special principles which govern the exercise of that discretion. However, it might be argued that a court should not exercise it if the order may be ineffective. I can see that this may be right if there is clear evidence that an order would certainly be ineffective, but I do not consider that this is the case where the evidence goes no further than to say that the order may not be effective.

This seems to me to be consistent with the judgment of Teare J in Trafigura Pte Ltd v Emirates General Petroleum Corp (EMARAT) [2010] EWHC 3007 (Comm). In that case, the judge considered the position as to whether there was any evidence of assets in the jurisdiction and concluded that “although it is not known that there are assets within the jurisdiction, assets may come into the jurisdiction in future” and he went on to say that he was satisfied that it was “just and convenient, that in circumstances where there has been a breach of two orders of the court, that leave to issue a writ of sequestration should be given”.

This dovetails with another factor, which it seems to me must come into play in making such an order. This is the disciplinary aspect. Where a company disobeys a court order, it cannot be personally committed to prison as an individual contemnor can. The sanction which the court primarily has against it is the writ of sequestration and this is reflected in a series of cases to which Mr Joseph QC referred me. In the Hin-Pro case to which I have already referred, Andrew Smith J considered it proper to permit a writ of sequestration to be issued for a breach of an order by a company.

I have also been directed to Touton Far East PTE Ltd v Shri Lal Mahal Ltd & Ors [2017] EWHC 621 (Comm). There, Leggatt J considered the comments of Whipple J in Vis Trading, which I have mentioned before. Under para.22, he held:

“I respectfully agree with the points made in those comments and consider that they have equal application in relation to the issue of a writ of sequestration against the first defendant’s assets. The court cannot in this case just stand by and allow the deliberate and flagrant breach of its orders to go unmarked. A writ of sequestration outstanding against the first defendant in this country will not be a meaningless order. It is an order which I consider just and appropriate in the circumstances of this case. It is an order which I shall make.”

This last authority in fact suggests it may well be appropriate to issue a writ of sequestration even where the evidence is that it will be of no practical utility. However, this is not a point I need to decide, for this is not a case where there is no point in making it. The position on EMC’s assets in the jurisdiction is, as the claimant submits, somewhat akin to that considered by Teare J in Trafigura. In particular, Mr Shepherd in his evidence explains that EMC is a copper exporter and has a relationship with at least one buyer, Ocean Partners, which is based in Maidenhead in this jurisdiction. Accordingly, there is evidence that there may be assets either currently in the jurisdiction, or which may come into the jurisdiction in future.

Further, I am told in submissions that one of the rationales behind the application for the disclosure order was precisely because it was anticipated that debts to the defendant might well be located in this jurisdiction and it was important, therefore, to discover the locus of such potential debts.

Accordingly, taking this in combination with the fact that it is appropriate for the court to ensure that deliberate and now longstanding breach of an order of this court does not go unmarked, I will grant the application for the issue of a writ of sequestration in the form produced to me, subject to the introduction of names of the commissioners, which is the next stage.

The final point is costs. The claimants seek their costs on an indemnity basis. CPR44.2 provides:

“In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –

(a)

the conduct of all the parties;”

The conduct of the parties includes conduct before as well as during the proceedings and the manner in which a party has pursued or defended its case, or a particular allegation or issues.

The key principles in relation to the court’s discretion to award costs on an indemnity basis are summarised in a number of places, but are perhaps best taken from the characteristically clear and helpful judgment of Colman J in National Westminster Bank Plc. v Rabobank Nederland [2008] 1 All ER (Comm) 243, where the learned judge set out the relevant rules of the CPR and conducted an excellent review of the authorities as they stood at that time. He then went on to consider the case of Three Rivers District Council v Bank of England [2006] 5 Costs LR 714 and the review of the principles which Tomlinson J (as he then was) made there. He quoted from them:

“(2)

The critical requirement before an indemnity order can be made in the successful defendant’s favour is that there must be some conduct or some circumstance which takes the case out of the norm.

(3)

Insofar as … conduct … is relied on as a ground for ordering indemnity costs, the test is not conduct attracting moral condemnation, which is an a fortiori ground, but rather unreasonableness.

(4)

The court can and should have regard to the conduct … during the proceedings, both before and during the trial … and the manner in which the [unsuccessful litigant] pursued its case and its allegations.”

He then went on to say:

“[28] Where one is dealing with the losing party's conduct, the minimum nature of that conduct required to engage the court's discretion would seem, except in very rare cases, to be a significant level of unreasonableness or otherwise inappropriate conduct in its widest sense in relation to that party's pre-litigation dealings with the winning party or in relation to the commencement or conduct of the litigation itself. ... But in each case in which the costs of the whole litigation are under consideration, the conduct adversely criticised must be looked at in the context of the entire litigation and a view taken as to whether the level of unreasonableness or inappropriateness is in all the circumstances high enough to engage such an order. ...”

I see no reason why a failure to engage at all with a contempt application, combined with what appears to be a deliberate decision in the context of a discrete application to disinstruct solicitors otherwise engaged on behalf of the party, cannot and should not be characterised as unreasonableness, as required in this context, taking a case outside the norm. I understand that that is a view which is not infrequently taken in relation to applications for costs in contempt applications.

Accordingly, I accede to the application for indemnity costs. I have reviewed the statement of costs and, given that I am making an order on the indemnity basis, I see nothing which would lead me to make any deductions from that schedule. However, in the light of what I have said, the draft order will require some small adjustments, which can be dealt with at the close of this judgment.

Before I complete this judgment, I should not omit the following. Practice Direction (Committal for contempt: open court) [2015] 1 WLR 2195 imposes specific requirements regarding judgments in committal cases. In paras.13-15, it sets out those requirements, which are:

“(i)

the name of that person [should be stated];

(ii)

in general terms the nature of the contempt of court … [and the] order [which], is being made;

(iii)

the punishment being imposed; and

(iv)

[must] provide the details … to the national media [via various routes] …”

It goes on to say in (2):

“There are no exceptions to these requirements. There are never any circumstances in which any one may be committed to custody or made subject to a suspended committal order without these matters being stated by the court ...

In addition to the requirements at paragraph 13, [there is a requirement for the court] either [to] produce a written judgment setting out its reasons or ensure that any oral judgment is transcribed, such transcription to be ordered the same day … and prepared on an expedited basis.”

Then copies of the written judgment are to be sent to various sources.

The Practice Direction does not specifically deal with sequestration and does, in some respects, seem to contemplate dealing solely with committal applications. However, given that it is said to apply generally in relation to committal proceedings and that this proceeding, although in some ways dealing primarily with a writ of sequestration, does involve a declaration of contempt which has been the subject of consideration on a quasi-criminal basis, I shall regard it as applying to the application before me today.

Accordingly, I now state the following. The defendant, Erdenet Mining Corporation LLC, has committed a contempt of court. The contempt in question is of an order of this court made by the Robin Knowles J on 25^th July 2017, by which the defendant was ordered to provide an affidavit giving full details of all assets exceeding $500,000 by 4p.m. on 22^nd August 2017. That order has never been complied with.

I am making a declaration that the defendant is in contempt of this court and also ordering that the claimants may issue a writ of sequestration to sequest to all the real and personal property of the defendant for its contempt of court.

I will also order the defendant to pay the claimants’ costs on an indemnity basis and I will make an order for substituted service of this order.