Mr Justice Burton :
- The Second Defendant, the Islamic Republic of Pakistan ("IRP") applied (inter alia) to set aside service or for a stay on grounds of forum non conveniens, in relation to a claim brought against it by the Claimant, Mid-East Sales Limited, a company incorporated in Liberia. The grounds relied upon were not of state immunity, because the claims arise out of a commercial transaction, into which IRP allegedly entered, but upon grounds of lack of jurisdiction, absence of arguable case and non-disclosure. Such is commonplace in respect of challenges in this Court by a Defendant on grounds of jurisdiction. But there is an unusual feature. The proceedings now challenged on grounds of jurisdiction were issued on 11 June 2007; the Order granting leave to serve out of the jurisdiction, by Gloster J, was made on 4 December 2007 (more than 6 years ago); proceedings were served, after considerable difficulty, on 15 January 2009 (more than 5 years ago); judgment was entered in default by my order of 14 January 2011 (more than 3 years ago); the default judgment was served, again after difficulty, on 3 September 2012 (1½ years ago) and the Defendant has issued (but only after the issue by the Claimant of third party debt applications to enforce the judgment) this application on 10 April 2013, together with an application for an extension of time to file a Part 11 application.
- The context therefore is an application which Mr Alexander Layton QC, who appears for IRP together with Ms Mahnaz Malik, recognises is way outside the normal timescales for promptness in bringing an application to set aside a judgment, but he seeks to explain the earlier periods, emphasises that the last period is most relevant and relies on what he submits to be the strength of IRP's case to set aside the judgment.
- Mr Rafiuddin on behalf of the Claimant negotiated in 1994-5 with Mr Ahmad Bhatti on behalf of one or other or both of the entities known as United Engineering & Trading Company (PVT) Limited ("UETC"), now the First Defendant, and Dr AQ Khan Research Laboratories ("KRL"), both involved in a Pakistan Government Research Laboratory conducting inter alia nuclear weapons' development, which came under the control of the Strategic Plans Division ("SPD"), which is responsible for all aspects of Pakistan's nuclear security or atomic energy, to supply and equip two power stations. Mr Rafiuddin's case is that he made it clear to Mr Ahmad Bhatti of KRL that he wanted to contract on the basis of the Claimant's standard conditions so as to incorporate provision for English law and jurisdiction. Mr Bhatti objected to this, pointing out that payment was to be made for the plant under a confirmed letter of credit. Mr Rafiuddin explains (paragraph 6 of his first witness statement of 3 May 2007) that:
"In the end, we agreed that with payment being guaranteed via letter of credit to be confirmed by the paying bank, the contract for the power stations would specify neither law nor jurisdiction. However I knew that in a contract of this type it was certain that KRL would require further services and spares. I therefore insisted and Mr Bhatti agreed that the Claimants would draw up Special Conditions of Contract specifying English law and jurisdiction and that these would apply, as well as the Claimant's general conditions, to any further transactions not paid in advance or covered by reconfirmed letters of credit."
This is corroborated by the preamble and the terms of a Modification to [Claimant's] General Conditions of Sale, signed by Mr Rafiuddin on 5 March 1995. He says he delivered the Purchase Contract for the plant (dated 6 March 1995) together with the Special Conditions to Mr Bhatti on 5 March (although the Particulars of Claim at paragraph 3 erroneously recite 5th May) 1995. The General Conditions provide for English law, but not jurisdiction. The Special Conditions provided as follows:
"Unless it is specifically mutually agreed otherwise in writing any questions relating to any quotation, contract or supply made subsequent to the completion of deliveries of stores/goods/services ordered under [the Purchase Contract] shall be subject to the [Claimant's] General Conditions of Sales (November 1994) and to the above-mentioned Special Conditions of Sale or agreed written amendments of these conditions and shall be determined in all respects by the laws of England, and any dispute(s) incapable of amicable resolution shall be tried and adjudicated in the appropriate UK Court irrespective of where the cause for action may arise. Jurisdiction for the said action will rest in the UK."
- Mr Layton points out the provision (clause 20.1) in the Purchase Contract providing for amendment to be made in writing, but there was, on the Claimant's case, no amendment of the Purchase Contract, but a specific agreement for the incorporation of conditions into the subsequent supply of any services or spare parts.
- There was such a subsequent contract, for the purchase of spare turbines, originally supplied on loan and subject to an agreement, made in July 1995 between Mr Rafiuddin and Mr Bhatti and Mr Badr-ul-Islam of KRL, that the spare parts would in due course be purchased, and they were invoiced by an invoice dated 31 July 1995, by a footnote to which it was provided that the turbines were to be sold "subject to the provisions of our General and Special Conditions of Contract, a copy of which will be forwarded on request." In 1998 the Claimant's charged the then current price for the two turbines of $1,674,503, and a balance remains unpaid and payable of $1,024,453.
- Further parts were supplied and services provided on the same terms:
(i) Modified fuel inlet nozzles for the units at $7,500;
(ii) The supply of resident technical experts in the sum of $535,029;
(iii) Subsequent repair works at $11,250.
- These sums remained outstanding, despite repeated requests by the Claimant and, according to Mr Rafiuddin, repeated assurances by Mr Bhatti and the eponymous Dr AQ Khan of KRL.
- Mr Rafiuddin describes a meeting at KRL's offices on 18 February 2001 with Dr Khan and five other representatives of KRL, including Mr M.A. Khan, at which he continued to press for payment, and Dr Khan laughed off his threat of legal proceedings, because of the context of national security. Mr Rafiuddin reminded Dr Khan that satisfactory commissioning of both power stations had been certified in March 1998, and that the plant had operated thereafter without criticism until damage to one of the units in circumstances not his responsibility. Mr Rafiuddin says that Dr Khan offered to pay off all that was due if the Claimant assisted in the repair of such damage so that it could be re-commissioned, and (paragraph 22 of his first witness statement) that Dr Khan confirmed that the balance owing would be paid as soon as the Claimant had arranged for the unit to be repaired and re-commissioned: and that this agreement is evidenced by a minute incorporating such agreement, signed by Dr Khan and Mr M.A. Khan on that day in those terms.
- The works were done and Mr Rafiuddin pursued payment, referring to the agreement of 18 February 2001 by a letter dated 21 March, and particularly 22 March 2001, the latter of which ended in "we shall be most grateful if you could look into this matter urgently and sanction our payments as already agreed between us, and minuted by Mr M.A. Khan on February 18 2001".
- There are further references to this in Progress Reports, and there were further meetings between the parties in March and April 2001. The Defendants have now produced a handwritten amendment to the minute of 18 February, seeking to detract from the agreement there recorded, but Mr Rafiuddin does not accept that it is genuine or consistent with the contemporaneous correspondence, including the Claimant's consistent reliance upon, and the lack of any rejection or questioning of, the agreement as contained in the 18 February minute. The Claimant then gave in his second witness statement dated 22 November 2007, an account not contained in his first witness statement:
"4. . . In about May or June 2001 I attended a meeting at Dr AQ Khan's office, attended by Dr AQ Khan and Mr Mohammed Fahim, KRL's member of Finance. At that time Dr Khan no longer headed KRL but he worked for the President of Pakistan as Chief Scientific Advisor with special responsibility for KRL affairs.
5. As I was well aware, at that time Pakistan had difficulties finding foreign currency to meet its foreign currency obligations. An organisation like KRL could not simply pay my company out of its own resources. It needed to apply to the Special Projects Directorate for funding out of the Ministry of Defence budget. Nevertheless, because of its importance to the Ministry as the source of nuclear weapons, such applications by KRL were always granted.
6. At that meeting it was agreed between the Claimant and the Defendants that KRL would apply to the Special Projects Directorate of the Ministry of Finance for funds to pay the sums outstanding and that in return the agreement of 18th February 2001 would be varied so as to provide that payment would only fall due when budget approval for the payment had been given by the Directorate.
7. I recall that in front of me Dr Khan instructed Mr Fahim to write the letter and put it up to him for signature. However, [I] did not expect this to happen immediately. In Pakistan things move slowly and I would not have regarded KRL as being in breach of its obligation until the end of 2001. I believed (and believe now) that if KRL had done what it promised and made the application, payment would have been made shortly thereafter."
On 9 January 2002 he received a fax from KRL, which is exhibited, which he submits made it clear that it had no intention of applying for payment of the sum due to the Claimant. Paragraphs 17 to 21 of the Particulars of Claim therefore plead that payment was required to be made, pursuant to the agreement as varied, by a reasonable time after May 2001, and in any event by or before such repudiatory fax.
- Mr Layton submits:
(i) This case is an afterthought, and untrue, and is only now put forward to seek to substantiate a case that the Claimant's cause of action only arose upon KRL making it clear in January 2002 that it was not going to comply with the alleged agreement of May/June 2001, and thus in an attempt to solve what would otherwise be a limitation problem for the Claimant if the 6 years ran from 18 February 2001, because the application for service out was 3 May and the Claim Form was issued on 11 June 2007.
(ii) Mr Rafiuddin's fax of 7 June 2001 makes no mention of the alleged meeting in May/June 2001, nor does that of 13 June or 1 July 2001.
- Mr Page QC, for the Claimant, points out that he referred these very matters to Gloster J when she made the ex parte order for service out, as appears from the transcript of that hearing on 3 December 2007, and points out that there has been even now no evidence in response from any of the KRL individuals involved in the project, namely neither Dr Khan nor Mr Fahim, (both alleged by the Claimant to have been present at the meeting of May/June 2001), nor Mr Badr-ul-Islam, Mr M.A. Khan or Mr Shamin ur Rahman. Mr Rafiuddin later gave in his fourth witness statement, in opposition to these applications by IRP, a much fuller account of the events of 2001 (paragraphs 45 to 55), and has now dated the meeting as 8 May 2001.
- Mr Rafiuddin recounted in his first witness statement how correspondence continued with no result, and in 2004 the Claimant instructed English solicitors to recover the debt, and wrote a pre-action protocol letter on 30 April 2004, to which there was no response. However in 2005 the Claimant discovered that the First Defendant and KRL had started proceedings in Pakistan in June 2004, of which the Claimant had had no knowledge, which had been served, Mr Rafiuddin suggests in his first witness statement (not rebutted in any subsequent evidence) "presumably deliberately" on an out of date address for the Claimant. He continued:
"29. The Pakistan action . . . was commenced in June 2004, presumably with the object of pre-empting the English proceedings. It has not progressed beyond the exchange of pleadings, in which the Claimants have challenged the jurisdiction of the Pakistan courts. No directions have been given in this case and there have already been a number of adjourned procedural hearings, and I believe that the Defendants intend, and will be able, to spin the proceedings out indefinitely so as to prevent any adjudication on the Claimant's claim. This can easily be done in Pakistan, where delays in court proceedings are notorious."
- The Claimant in May 2007 lodged that witness statement with Gloster J, who raised four questions, inter alia in respect of the inadequacy of evidence supporting the joinder of IRP as a party and of the incorporation into the contract of the Claimant's Special Conditions:
(i) As for the First Defendant, UETC, the Claimant had discovered that it had never been registered as a company in Pakistan. With regard to KRL, that too is not a registered company, and in his second witness statement Mr Rafiuddin explained as follows:
"21. The basis for the addition of the Islamic Republic is that the principal party to the contract sued on would have been KRL, had KRL been a legal entity. Furthermore the Pakistan proceedings were brought in the name of (inter alia) KRL. I believe that KRL is not a legal entity but (as pleaded) is simply an emanation of the Government of Pakistan. KRL is controlled and funded by the . . . SPD, controlled by the Joint Chiefs of Staff Headquarters located at Chaklala Cantonment, Rawalpindi. If this is correct, the proper defendant is the Islamic Republic Pakistan."
(ii) Mr Rafiuddin gave further information as to the contractual history, much as I have set out above. He explained that not all documents he would have wished were available to him, as there had been a theft of his documents in Islamabad on 18 November 1998 in circumstances which he described.
- The position in relation to the Pakistani proceedings has been as follows:
(i) The First Defendant and KRL (not IRP) brought the proceedings on 11 June 2004 against the Claimant and Mr Rafiuddin.
(ii) Once the existence of those proceedings had been discovered and they were in a position to respond to them, the Claimant and Mr Rafiuddin served a defence which denied that KRL is a legal entity with capacity to sue, and incorporated a set off and counterclaim against the First Defendant and KRL for US$7 million, expressly without prejudice to their case that the Pakistan courts had no jurisdiction:
"10.1 It is most respectfully submitted that the present written and counter claim are without prejudice to the rights of the Defendants to initiate and prosecute redress and relief against the Plaintiffs, appropriate proceedings in a Court of Competent jurisdiction.
. . .
12. Paragraph 12 of the aforetitled Suit is denied. This Honourable Court does not have the jurisdiction to adjudicate upon the aforetitled Suit, as both the Defendants have their place of business / residence beyond the jurisdiction of this Honourable Court. The Contract was also not executed within the jurisdiction of this Honourable Court. It was signed in Dubai, U.A.E.
. . .
14. The Defendants very respectfully submit to this Honourable Court, that without prejudice to the plea of lack of jurisdiction, in accordance with Clause l7 of the Defendants' General Conditions of Sale, the dispute raised in this Suit, inclusive of counter claim, is to be governed and determined by and under English Law."
(iii) Preliminary issues were formulated by the Civil Judge, Judge Tarrar, including the issue of the challenge to jurisdiction. By order dated 6 February 2007 Judge Tarrar rejected the jurisdictional challenge.
(iv) The Claimant and Mr Rafiuddin filed a Civil Revision Petition (i.e. an appeal) against Judge Tarrar's order in May 2007 and Judge Paracha on 4 May 2007 stayed the civil action pending that appeal. The statement of KRL's law officer, Mr Piracha, in paragraph 30 of his second witness statement, that there have been no applications by the Claimant to challenge the jurisdiction is plainly incorrect.
(v) No material activity has taken place, save that in early 2009 the case, and the pending appeal, were transferred to the Islamabad High Court, and thereafter, although there were one or two adjournments, there had still been no further action until 18 March 2011, when the Claimant and Mr Rafiuddin filed a motion for dismissal of the proceedings against them on the basis of the lack of capacity of both Pakistani claimants. This motion has not yet been heard, now 3 years on.
The English proceedings
- The Claimant made an application on 3 May 2007, supported by Mr Rafiuddin's first witness statement, for leave to serve out of the jurisdiction in Pakistan on (at that stage) UETC, IRP and KRL. Gloster J concluded on paper that she was not satisfied that the necessary criteria for such permission had been met and, as set out in paragraph 14 above, she set out four reasons for her conclusion, directing that if the application were to be restored it should be made orally.
- Because the Claimant was concerned as to the limitation period, the Claim Form, now addressing only UETC and IRP (for the reasons subsequently explained in paragraph 21 of Mr Rafiuddin's second witness statement, set out in paragraph 14(i) above), was issued in June 2007 and while the Claimant's solicitors put together the renewed application, they sought and obtained from Andrew Smith J on 18 October 2007 an order extending time for service of that Claim Form and Particulars of Claim to 11 January 2008. Mr Dudley of the Claimant's solicitors explained, in paragraph 4 of his witness statement in support, that since the direction by Gloster J:
"My client company, Hugo Page QC (counsel advising) and I have spent much time trying to resolve the issues raised by the Commercial Court Judge. Additionally, and more important than the four reasons put forward by the Commercial Court, has been counsel's concern over the limitation period."
- The renewed application on 3 December 2007 addressed the questions, inter alia as set out in paragraphs 10 and 14 above. Gloster J made the Order, and the Claimant's solicitors then set about seeking to serve the proceedings, so far as IRP was concerned through diplomatic channels, a cumbersome process. Mr Rafiuddin's wife had a personal contact with the then Pakistan High Commissioner, Dr Lodhi, who suggested to her that the Claimant's solicitors should write to her, giving details of the claim. The letter was sent enclosing the proceedings and Gloster J's Order, on 4 March 2008, and Mr Rafiuddin believes that the manuscript annotation at the bottom of the exhibited copy letter records it being passed by the High Commission to the Director-General of the SPD. Mr Dudley in his eighth witness statement before me makes the point that, although such letter was not intended to be, and could not be, service of the proceedings, nevertheless from that time on the Second Defendant was aware of the proceedings and of the Order of Gloster J.
- Meanwhile, at the instance of the Claimant's solicitors, the Royal Courts of Justice Foreign Process Section ("FPS") commenced the diplomatic procedure, notifying the Claimant's solicitors on 7 April 2008 that such service in Pakistan would take a very long time, possibly as long as a year, and further, by a letter dated 20 May 2008, notified them of there being no progress and still an estimated one year.
- On or about 28 May 2008, Mr Rafiuddin called on the Pakistan Deputy High Commissioner Mr Abdul Basit. In his fourth witness statement he gives his account of what occurred, in paragraph 6 to 10. According to him, Mr Basit told him that Dr Lodhi had been in communication with the Director-General of the SPD, who had told Mr Basit to appoint a legal team to fight the case, and that Mr Basit had consequently appointed Mr Iftikhar Ahmad of IA Solicitors to handle the case. Mr Rafiuddin recounts as follows:
"8. I asked Mr Basit if he would confirm in writing that the High Commission had received the claim and passed it on to the concerned authorities. Mr Basit said that he would ask IA Solicitors whether he should. Mr Basit called Mr Ahmed while I was in his office. The call was not on speaker but I could hear Mr Ahmed's voice from Mr Basit's receiver. I could clearly hear both sides of the conversation. They used both English and Urdu, which I also speak. Mr Basit explained what I had asked for. Mr Ahmad told him that he must not acknowledge the Claimants' solicitors' letter or admit that it had been passed on. He said he had the matter in hand. He said that the best thing to do was to ignore the case.
9. Mr Ahmed added that even if the claimant obtained judgment against the Pakistan government it could not be enforced in the UK as there were no vulnerable assets there. The Claimant would have to apply to Pakistan and the Court there would not recognise a default judgment. He then used an Urdu phrase which meant that the Claimant would be forever beating staves around uselessly. Afterwards Mr Basit turned to me and said 'you heard what he said. My hands are tied. I can't give you anything'.
10. I called Mr Dudley and gave him IA Solicitors' details and suggested to him that he should write to IA Solicitors to confirm that they are acting. Mr Dudley did so on 9th June 2008."
- This is denied by Mr Basit in a witness statement of 25 February 2014 (paragraphs 9 to 11). I cannot resolve this dispute; however there is substantial corroboration of Mr Rafiuddin's account in the shape of a Note of Advice by the very same Mr Iftikhar Ahmad, subsequently obtained by the Claimant on an application for disclosure in these proceedings, upon the basis of waiver of legal privilege, by Order of Males J on 14 March 2014. In an Advice of 24 March 2009, Mr Ahmed referred to advice that he had indeed given to IRP in the previous year, namely in the following terms:
"It would be recalled by those instructing me that by way [of] defence strategy it was decided that the Defendants would under no circumstances appear before a High Court in London and defeat the service invoking Article 13 of the [Hague] Convention. This would instantly stay the proceedings and Claimants would have no further forum in England and Wales to file this claim. It was a position adopted after incisive deliberations when I briefed both clients in person last year. The seriousness and the imminent fall-out . . . of Defendant's appearance or acknowledging the service would inevitably open doors of intentional mischief on the part of British media and invite serious consequences for the State of Pakistan."
This clearly suggests that what Mr Page for the Claimant calls the Defendants' "defence strategy" was indeed in place as from March 2008, i.e. before the conversation recounted by Mr Rafiuddin as having taken place on or about 28 May 2008, of which Mr Rafiuddin could have had no other source of knowledge.
- It is also clear that it was as a result of the conversation with Mr Basit that Mr Rafiuddin learnt of the instruction of Mr Iftikhar Ahmad of IA Solicitors, because that is why the Claimant's solicitors then wrote to him at his office in Hendon on 2 June 2008, to the effect that they understood that he had been appointed to act for the Defendants, and asking for confirmation that he had instructions. Mr Dudley describes how he spoke to Mr Ahmed on the telephone on 9 June, when Mr Ahmed said that he expected to be formally instructed, and in a letter of that date IA Solicitors wrote to Mr Dudley, referring to his letter and telephone call and stating that: "we have provisionally been engaged in this matter and are awaiting formal instructions from both Defendants" : they would revert. The Claimant's solicitors chased IA Solicitors on 30 June and 17 July, in response to which IA Solicitors "reiterate that both Defendants have not formally instructed us".
- The witness statements served on behalf of IRP by Mr Piracha, KRL's Director of Legal Affairs (at paragraph 27-28 of his first witness statement) and Mr Gardezi, the Pakistan Deputy High Commissioner (at paragraph 28) both assert that IA Solicitors in the United Kingdom were only asked to advise on the appropriate response to the claim after January 2009 or, per Mr Gardezi, after 6 March 2009. But this was plainly incorrect, as (i) the subsequently disclosed Note of Advice makes it clear that Mr Ahmed was giving advice, as quoted above, in 2008 and (ii) in fact IA Solicitors ceased trading in September 2008, as confirmed both by the Law Society, and subsequently by Mr Ahmed himself, now in Islamabad, in March 2011. Mr Piracha, in paragraph 11 of his second witness statement, has now conceded/corrected this, though Mr Gardezi has not.
- After this dead end, and with no result obtained from another letter to Mr Basit by the Claimant's solicitors, again enclosing the proceedings, dated 7 July 2008, the Claimant had no alternative but to rely on the diplomatic channels, and, as appears from an attendance note dated 11 November 2008, Mr Dudley heard from the Foreign and Commonwealth Office ("FCO") that the Consular Service of the UK's High Commission in Pakistan had tried several times to serve the papers, but that the Pakistan Foreign Ministry was "being difficult" (paragraph 29 of his eighth witness statement). The next development was a letter from the Government of Pakistan Ministry of Defence dated 6 January 2009 sent to the Claimant's solicitors in Pakistan, who had again sought to serve the proceedings. The relevant official in that letter made it clear that:
"According to the position taken by the Claimant in proving both Defendants to be the State of Pakistan, we would require the full compliance with Rule 6.44 of the Civil Procedure Rules as updated in October 2008. We do not consider this purported service by the Solicitors for the Claimant, through an agent in Pakistan, and service required under the Rules and consequently return hereby the document sent by you."
This is a clear and correct reference to CPR Rule 6.44, which governs the service on a State, in accordance with the provisions of the State Immunity Act 1978 ("the 1978 Act") .
- There was a similar if not identical letter sent by the High Commission for Pakistan on 9 January 2009, making the same point by reference to the same Rule. On 6 January, Mr Dudley made a further application for an extension of time, recording that the FCO had made a further effort to effect personal service on 23 December 2008, which service had been refused, and that they were now proposing to deal with service by post under cover of a "note verbale", which would be good service under the 1978 Act. Christopher Clarke J subsequently gave the relevant extension on 30 January 2009.
- As the FCO had thus indicated, service was eventually achieved by them on IRP, in accordance with the provisions of the 1978 Act, on 15 January 2009, and there is a certificate of service to that effect. Gloster J's Order of 4 December 2007 gave IRP two months and twenty three days after service upon it of the Claim Form to file and serve a defence, or to file and serve an acknowledgement of service and then a defence 14 days thereafter.
- IRP never did serve an acknowledgement of service or a defence. This is where Mr Page draws attention to the advice of Mr Iftikhar Ahmad, now disclosed, to which I have referred in paragraph 21 above. He gave two Advices, the first dated 17 March 2009, in which he records that "our intention is not to partake in the proceedings". His advice is to follow the procedure of the Hague Convention, which by Article 13, permits a State to reject service under the Convention "only if it deems that compliance would infringe its sovereignty or security". He says that he had been told over the telephone by the FPS that the reference to the 1978 Act in the form of service "does not change [the] UK's policy to route all documents through diplomatic channels using the Hague Service Convention". His advice was to "have the Ministry of Law instead of the Foreign Office to return the service under the Convention", and he drafted a letter, to which I will refer, for the Ministry of Law to send to the British High Commission. This in his opinion "would stay the proceedings in the High Court in line with the Rules, as no service to the Defendants had been [e]ffected".
- It is apparent from his second Advice dated 24 March 2009 that he was experiencing some resistance from the Ministry of Law and the Ministry of Foreign Affairs in this regard, not perhaps surprising when not only was the service in fact under Rule 6.44 and the 1978 Act (and not the Hague Convention), but the Pakistani Ministry of Defence and the High Commission had specifically required that course to be taken in their letters of 6 and 9 January 2009 (referred to in paragraphs 24 and 25 above). Both the Ministry of Law and the Ministry of Foreign Affairs are recorded as having disagreed that it was appropriate to "respond to the service as advised by me, because it is felt that, as the service was not sent by using the Hague [Convention, the] solicitor would not return the service through the Hague Convention". Mr Ahmed opines "in my opinion both the ministries have not understood the basis of the case of both Defendants who in fact are one as the state of Pakistan", and he then refers to the "defence strategy adopted after incisive deliberations" the previous year, set out in paragraph 21 above.
- It seems that the Pakistan Ministry of Law and Justice was persuaded to adopt Mr Ahmed's draft letter to the British High Commission, notwithstanding that the signature by the Solicitor at that Ministry is recorded as the "Central Authority under the Hague Convention 1965". There is an addition of a sentence which appears to reflect Mr Ahmed's alleged conversation with some officer at the FPS, but would appear to be entirely inappropriate to be stated by someone who was indeed "Central Authority under the Hague Convention" namely:
"We understand that all service to the State of Pakistan is done under the provisions of the Hague Convention . . . We have checked the position with the [FPS] who confirm that it is perfect for us to use 'the Hague Service Convention' for our response."
- On 27 May 2009, by which time the time for service of an acknowledgement of service had long expired, Mr Ahmed, under the letter heading of his firm IA at Islamabad Pakistan, but apparently writing from an address in London N20 because he was on vacation there, stated that "both defendants were in effect the state of Pakistan, who were served with the claim through the British High Commission in Islamabad. The service was returned invoking Article 13 of the 'The Hague Service Convention' in or about the first week of last month. Under the rules all proceedings in the court are stayed following the return of service under the said provision of the Convention. I would be grateful if the final order of the court on this issue of foreign service and its return is communicated to me in London so that we could advise our clients accordingly". According to the FPS that letter was not received by it until July, when it was passed on to the Claimant's solicitors. There was of course no stay, as the Hague Convention did not apply. Meanwhile the Claimant's solicitors continued to have difficulty in serving UETC, and were obtaining extensions of time for service of the proceedings on them.
- On 12 November 2010 the Claimant applied for judgment in default against IRP. The application came before me, and I made the order sought that there be judgment against IRP in default of acknowledgement of service. I made, at the instance of the Claimant, an order for service of the default judgment by an alternative method, namely upon IA Solicitors, both in Islamabad at the firm's address and at the London N20 contact address also set out in the 27 May letter. Papers were served on 21 January 2011 in Islamabad and were not accepted, and were delivered on 25 January 2011 to the contact address in N20, which resulted in the letter to which I referred to in paragraph 23 above, stating that no English firm had existed since September 2008, that his Islamabad firm had ceased to practice in about August 2010, that he had retired from law practice and that he had no instructions. Apart from some activity in the Pakistan proceedings (as referred to in paragraph 15(v) above), there were no further procedural steps taken by the Claimant until, according to paragraph 41 of Mr Dudley's eighth witness statement, he was advised by counsel in June 2012 that the service which the Claimant had believed was valid, as being in accordance with my Order, was in fact not good service, by reference to s12 of the 1978 Act, and that in order for there to be good service so that the judgment in default could be enforced, there would need to be service on IRP through diplomatic channels. This was immediately put into effect, and there is a Certificate of Service by the British High Commission in Islamabad dated 3 September 2012. This is undoubtedly good service, but there is further disputed evidence as to its circumstances.
- In his first witness statement of 10 April (and his second of 17 April 2013, identical save for adding exhibits) in support of these applications, Mr Cross of IRP's solicitors says (at paragraph 112) that he had been informed by IRP that "on or around 3 September 2012, a bundle of documents, including a copy of the default judgment, was left on the desk of an Officer of the Ministry of Foreign Affairs [Mr Mehr] in Islamabad. There was no covering letter or note verbale from the British High Commission. I am informed that [Mr Mehr] does not recall signing any document in receipt of the bundle and that [Mr Mehr] believes the bundle was left by an Officer of the British High Commission, who at the time frequently visited his offices." Mr Mehr in his first witness statement at paragraph 4 confirms that account. At paragraph 8 Mr Mehr states that it is his "recollection that the documents were forwarded to the section concerned in the Ministry of Foreign Affairs at the end of September or early October 2012", without a note verbale, which he would usually have expected, without which he was unable to identify to what case the papers related and that he then (paragraph 10) forwarded the documents to the Ministry of Law and Justice under cover of a letter dated 9 October 2012. Mr Gardezi, in paragraph 39 of his witness statement states that "as noted [in] Mr Mehr's statement, the documents did not come to his attention until 3 October 2012, and the papers were then forwarded to the Ministry of Law and Justice on 9 October 2012".
- The account given by the British High Commission in Pakistan is set out in a letter from the FCO dated 14 November 2013, as follows:
"1) An appointment was scheduled with Mr Mubeen Mehr on 3 September 2012 to serve the documents.
2) On 3 September 2012, the Senior Consular Officer gave his details to the reception at the Ministry of Foreign Affairs and was escorted to [Mr Mehr's] office. [Mr Mehr] was in a meeting and the Officer was asked to wait. The Officer waited 30 minutes.
3) The Officer handed the documents to [Mr Mehr] explaining the reason for the visit, i.e. to serve the documents.
4) [Mr Mehr] accepted the documents and quickly flicked through them. He kept the documents with him.
5) [Mr Mehr] and the Officer discussed other consular matters and the meeting ended after about 1 hour."
In a witness statement in response, Mr Mehr notes what the FCO say, and does not contradict any of it, in particular the suggestion that he "flicked through" the documents served. He simply repeats (at paragraph 6) that "the documents relating to the said case were received by myself in my office in September 2012". It seems to me clear that, notwithstanding that there was no note verbale, the default judgment and the other papers came sufficiently to the attention of the relevant Officer of the Defendant, Mr Mehr, on 3 September 2012, and that, despite what he says in paragraph 18 of his second witness statement about it being difficult to establish which claim the documents related to, or requiring time to ascertain which Ministry dealt with them, there is an insufficiently explained delay between 3 September and 7 October, which is glossed over by the original suggestion that it took time for the papers to come to his attention at all, which is not consistent with the account of the FCO, which he has not challenged.
- An account is given as to what happened next, by two witnesses for the Defendants. Mr Gardezi tells in paragraph 40 that the Ministry of Law and Justice required the assistance of the Ministry of Foreign Affairs ("MOFA"), and he then sets out his comments:
"41. During November 2012, the Ministry of Law and Justice and MOFA sought to obtain information in relation to the Claim from SPD and in December 2012, the Ministry of law and Justice directed MOFA to instruct a London based law firm to set aside the Default Judgment. The appointment of a lawyer necessitated the involvement of all of the relevant parties including the High Commission. . . . KRL, SPD and their own lawyers.
42. At the end of February 2013, the High Commission of Pakistan was informed by our bankers that the High Commission's accounts were being closed as a consequence of the Respondent's proceedings.
43. Having received SPD's recommendations, the MOFA sent the recommended panel of lawyers to Pakistan's High Commission in London for their review at the beginning of March 2013. The High Commission recommended Thomas Eggar LLP, the solicitors on record for the Government of Pakistan.
44. The High Commission received the Ministry of Law and Justice's approval to appoint Thomas Eggar LLP on 8 March 2013. The Applicant's Solicitors (Thomas Eggar LLP) filed the Application to set aside the Default Judgment on 10 April 2013."
- This must be set against the fact that Thomas Eggar LLP were only instructed on 13 March 2013, but simply to act in respect of the Third Party Debt Orders (obtained on 31 January 2013 by the Claimant against two banks, in the sum of U.S.$7.791m), and as late as 18 March 2013 confirmed in a letter to the Claimant's solicitors that they were not instructed in respect of the main proceedings and the default judgment.
- This is still a very inadequate account of the passage of time between 7 October 2012 and the date when these applications to set aside were issued on 28 March 2013. But in any event they fall to be set alongside the frank account by Mr Cross in his first and second witness statements in support of these applications, when, after setting out in paragraph 112 that Mr Mehr "does not recall signing any documents in receipt of the bundle and . . . believes the bundle was left by an Officer of the British High Commission" and "did not consider that leaving the documents on his desk constituted effective service" he states as follows:
"115. For the reasons set out above, the Second Defendant considered that it had not been properly served, and therefore did not take any steps to set aside the default judgment at that time.
116. It was only after the Interim Third Party Debt Order . . . was made and the Second Defendant's bank accounts were frozen that the Second Defendant considered it necessary or appropriate to make the present application and . . . then did so promptly."
- The first application by IRP is to set aside the Order of Gloster J (and subsequent extensions), permitting service out of the jurisdiction, and to have an extension of time for the service of an acknowledgement of service and/or to make a Part 11 application, which, of course, in substance is what IRP makes in challenging the jurisdiction before me. Mr Layton's first assault is on the gateway, namely as to whether there is a good arguable case (within Canada Trust Company v Stolzenberg  1 WLR 1582 CA) that the Special Conditions providing for English law and jurisdiction (and/or the General Conditions providing for English law) were incorporated.
- His next submission is that there is no serious issue to be tried:
(i) as to whether IRP is a proper defendant. It has become clear now that UETC is not incorporated as a company or other entity in Pakistan (albeit that it is a claimant in the Pakistani proceedings and that the Purchase Contract is in its name): but this was not the basis upon which the case for joinder of and service on IRP was made before Gloster J and is sought to be supported before me, but rather by reference to the position of KRL. Mr Layton submits that KRL is a legal entity in Pakistan and one not to be treated within Trendtex Trading Corp v Central Bank of Nigeria  1 QB 529 and La Générale des Carrières et des Mines v F.G. Hemisphere Associates LLC ("GCM")  UKPC 27 as a department or organ of the State of Pakistan, such as to render IRP contractually liable, and that there is no serious issue to the contrary: and he also denies that IRP was bound by the contract, by virtue of the provisions of Article 173(3) of the Constitution of Pakistan, whereby:
"All contracts made in the exercise of the executive authority of the Federation or of a Province shall be expressed to be made in the name of the President or, as the case may be, the Governor of the Province, and all such contracts and all assurances of property made in the exercise of that authority shall be executed on behalf of the President or Governor by such persons and in such manner as he may direct or authorize."
(ii) in respect of enforcement of the contract upon which the Claimant relies, by virtue of an accrued limitation defence: indeed he submits that the Claimant's case on limitation is a "palpable nonsense".
(iii) also by virtue of a doubt as to whether the Claimant company has a right to enforce the contract, because it has turned out that, although incorporated in Liberia (a matter that had previously been put in issue by IRP on this application), it was incorporated only on 13 March 1995, eight days after the date of the 5 March agreement relied upon for the purpose of incorporating the Conditions into the subsequent contract, and seven days after the Purchase Contract. Given the clearly arguable availability of ratification, this is not a point which has merited material consideration on this application.
- The third assault was by reference to the 'Golden Rule' of material non-disclosure:
(i) The existence of parallel proceedings in Pakistan brought by UETC and KRL was disclosed, as set out in paragraph 13 above (together with the assertion of the Claimant's extreme concern that they would not get a fair trial in Pakistan, not least by reference to what Dr Khan himself had said in 2001 (referred to in paragraph 8 above), and again in his second witness statement). In neither statement however did the Claimant say that he had counterclaimed in those proceedings, as set out in paragraph 15(ii) above.
(ii) Mr Layton also ran a number of other points which seem to me to be makeweights:
a) The non-disclosure of clause 20 referred to in paragraph 4 above.
b) The weak – or he would say the non-existent – case on limitation – but this was plainly discussed with Gloster J, as appears from the transcript, where she expressed her reservations.
c) The position as to the Claimant company, which does not appear to have become apparent until later, and in any event is subject to the ratification question.
None of these latter points either individually or collectively appear to me to be worthy of further consideration.
- The second application is to set aside the default judgment entered by my Order of 14 January 2011, with an extension of time for service of an acknowledgment of service and/or defence. Obviously, if the first application succeeds, then this second application or series of applications would be likely to succeed also, the basis of its success being such as to set aside the proceedings (and thus the judgment) against IRP, on grounds of lack of jurisdiction. If IRP has not been successful on the first application, then Mr Layton seeks in any event to set aside the default judgment under CPR Rule 13.3, which provides that:
"(1) . . . the court may set aside or vary a judgment entered under Part 12 if –
(a) the defendant has a real prospect of successfully defending the claim; or
(b) it appears to the court that there is some other good reason why –
(i) the judgment should be set aside or varied; or
(ii) the defendant should be allowed to defend the claim.
(2) In considering whether to set aside or vary a judgment entered under Part 12, the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly.
(Rule 3.1(3) provides that the court may attach conditions when it makes an order)."
- Mr Layton submits as follows:
(i) He has a real prospect of success of defending the claim by reference to (a) the identity of KRL and the liability of IRP as alleged party to the contract (b) the issue of the incorporation into the contract(s) of the General and Special Conditions, (giving rise to an alleged contractual rate of interest), (c) limitation, (d) (possibly) the status of the Claimant's company, though I refer to paragraph 38(iii) above.
(ii) The delay or passage of time from 3 September 2012 (with an allowance of 2 months after service) until 10 April 2013 should not be adjudged to be a failure to make the application promptly and/or can be otherwise surmounted or excused.
(iii) There are again elements of non-disclosure, none of which seem to me to be substantial, or in any event material. Although there was some discussion before me in January 2011 of the nature of the case, I am satisfied that there is no obligation upon the Claimant to prove its case on such a default application. Mr Layton suggests that there should have been some reference to the fact of the Claimant's motion for dismissal of the case in Pakistan in March 2011 (referred to in paragraph 15(v) above), and that more should have been made of the fact that the Hague Convention was apparently being relied upon by IRP in its response to the service in January 2009, as referred to in paragraph 30 above. As to the latter, Mr Dudley did exhibit the letter of 27 May 2009, and it is clear from the transcript before me that there was reference to it: and the address for service was drawn from it. Mr Dudley's first affidavit, at paragraph 15, referred to IA's reliance on Article 13: while stating, incorrectly, that Pakistan was not a party to the Hague Convention (the CPR Rule he cites does, but not very clearly, explain that, although not a member of the Hague Convention Organisation, Pakistan does regard itself as bound by the Convention), he nevertheless correctly points out that "service was in any event effected through diplomatic channels and not through the Hague Convention".
- I turn to what I have called, in paragraph 1 above, the unusual feature of this case, although one that is not wholly unprecedented, as will be seen below. The application to set aside the Order of Gloster J was made 4 years and 3 months after service of it upon IRP, and that to set aside the default judgment 7½ months after its service - leaving aside a number of informal acts of service/notification, which I agree with Mr Layton should not be taken into account particularly by virtue of the protection given by s12 of the 1978 Act, although plainly such prior notice would remove the sense of surprise or the excuse of unpreparedness which might otherwise be a plausible reason for some of the passage of time after formal service. I need to address the question of delay in the context of the Rules and of previous decisions.
- I have already set out in paragraph 39 above the Rule which applies in relation to setting aside a judgment in default (CPR 13.3). The previous rule under the RSC (prior to 2000) did not incorporate the specific provision relating to promptness within the rule itself, but it was an important part of the application of the law under the RSC, and its express incorporation into the CPR did not in my judgment change anything. There was in the 1999 White Book a cross reference to Rule 2.2, which required even an application to set aside a judgment or order for irregularity to be made within a reasonable time: in Singh v Atombrook Limited  1 WLR 810 CA it was concluded that 3 months was too late to entertain such an application as of right, so that the applicant had to fallback on the discretion to set aside a regular judgment. As to the latter, the seminal case was Evans v Bartlam  AC 473, which required that there should be a reasonable explanation as to why judgment had been allowed to go by default, and the application should be made promptly and within a reasonable time, with evidence explaining the passage of time.
- In this case, after the failure by IRP to take steps in relation to filing and serving within 2 months and 23 days (7 April 2009) a defence or an acknowledgement of service (and if the latter course were taken then a further 14 days thereafter for service of a defence), the Claimant entered judgment in default, which now would have to be set aside. If the issue were only one of failure to comply with a court order for service of an acknowledgement of service and/or defence within a set time, an extension would have to be sought, but in this case the sanction of judgment has been imposed. In this regard reference must be made to CPR Rule 3.9, which read, prior to its amendment as from 1 April 2013, as follows:
"(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order the court will consider all the circumstances including –
(a) the interests of the administration of justice;
(b) whether the application for relief has been made promptly;
(c) whether the failure to comply was intentional;
(d) whether there is a good explanation for the failure;
(e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant pre-action protocol;
(f) whether the failure to comply was caused by the party or his legal representative;
(g) whether the trial date or the likely trial date can still be met if relief is granted;
(h) the effect which the failure to comply had on each party; and
(i) the effect which the granting of relief would have on each party.
(2) An application for relief must be supported by evidence."
- I turn to a brief analysis of the cases to which useful reference can be made, for which I am indebted to the diligence of counsel, relevant to decisions under the Rules prior to 1 April 2013:
(i) In Reynolds v Coleman  36 Ch D 453 CA it was held too late after a year, to set aside service out of the jurisdiction.
(ii) In Rayner v Republic of Brazil  2 Lloyd's Law Rep 750 CA an application to set aside judgment in default after 7 years was permitted. Waller LJ concluded that arguable defences had been shown, and that the presence of a defence on the merits was the "major consideration" (768) and that "the passage of time alone should [not] preclude a defendant having a judgment in default set aside" (763).
(iii) In Regency Rolls Ltd v Carnall  EWCA Civ 379, 30 days was "altogether too long a delay" (per Simon Brown LJ) but, centrally, there was a "lack of any worthwhile case on the facts".
(iv) In Nolan v Devonport  EWHC 2025 (QB), there was a delay of 11 years, and, whether or not there was merit, HH Judge Grenfell concluded that he would strike out as an abuse an application to set aside judgment, where he was satisfied that the defendants had no intention of bringing the set aside application to court until the claimant started attempts to enforce it.
(v) In Khan v Edgbaston Holdings Ltd  EWHC 2444 QB, HH Judge Coulson QC (as he then was) referred to a case of Hart Investments Limited v Fidler  EWHC 2857 TCC, where a delay of 59 days had been found to be "very much at the outer edge of what could possibly be acceptable"; he concluded that 6 months was unjustifiable delay, but in any event concluded that there was no real prospect of success.
(vi) In Berezovsky v Russian Television and Radio Broadcasting Co  EWHC 1733 (QB) Eady J allowed an application where there was a 3 months delay but an arguable defence.
(vii) The Court of Appeal (per Ward LJ) in Mullock v Price  EWCA Civ 1222 concluded that 2 years was not prompt, and dismissed the application even though there were apparent merits.
(viii) Finally in Standard Bank Plc v Agrinvest International Inc  2 CLC 886, Rayner, and its allowing of an application after 7½ years, was addressed, but Moore-Bick LJ said:
In that case the application was refused after a delay of one year. There were concluded to be no merits, but the words of Moore-Bick LJ are relevant, with regard to refusal of relief notwithstanding the "possibility" in such a case that the defendant might succeed at trial.
"22. The Civil Procedure Rules were intended to introduce a new era in civil litigation, in which both the parties and the courts were expected to pay more attention to promoting efficiency and avoiding delay. The overriding objective expressly recognised for the first time the importance of ensuring that cases are dealt with expeditiously and fairly and it is in that context that one finds for the first time in rule 13.3(2) an explicit requirement for the court to have regard on an application of this kind to whether the application was made promptly. No other factor is specifically identified for consideration, which suggests that promptness now carries much greater weight than before. It is not a condition that must be satisfied before the court can grant relief, because other factors may carry sufficient weight to persuade the court that relief should be granted, even though the application was not made promptly. The strength of the defence may well be one. However, promptness will always be a factor of considerable significance . . . if there has been a marked failure to make the application promptly, the court may well be justified in refusing relief, notwithstanding the possibility that the defendant might succeed at trial."
- Mr Layton produced two decisions of the Privy Council in 2011, on appeal from the Court of Appeal in Trinidad and Tobago, and by reference to the Trinidad and Tobago Rules, (which he produced in schedule form so as to show that they were not greatly different to the form of the CPR prior to its amendment on 1 April 2013).
- The first is A-G v Matthews  UKPC 38, where there was a failure by the defendant (the Government) to file a defence by 11 November to a claim by a claimant that he had been assaulted in prison, and the claimant's attorney on 11 December refused to agree an extension of time, indicating that the defendant had to apply to the Court for relief from sanctions under Trinidad Rule 26.7 (which is materially the same as our CPR 3.9 set out in paragraph 43 above), and on the same day as the defendant did so the claimant filed an application for permission to enter judgment in default of defence. In the Trinidad Court of Appeal (by a majority) the Court concluded that "the correct interpretation and application of rule 26.7 where the time specified by the rules for taking some procedural step has passed and no prior application for an extension of time had been made . . . [was] that the consequence of the non-compliance with the rule was the imposition of an 'implied sanction' . . . that . . . no appeal could be pursued".
- It is plain, from the fact that one of the earlier Trinidad Court of Appeal cases being followed by that court was one of an expiry of a period of time for filing an appeal, that the courts in Trinidad were applying the words of Brooke LJ in Sayers v Clarke Walker  1 WLR 3095 at paragraph 21. Brooke LJ concluded that "where an applicant has not complied with the relevant rule, and if the court is unwilling to grant him relief from his failure to comply through the extension of time he is seeking, the consequence will be that the order of the lower court will stand, and he cannot appeal it", such that it would thus be an implied sanction imposed by the rule, whereby the principles in CPR 3.9 should be applied.
- This principle is still followed by our Court of Appeal in such a case (see Yeates v Aviva Insurance UK Ltd  EWCA Civ 634 esp at paragraph 25 per Longmore LJ). It is noteworthy that in another of the Trinidad Court of Appeal decisions in which the implied sanction doctrine had been reasserted, Attorney General of Trinidad and Tobago v Regis (Civ App No 79 of 2011) (unreported) 13 June 2011, the Court had said, (in a passage cited by Lord Dyson giving the opinion of the Board in Matthews at paragraph 11) that the Trinidad Court of Appeal's recent decisions had "resulted in an observable shift away from a cancerous laissez-faire approach to civil litigation to a more responsible and diligent one".
- Lord Dyson did not follow that approach, and disapproved the implied sanction theory, and he did so for three main reasons:
(i) There was no express provision in the Rules whereby if a defence is not served within the period specified it cannot be served at all without permission. Hence there had not been at the time of the issue of the application any express or implied sanction from which relief was required.
(ii) He referred to Rule 26.6, which is the equivalent of our CPR Rule 3.8, which reads (in material part) as follows:
"(1) Where a party has failed to comply with a rule, practice direction or court order, any sanction for failure to comply imposed by the rule, practice direction or court order has effect unless the party in default applies for and obtains relief from the sanction."
He considered that the two Rules must be read together. It is difficult to see why this should be so, because, as can be seen from the two Rules, they deal with different situations. Rule 3.8 applies where the rule, practice direction or court order with which the party has failed to comply expressly imposes the sanction: and plainly that was not the case in relation to the facts being considered in Matthews, and indeed is not the case on the facts of our case. Rule 3.9 (and Rule 26.7) however deal with the different situation, in which the sanction has not been imposed by the very rule which has been contravened, namely with "relief from a sanction imposed for any failure to comply with a rule, practice direction or court order", including of course a subsequent sanction, such as an entry of judgment in default on a later occasion. Nevertheless, on the facts of Matthews, it was obviously the case that no sanction had been imposed either by the Rule itself which had been breached or indeed at all, given the contrast which, by reference to (i) above, Lord Dyson drew between the facts of Matthews and the facts of a case in which a party, having failed to comply with a time limit for putting in an appeal, did require the permission of the court to surmount what could be interpreted as an implied sanction.
(iii) Thirdly, Lord Dyson considered (paragraph 18) that "it cannot have been intended that, where a defendant wishes to set aside a default judgment, it must satisfy the conditions of both rule 13.3 [also our 13.3] and 26.7 [our 3.9] . . . It cannot have been intended that a defendant who wishes to set aside a default judgment must satisfy the requirements of both rules." Whether or not that is right in Trinidad, in England and Wales there is Court of Appeal authority to the contrary, and there seems nothing lacking in commonsense about it. In Khan, reference was made to Hussain v Birmingham City Council & Ors  EWCA Civ 1570, where the Court of Appeal (per Chadwick LJ) plainly considered (at paragraph 30) that CPR 3.9 was also relevant to the Court's consideration of an application to set aside judgment under CPR 13.3. As will be seen, Silber J in Samara v MBI & Partners UK Ltd  EWHC 563 (QB) had no difficulty in cross-applying the consequences of the two Rules.
- Mr Layton points to the other, contemporaneous, decision of the Privy Council on appeal from Trinidad and Tobago, in which Lord Dyson again delivered the opinion of the Board, Attorney General v Universal Projects Ltd  UKPC 37. This was a case where again there was an application for permission to enter judgment in default of appearance, it being made clear in that case that under the Rules of Trinidad and Tobago the Claimant may not obtain a default judgment against the State without the permission of the court (obviously the reason why judgment in default had not been in fact entered in either case, requiring to be set aside).
- In that case there had been an application for an extension of time for service of the defence, which had been granted on the basis of an unless order, namely that "in default leave is granted to the Claimant to enter judgment against the Defendant". Thus the sanction had been imposed by the order of which the Defendant was in breach (26.6/3.8). Unlike Matthews, where the Privy Council concluded that there had been no sanction from which relief was required to be given, in Universal Projects Lord Dyson concluded that there had been a sanction, from which the Court was not prepared to give relief, in the light of the finding by the first instance Judge and the Court of Appeal that the Defendant had not acted promptly, and had not satisfied the pre-conditions for obtaining relief, such as giving a good explanation for the delay. Still intent on keeping the distinction referred to in Matthews, as set out in paragraph 50(ii) above, between an application to set aside a default judgment and an application to obtain relief from a sanction, Lord Dyson concluded that, because of the unless order (which he considered could have been expressed as a debarring order), the application should not be seen as an application to set aside a default judgment, and thus it should be tested by reference to Rule 26.7 (our 3.9). In any event it fell to be distinguished from Matthews because in Matthews there was no sanction and in Universal Projects there was a sanction, albeit one that, because the defendant was the State, had not yet been put into effect.
- It must be said that in both the two Trinidadian cases, the delay was only a matter of days or weeks, and Lord Dyson, while recognising that the Board's decision in Matthews had overturned the "implied sanction" decisions, which had been motivated as set out in paragraph 49 above, nevertheless stated (in paragraph 19 of Matthews) that:
"The Board certainly has no wish to impede the court's commendable desire to encourage a new litigation culture or to undermine the steps that it is taking to rid Trinidad and Tobago of the 'cancerous laisser-faire approach to civil litigation'."
- I must now turn in this review to the impact of the amendment in England and Wales of CPR Rule 3.9 and of the Overriding Objective, as from 1 April 2013, as a result of the dramatic change of approach intended by the Jackson Report and the words of – as it turns out – Lord Dyson, to which I shall refer below:
(i) CPR 3.9(1) now provides, in a very much more shortened form than that set out in paragraph 44 above, with which it must be contrasted:
"On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need –
(a) for litigation to be conducted efficiently and at proportionate cost; and"
(b) to enforce compliance with rules, practice directions and orders."
There is no change either to Rule 3.8 or to Rule 13.3.
(ii) There is an important amendment to the Overriding Objective in CPR Rule 1.1 so as to add a new (f) of "enforcing compliance with rules, practice directions and orders."
- This brings me to Mitchell v News Group Newspapers Limited  1 WLR 795, a decision of the Court of Appeal, presided over by Lord Dyson, giving what is described in the headnote as "Guidance on the new more robust approach to the court's enforcement of compliance with rules, practice directions and court orders". The non-compliance in question was with the new provisions for cost management, and the particular Rule in question, where one of the parties was late with its costs budget, was CPR 3.14 which provides "Unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees." This is plainly a non-compliance with a court order which itself imposes its own sanction, thus falling within CPR Rule 3.8; although that point does not seem to have been specifically addressed, it may be relevant by virtue of the contrast with Matthews which, notwithstanding the presence in both cases of Lord Dyson, was not referred to in Mitchell.
- In paragraph 38, Lord Dyson MR cited three lengthy paragraphs from a lecture he himself had given on the Jackson Reforms on 22 March 2013, emphasising "such tougher, more robust approach to rule - compliance and relief from sanctions", in that "parties can no longer expect indulgence if they fail to comply with their procedural obligations", an approach, not surprisingly, that he, giving the judgment of the court, endorsed. He continued:
"40. We hope that it may be useful to give some guidance as to how the new approach should be applied in practice. It will usually be appropriate to start by considering the nature of the non-compliance with the relevant rule, practice direction or court order. If this can properly be regarded as trivial, the court will usually grant relief provided that an application is made promptly. The principle "de minimis non curat lex" (the law is not concerned with trivial things) applies here as it applies in most areas of the law. Thus, the court will usually grant relief if there has been no more than an insignificant failure to comply with an order: for example, where there has been a failure of form rather than substance; or where the party has narrowly missed the deadline imposed by the order, but has otherwise fully complied with its terms. We acknowledge that even the question of whether a default is insignificant may give rise to dispute and therefore to contested applications. But that possibility cannot be entirely excluded from any regime which does not impose rigid rules from which no departure, however minor, is permitted.
41. If the non-compliance cannot be characterised as trivial, then the burden is on the defaulting party to persuade the court to grant relief. The court will want to consider why the default occurred. If there is a good reason for it, the court will be likely to decide that relief should be granted. For example, if the reason why a document was not filed with the court was that the party or his solicitor suffered from a debilitating illness or was involved in an accident, then, depending on the circumstances, that may constitute a good reason. Later developments in the course of the litigation process are likely to be a good reason if they show that the period for compliance originally imposed was unreasonable, although the period seemed to be reasonable at the time and could not realistically have been the subject of an appeal. But mere overlooking a deadline, whether on account of overwork or otherwise, is unlikely to be a good reason. We understand that solicitors may be under pressure and have too much work. It may be that this is what occurred in the present case. But that will rarely be a good reason. Solicitors cannot take on too much work and expect to be able to persuade a court that this is a good reason for their failure to meet deadlines. They should either delegate the work to others in their firm or, if they are unable to do this, they should not take on the work at all. This may seem harsh especially at a time when some solicitors are facing serious financial pressures. But the need to comply with rules, practice directions and court orders is essential if litigation is to be conducted in an efficient manner. If departures are tolerated, then the relaxed approach to civil litigation which the Jackson reforms were intended to change will continue. We should add that applications for an extension of time made before time has expired will be looked upon more favourably than applications for relief from sanction made after the event."
- At paragraph 43 he referred to the term "good reason" used in relation to applications for an extension for the period of validity of a claim form under CPR Rule 7.6 (and which also of course appears in Rule 13.3, set out in paragraph 39 above), and stated that "good reasons are likely to arise from circumstances outside the control of the party in default". In paragraph 46 he emphasised that "The new more robust approach that we have outlined above will mean that from now on relief from sanctions should be granted more sparingly than previously".
- Finally there is the judgment of Silber J in Samara to which I referred to in paragraph 50(iii) above. This is a case where there was delay of some 20 months, which Silber J concluded would have trumped the countervailing factors, including the fact that there was an arguable defence, even under what he referred to as the "old regime". He was however satisfied that the "new regime" as from 1 April 2013 was what governed the application to set aside judgment entered in default.
- He considered Mitchell in detail (again Matthews was not cited) and concluded that, as was submitted to him by the Claimant "the underlying philosophy and the rationale behind the consequential amendments to the CPR have changed the approach of Courts to failures to comply with all rules and orders, including CPR r13(3)". Counsel for the Defendant contended that "the new regime does not apply to the special rules under CPR Part 13 because there had been no trial". Silber J however concluded that:
(i) (Paragraph 36) "the new regime has universal application to all rules in the CPR . . . it is based on and underpinned by the changes to the overriding objectives which apply to all parts of the CPR" and he recited in particular the new subparagraph (f) which I have set out at paragraph 54(ii) above.
(ii) (Paragraph 37) "there is no express statement that CPR Part 13 or that any part of it is excluded from these provisions and I have found nothing in the rules or in the decided cases to show expressly or impliedly that this is so . . . Lord Dyson, described the effect of the new regime in very general terms and as being of universal application".
(iii) (Paragraph 38) "It is very clear that in the new regime, the need for promptness has even greater significance than it had previously and that relief will be granted much more sparingly than hitherto".
- It seems to me that, quite apart from how Lord Dyson himself, in the light of his own words in his 22 March 2013 Implementation Lecture (strikingly coincident with the words of the Court of Appeal in Trinidad and Tobago from whose impact he, with declared reluctance, departed) might now, and in the context of the CPR rather than the Trinidad and Tobago Rules, address the question in Matthews, the decision in Matthews can in fact be distinguished:
(i) On the narrow question of 'implied sanction', of which he found there was none in the relevant Trinidad and Tobago Rules, there is plainly a sanction here, in that judgment in default has been entered from which relief is sought.
(ii) The concentration on CPR 3.8 (Rule 26.6) is of no materiality. Just as in Matthews there was no sanction contained in Gloster J's order. However the sanction is the subsequent default judgment entered by me as a result of the failure to comply with Gloster J's order.
(iii) Insofar as both in Matthews and in Universal Projects the Privy Council appeared to find some difficulty with the fact that both (the equivalent of) CPR 3.9 (or 3.8) and 13.3 would apply to the same application, namely applying to set aside a judgment in default which had been imposed as a sanction for non-compliance with an earlier Rule, Silber J found no difficulty with that, and, although not cited to him, Hussain would in any event have been binding Court of Appeal authority in that regard.
(iv) What Silber J called the universal approach of the Court of Appeal in Mitchell, by reference inter alia to the new amended overriding objective, does indeed seem likely to be what was intended by Mitchell, whatever the proper construction of the Trinidad and Tobago Rules may now be.
- There were warnings to the legal profession. Lord Dyson says so at paragraph 46 of Mitchell, by reference to the Implementation Lectures, and Jackson LJ himself in Fred Perry (Holdings) Ltd v Brands Plaza Trading Ltd  EWCA Civ 224 sounded a clear note of warning on 1 February 2012, when he said: "After [1 April 2013] litigants who substantially disregard court orders or the requirements of the Civil Procedure Rules will receive significantly less indulgence than hitherto." Although a foreign litigant, IRP at one stage consulted a firm of lawyers in London (as set out in paragraphs 20 to 23 above) but then, notwithstanding the service of the default judgment on 3 September 2012, failed to instruct English lawyers, for which Mr Cross gives the explanation set out in paragraph 36 above.
- They did not do so until after the service of the Third Party Debt Orders, and then not until 18 March 2013, and for some reason even then only in respect of those orders themselves, not giving instructions to Thomas Eggar LLP to make these applications until 28 March. Leaving aside the fact that 18 March 2013 was still time enough for English solicitors, with those warnings ringing in their ears, in relation to so delayed an application, to bring it prior to 1 April 2013, IRP in fact disabled itself from bringing any application prior to 1 April by its delay, and I am not satisfied that any delay was caused, such as IRP suggest, in the bringing of that application by dilatory responses to requests for information made to the Claimant's solicitors. It is perhaps not insignificant that, having supplied on 18 March its application bundle relating to the Third Party Debt Order application, the Claimant's solicitors, when asked on 25 March for some further documents, suggested on 26 March that the documents requested were not of relevance given the judgment which had been entered against IRP, no application having been made to set it aside, which at that stage Thomas Eggar LLP were still not instructed to make. I see no basis to exempt IRP from the general application of the "new regime" from 1 April 2013 onwards.
- The following features appear to me to arise from consideration of the history set out above:
(i) IRP knew from March 2008 about the Order of Gloster J, and prepared themselves shortly afterwards with the advice of Mr Ahmed.
(ii) The advice recommended and implemented the defence strategy, which was "not to partake in the proceedings". It is noteworthy that in the Advice of 17 March 2009, when Mr Ahmed thought that he had noticed that there was a defect in the service (understandably not knowing about the order of Christopher Clarke J extending time for that service on 30 January 2009) which would have meant that the deadline of 11 January had expired before the service of 15 January 2009, he said that "as our intention is not to partake in the proceedings wherein we would have joined issue with the technical failings including the challenge to jurisdiction, I would advise that we merely refer to this breach by the Claimant by way of a point raised". The same plainly applied to any other matters of which they either knew as a result of having seen those proceedings, albeit informally, or could have known.
(iii) Insofar as the Hague Convention advice, (referred to in paragraphs 27 to 29 above) was wrong, and insofar as it was given by an independent lawyer, the deletion of CPR 3.9(1)(f), apparent from paragraphs 44 and 54 above, since 1 April 2013, would be material. However, given the context of the advice, in which Mr Ahmed expressly recorded the unhappiness of both the Ministry of Law and the Ministry of Foreign Affairs with such advice, and that it seems obvious that, to the knowledge of his client, Mr Ahmed was simply giving advice which was as helpful to the client's interests as possible, but was obviously far from foolproof, it seems somewhat self-serving for Mr Piracha in paragraph 18 of his second witness statement to state that he does "not disagree with [the] characterisation of [such] advice as 'extraordinarily incompetent'". One thing is clear and that is that Mr Ahmed was not saying that the service under Rule 6.44 and the 1978 Act (and not within the Hague Service Convention) was not good service. As he said in his Advice of 24 March 2009:
"I have previously dilated on the provisions of both the Convention and the said Act so I do not feel the necessity to repeat it here. Chiefly, the fact is that the Convention is NON-MANDATORY: the party states may use this or another agreed method of service as they deem fit.
The use of State Immunity Act is provided for in the Rule 6.44 and it is intended to provide such privileges and treatment to states and the heads of states, notwithstanding the commercial nature of the proceedings, which are not touched by the Convention. Suffice it to say that use of the Act in sending this service to the foreign office and not using the Convention is no ploy to avoid or by-pass the Convention on the part of the high court in London."
Whatever may have been the perceived advantages following Mr Ahmed's suggestion of purporting to reject that service by reference to the Hague Convention, what cannot be supported is the submission in paragraph 68(c) of Mr Layton's skeleton that IRP had a "good faith belief that it had not been validly served with the process".
(iv) IRP says that it believed that the judgment was stayed, but no order was made to that effect, whether to its knowledge or at all, and the cavalier attitude was signified by the fact that they instructed no English solicitor from September 2008 onwards.
(v) There was plainly delay by the Claimant after January 2011, caused by the inapt service upon Mr Ahmed in accordance with my Order, and then no doubt by the Claimant looking for assets; but the delay by IRP from 3 September 2012 seems to me to show that the defence strategy was still in operation, and that, as in Nolan and indeed Mullock, activity only began once the execution started to 'bite'. There is clearly a very inadequate and unpersuasive explanation of the passage of time after September 2012, as set out in paragraphs 32 to 36 above. The extra period of time allowed for a State to respond (the 2 months provided by s12(5) of the 1978 Act) is not intended simply to amount to a period of limbo, but specifically provides the additional time which a Government bureaucracy might require, and so it is obvious that the entirety of the period including that 2 months needs to be explained.
The Gloster J Order
- The passage of time here – 4 years 3 months - was substantial, when contrasted with Reynolds, referred to in paragraph 45 above. I turn to the nature of the application which, after that time, IRP now seeks to make.
- There is plainly a dispute as to the incorporation of the General and Special Conditions, as set out in paragraphs 3 to 7 above. The Claimant's case is supported by his own evidence and the documents to which he refers. No evidence is adduced at this stage for IRP, and there is plainly a good arguable case. It is pointed out by Mr Layton that it is surprising that the Special and General Conditions are hardly referred to in the defence and counterclaim in the Pakistan proceedings, but then, as Mr Page points out, they are not relevant to the defence to the Pakistani claim, which is by reference to the Purchase Contract, in which the Claimant accepts that those conditions were not incorporated. One matter that will require explanation by the Claimant is that, as set out in paragraph 15(ii) above, he claims, in apparent support of a challenge to the jurisdiction of the Pakistani Courts, that the Purchase Contract was signed in Dubai, which is inconsistent with his present evidence.
- As to the parties to the contract, I have already indicated that I do not at present find the fact of the date of incorporation of the Claimant company to undermine the arguability of the Claimant's case: both UETC and KRL have in any event joined the Claimant as a Defendant in the Pakistan proceedings.
- As for IRP, there is a heavily contested issue between the Claimant and IRP, each supported by lengthy and well documented reports from distinguished and qualified experts, Mr Ali Raza, Senior Partner in the firm of Awan Raza, an advocate of the Supreme Court of Pakistan with 22 years of domestic and international practice, for the Claimant, and Mr Shamshad Ullah Cheema, an advocate of the Supreme Court of Pakistan with 21 years of practice and substantial academic experience, for IRP. The Claimant submits in these proceedings, and has also put in issue in the Pakistan proceedings in which KRL is a Claimant (both in paragraph B of its defence and by reference to the third preliminary issue), that KRL is not a legal entity at Pakistan law: and even if it is, it is an emanation or organ of the State. Both these propositions are denied by IRP.
- The business in which both UETC and KRL were involved was the development of nuclear systems and energy in Pakistan, a very important element of the Pakistan Government's policy. In giving advice to IRP in March 2009 in relation to the defence strategy, Mr Ahmed advised, as if it was uncontroversial, that "both defendants" (i.e. UETC and IRP) ". . . in fact are one as the State of Pakistan". If such is the case in relation to UETC, Mr Page submits, then how much more so is it the case in relation to KRL, which actually appears to have carried on the work of development in relation to which UETC signed the Purchase Contract. Mr Page refers to the Authority Letter in relation to the claims in the Pakistani proceedings both by UETC and KRL, which was signed by "Dr Javed Arshad Mirza being Chief Executive of [UETC] P.O. Box No. 518 Rawalpindi, and Chairman of [KRL], Government of Pakistan G.P.O. Box No. 502 Rawalpindi". The actual claim commences by describing the two claimants as follows:
"[UETC] is an associated undertaking engaged in allied ventures for and in collaboration with [KRL], an Autonomous Body established by the Federal Government of Pakistan."
- I do not propose to summarise the respective cases of the Claimant and IRP and their experts, because it is plain to me that I cannot possibly resolve them. Suffice it to say that the Pakistan Atomic Energy Commission Ordinance 1965 established the Pakistan Atomic Energy Commission ("PAEC") as a body corporate, with the members of it to be appointed by Central Government. There was no mention of KRL (or UETC). Mr Cheema says that KRL was set up as a Research Laboratory under the PAEC. Mr Raza disagrees with this and points out that it is nowhere evidenced. His evidence is that Dr A.Q. Khan took over a Project (706) for research in nuclear enrichment in 1976, which was renamed KRL in or about 1981 by the then President of Pakistan.
- The National Command Authority ("NCA") was, according to Mr Cheema, established in 2000 by Presidential Executive Order. In 2007 (after the events of the subject matter of these proceedings) there was a National Command Authority Ordinance issued under a Statement of Object Reasons by the Minister for Parliamentary Affairs. This statement reads in material part:
"Whereas, after the successful nuclear tests the [NCA] was established in year 2000 . . . Also being mindful of Pakistan as a responsible state and considering the obligations under international law particularly under UNSC Resolution 1540, it is in order to re-demonstrate through the present law the resolve of the Government of Pakistan to continue to exercise full and complete control and security and safety measures over all matters concerning nuclear and space technologies, nuclear establishments, nuclear systems, nuclear materials, relevant personnel and related information etc."
- By s3 of the Ordinance, and subsequently the National Command Authority Act 2010, the NCA is established as a legal entity, of which the Chairman is the President of Pakistan and the Vice-Chairman the Prime Minister, with, as ex officio members, four Senior Cabinet Ministers and the four Chiefs of Staff of the Armed Forces. The SPD (by s5) is the Secretariat, and the Director General of the SPD, to act (by s.3(6)) as the Secretary of the NCA, is to be appointed by the Chairman (the President of Pakistan). By Clause 2(d) of both Ordinance and Act the following definition is set out:
"'Strategic Organisation' means such body notified by the [NCA] to be a Strategic Organisation and includes Pakistan Atomic Energy Commission, Dr A.Q. Khan Research Laboratories (KRL) and Space and Upper Atmosphere Research Commission."
At paragraph 56 of Mr Cheema's expert report he is of the view that "this is one of the methods through which a legal entity with separate legal personality can be created in Pakistan". To the contrary, Mr Raza in paragraph 42 of his first report concludes that it is pertinent that a Strategic Organisation is defined as a 'body', being a reference to admittedly non-incorporated Government-controlled entities, and points out that s8 refers to the Strategic Organisations as "all the Organisations working under the control, regulations and directions of the [NCA]". In any event, as he points out, if it is the nomination of KRL as a Strategic Organisation by NCA which makes it a legal entity, then there is certainly no evidence of it having been a legal entity prior to 2007.
- As for autonomy, insofar as the PAEC is concerned (if that be relevant) s16 of the PAEC Ordinance provides that:
"The Central Government may, from time to time, issue to the Commission such directives and orders as it may consider necessary for carrying out the purposes of this Ordinance and the Commission shall follow and carry out such directives and orders".
In relation to the NCA Ordinance and Act, apart from s8 (above) Mr Raza points also to the provision of funds to NCA by the Ministry of Finance, through the SPD (s17).
- I have considered GCM, per Lord Mance at paragraph 16, where he explains that "the distinction between a state organ and a separate or distinct entity is not concluded by determining whether the separate entity has separate legal personality", and indeed that "a separate entity must therefore have legal personality in this sense in order to have immunity as part of the state: but an organ of the state may under certain circumstances have legal personality". Thus (paragraph 25) "a body may . . . fall to be regarded as an organ of the state, rather than a separate or distinct entity, even though it has a separate juridical personality. . . . It is difficult to think that a state could detach itself from, or disown its identity with, its armed or police forces or a ministry like the Treasury or the Ministry of Justice or Defence by decreeing that such forces or Ministry . . . should have their own legal personality. In such cases at least, function must remain an important aspect of the question whether a juridical entity is in reality part of the state." Mr Page submits that KRL is an important, if not vital, part of the network of the Armed Forces or the Ministry of Defence, in relation to nuclear security or development. As is clear from paragraph 29, if a separate juridical entity were formed by the State, with its own management and budget (in the Claimant's submissions, not the case here), then "the strong presumption is that its separate corporate status should be respected . . . The presumption will be displaced if in fact the entity has, despite its juridical personality, no effective separate existence."
- I am entirely satisfied that there is a serious issue to be tried, with regard to the liability of IRP under the contract, that KRL is not a separate legal entity with juridical personality or that it is (paragraph 29) "so closely intertwined and confused that the entity could not properly be regarded for any significant purpose as distinct from the State and vice versa." I also conclude, having again considered the rival opinions from the various experts, that, notwithstanding the provisions of Article 173(3) of the Constitution of Pakistan, there is a good arguable case that, as explained by Mr Raza, that Article does not apply and in any event that, as is regularly the case in Pakistan, the contract was "executed under the delegated/nominee authority granted to KRL by the Second Defendant".
- That is sufficient for determination in respect to the challenge to jurisdiction which Mr Layton set out to make, or rather which he submits he would have made had there been an extension of time for the making of a Part 11 challenge and/or had no judgment in default been entered. However, after the close of Mr Layton's submissions, and indeed when I had indicated to Mr Page that I would not be calling on him in regard to this aspect of the case, and he was nearing the end of his response, at the end of Day 3, Mr Layton sought to raise a new point. In paragraph 31 of his skeleton argument, he had said that "in the interest of clarity, the IRP does not assert on the present application that it has immunity from suit in this case, as it accepts that if (which it denies) the court otherwise has jurisdiction over it, the claim as formulated by the Claimant would, on the present state of the law, fall within the exception for commercial transactions in s3(3) of the [1978 Act]". The new and belated argument which he sought to raise is, by reference to J H Rayner (Mincing Lane) Ltd v DTI  Ch 72 at 194 E-H and 252 B-G, and passages at pp 228-230, 234-236 in Lady Hazel Fox: The Law of State Immunity (3rd Ed) that (absent waiver) a Judge must determine immunity if necessary of his own motion (proprio motu) and on the balance of probabilities. I shall return to this below.
(ii) Other matters
- I now turn to the other two specific matters which are or could have been raised by way of jurisdictional challenge and/or challenge to the Order of Gloster J. The first is as to limitation. As set out in paragraph 11 (and paragraph 38(ii)) above, Mr Layton raises a vehement challenge to the Claimant's case in this regard. There were no references, such as would have been expected, in the correspondence set out in paragraph 11(ii) above, nor indeed in the later correspondence of 9 January and 22 February 2002. This is not simply omission to refer to a May/June (or 8 May) 2001 meeting and/or agreement, but the making of an inconsistent case, namely reliance upon the promise to pay of February 2001, not upon the subsequent agreement of 8 May, by which there was an agreed deferral. Again there is no mention of, or reliance upon, the 8 May agreement in the letters before action of 24 March and 30 April 2004, nor in the draft Particulars of Claim which were before Gloster J in May 2007.
- This is obviously a serious obstacle to the Claimant's case, and he has put forward an explanation at this hearing (and confirmed subsequent to it), by means of his seventh, and obviously very belated, witness statement. His explanation is:
(i) The 8 May 2001 meeting and agreement concerned sensitive and confidential matters regarding "SPD funding for clandestine KRL projects" in the context of the Pakistani nuclear programme.
(ii) Dr Khan was being "moved on" by the Pakistani Government, because of demands by the United States that he be removed from the nuclear programme, and, unlike the meeting of 18 February, there was nothing in writing.
(iii) He did not trust IRP or the SPD to provide the monies, and determined in these circumstances to proceed on what he called "two tracks" to push hard for payment.
(iv) The obligation as to interest was in any event only suspended by the agreement of 8 May 2001, so that it was, in any event, due and owing.
It remains the case that there is no evidence to contradict that of Mr Rafiuddin from Dr Khan or any other witnesses for the Defendants either said by the Claimant to have been present at it or to have known of it.
- Had this application by IRP been made promptly and in time, their case in this regard would plainly have had a good deal of merit.
- As to non-disclosure, the only matter which I consider to have any arguability is that relating to the fact that the Claimant did not disclose to Gloster J the existence of its counterclaim in the Pakistani proceedings. Gloster J plainly knew of the fact that by permitting service of the English proceedings parallel proceedings would be caused, and she plainly was entitled to take into account and have regard to the evidence and submissions of the Claimant set out in paragraphs 13 and 39(i) above. However she was not told that the Claimant had counterclaimed against UETC and KRL, the claimants in the Pakistani proceedings, for all the matters the subject of the English proceedings for which she was now giving permission.
- Mr Page submits that this does not constitute a material non-disclosure:
(i) The significant fact was that there were parallel proceedings, and the proof of the pudding as to their immateriality is that now, 10 years on, those proceedings have gone nowhere.
(ii) The existence of the counterclaim did not constitute a submission to the Pakistani jurisdiction, as Mr Layton contends. There is dispute between the experts as to this, but Mr Raza's explanation for the Claimant, supported as I see it by his account of the Pakistani court procedures, is that it is necessary, when challenging the jurisdiction in Pakistan, for a defendant to set out his case in full, including any cross claim, or the opportunity to pursue that case would be lost if the jurisdiction challenge fails: of course it is necessary to put forward such case without prejudice to the jurisdiction, which the Claimant did here, as set out in paragraph 15(ii) above, albeit not by reference to the Special and General Conditions, for the reasons set out in paragraph 65 above. This putting forward of a full case in the foreign court while challenging the jurisdiction, where such is required by the foreign jurisdiction, were found not to amount to a submission in AES Ust-Kamenogorsk v Ust-Kamenogorsk  2 Lloyd's Rep 233 CA at paras 186, 200 (not revisited in the Supreme Court).
- The 'golden rule' as to the obligation to make material disclosure on an ex parte application is a non-statutory jurisdiction, entirely governed by the Court's discretion. It is not necessary to set out a long list of cases to emphasise that if a court considers that a material matter, which might have made a difference to the ex parte judge's decision, was not disclosed, then the reviewing court has a discretion as to what to do about it, ranging from striking out the order and not permitting it to be reapplied for, through setting it aside but re-granting it possibly on terms, to making some order by way of sanction as to cost, to taking no step at all. In this case:
(i) Although IRP did not know precisely what was disclosed to Gloster J, it plainly made a decision not to challenge her order on any basis (see paragraph 63(ii) above).
(ii) The material matter of the existence of the Pakistani proceedings was disclosed, and IRP, the Defendant now challenging that order, was on any basis not a party to those proceedings either as claimant or defendant to the counterclaim. Mr Raza's advice (again contested) is that if the Claimant's challenge to the jurisdiction is eventually upheld in Pakistan, then its counterclaim falls away also. In any event any election as to which course to follow (see for example Australian Commercial Research & Development Ltd v ANZ McCaughan Merchant Bank Ltd  3 All ER 65) can be made at a later stage.
(iii) The discretion would fall to be exercised by me now, 10 years later, and the Pakistani proceedings have still not gone forward or the jurisdictional challenge been finally resolved.
(iv) There is a statement in Gee: Commercial Injunctions (5th Ed) at 9.028 that an allegation of non-disclosure should be made without unnecessary delay. A reference in a footnote is to a case which does not seem to me to support that proposition. However it seems to me, even without reference to authority, that such statement is correct. It is the court which is to be invited to exercise possibly draconian powers to enforce the court-made rule, and after 7½ years its appetite to do so must have waned. In any event, Reynolds v Coleman is exactly on point: it is too late now to set aside the order on that ground.
(iii) Forum non conveniens
- Finally there is the question as to forum non conveniens. Insofar as it is to be revisited 7½ years on, the position seems even clearer now than it was before Gloster J that the English court is the appropriate forum. In any event IRP is not a party to the Pakistani proceedings.
My January 2011 order
- Before I turn to consider my decision in respect of the challenge to Gloster J's Order, I shall address the argument with regard to my Order of 14 January 2011. I can decide that question shortly:
(i) There was substantial delay by IRP, though nothing like of the order of that in applying to set aside the Order of Gloster J.
(ii) It is plain that it was only the Third Party Debt Order applications which roused IRP into action.
(iii) I do not consider that there was any arguable material non-disclosure, and certainly none which should be permitted to be raised after such delay.
(iv) IRP would have a real prospect of success in defending the claim if judgment was set aside, particularly as to:
a) the defence of limitation
b) the defence as to the liability of IRP on the contract(s).
- I am satisfied that I should look at each order separately. As for Gloster J's order, but for the words of Lord Dyson in the Privy Council decision in Matthews this would appear to relate to an implied sanction contained within it, by virtue of the fact that IRP is seeking an extension of time to make a Part 11 challenge, from which it is otherwise excluded, in accordance with the decisions of the Court of Appeal with regard to extensions of time for permission to appeal in Sayers and Yeates. However I do not need to decide whether the Privy Council decision in that regard is binding or persuasive, because in this case there was a sanction, which has been imposed subsequently, namely the judgment in default in the absence of such challenge or a defence.
- I am accordingly considering CPR Rule 3.9 but (again pace Lord Dyson in Matthews) also Rule 13.3 as in Hussain. I am satisfied, as was Silber J in Samara, that the new approach described by Lord Dyson's Implementation Lecture and exemplified in Mitchell is intended to be of universal effect, i.e. across the board in relation to the CPR, by reference at least to the amended Overriding Objective, just as in Agrinvest (as set out in paragraph 45(viii) above) it was considered that the introduction of the CPR itself would and should have an accelerating effect.
- IRP was plainly guilty of very substantial delay in bringing this application, which was at least in part clearly the result of a tactical decision (which the first instance Judge had found in Rayner (at 766) not to be the case there). But for the pause for thought set out below, I am satisfied that, as in Reynolds, decided 126 years before Mitchell, although this is a case of depriving a party not otherwise subject to the jurisdiction of this court the opportunity to challenge it, the order for service out should not be set aside in order to give the opportunity to IRP for an extended period of time for a Part 11 challenge. Accordingly, I would not, after this lapse of time and in the light of the 'defence strategy', give relief from sanctions, even if there may have been ground for dispute as to the seriousness of the issues to be tried, and in any event not in respect of the belated allegations of material non-disclosure.
- My pause for thought relates to Mr Layton's new point. It seems to me arguable that it could be said that IRP waived the right to assert immunity at the jurisdictional stage. However in any event I am satisfied that, by virtue of the other powerful and conclusive reasons for my not setting aside Gloster J's Order, I can address the question of whether the issue of immunity/liability of IRP on the contract can be decided on the balance of probabilities by taking that matter into account when I consider the setting aside of my Order and of the judgment in default in order to allow IRP to defend the claim, to which I now turn.
- It seems to me clear that, although applications under CPR 13.3 do fall to be considered by reference to the new approach, there needs to be, and here I differ from Silber J, a somewhat different approach from that in relation to a case, as in Mitchell, falling within CPR 3.8. A sanction set out by the Rule itself for breach may be said to be pre-estimated as the appropriate course, absent good reason. But a sanction imposed pursuant to CPR 3.9, or an application by reference to CPR 3.9 and 13.3, may allow different or wider considerations to be taken into account, or more than trivial delays to be addressed. In this case:
(i) The passage of time was 7½ months, though IRP was entitled to 2 of those months, so the delay was 5½ months.
(ii) IRP plainly has arguable defences, such as more than to satisfy the first condition in CPR 13.3(1).
(iii) There is in this case the important issue of allowing the claim of immunity to be resolved on the balance of probabilities.
- Notwithstanding my criticism of the delay by IRP from 2 September 2012 to 10 April 2013, and the very belated making of the application, I will permit the judgment to be set aside so that it may defend the Claimant's case within the jurisdiction, and file a defence accordingly. However I will only do so on terms (see the note to CPR 13.3 set out in paragraph 40 above).
- These terms are:
a) as to costs, to be argued:
b) as to the continuation of security in respect of the full amount of monies caught by the interim Third Party Debt Orders, until further order.
- With that exception I dismiss all the other applications by IRP.