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Alistair James Company Limited v Sakson Drilling & Oil Services [2017] DIFC CFI 003

Alistair James Company Limited v Sakson Drilling & Oil Services [2017] DIFC CFI 003

May 22, 2018

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Claim No: CFI-003-2017

 

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

 

IN THE COURT OF FIRST INSTANCE

BETWEEN

ALISTAIR JAMES COMPANY LIMITED

Applicant

and

SAKSON DRILLING & OIL SERVICES

Respondent

 

Hearing: 23 November 2017

 

Counsel: Raza Mithani assisted by David Parker of Berwin Leighton Paisner LLP for the Applicant

Michael Patchett-Joyce instructed by Global Advocacy & Legal Counsel and assisted by Sharon Lakhan for the Respondent

Judgment: 22 May 2018


JUDGMENT OF H.E. JUSTICE ALI AL MADHANI


Summary of Judgment

H.E. Justice Ali Al Madhani granted the Applicant’s immediate judgment application against the Respondent on the grounds that it had no real prospect of defending the claim as provided by Rule 24.1 (b) and (2) of the Rules of the DIFC Courts (RDC). Judgment was given against the Respondent in the sum of USD 236,519.50 plus interest at 5% per annum.

 

The Applicant had applied for immediate judgment on the grounds that the Respondent was bound by the Settlement Agreement between the parties (which provided for instalment payments from the Respondent to the Applicant), which estopped it from raising any issue for any failure to pay outstanding sums, the Respondent had affirmed the Settlement Agreement by conduct and no longer had any right to rescind it, and lastly that the Settlement Agreement was affirmed by the lapse of time.

The judge found the terms of the Settlement Agreement were clear, therefore the Respondent did not have any bona fide defences to the claim against it. The Respondent’s argument that it had been subjected to economic duress in order to enter into the Settlement Agreement and that it should consequently be declared void was also rejected, moreover, the Respondent had affirmed the Settlement Agreement through its conduct.

This summary is not part of the Judgment and should not be cited as such

ORDER

UPON the Applicant’s Application No. CFI-003-2017/2 dated 13 August 2017 seeking immediate judgment

AND UPON hearing Counsel for the Applicant and Counsel for the Respondent at a Hearing on 23 November 2017

IT IS HEREBY ORDERED THAT:

1.Pursuant to Part 24 of the Rules of the DIFC Courts(RDC), the Applicant is awarded the sum of USD 236,519.50.

2. The Respondent shall pay interest calculated on a simple basis at a rate of 5% per annum on the sum awarded from and including 10 November 2016 and accruing at a daily rate of USD 32.40 (being USD 16,232.40 at the date of this Order).

3. The Defendant is to pay the costs of the application on the standard basis, to be assessed by the Registrar if not agreed by the parties.

 

Issued by:

Ayesha Bin Kalban

Assistant Registrar

Date of issue: 22 May 2018

At: 10am

JUDGMENT

Parties 

1.The Applicant, Alistair James Company Limited (“Alistair James”), is a company incorporated in Tanzania, engaged in transportation of cargo freight and logistics as well as some rental services.

2. The Respondent, Sakson Drilling & Oil Services, is a company incorporated in the DMCC Free Zone Dubai UAE in the business of providing services for the oil and gas industry, including to provide land drilling/workover rigs and transporting those rigs between various well locations.

The Applicant’s Case

3. The Applicant submits that it has provided quotations to the Respondent on 3 November 2015 and 18 January 2016 for the transportation of Rig PR-05 and accessories, camp and assorted equipment from Mbuyu to Dar Es-Salaam Port and from there to Kuwait and Egypt. Thereafter, parties entered into the Transportation Contract for the Applicant to perform the Services for a fee to be paid by the Respondent on 20 January 2016.

4. On 19 March 2016 the first Rig part was received by Kuwait port and on 11 June and 1 July 2016 the second Rig part was received by Alexandria port, Egypt, constituting performance of the Services from the Applicant prospect.

5. The Applicant then claims that the Respondent had persistently delayed in paying for the Services despite its confirmation that it would pay the Applicant for the Services in full before the Applicant released the bills of lading. The Applicant then retained the bills of lading. This led to an impasse between the Parties when the Respondent continued to fail to pay for the Services contrary to its stated intention.

6. Subsequently (some weeks after the shipment was completed), the Respondent asked the Applicant whether it would be prepared to agree to an instalment plan for payment for the Services. There followed negotiations which culminated in the signing of the Settlement Agreement which included instalment payments in accordance with the terms of the Agreement.

7. Under the terms of the Settlement Agreement, the bills of lading were released to the Respondent on the date of payment of the first instalment.

8. Furthermore, the Respondent proceeded to make three further payments under the Settlement Agreement. The Respondent delayed in payment of each of these instalments: the second instalment by five days; the third by seven days and the fourth by nineteen days.

9. The fourth and final payment made was a payment on 29 November 2016 for USD 36,484.50, when the instalment amount due was USD 72,969.00 but then the Respondent failed to make any payment of any of the subsequent instalments.

10. Clauses 1.5 and 1.6 of the Settlement Agreement state that in the event of failure to make payments by the Respondent by 4pm on the due date, (a) interest is chargeable on that amount at a rate of 5% per annum and (b) all the amounts outstanding under the Settlement Agreement at that point become payable in full.

11. Finally, on 12 December 2016 the solicitors for the Applicant sent a letter of demand to the Respondent seeking that the Outstanding Sums be paid in full owing to the Respondent’s payment default.

12. On 22 December 2016, following non-payment of the remainder of the November instalment and the December instalment, the Respondent emailed the Applicant promising to pay the remainder of the November instalment by 10 January 2017. The Applicant contends that it received nothing after November 2016 and therefore proceeded to the current Claim suing the Respondent in breach of the Settlement Agreement, with remedy sought as the balance in the sum of USD 236,519.50 (the “Outstanding Sums”), which became immediately payable pursuant to clause 1.6 of the Settlement Agreement and interest accrued on the Outstanding Sums at the rate of 5% per annum pursuant to clause 1.5 of the Settlement Agreement.

The Respondent’s Case

13. The Respondent argues that having accepted the Applicant’s quotation, it did enter into a Transportation Contract with the Applicant in which it specifically represented that it had “sufficient logistic capability to transport the Company’s Rig with technical expertise to perform all of its obligations under this Contract promptly, safely, diligently and in observance of the highest international transport standards…”.

14. It is further said that in accordance with the Transportation Contract the Applicant was required to “transport and custom clearance” the Defendant’s Rig and other equipment from Mbuyu to the hook on the vessel ramp at Dar Es Salaam Port and that the Transportation Contract was specified to cover complete logistics and custom clearance services to delivery under hook on the vessel ramp, the Applicant was deemed to have satisfied itself as to the correctness and sufficiency of the rates and prices for performing the Work.

15. The Respondent contends that the Applicant breached the Transportation Contract and/or was negligent in its performance of the Transportation Contract such that:

a. it failed to satisfy itself as to the correctness and sufficiency of the rates quoted for wharfage and other charges at Dar Es Salaam Port, which led to additional charges being incurred by the Respondent which had not formed part of the Applicant’s estimate, even contingently, and for which the Respondent was, therefore, completely unprepared; and

b. it failed to complete the proper procedures for customs clearance in Dar Es Salaam Port by not attending the meterage survey of the volume of the cargo at Dar Es Salaam Port, and did not collect the manifest from the Port Authority, which resulted in additional port charges and the Respondent not being able to challenge those additional charges because of never having received a copy of the manifest.

16. The Respondent further contends that in order to be able to offload its cargo and to obtain payment from its client, it required the Applicant to deliver the bills of lading. The Applicant then refused to do so, putting pressure on it to pay amounts said to be owing under the Transportation Contract, although it knew that the Respondent was not able to claim payment from its client until the cargo was released and it produced the bills of lading to the client.

17. The Applicant’s refusal to release the bills of lading has put significant pressure on the Respondent as it could not collect its cargo, which led to daily demurrage and storage charges, harm to its reputation and significant risk that the Port would confiscate and auction off the cargo at any time.

18. The Respondent finally argues that it never accepted the idea that the Settlement Agreement was a commercial negotiation, as the Applicant was able to exercise enormous economic duress on the Respondent to procure a settlement on terms unfavorable to the latter.

The Application

19. The Applicant’s application is that the Parties entered into and participated fully in a commercial negotiation with both instructing lawyers to advise them, these negotiations culminated in the Parties reaching an agreement whereby the Respondent “agreed to resolve the dispute amicably by making payment in instalments of the disputed amount USD 410,278.78 and release of Bill of Lading from the part the applicant.” On 18 August 2016, the negotiation between the parties resulted in the Applicant and the Respondent entering into a settlement agreement (the “Settlement Agreement”).

20. The Applicant argues that in accordance with paragraph 1.1 of the Settlement Agreement it was agreed that the Respondent would pay the Applicant the Settlement Amount in eight monthly instalments totalling USD 458,247.78, with the last instalment falling due on 10 March 2017.

21. The argument continues to the extent that it was also expressly agreed in recital 5 of the Settlement Agreement that the Respondent would not be entitled to raise any defence (including set-off) as a justification for any failure to make payments under the Settlement Agreement:

“Sakson hereby agrees that it is liable to pay AJC the Outstanding Sums in full and that it cannot and will not raise any issue, matter, defence, claim and/or counterclaim whatsoever…in support of and/or as justification for any failure to pay AJC the Outstanding Sums”.

Grounds for Immediate Judgment

22. The Applicant is applying for immediate judgment as it argues that the Respondent has no real prospect of successfully defending the case for the following reasons:

a. the Settlement Agreement is patently not voidable (based on alleged duress or any other reason). It is clear from the background outlined above that the Respondent entered into negotiations with the Applicant which culminated in the agreement they reached in terms according to the Applicant’s own suggestion that payment in instalments be agreed. In the meantime, the Respondent had taken no action whatsoever seeking release of the bills of lading which it could have done;

b. the Respondent first raised its allegations that the Settlement Agreement is voidable when it filed its Defence in these proceedings in February 2017;

c. in any event and prior to raising those allegations, the Respondent made four payments referenced above after it had agreed and executed the Settlement Agreement; and

d. in these circumstances, by making those payments under and pursuant to the terms of the Settlement Agreement, the Respondent affirmed the Settlement Agreement and no longer has any right it may have had (which it did not) to rescind the Settlement Agreement.

e. further, as the Settlement Agreement is effective, the Respondent is unable to apply a defence of set off to the Applicant’s claim (even if it were able to make out a claim and properly quantifiable damages) as it released any right to apply any defence of this nature in the Settlement Agreement (recital 5 of the Settlement Agreement).

23. The Applicant’s claim is that:

(i) the Settlement Agreement is valid, binding and effective;

(ii) the sum of USD 236,519.50 is properly due and payable;

(iii) the Respondent is not able to apply any defence of set off to the Applicant’s claim; and

(iv) the Applicant knows of no other compelling reason why the case or issue should be disposed of at a trial.

Defence to the Immediate Judgment Application

24. The Respondent’s position as to the immediate judgment application is that it has bona fide defences to the claim which, because of complex issues of law and fact, should not be disposed of summarily as part of the immediate judgment procedure.

25. The Respondent raises the following defences to the Applicant’s application:

a. The Respondent’s first defence is that the Applicant entered the Settlement Agreement by exercising enormous economic duress on the Respondent in order for the Respondent to release the bills of lading to be able to offload its cargo and to obtain payment from its client, therefore the Settlement Agreement should be declared void;

b. The Respondent contends that the Applicant’s application for immediate Judgement offends the principles of natural justice as the Settlement Agreement was obtained based on duress. Allowing the Applicant to enforce the Settlement Agreement in those circumstances as an immediate judgment would deprive the Respondent of the right to cross-examine the Applicant’s witnesses as to the circumstances surrounding the failure of the Applicant’s staff to attend at the survey and measurement of the cargo at Dar Es Salaam Port, or the execution of the Settlement Agreement; and

c. The Respondent’s second defence, is that it was only after the signing of the Settlement Agreement and the payment of three instalments under the Settlement Agreement, that it became aware that the additional charges it had incurred in relation to the shipment of the Rig were as a result of the Applicant’s breach of contract and/or negligent performance of the contract.

26. The Respondent submits that the questions as to the validity of the Settlement Agreement and alternatively whether any amount found to be owing by the Respondent to the Applicant can be set off against damages sustained by the Respondent as a result of breach of contract and/or negligence of the Applicant, turn on a detailed construction of the relevant contracts and an assessment of the factual matrix put forward by each party.

27. The Respondent further argues that the only evidence from the Applicant in these proceedings is from the Applicant’s legal representative but none of the Applicant’s management or employees has given any factual evidence in these proceedings to date of the trial.

28. The Respondent’s third point of defence against the application is that the Applicant cannot rely on Recital 5 of the Settlement Agreement which reads:

“Sakson hereby agrees that it is liable to pay AJC the Outstanding Sums in full and that it cannot and will not raise any issue, matter, defence, claim and/or counterclaim whatsoever (including by reference to the terms of the Contract and/or this Agreement) in support of and/or as justification for any failure to pay JC the Outstanding Sums.”

29. The reason for that from the Respondent’s perspective is that in the ordinary application of the contra proferentem rule, the Settlement Agreement must be construed strictly against the Applicant who sought legal advice and then drafted the Agreement to the extent that there is no scope for the Applicant to refer to, or rely on, the wider terms of the Recital.

30. The Respondent further contends that the operative part of the contract is the only possible provision on which the Applicant might seek to rely which follows on from the words:

 “IT IS HEREBY AGREED BETWEEN THE PARTIES THAT:”

and the words in clause 1.3 to the effect that payment of instalments should be made

 “… without deduction for or on account of any set-off or counterclaim”.

31. It is argued that even this provision of the contract (1.3) is also limited in scope to any “set-off or counterclaim” and that it is well-known that “set-off” concerns the balance of mutual debts. Further, it was argued that a counterclaim is substantively different from a defence.

32. The Respondent’s last and alternative defence is that if the Court considers that the Settlement Agreement has been affirmed, any amount found to be owing under the terms of the Settlement Agreement should be set-off against the amounts that are owed to the Respondent as a result of the Applicant’s breaches or negligent performance of the Transportation Contract on the basis that the execution of the Settlement Agreement was obtained by duress and permitting the Applicant to rely upon it.

The Judgment

33. Applications for immediate judgment are governed by Part 24 of the Rules of the DIFC Courts (RDC). Part 24(1) provides:

“24.1 The Court may give immediate judgment against a claimant or defendant on the whole of a claim, part of a claim or on a particular issue if:

(1) it considers that:

(a) that claimant has no real prospect of succeeding on the claim or issue; or

(b) that defendant has no real prospect of successfully defending the claim or issue; and

(2) there is no other compelling reason why the case or issue should be disposed of at a trial.”

34. As It was summarised above that the Applicant is applying for immediate judgment as it argues that the Respondent has no real prospect of successfully defending the Claim for the following reasons:

a. The Respondent is bound by the Settlement Agreement.

b. The Settlement Agreement estopped the Respondent from “rais(ing) any issue, matter, defence, claim and/or counterclaim whatsoever…in support of and/or as justification for any failure to pay AJC the Outstanding Sums” as provided in Recital 5 of the Settlement Agreement.

c. The Respondent affirmed the Settlement Agreement by conduct and no longer has any right to rescind it.

d. the Settlement Agreement is affirmed by the lapse of time.

35. In my Judgment as to the defence put forward by the Respondent concerning the wharfage or the volume of Kuwait Cargo, they were clearly settled by the terms of the Settlement Agreement. It is clearly stated in the Settlement Agreement that the Respondent cannot:

“raise any issue, matter, defence, claim and/ or counterclaim whatsoever (including by reference to the terms of the Contract and/ or this Agreement) in support of and/ or as Justification for any failure to pay the Outstanding Sums”.

36. Moreover, operative clause 1.3 of the Settlement Agreement provides:

“Payment of the Settlement Instalments shall be transferred free of any charge, Constraint, lien or encumbrance and will be made without deduction for or on account of any set-off or counterclaim.”

37. I do not agree with the Respondent’s argument that the reference of estoppel from raising defence in the Settlement Agreement was mere recital and that the Applicant cannot rely on it or at least that it should be interpreted against it as a drafting party who had the benefit of legal advice. In my Judgment if the words of the operative part of the contract are clear they will not need to be reinterpreted.

38. In Walsh v Trevanion 69 E.C.L. 750, Patteson J. said:

“when the words in the operative part of a deed of conveyance are clear and unambiguous, they cannot be controlled by the recitals or other parts of the deed. On the other hand, when those words are of doubtful meaning, the recitals and other parts of the deed may be used as a test to discover the intention of the par-ties, and to fix the true meaning of those words.”

39. Similarly, in Holliday v Overton, 14 Beav. 467, Sir John Romilly M.R. said:

“it is impossible by a recital to cut down the plain effect of the operative part of a deed.”

40. In my Judgment the operative Clause 1.3 of the Agreement is clear and there are no contradictions between it and Recital 5, therefore the Respondent’s claim that it has bona fide defences to the claim in this aspect must be dismissed.

41. The second challenge raised by the Respondent in respect of the Settlement Agreement was that it was entered into by exercising enormous economic duress on the Respondent in order for the Applicant to release the bills of lading to be able to offload its cargo and to obtain payment from its client, therefore the Settlement Agreement should be declared void.

42. The Principle of Economic Duress was addressed in Pao On v Lau Yiu Long (1980] AC 614 at 636, where the Privy Council stated that although economic duress might be recognised as a principle:

 “…the basis of such recognition is that it must amount to a coercion of will, which vitiates consent. It must be shown that the payment made or the contract entered into was not a voluntary act.”

“Duress, whatever form it takes, is a coercion of the will so as to vitiate consent ..in a contractual situation commercial pressure is not enough. There must be present some factor “which could in law be regarded as a coercion of his will to vitiate his consent.’ ..In determining whether there was a coercion of will such that there was no true consent, it is material to inquire whether the person alleged to have been coerced did or did not protest: whether, at the time he was allegedlv coerced into making the contract, he did not have an alternative course open to him such as an adequate legal remedv: whether he was independently advised: and whether after entering the contract he took steps to avoid it. All these matters are relevant in determining whether he acted voluntarily or not. “

43. The Respondent has not addressed the issue of whether pressure from the Applicant was illegitimate or if the Applicant was acting in bad faith in asserting new terms to the Settlement Agreement. The Respondent also had not addressed this Court as to whether it had some realistic practical alternatives to accepting the variation of the contract.

44. It is further evident that even if one was to accept that there was economic duress in this case, the Respondent after entering the Settlement Agreement took no steps to avoid it. Instead the Respondent affirmed the Settlement Agreement by conduct when it paid three consecutive payments and made no reservation until it had been sued before this Court.

45. The affirmation is obvious in the letter dated 22 December 2016, in which the Respondent promised to continue to pay the instalments under the Settlement Agreement:

 “We are closing our accounts of the year and we will resume in our due payment once we determine our cash flow and financials.  In the meantime, we will try our best to settle the amount of $36,484.50 before January 10th 2017. Since the signing of our Agreement in August 2016, we have shown good faith and paid half of the total amount.”

46. In fact, even after proceedings had been issued, the Respondent continued to promise to make payments. By email dated 22 January 2017, the Respondent wrote that “…we propose to make all short and unpaid sums from November 2016 to January 2017 to catch up the payment plan and to continue accordingly for the rest of the payments going forward”.

47. In my Judgment, the duress claim does not void the Settlement Agreement which remains valid, binding and effective. Furthermore, even if it was voidable, the Respondent cannot elect to rescind the Settlement Agreement now as it has repeatedly affirmed the Settlement Agreement.

48. Therefore, the Respondent has no real prospect of defending the claim and the Court sees no other compelling reason why the case or issue should be disposed of at a trial, it therefore grants the immediate judgment application against the Respondent in the sum of USD 236,519.50 plus interest at 5% per annum.

49. The Respondent is to pay the cost of the application on the standard basis, to be assessed by the Registrar if not agreed by the parties.

 

Issued by:

Ayesha Bin Kalban

Assistant Registrar

Date of issue: 22 May 2018

At: 10am

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