In a hearing just before the Summer vacation, on 30 July 2024, the London Circuit Commercial Court gave a judgment indicating its approach to submission to the jurisdiction in the context of arbitration clauses, as well as useful guidance on the jurisdiction to order summary assessment of costs in the context of a prior consent order in Kataman Metals LLC v TMT Metals (UK) Ltd (unreported).
Ryan Hocking acted for the successful Claimant.
Background
On 2 May 2023, the Claimant ("Kataman") issued a claim for approximately USD $1 million, alleging that TMT Metals (UK) Ltd ("TMT") had breached two contracts under which it was obliged to purchase a significant quantity of metal. Both contracts contained arbitration clauses (albeit that the precise meaning and effect of those clauses was in issue).
On 16 May 2023, TMT filed an acknowledgement of service stating its intention to defend the whole of the claim. On 28 May 2023, towards the end of the period for filing its Defence, TMT requested Kataman's agreement to an extension of time, stating that solicitors were in the process of taking instructions (as well as citing the partner with conduct of the matter being on annual leave, and counsel's availability). After some back and forth, an extension to 28 June 2023 was agreed.
On 27 June 2023, TMT requested agreement to an application for a further extension of time for its Defence, stating that counsel had by that point been instructed to draft the Defence but had pre-existing commitments. The Court then granted an extension to 26 July 2023.
On 25 July 2023, TMT requested agreement to a third extension to 9 August 2023, stating that this was required to finalise its Defence and Initial Disclosure List, and that TMT anticipated finalising the Defence following a conference with counsel at the end of that week (i.e. by 28 July 2023). TMT then made an application for a further extension of time at 16:19 on 26 July 2023 (a healthy 11 minutes before the deadline).
The Court never determined TMT's second application for an extension. Instead, on 9 August 2023, TMT indicated that it no longer intended to file a Defence, and instead intending to apply for a stay of the proceedings pursuant to s.9 of the Arbitration Act 1996 (which it then did). Kataman then invited TMT to file and serve a Defence without prejudice to its application, stating that it would otherwise make a cross-application for default judgment and seek for that to be determined immediately following determination of TMT's stay application.
In due course, that is exactly what Kataman did, and the applications were listed to be heard on 8 May 2024.
On 23 April 2024, TMT's solicitors wrote to Kataman's solicitors stating that TMT was "prepared to take a pragmatic view" and would be withdrawing its stay application, as well as writing to the court to request that the 8 May 2024 hearing be vacated. Kataman sought to retain the hearing date for the purposes of the default judgment application.
On 3 May 2024, a full year after the claim was issued, TMT eventually filed and served its Defence.
By the afternoon of 7 May 2024 – the day before the hearing – TMT also confirmed that it consented to paying Kataman's costs of the applications to be assessed on the indemnity basis if not agreed. A consent order to that effect was then approved by Philip Marshall KC (sitting as a Judge of the High Court) on 8 May 2024.
Despite attempts by Kataman to reach agreement with TMT as to the level of its costs, TMT did not make any offers in open correspondence, and on 6 June 2024 Kataman then applied for a summary assessment of its costs, or in the alternative an order that it be permitted to commence detailed assessment forthwith pursuant to CPR r47.1.
The judgment
It is fair to say that the Judge, HHJ Pelling KC (sitting as a Judge of the High Court), took a fairly dim view of TMT's conduct in the proceedings. The Judge appeared to accept Kataman's submissions that TMT's stay application was bound to fail, describing it as having no realistic prospect of success and, more bluntly, "hopeless" and "doomed". There were a number of points at which the Judge stated that Kataman's task had been made more complicated than it needed to be as a result of TMT's actions.
The Judge considered the wording of the consent order – that TMT "pay [Kataman's] reasonable costs of the default judgment and stay application, to be assessed on the indemnity basis if not agreed" – and noted that the order did not specify whether assessment was to be by detailed or by summary assessment. He therefore found that the Court had jurisdiction to order summary assessment without more, as there was no barrier to this under the CPR. It follows that the Judge did not need to consider whether there had been a change of circumstances since the consent order, nor whether it would be appropriate to permit detailed assessment to be commenced forthwith pursuant to CPR r47.1.
Discussion
Whilst the merits of TMT's stay application had effectively been rendered moot by its having been withdrawn, the Judge's reasoning in carrying out a summary assessment of Kataman's costs made clear that he viewed the application as unmeritorious, and that Kataman was right to rely upon the authority of Fairpark Estate Ltd v Heals Property Developments Ltd [2022] EWHC 496 (Ch) (in which the Defendant's conduct was strikingly similar to TMT's own). It is encouraging to see the Court taking a robust view in relation to what plainly amounts to a submission to its jurisdiction. Whilst the Court will be very keen to hold parties to binding arbitration clauses, and will generally take a fairly pro-arbitration stance, it does not follow that parties will be permitted to abuse applications under s.9 of the Arbitration Act 1996 in order to delay or frustrate proceedings (or at least, not without consequence).
The pragmatic decision on the summary assessment of costs is also welcome. Whilst a failure to negotiate in good faith as to costs is capable of amounting to a change in circumstances justifying the variation of a previous order (as in Pipa v BGEO Group Limited [2022] EWHC 846 (Comm)), it will not always be straightforward to satisfy this requirement. Similarly, whilst the Court has an explicit jurisdiction under r47.1 of the CPR to permit a detailed assessment to be commenced immediately, the expense and delay entailed will often be unattractive to claimants who have succeeded at an interlocutory stage. This decision addresses both of those potential pitfalls by ensuring that a party who has successfully persuaded their opponent to withdraw an unmeritorious application can obtain an enforceable costs order reasonably promptly in the way they no doubt envisioned. It also, as noted by the Judge, reflects the reality of how such situations are dealt with in practice, with the parties being eager to use consent orders so as not to waste Court time (and the Court being just as eager, if not more so, to encourage such conduct).
The only caveat is that such an approach places some weight upon the exact wording of the provision for costs in consent orders. If parties genuinely envision detailed, rather than summary, assessment taking place, this ought to be specified in the order. That said, a paying party would be well-advised not to insist upon the point, lest they find themselves having to explain why it was not possible to negotiate a sensible consent order.
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