Caucedo Investments Inc & Anor v Saipem SA & Anor

Issues arise between the parties in relation to costs of and occasioned by the enforcement of an arbitration dated 12 November 2012. The Claimants employed the Defendants to construct a marine terminal facility at Caucedo in the Dominican Republic in 2002 to 2004. Disputes arose in relation to this development which pursuant to the ICC arbitration agreement between the parties were resolved by arbitration in London, the arbitrators’ relevant award being dated 12 November 2012 and deciding that the Defendants were liable to the Claimants in the sum of $12,927,472. The Defendants are well-known French contractors, based in France.

That sum was not paid and the Claimants issued a claim on 26 November 2012 seeking leave to enforce that award and an order that the Defendants pay the costs of their application. On 30 November 2012, the Court ordered that pursuant to Section 66 (1) of the Arbitration Act 1996 the Claimants had leave to enforce that award and that pursuant to Section 66(2) judgment be entered for the Claimants against the Defendants in the sum of $12,927,472, that the costs of the application including the cost of entering judgement should be paid by the Defendants with such cost to be summarily assessed if not agreed and that the Defendants could apply to set aside the order within 14 days after service.

On 16 November 2012, the Claimants’ solicitors (Beale & Co) had written to the Defendants’ solicitors (RPC), who had acted for the Defendants in the arbitration asking them to confirm that the Defendants would be in a position to make payment of the sum awarded. On 26 November 2012, Beale had written to RPC enclosing a copy of the Claim Form asking them to confirm that they were instructed to accept service of these proceedings on behalf of the Defendants. RPC e-mailed on the same day to say that they did "not have instructions to accept service at present" although they were taking instructions from the Defendants’ insurers, adding opaquely that "it might be sensible to wait before taking further enforcement steps." On 29 November 2012, Beale confirmed the contents of that e-mail back to RPC saying that it was "somewhat difficult to understand given that you are continuing to correspond with us on behalf of the…Defendants in respect of interest and costs” and that "if you do not have instructions to accept service it will be necessary for us to serve the…Defendants directly with enforcement proceedings”. They added that the Claimants would be seeking from the Defendants "the costs incurred in respect of issuing and serving all documents necessary for enforcement" of the award.

On 4 December 2012, Beale sent a copy of the Court’s Order dated 30 November to RPC saying that given "that you have previously advised that you do not have the instructions to accept service of enforcement proceedings we shall now proceed to serve the Defendants direct." There was no response. Following an application by the Claimants to serve out of the jurisdiction in France, the court issued its order on 13 December 2012 granting permission to serve the Defendants at two addresses in France with the parties being given permission to apply to set aside or vary the directions, it being stated that the costs of the current application were costs in the case. On 7 January 2013, Beale sent the Claim form, Mr Ward’s witness statement of 26 November 2012 and the Order of 30 November 2012 to an office of the second named Defendant in Wallsend in this country where it maintained its UK office. Mr McIntosh, the Accounts Manager of the UK branch, e-mailed on 9 January 2013 Mr Ward of Beale to suggest that they had been sent to the wrong address and that they should be served in France; Mr Ward replied on the same day explaining the difficulties that RPC had refused to accept service and that the second named defendant carried on business in the UK. Mr McIntosh’s response was to say that the documents would be shredded.

The service process in France took some time because the Claimants felt it necessary to procure French translations of a number of the documents such as the Court Orders, two witness statements supporting the Claim and the application for service outside the jurisdiction. Service was effected on 14 February 2013 in France. Meanwhile, for no obviously good reason, the award had still not been honoured although on 7 February 2013 RPC wrote to Beale saying that "you should not read anything sinister into the delay in payment of the Award" and suggesting that there were delays attributable to several insurers being involved and various uninsured interests; RPC expected payment to be made “shortly”.

The Defendants paid the award in three tranches, $10,725,949.84 on 11 February 2013, $2,107,978.93 on 12 February 2013 and the final $93,523.83 in three payments at the end of February and the beginning of March 2013.

On 25 March 2013, Beale wrote to RPC asking whether they were instructed to deal with the costs associated with the enforcement proceedings, identifying that the costs to date were some £20,000 and nearly €28,000. A large part of this related to French translations costs; invoices were enclosed. No response having been received, a reminder was sent on 9 April 2013. This produced an e-mail response from RPC on 15 April 2013 saying that they had forwarded a copy to Clyde and Co in relation thereto. Clyde responded on the same day saying that they had to discuss the position with their client and insurers adding that they considered that "the enforcement proceedings and the costs you now seek to have been wholly unjustified." On 29 April 2013, Beale wrote to Clyde calling for a response on the question of the costs of the enforcement proceedings, enclosing a summary assessment costs bill which totalled £49,701.58. There seems to have been no response from Clyde.

On 2 May 2013 RPC wrote to Beale saying that they had been instructed to deal with the costs issues. On 2 May 2013, Clyde wrote saying that the enforcement proceedings were premature and unnecessary because the Defendants had neither failed nor refused to make payment of the damages awarded. They commented on the translation fees saying that this was unjustifiably high and, without instructions, saying that they considered that a payment of £25,000 was more than reasonable. They withdrew that offer by a second letter of the same day. Beale wrote on 9 May 2013 saying they were "perplexed and concerned" and asking for confirmation as to which firm was representing the Defendant. RPC responded following day saying that they were instructed. Further correspondence followed in May with RPC suggesting that the costs were excessive and offering £2,500 in settlement of the costs order.

On 26 July 2013, the Claimants issued another application dated 26 July 2013 seeking £61,281.41 incurred in the enforcement proceedings. That was supported by a second witness statement of Mr Ward which explained the background and the correspondence, largely set out above. He sought to explain the costs bill.

On 30 July 2013, the Court ordered as follows:

“1.

The Defendants shall pay the Claimants’ costs incurred in these enforcement proceedings, to be summarily assessed by the Court, without a hearing.

2.

The Claimants shall serve the application and statement on the Defendants as soon as practicable. Service may be effected on the Defendants by service on their solicitors Reynolds Porter Chamberlain LLP and Clyde & Co LLP.

3.

The Defendants shall file and serve any submissions or evidence relating to such summary assessment by no later than 12 August 2013. The Claimants shall file and serve any submissions and evidence in response by no later than 16 August 2013.

4.

The parties have permission to apply to set aside or vary these directions.”

On 9 August 2013, Defendants issued an application to set aside that order calling for summary assessment of the Claimants’ costs of enforcement in the sum of £1,415 and asking for the Defendant's costs of their application summarily assessed for £1,940. Mr Justice Edwards-Stuart gave further directions for the filing of submissions in response in reply.

Following the exchanges of witness evidence and submissions, contained in the witness statements of Mr White of RPC (9 August 2013) and Mr Ward of Beale (24 July and 16 August 2013), I can deal with the matter in writing without further oral submissions. The delay in dealing with this matter is regrettable but the Long Vacation intervened together with other business to address in October.

The Defendants argue that because the Claimants did not follow the prescribed procedure to issue an application and to secure an order "for the costs of any judgement which may be entered hereunder", they can be entitled to no more than the costs of and occasioned by the Claim ( the maximum for which it is said should be £1,500 or no more than £2,500. They also argue that the Application dated 26 July 2013 seeks an assessment of costs incurred in these proceedings in accordance with Paragraph 3 of the Court sealed on 30 November 2012. There are then arguments, based on the Commercial Court practice, to the effect that, even if RPC was not prepared to accept service, in effect some form of substituted service on RPC should have been sought and obtained on the basis that the documentation would have got through to the Defendants in any event. There is substantial detailed argument that the total costs claimed of over £61,000 are excessive and that no VAT should be allowable.

Against that the Claimants argue that they were wholly justified in seeking to serve in France given RPC’s statement that they did not have instructions to accept service and that the Defendants’ UK office suggested that service should be in France. They argue that there is no procedural bar to them having the costs of and occasioned by the proceedings, their applications and of service. They say that the costs are reasonable and so far as the French costs are concerned they cost what they did and in particular in relation to the translation competitive tenders were obtained for that service.

One can start from the proposition that, absent any valid ground of challenge or appeal, an arbitration award should be honoured by the "losing party". The arbitration agreement (Clause 20.4, set out in the award in question at Paragraph 5) as is common states that arbitrators’ awards shall be "final and binding upon the parties" and that "judgment may be entered on the award in any court of competent jurisdiction". The actual award adjudged and awarded that the Defendants should pay to the Claimants the sum of $12,927,472 (Paragraph 211). A failure to honour the award is a breach of contract, amongst other things. The sum awarded was due as from the date of the award.

I can accept that commercially it may take a losing party to arbitration or court proceedings time to collect or secure the money needed to honour the award or judgment. In cases where the losing party is insured, courts are often asked to allow 28 days the payment to enable the money to be collected from the various insurance interests. However, whilst this may explain the delay in payment, it does not particularly or usually excuse that delay.

Section 66(1) of the Arbitration Act states simply that an arbitration award "may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect." Section 66(2) goes on to say that where "leave is so given, judgment may be entered in terms of the award". There is nothing exceptional about that and in the ordinary course of events the Order of 30 November 2012 would in terms of costs simply have resulted in the costs of the proceedings up to that point being paid by the Defendants. There is no issue, subject to quantification, that the Defendants should pay those costs.

The real issue is to what extent, if at all, the Defendants should pay the costs thereafter associated with the application to serve the Orders and the related documents in France. So far as the Court Orders are concerned, that made on 13 December 2012 in effect left open the question of the further costs saying that the costs were "in the case". Mr White seeks to argue that notes at 2E-251 and 252 in Volume 2 of the Civil Procedure somehow limit the costs of and occasioned by the application to serve Court Orders in France. Those notes simply refer to “the costs of any judgment” and strongly suggesting that the Order should spell out that those are to be expressly the subject of the Order. The Order of 30 November 2012 was simply giving leave to enforce and entering judgment. It said nothing about service of the Order itself which was dealt with later. These notes do not help the argument.

Practice Direction 62 - Arbitration sets down procedures for arbitration claims and Paragraph 3.1 says that the "court may exercise its powers under rule 6.15 to permit service of an arbitration claim form at an address of a party’s solicitor…acting for that party in the arbitration." Mr White argues that that order ought to have been sought and there was no necessity to serve out of the jurisdiction. Mr Ward in his third Statement says that CPR Part 62.2 addresses "arbitration claims" covered by Section I of that Part and not Section III of CPR Part 62 which applies to enforcement proceedings. I agree with Mr Ward; Part 62.2(2) is specific about that; the Practice Direction only relates to arbitration claims to which Section I applies and therefore not to enforcement proceedings.

However, the overriding objective applies not only to what the Court does but also to what parties do and it is therefore incumbent on parties, as it was on the Claimants, to act in a cost-efficient and proportionate way and it can properly be said that consideration should have been given to seek to serve the various documents which were the subject matter of the order of 13 December 2012 within the jurisdiction.

That said, I do not consider that the Claimants and their solicitors can be said to have behaved in any way unreasonably in seeking, eventually, to serve out of the jurisdiction. RPC, doubtless on instructions, made it clear that they were not authorised to accept service. There was no conceivably good reason for RPC not to be instructed to accept service. The fact that there was what was thought to be a temporary “blip” in the honouring of the award was not an excusable reason for the Defendants to refuse to accept service. The only inference one can draw from sophisticated parties such as the Defendants advised by sophisticated and intelligent city solicitors is that they were trying to gain time; whether this was because they wanted time to consider whether they could challenge the award in some way or, as has been suggested, because it was taking time to collect the money to honour the award does not really matter in this context. Certain it is that the refusal to authorise their solicitors to accept service in London did secure an additional three months or so because the order dated 30 November 2012 could not become effective in effect until 14 days after service.

RPC were, at best, somewhat elliptical in their e-mail response of 26 November 2012 because they did not suggest that there was a problem in relation to obtaining payment; they simply said that there were taking instructions from insurers. The statement made that the Claimants "might be sensible to wait" is equally elliptical: why would it be sensible to wait?

Beale gave to RPC the chance again to say that it had secured instructions to accept service when Beale wrote on 4 December 2012 sending a copy of the order made 4 days before. RPC were still acting for the Defendants in relation to the arbitration and it would have been very easy for them to accept that service could be made on them.

One then has Beale sending the requisite documents to the Defendants UK office on 7 January 2013 to be told that that they should have been sent to France and with the relevant manager threatening to shred what had been sent. It is (almost) inconceivable that the manager did not have some conversation either with RPC or at least the Defendants’ head office in France about this.

There were thus numerous opportunities for the Defendants to avoid the costs of and occasioned by the service of the documents in France. They are the authors of their own misfortune in this regard therefore. I am satisfied that the Claimants behaved reasonably and properly in the circumstances. Meanwhile the weeks went on without the award being honoured. It is difficult to see why the honouring of this award took more than three months; one month one can understand and maybe even two months with Christmas and New Year intervening, but not more.

Reliance has been placed by Mr White on the relatively recent decision of Mr Justice Field in the Commercial Court in Cruz City Mauritius Holdings v Unitech Ltd and others [ 2013] EWHC 1323 (Comm) which was to do with an application for disclosure of assets. Issues of service were raised which the judge also addressed. Referring to various cases, Mr Justice Field said at Paragraph 17:

“In neither Cecil v Bayat nor Abela was there any reference to the invariable practice in the Commercial Court in relation to arbitration applications relating to arbitrations seated within the jurisdiction to permit service upon a party's solicitor who has acted for that party in the arbitration, provided that that solicitor does not appear to have been disinstructed and absent other special circumstances. This practice was referred to by Tomlinson J in Kyrgyz Republic Ministry of Transport Department of Civil Aviation v Finrep GmbH [2006] EWHC 1722 (Comm); [2006] 2 CLC 402. In that case, it was argued on the basis of Knauf UK GmbH v British Gypsum Ltd [2001] EWCA Civ 1570 that, even in relation to an arbitration claim, a mere desire for speed was unlikely to amount to a good reason to authorise service by an alternative method and that the defendant was entitled to be served pursuant to the provisions of the European Union Service Regulation no. 1348 of 2000. Paragraphs 29 and 36 -39 of Tomlinson J's judgement read as follows:

“…38. The discretion given to the court by CPR 6.8(1) is dependent upon there appearing to be good reason to authorise service by an alternative method. In the context of an arbitration which has its seat in England or Wales and where the party thereto sought to be served with an arbitration application relating to that arbitration has an agent within the jurisdiction who acts or acted for him in the arbitration and whose authority does not appear to have been determined there will in my judgment very often, and perhaps ordinarily, be good reason to permit service to be made upon that agent rather than requiring service to be effected out of the jurisdiction. In such circumstances an application to serve upon the agent is not motivated by a mere desire for speed in effecting service. It is inherently desirable and in the interests of all parties that if arbitration applications are made in relation to either pending or otherwise completed arbitrations they are determined by the court as soon as reasonably practicable, consistent with their being dealt with justly. Such disposal contributes to the achievement of finality of the arbitral process. Moreover, in the ordinary case where an overseas party to an English arbitration has or has had solicitors in England acting for him in that arbitration, service of the application and associated documents upon the English solicitors is the most reliable method whereby those documents will be brought expeditiously to the attention of the responsible persons within the relevant entity sought to be served. It will also usually be the most economical method of achieving that result.”

This was not a case which was concerned with costs as such. In my judgment, in the current case the Court has to ask itself the question as to whether it was reasonable and proportionate for the Claimants, having obtained the order which they did on 30 November 2012, to seek permission to serve out of the jurisdiction and then, having obtained such permission, to take reasonable steps to do just that. For the reasons which I have given above, it was.

The Order of the Court dated 30 July 2013 ordered that the Claimants’ costs should be paid by the Defendants. I see absolutely no reason why this order should be set aside.

However, moving onto the summary assessment, I am extremely surprised at the amount involved, over £61,000. The bill (exclusive of VAT) breaks down as follows:

These were for the costs up to 24 July 2013 and doubtless some costs were incurred thereafter, including Mr Ward’s third statement and correspondence at the end of August 2013. Taking into account all the arguments which have been put forward, I summarise the allowable costs as follows:

This produces a total of £32,743.37. Because there has been no challenge on the VAT point raised by Mr White and because it seems reasonable to assume that foreign clients would not be charged VAT, I decline to allow VAT.

The Defendant will pay the Claimants their costs which I summarily assess at £32,743.37; these should be paid within 14 days.