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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> ZCCM Investments Holdings Plc v Kansanshi Holdings Plc & Anor [2019] EWHC 1285 (Comm) (22 May 2019) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2019/1285.html Cite as: [2020] 1 All ER (Comm) 132, [2019] EWHC 1285 (Comm) |
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BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
7 Rolls Building Fetter Lane London EC4A 1NL |
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B e f o r e :
____________________
| ZCCM INVESTMENTS HOLDINGS PLC |
Claimant |
|
| - and - |
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KANSANSHI HOLDINGS PLC KANSANSHI MINING PLC |
Defendants |
____________________
for the Claimant
Michael Black Q.C and Edward Knight (instructed by Amsterdam & Partners LLP) for the Defendants
Hearing dates: 26, 27, 28 March 2019
____________________
Crown Copyright ©
Cockerill J:
Introduction
a) The Original Arbitration Claim by ZCCM Investments Holdings plc ("ZCCM") under s. 68(2)(a)/(d) of the Arbitration Act 1996 ("the Act") ("the Original Arbitration Claim").
b) ZCCM's challenge under s.68(2)(g) of the Act ("the Fraud Claim").
c) ZCCM's application seeking an extension of time (and related relief) to bring the Fraud Claim ("the Extension Application").
d) The issues raised in the Respondent's Notice of Kansanshi Holdings Limited ("KHL") namely whether:
i. The Ruling was not an award but merely a procedural order; and
ii. The Original Arbitration Claim is barred by s. 70 of the Act because ZCCM has not exhausted any available recourse under s. 57 of the Act.
| Para | |
| Background | 3 |
| The Original Arbitration Claim | 26 |
| Ruling or Award | 27 |
| S.68: The Law | 49 |
| Issue 1 | 64 |
| Issue 2 | 81 |
| Issue 3 | 94 |
| Issue 4 | 97 |
| Issue 5 | 115 |
| Exhaustion of Remedies | 128 |
| The Fraud Claim | 136 |
| Amendment/Extension of Time | 147 |
| The Merits of the Fraud Claim | 164 |
| Remaining Issues | 200 |
| Conclusion | 221 |
Background
a) The understanding of its appointees to the Board of KMP ("the ZCCM directors") based on express representations made by KHL/its appointed directors of KMP's board ("the KHL directors") and/ or others within the FQ Group, was that:
i. KMP's monies were being held by FQMF on deposit with reputable international financial institutions for KMP's use and were readily available for KMP's working capital requirements.
ii. Therefore, interest at 30 day LIBOR was a fair and appropriate rate and a better rate than KMP could otherwise expect to obtain by use of the monies.
b) What ZCCM and its directors on KMP's Board did not know was that the FQ Group was using KMP's monies.
c) Therefore, ZCCM had established a prima facie case against KHL under the heads to which I have alluded.
d) The primary case was put in misrepresentation; but the other claims were said essentially to flow from one or other aspect of the misrepresentation claim. Thus, it was said that:
i. There was breach of fiduciary duty by (inter alia) the KHL directors by which KMP's monies were paid to and used for the benefit of FQ Group without disclosure of the use to which the monies were put, benefitting FQ Group to the detriment of KMP, by obtaining use of KMP's monies at below the market rate and putting those funds at risk.
ii. There was breach by KHL of the Amended Shareholders' Agreement ("ASHA"), in particular Clause 11 requiring all contracts with Affiliates to be on Arm's Length Terms and disclosure of the Affiliate's interest and implied terms to act in good faith and give full and not false information.
iii. There was a substantial loss suffered by KMP, in particular, reflecting the interest which it should have been paid at an Arm's Length rate, namely the rate applicable to an unsecured commercial loan. It pointed to the interest payable under a US$300 million senior term loan and US$700 million revolving credit facility with the interest payable on both being LIBOR plus 3% as evidence that 30 day LIBOR was well below genuine market rates.
a) The inclusion of the sums transferred in the KMP audited accounts as an inter-company loan to FQMF bearing interest at LIBOR;
b) A memorandum of 11 October 2010 from KHL to ZCCM containing certain statements including as to the payment of commercial interest and as to FQMF's status being the FQ Groups global treasury function managing funds with highly rated financial institutions;
c) ZCCM's request for a loan on similar terms;
d) Later accounts noting the loan was repayable on demand;
e) The approval of the KMP Board to provide loans on similar terms to both shareholders;
f) ZCCM's request for a one-off dividend to compensate it for not having participated in shareholder loans earlier.
a) Dishonest representation that:
i. The monies were held on deposit whereby the full amount was immediately available for repayment;
ii. For that reason, the interest rate was the best available;
b) In fact, FQMF was using the monies for the purposes and to the benefit of the FQ Group.
"58. Addressing, first, ZCCM-IH's focus on the characterisation of the arrangement as a deposit that was managed by highly-rated financial institutions, it is impossible to divorce the references in the contemporaneous material to the transaction as a "deposit" from the references to the same transaction as a "loan". For the purposes of determining whether or not a statement was made dishonestly, regard has to be had to the entirety of the relevant material, and not just to selected parts of it. In particular:
a. it is apparent from a review of the record that the terms "deposit", "short-term deposit", "loan", and "intercompany loan", along with other similar terms, were all used interchangeably by both KHL and ZCCM-IH to refer to the same transaction: for example, KHL's Memorandum, upon which ZCCM-IH particularly relies, refers repeatedly to both "the deposit" and "the loan account", as does ZCCM-IH's Related Party Financing paper, which was prepared several years later;
b. shortly after ZCCM-IH first began to question the arrangement, in December 2010, it sought not to obtain a better rate of return for KMP, but rather to secure a similar shareholder loan for itself. While the two are not inconsistent, in looking for a similar loan pro-rated to its shareholding ZCCM-IH was plainly not treating the arrangement simply as a deposit arrangement, in which KMP's monies could not be put to use by the recipient of the loan for its own purposes: on the contrary, it was asserting that FMQF had derived a benefit from transfer to it of KMP's funds, and that it, ZCCM-IH, should be afforded the opportunity to do the same. Indeed, in March 2011 ZCCM-IH itself proposed a shareholder loan arrangement that, as noted above, included terms (i) that the applicable interest rate on the loans would be the LIBOR 30 day rate; (ii) that part of the loan funds must be placed on deposit with approved banks as determined by KMP (the "Escrowed Amount"); and (iii) that the loan balance, which was not escrowed, may be used by the shareholders for their general corporate purposes in other words, it made a proposal in almost precisely the same terms as the arrangement that it contends in this arbitration that KHL dishonestly failed to tell it about;
c. there is no evidence that the value of KMP's funds loaned to FQMF was not available for use if needed: on the contrary, amounts were repaid to KMP, together with interest, as and when required.
59. The thrust of ZCCM-IH's case is that it was deliberately and dishonestly misled by KHL into believing that the transaction was not in fact a loan (implicit in which is an entitlement on the part of the borrower to use the funds it has borrowed in any way it sees fit), but we are unable to accept ZCCM-IH's submission that KHL's characterisation of the arrangement as a "deposit" had the dishonest connotation that ZCCM-IH now ascribes to it in circumstances where both parties repeatedly described the same arrangement as a "loan"; where having had the arrangement described both as a "deposit" and as a "loan" (e.g. in the Memorandum) ZCCM-IH sought a similar loan for itself; and where it is undisputed that (i) KMP's funds were repayable on demand; and (ii) they were repaid as and when required, with interest. On the contrary, taken in the round, and in the context of all the discussions that took place in relation to the arrangement over the period in question, as reflected in the contemporaneous documentation, KHL's description from time to time of the arrangement as a "deposit" was, not in our judgment, obviously or necessarily dishonest. To establish a prima facie case of dishonesty it is insufficient, as a matter of law, to point to representations that are consistent with honesty, unless there is some additional factor that "tilts the balance", which is not the case here."
a) At paragraphs 60-2 that the same point could be made in relation to the representations as to the rate of return. The Tribunal found that ZCCM had put in no evidence to support the assertion that a better rate of return could have been obtained and that the only independent evidence was a report of KPMG which supported LIBOR as arms' length based on an analysis of short term interest rates. Hence it found the representations were consistent with honesty;
b) At paragraphs 63-5 that the case on loss was bound to fail in the light of the facts that (i) ZCCM had known about the rate of interest and not suggested an alternative arrangement, (ii) KMP had extensive capital requirements which made short term deposit arrangements sensible and (iii) there was no evidence that the directors of KMP could not properly have made this arrangement.
c) At paragraph 67 it found:
"ZCCM-IH has in our judgment failed to make out a prima facie case either as to falsity or as to loss. These conclusions are fatal to ZCCM-IH's permission application, whichever way it is put. Most of ZCCM-IH's causes of action are founded on its allegations of deliberate dishonesty which in our view fail to meet the threshold for a finding of dishonesty. All of its causes of action are dependent upon proof of loss, as to which ZCCM-IH has put in no evidence."
The Original Arbitration Claim
The Ruling: Procedural Order or an Award?
"A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3)."
"I have always understood the position to be that there are no circumstances which could give rise to a power to review an interlocutory direction not made in the form of an award. Basically, the position is, as I understand the authorities, that the Court has never had some general power to supervise arbitration and review interlocutory decisions. The power which it does have comes from the Arbitration Acts. It follows that there can be an examination as to whether there has been misconduct at any stage which may lead to the arbitrator being removed. But the power to review and remit under s. 22 applies to awards. (See Mr. Justice Donaldson (as he then was) in Exormisis Shipping S.A. v. Oonsoo, [1975] 1 Lloyd's Rep. 432; Three Valleys Water Committee v. Bunnie, (1990) 52 B.L.R. 47, a decision of Mr. Justice Steyn (as he then was); and Lord Donaldson, M.R. in King v. Thomas McKenna Ltd., [1991] 2 Q.B. 480 at p. 490B-C). In so far as the Judge relied on s. 22(1) (which speaks of matters rather than awards), as providing the power to review and remit a decision not in the form of an award, it seems to me with respect his view is inconsistent with well-established authorities."
Discussion
a) The Court will certainly give real weight to the question of substance and not merely to form: Emmott at paragraph 18 (by concession); Russell on Arbitration (24th edition, 2015) at [6-003].
b) Thus, one factor in favour of the conclusion that a decision is an award is if the decision is final in the sense that it disposes of the matters submitted to arbitration so as to render the tribunal functus officio, either entirely or in relation to that issue or claim: Cargill at 5, The Smaro at 247; Enterprise Insurance at [39].
c) The nature of the issues with which the decision deals is significant. The substantive rights and liabilities of parties are likely to be dealt with in the form of an award whereas a decision relating purely to procedural issues is more likely not to be an award. Brake at [25], The Smaro at 247; Emmott at [19-20], Cargill at 5, The Trade Fortitude at 175.
d) There is a role however for form. The arbitral tribunal's own description of the decision is relevant, although it will not be conclusive in determining its status: The Trade Fortitude at 175 Emmott at [19-20].
e) It may also be relevant to consider how a reasonable recipient of the tribunal's decision would have viewed it: Emmott at [18]; Ranko p 4.
f) A reasonable recipient is likely to consider the objective attributes of the decision relevant. These include the description of the decision by the tribunal, the formality of the language used, the level of detail in which the tribunal has expressed its reasoning: Emmott at [19 -20]; Uttam Galva Steels at [29]; The Trade Fortitude at 175; The Smaro at 247.
g) While the authorities do not expressly say so I also form the view that:
i. A reasonable recipient would also consider such matters as whether the decision complies with the formal requirements for an award under any applicable rules.
ii. The focus must be on a reasonable recipient with all the information that would have been available to the parties and to the tribunal when the decision was made. It follows that the background or context in the proceedings in which the decision was made is also likely to be relevant. This may include whether the arbitral tribunal intended to make an award: The Smaro at 247, Ranko p 4.
S. 68: The Law
"(1) A party to arbitral proceedings may ... apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award.
(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant-
(a) failure by the tribunal to comply with section 33 (general duty of the tribunal);
(d) failure by the tribunal to deal with all the issues that were put to it; "
"the courts strive to uphold arbitration awards. They do not approach them with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults Far from it. The approach is to read an arbitration award in a reasonable and commercial way, expecting, as is usually the case, that there will be no substantial fault that can be found with it"
"6. the focus of the enquiry under section 68 is due process, not the correctness of the tribunal's decision. As the DAC Report states, and numerous cases since have reiterated, the section is designed as a long-stop available only in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected .
30. A number of cases have emphasised that the court should read the Award in a reasonable and commercial way and not by nitpicking and looking for inconsistencies and faults. A similar point was made by Teare J in Pace Shipping v Churchgate Nigeria Ltd [2009] EWHC 1975 (Comm); [2010] 1 Lloyd's Rep 183 at [20] specifically deprecating a minute textual analysis."
" the Court of Appeal has said that they do not mean each and every point or argument in dispute. Rather they mean those issues which the tribunal has to resolve. The "issue" must be an important or fundamental issue, for only a failure to deal with such could be capable of causing substantial injustice. There is also a difference between a failure to deal with an issue and a failure to provide sufficient reasons for a decision on that issue. The court will not nit-pick through the reasons in an award. Once the court has identified the issue and the tribunal has dealt with it in any way that is the end of the enquiry. It does not matter for the purposes of ground (d) whether the tribunal has dealt with it well, badly or indifferently."
"[49] In my judgment "issues" certainly means the very disputes which the arbitration has to resolve. In this case the dispute was about the open market rent for this property. The arbitrator decided that. In order fairly to resolve that dispute the arbitrator may have subsidiary questions, "issues" if one likes, to decide en route. Some will be critical to his decision. Once some are decided, others may fade away."
"[20] : general issues can often be broken down into more specific issues. An "issue" of remoteness, itself an aspect of the "issue" whether damages are recoverable, might well embrace sub-issues, and I think that sub-section 68(2)(d) can cover sub-issues of this kind.
[21] The assumption of responsibility question is, to my mind, an "issue" within the meaning of sub-section 68(2)(d). It is not simply a way of presenting the question of foreseeability, and not simply an argument in support of a contention that losses were not within the First Limb or the Second Limb of Hadley v Baxendale. It can be difficult to decide quite where the line demarking issues from arguments falls, but here almost the whole of Dow's claim could have depended upon how the assumption of responsibility question was resolved. I accept PIC's submissions about whether it was an issue because this accords with what I consider to be the ordinary and natural meaning of the word, and I find support for this conclusion in that, as I see it, fairness demanded that the question be "dealt with" and not ignored or overlooked by the Tribunal, assuming it was put to them."
"[19] But, although the Board expressly referred to the evidence of Mr Newcomb in its Award , there is no indication that it addressed what was clearly an important and discrete issue. Paragraph 7.12 of the Award (where the evidence and the Board's conclusion in relation to listed persons is set out) does not address the point.
[20] the Board appears to have overlooked the issue as a separate issue altogether, and concentrated on the identity of the specific suppliers; If the Board had indeed been addressing the wider argument, it is inconceivable that it would not have addressed its reasons for not accepting or treating as irrelevant Mr Newcomb's unchallenged evidence."
"On analysis, these criticisms are all directed to asserting that the arbitrators misdirected themselves on the facts or drew from the primary facts unjustified inferences. Those facts are said to be material to an "issue", namely what were the terms of the oral agreement. However, each stage of the evidential analysis directed to the resolution of that issue was not an "issue" within Section 68(2)(d). It was merely a step in the evaluation of the evidence. That the arbitrators failed to take into account evidence or a document said to be relevant to that issue is not properly to be regarded as a failure to deal with an issue. It is, in truth, a criticism which goes no further than asserting that the arbitrators made mistakes in their findings of primary fact or drew from the primary facts unsustainable inferences."
"[32] The issue of the non-applicability of the Rotterdam resale prices for the reasons on advances by the Buyers to the Board was a quite distinct issue from the Sellers' claim for an increase in the damages. It was an issue raised fair and square before the Board by the Buyers and yet it received no mention at all by the Board in their Award. In my judgment, even after a fair, reasonable and commercial reading of the Award, the conclusion must be that the Board failed to deal with this issue."
"[38] As those observations recognise, there should be some form of communication, normally in the form of a decision, by an arbitral tribunal to the parties from which the latter can ascertain whether or not an essential issue has dealt with. It is not sufficient for an arbitral tribunal to deal with crucial issues in pectore, such that the parties are left to guess at whether a crucial issue has been dealt with or has been overlooked: the legislative purpose of section 68(2)[d] is to ensure that all those issues the determination of which are crucial to the tribunal's decision are dealt with and, in my judgment, this can only be achieved in practice if it is made apparent to the parties (normally, as I say, from the Award or Reasons) that those crucial issues have indeed been determined."
"(vi) If the tribunal has dealt with the issue in any way, Section 68(2)(d) is inapplicable and that is the end of the enquiry (Primera at paragraphs 40-1); it does not matter for the purposes of Section 68(2)(d) that the tribunal has dealt with it well, badly or indifferently.
(vii) It matters not that the tribunal might have done things differently or expressed its conclusions on the essential issues at greater length (Latvian Shipping v Russian People's Insurance Co [2012] 2 Lloyd's Rep 181, paragraph 30)."
"[23] By contrast, if it is realistically possible that the arbitrator could have reached the opposite conclusion had he acted properly in that the argument was better than hopeless, there is potentially substantial injustice. The accepted test now seems to be that there is substantial injustice if it can be shown that the irregularity in the procedure caused the arbitrators to reach a conclusion which, but for the irregularity, they might not have reached, as long as the alternative was reasonably arguable."
"In determining whether there has been substantial injustice, the Court is not required to decide for itself what would have happened in the arbitration had there been no irregularity. The applicant does not need to show that the result would necessarily or even probably have been different. What the applicant is required to show is that had he had an opportunity to address the point, the tribunal might well have reached a different view and produced a significantly different outcome."
Issue 1: Failure to deal with the allegation that KHL expressly represented to ZCCM how FQMF was holding the monies.
a) Held on deposit accounts maintained by FQMF with reputable international financial institutions/managed by highly rated international financial institutions; and
b) Retained on deposit accounts for KMP's use and were readily available as and when needed to meet KMP's working capital requirements.
Discussion
a) False representation that KMP's monies were being held by FQMF on deposit with reputable international financial institutions for KMP's use.
b) False representation that KMP's monies were readily available for KMP's working capital requirements (when in fact FQMF was using them).
c) Therefore, false representation that interest at 30 day LIBOR was a fair and appropriate rate and a better rate than KMP could otherwise expect to obtain by use of the monies.
"A tribunal does not fail to deal with issues if it does not answer every question that qualifies as an 'issue'. It can 'deal with' an issue where that issue does not arise in view of its decisions on the facts or its conclusions. A tribunal may deal with an issue by so deciding a logically anterior point."
Issue 2: Failure to address the issue of breach of fiduciary duties.
"Moreover, critically in this context, whether or not to place the monies on longer-term deposits, or to use them in some other way, would be a management decision, to be taken by the KMP board; and there is no evidence that the KHL directors on that board, acting in accordance with their fiduciary duties and in the best interests of KMP, could not quite properly have decided that putting the monies on short-term deposit was the right thing to do."
Discussion
"For these reasons, ZCCM has in our judgment failed to make out a prima facie case either as to falsity or as to loss. These conclusions are fatal to ZCCM's permission application, whichever way it is put."
Issue 3: Tribunal's failure to deal with the issue of breach of the ASHA
Issue 4: Failure to deal with the case put to it by ZCCM in relation to the rate of interest paid by FQMF to KMP
Discussion
Issue 5: The Tribunal wrongly proceeded on the basis that it was undisputed that KMP's monies were repaid as and when required and/or failed to address the issue that KMP's monies were not always readily available
"[37] From these decisions I derive the following propositions relevant to grounds under section 68(2)(a):
(1) The underlying principle is that of fairness or, as it is sometimes described, natural justice.
(3) It will generally be the duty of a tribunal to determine an arbitration on the basis of the cases which have been advanced by each party, and of which each has notice. To decide a case on the basis of a point which was not raised as an issue or argued, without giving the parties the opportunity to deal with it, will be a procedural irregularity. "
Discussion
Exhaustion of Remedies
"(1) The following provisions apply to an application or appeal under section 67, 68 or 69.
(2) An application or appeal may not be brought if the applicant or appellant has not first exhausted
(a) Any available arbitral process of appeal or review "
"Within 30 days after the receipt of the termination order or the award, a party, with notice to the other parties, may request the arbitral tribunal to make an award or an additional award as to claims presented in the arbitral proceedings but not decided by the arbitral tribunal."
"In my judgment section 57(3)(b), which uses the word "claim", only applies to a claim which has been presented to a Tribunal but has not been dealt with, as opposed to an issue which remains undetermined, as part of a claim I consider that the terms of section 57(3)(b) are apt to refer to a head of claim for damages or some other remedy (including specifically claims for interest or costs) but not to an issue which is part of the process by which a decision is arrived at on one of those claims."
Discussion
The Fraud Claim
a) The arrangement between KMP and FQMF was "a simple loan at interest" and, accordingly, there were no restrictions on the use to which FQMF could put KMP's money.
b) Use of the word "deposit" to describe the arrangement between KMP and FQMFL did not mislead ZCCM because in a general deposit arrangement there is no restriction on the use to which the monies advanced can be put.
c) "All of the evidence" supported its case and that there was "not a shred of evidence" to support ZCCM's case.
I was taken to a number of transcript references focussing on this distinction between loan and deposit; and while I have not read the entire transcript it is fair to say that it is apparent from the Ruling that this distinction was the focus of much argument at the hearing.
"Kansanshi Mining PLC-Audit Findings
Reference is made to our audit that we conducted from 14 June 2012 to 29 June 2012.
Thus, this letter serves as notice of the audit findings emanating from the audit mentioned above.
1.3.2 Loan to FQM Finance
The company provided an unsigned loan agreement with FQM Finance dated 1 January 2007. Though the company has argued that the arrangement was not a loan but simply a senior credit obligation.
However, we still feel the loan should have attracted interest at Arm's Length like a loan to any other third party would have attracted. The company recently went to the market to get a loan amounting to one billion dollars at LIBOR plus 3%. This is very unusual especially that as at 26 June 2012 the loan account (money learnt FQM Finance) was about $2,000,000,000. Why then should a company that has a reserve with as much as $2,000,000,000 opt to get a loan with interest rates at LIBOR plus 3%? This further explains why we have argued that the money should have been lent at LIBOR plus 6% to reflect what such a transaction would obtain on the market.
Based on our arguments above, we intend to readjust the lending rate so that it is based at LIBOR plus 6%. Thus, the adjusted interest receivable will be as follows: ."
"Loan to FQM Finance
We reiterate the explanation given earlier that this was not a loan but rather a deposit. This deposit cannot be classified as a loan as it has no features common to a loan.
The following are features you would expect from a loan
- Tenor you would normally expect a tenor to be in the document;
This is an "at call" deposit, so the tenor is at default overnight. This is a common feature with all "deposits".
- Security;
There was no security given by KMP or requested by FQML.
- Financial Covenants;
There were no financial or other covenants attached to the arrangement.
- Repayment;
There is no repayment schedule.
- Material Adverse Change/ Event of default clauses;
There were no MAC or EOD clauses.
The above clearly show that it was not a loan.
Pricing for short dated deposits is generally based off LIBOR adjusted for short term credit risk.
In terms of LIBOR, this is a standard benchmark for pricing of both Deposits and Loans. It is normal to match the LIBOR rate with the tenor, so it is appropriate to use Overnight Libor for pricing.
It is worthwhile to note that the income tax act neither defines a loan nor prescribe any criteria necessary for an advance to be classified as a loan. It is therefore reasonable to assume that the income tax act expects the same features as above from a loan .
Based on the above representations, we expect the assessments to be adjusted accordingly and fairly reflecting a consistent and compliant tax payer. "
"Loan to FQM
, we indicated to you that the funds you are referring to as a loan to FQMF is not actually a loan but just a deposit account where all proceeds relating to the exports of KMP are deposited. The funds are accessed by KMP as and when need arises. We submit that the advance does not have the features of a loan and hence cannot be treated as such. We argue on the same line below.
The issue of Arm's Length transacting between KMP and FQM is a matter of fact. KMP has indicated from previous correspondence that there is an arrangement between KMP and FQMF whereby all proceeds of Copper are deposited in the London FQMF account held at Standard Chartered Bank. This is a purely finance/treasury management arrangement to enable the treasury function which is housed in London conveniently manage the funds. There was no loan that KMP advanced to FQMF as found by your audit team. All sale proceeds are deposited into the account in London and the funds are at KMP's disposal. KMP actually draws money from the same account monthly and as and when the funds are needed based on its monthly cash budget requirements.
You have also stated that charging interest at LIBOR was not at Arm's Length. As indicated above, the depositing of funds into the UK account is actually not a loan but just a deposit into an account where central treasury (based in London) can easily monitor and manage the funds, KMP can only recover the interest that it would ordinarily earn on a deposit account. Further note that deposit and borrowing rates differ."
a) Delay, for which ZCCM is culpable;
b) ZCCM's continued participation in the arbitration notwithstanding knowledge of the alleged irregularity;
c) ZCCM's failure to seek disclosure or an adjournment pending disclosure;
d) The test for the introduction of new evidence has not been met;
e) KHL's non-disclosure could not amount to a fraud.
Amendment/Extension of time
"Accordingly, although each case turns on its own facts, the following considerations are, in my judgment, likely to be material:
(i) the length of the delay;
(ii) whether, in permitting the time limit to expire and the subsequent delay to occur, the party was acting reasonably in all the circumstances;
(iii) whether the respondent to the application or the arbitrator caused or contributed to the delay;
(iv) whether the respondent to the application would by reason of the delay suffer irremediable prejudice in addition to the mere loss of time if the application were permitted to proceed;
(v) whether the arbitration has continued during the period of delay and, if so, what impact on the progress of the arbitration or the costs incurred the determination of the application by the court might now have;
(vi) the strength of the application;
(vii) whether in the broadest sense it would be unfair to the applicant for him to be denied the opportunity of having the application determined."
"Moreover, where the evidence is consistent with laxity, incompetence or honest mistake on the one hand, and a deliberate informed choice on the other, an applicant's failure to adduce evidence that the true explanation is the former can legitimately give rise to the inference that it is the latter."
"[31] ... the court's approach to the strength of the challenge application will depend upon the procedural circumstances in which the issue arises. On an application for an extension of time, the court will not normally conduct a substantial investigation into the merits of the challenge application, .... Unless the challenge can be seen to be either strong or intrinsically weak on a brief perusal of the grounds, this will not be a factor which is treated as of weight in either direction on the application for an extension of time....
[32] The position, however, is different where the application for an extension of time has been listed for hearing at the same time as the challenge application itself, and the court has heard full argument on the merits of the challenge application. In such circumstances the court is in a position to decide not merely whether the case is "weak" or "strong", but whether it will or will not succeed if an extension of time were granted. If the challenge is a bad one, this should be determinative of the application to extend time....
[33] Conversely, where the court can determine that the challenge will succeed, if allowed to proceed by grant of an extension of time, that may be a powerful factor in favour of the grant of an extension, at least in cases of a challenge pursuant to s 68. In such case the court will be satisfied that there has been a serious irregularity giving rise to substantial injustice in relation to the dispute adjudicated upon in the award Where the delay is due to incompetence, laxity or mistake and measured in weeks or a few months, rather than years, the fact that the court has concluded that the s 68 challenge will succeed may well be sufficient to justify an extension of time. The position may be otherwise, however, if the delay is the result of a deliberate decision made because of some perceived advantage."
"[66] .. Furthermore, the importance and significance of the allegations raised (whatever the eventual outcome of the application) are such that I would be extremely reluctant to shut out CAT on grounds of delay. "
Discussion
The Merits of the Fraud Claim
a) [67] "There must be some form of dishonest, reprehensible or unconscionable conduct that has contributed in a substantial way to obtaining the award."
b) [70] "In any event, the applicant must also establish that there has been a substantial injustice. Amongst other things, the applicant must show that the true position or the absence of fraud would probably have affected the outcome of the arbitration in a significant respect."
c) [90] " the combination of Mr Rainsberry's complete lack of engagement with the relevance of correspondence, the failure to provide a meaningful explanation for its non-disclosure and the unwarranted and intemperate attacks on others all indicate that he did not have a good explanation, let alone a perfectly simple one, for the correspondence and his failure to disclose it."
d) [91] "I should note that I have repeatedly used, for convenience, the verb "disclose" and the noun "disclosure". There was no order for disclosure in the procedural sense. I do not regard that as relevant on this application and I do not intend this verb/noun to be construed in that way. What I mean is that matters were not disclosed in the sense that matters were not put before the arbitrator which on their face contradicted the version of the facts that was advanced before him."
e) [105] "I find, therefore, that the award was obtained by fraud in that matters that were completely inconsistent with key issues in Knowles' case were deliberately withheld from the arbitrator."
a) There was no fraud in circumstances where there was no obligation to disclose documents, and ZCCM were in any event well aware of the documents;
b) The merits of the loan vs deposit agreement were not material for the purposes of the application for permission to pursue a derivative claim, in which the Tribunal assumed that the arrangement was a loan and that the representations alleged were made;
c) The documents could have had no effect.
Discussion
Remaining issues
"Unless the plaintiff can produce evidence newly discovered since the trial, which evidence could not have been produced at the trial with reasonable diligence and which is so material that its production at the trial would probably have affected the result and (when the fraud consists of perjury) is so strong that it would reasonably be expected to be decisive at the re-hearing and if unanswered must have that result."
"For the reasons that I have given, I do not consider that the Etoile and Bracco cases are authority for the proposition that, in cases where it is alleged that a judgment was obtained by fraud, it may only be set aside where the party who makes that application can demonstrate that the fraud could not have been uncovered with reasonable diligence in advance of the obtaining of the judgment. If, however, they have that effect, I consider that they should not be followed. In my view, it ought now to be recognised that where it can be shown that a judgment has been obtained by fraud, and where no allegation of fraud had been raised at the trial which led to that judgment, a requirement of reasonable diligence should not be imposed on the party seeking to set aside the judgment.
55. Two qualifications to that general conclusion should be made. Where fraud has been raised at the original trial and new evidence as to the existence of the fraud is prayed in aid to advance a case for setting aside the judgment, it seems to me that it can be argued that the court having to deal with that application should have a discretion as to whether to entertain the application. .... The second relates to the possibility that, in some circumstances, a deliberate decision may have been taken not to investigate the possibility of fraud in advance of the first trial, even if that had been suspected. If that could be established, again, I believe that a discretion whether to allow an application to set aside the judgment would be appropriate but, once more, I express no final view on the question."
"66. I would leave open the question whether the position as I have summarised it is any different where the fraud was raised in the earlier proceedings but unsuccessfully. My provisional view is that the position is the same, for the same reasons. If decisive new evidence is deployed to establish the fraud, an action to set aside the judgment will lie irrespective of whether it could reasonably have been deployed on the earlier occasion unless a deliberate decision was then taken not to investigate or rely on the material."
" Where the evidence of forgery which it is sought to adduce is credible and cogent, this Court is made aware that there may well have been an attempt by one party to deceive the other and the court; so that a trial which ought to have been a fair trial may well have been rendered an unfair trial by that party's conduct. In those circumstances the requirements of doing justice are likely to point strongly towards admitting that evidence. It would be a reproach to the administration of justice if a party who had set out to deceive the court and the other side were able to say, once his deception had been found out, that, if only the other side had been more astute, the deception would have been discovered earlier. ..."
"If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Part, any objection
(d) that there has been any other irregularity affecting the tribunal or the proceedings, he may not raise that objection later, before the tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection "
""[i]t follows that where a party knows of a serious irregularity but takes a deliberate decision to continue to take part in the proceedings without objection and takes the point only after losing the arbitration, such party will generally be precluded from raising such irregularity at that later stage ...
Moreover, the effect of s. 73 is that an objection to a serious irregularity may not be raised by a party after participating in the proceedings without taking objection, unless that party can show that at the time of participation the grounds for the objection were not known to him and he could not with reasonable diligence have discovered them": Rustal Trading Ltd v Gill & Duffus SA [2000] 1 Lloyd's Rep 14 at 20-21; Thyssen Canada at para 18. "If the respondent can show that the applicant took part in or continued to take part in the arbitral proceedings without objection, after the grounds of objection arose (as happened in the present case since the alleged facts which are the basis for the objection occurred almost 3 years before the hearing of the arbitration), the burden passes to the applicant to show that he did not know and could not with reasonable diligence have discovered those grounds at the time": Thyssen Canada at para 18": Nestor Maritime at [11].
Discussion
Conclusion