Deutsche Bank AG v Tongkah Harbour Public Co Ltd (2011)
An action against a company was stayed under the Arbitration Act 1996 s.9 where the same matter had been referred to arbitration, but an action against the company's parent on a guarantee was not stayed since there was no arbitration agreement and the claimant bank was entitled to enforce the guarantee, if it could make good its claim, regardless of the claim against the principal debtor.
The applicant Thai companies (T1 and T2) applied to stay two actions brought against them by the respondent bank (D). T1 was a gold mining company and T2 was its parent. T1 had borrowed from D under a facility agreement and at the same time entered into an export contract which involved repaying the loan by selling gold to D's London branch at a price calculated according to a prescribed formula. T2 guaranteed T1's obligations to D. T1 was unable to meet its obligations under the export contract. It then concluded that the pricing arrangements were working unfairly and that the arrangements with D were in breach of Thai law and banking regulations. D terminated the facility agreement on the basis that an event of default had occurred and sought immediate repayment. It also terminated the export contract and claimed the early termination amount said to be due under it. It also claimed against T2 on the guarantee. D commenced two actions seeking payment from T1 of the sums allegedly due under the facility agreement and from T2 of the sums allegedly due under the guarantee. D also commenced arbitration proceedings against T1 under the export contract seeking payment of the early termination amount. The applicants submitted that the facility agreement and the export contract constituted one transaction and that the key disputes raised by D in the actions were the same as those referred to arbitration and that accordingly the actions should be stayed pursuant to theArbitration Act 1996 s.9 or the court's inherent jurisdiction.
(1) The fact that different branches or divisions of D were involved in the transactions did not affect the legal analysis. D was a single contracting party (see para.27 of judgment). (2) The claims in the court and arbitration proceedings were closely connected. The provisions in the two contracts were interconnected. The export contract was the means by which T1 repaid the facility. Both claims were based on the same events of default. Whereas in the action the bank claimed the outstanding loan amount, in the arbitration it claimed the early termination amount. Those were different claims, but they arose out of the same breach of the same contractual arrangements. They were aspects of the same matter. Under the relevant provisions D had the option to refer the matter to the court or to arbitration. Having referred it to arbitration, the statutory stay applied as regards the court proceedings, and it made no difference that the claim in the arbitration was restricted to a claim for the early termination amount under the export contract. It followed that the court proceedings against T1 were stayed under s.9 (para.29). (3) The case against T2 on the guarantee was different because there was no arbitration agreement. A claim under a guarantee might raise similar or even the same issues as the claim against the principal debtor, but the covenant to pay was given by a different party, in the instant case T2. D was entitled to enforce the guarantee if it could make good its claim, regardless of the claim against T1. The fact that there might be substantial overlap between the claims did not affect that conclusion. It was possible and commercially rational to allow the claim to proceed even though that might result in a degree of fragmentation in the resolution of the overall dispute, Deutsche Bank AG v Sebastian Holdings Inc (2010) EWCA Civ 998, (2011) 2 All ER (Comm) 245 considered (para.30).
Application granted in part