Zccm Investments Holdings Plc v Konkola Copper Mines Plc, Court of Appeal - Commercial Court, December 14, 2017, [2017] EWHC 3288 (Comm)

Resolution Date:December 14, 2017
Issuing Organization:Commercial Court
Actores:Zccm Investments Holdings Plc v Konkola Copper Mines Plc
 
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Neutral Citation Number: [2017] EWHC 3288 (Comm)

Case No: CL-2016-000352

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 14/12/2017

Before:

Lionel Persey QC

(sitting as a Judge of the High Court)

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Between:

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Jamie Riley (instructed by Clifford Chance LLP) for the Claimant

Sophie Mallinckrodt (instructed by Latham & Watkins LLP) for the Defendant

Hearing dates: 22 November 2017

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Lionel Persey QC:

  1. In this CMC the Claimant seeks:

    (1) summary judgment pursuant to CPR Part 24 in the sum of US$35,875,873, alternatively in the sum of US$9,060,000 together with contractual interest; and/or, if necessary

    (2) various directions for the future conduct of these proceedings.

    Introduction and background

  2. The Claimant (``ZCCM'') is a Zambian company in which the Zambian Government holds a 77.53% interest. The Defendant (``KCM'') is also a Zambian company, whose principal activities are the mining, production and marketing of copper and cobalt alloys. The ultimate majority shareholder of KCM is Vedanta Resources Plc (``Vedanta'').

  3. In March 2000 ZCCM and KCM entered into copper and cobalt price participation agreements. In November 2004 they concluded a shareholders' agreement. Various claims for non-payment of sums due from KCM to ZCCM arose under those agreements. These claims were subsequently settled pursuant to the terms of a detailed Settlement Agreement dated 11 February 2013 (``Settlement Agreement''). The terms of the Settlement Agreement, to which I will return in more detail below, required KCM to make payments (together with accrued interest) to ZCCM in the following sums:-

    (1) US$46,324,655 to be paid on or before 31 August 2013 in accordance with the payment schedule set out in Schedule 1 (``the Part A Instalments''); and

    (2) US$73,420,000 to be paid on or before 30 September 2013 in accordance with the payment schedule set out in Schedule 2 (``the Part B Instalments'').

    I was told that the Settlement Agreement was negotiated and drafted by the parties' solicitors, Clifford Chance LLP and Latham & Watkins LLP.

  4. By the time the Claim Form came to be issued on 6 June 2016 KCM had paid just under US$19.5 million in respect of the Part A Instalments and had failed to make any payment in respect of the Part B Instalments. The total sum then owing under the Settlement Agreement was a little over US$103 million, inclusive of contractual interest. The final Part B Instalment of US$9,060,000 (``the Final Instalment'') had not at that time yet fallen due.

  5. ZCCM at that time suspected that the full amount of all sums payable under the Settlement Agreement, including the final instalment, had become due pursuant to the acceleration provisions in Clause 6.3 of the Settlement Agreement (``the Acceleration Provisions'') by virtue of possible breaches by KCM of clauses 7.3 and 7.4 of that agreement. Those clauses, as will be seen, effectively conferred a priority in favour of ZCCM over Vedanta and other Vedanta group companies (``the Vedanta Group'') in respect of payments made by KCM, and prohibited KCM from making payments of certain kinds to the Vedanta Group. ZCCM did not have access to information that would have enabled it to determine clearly whether KCM was in breach of the Settlement Agreement terms. In the Particulars of Claim served with the Claim Form ZCCM claimed an account or inquiry into the sums that KCM might owe by virtue of the operation of the Acceleration Provisions.

  6. Two extensions of time for service of KCM's Defence were agreed between the parties, the second of which was on the terms of a signed Consent Order dated 15 August 2016 pursuant to which KCM agreed to give inspection of documents that had previously been requested by ZCCM. Those documents were not supplied and KCM did not serve a Defence by the agreed date. ZCCM therefore issued an application for default judgment.

  7. KCM purported to comply with the documentary requirements of the Consent Order by providing some documentation on 22 August 2016 and further information on 29 August 2016. That information showed that certain payments had been made to Vedanta on 11 April 2013 (2 months after the date of the Settlement Agreement) but fell well short of that which KCM had agreed to provide. On 9 September KCM provided some further information showing that sums totalling US$3,716,914 had been paid to the Vedanta Group on 11 April 2013. The supporting documentation was not, however, clear. KCM did not serve a Defence.

  8. ZCCM's application for a default judgment was heard on 16 December 2016 by Mr Ali Malek QC, sitting as a Judge of the High Court. He ordered default judgment in ZCCM's favour of US$103,327,244 (inclusive of contractual interest) in respect of the Part A and Part B Instalments outstanding as at the date of the Claim Form (ie not including the Final Instalment). He also ordered an inquiry (``the Inquiry'') or alternate account as to whether and, if so, in what sum, KCM was liable for the Accelerated Sum pursuant to the Acceleration Provisions in the Settlement Agreement. KCM was required by 20 January 2017 to give inspection of all documents evidencing payments by it to Vedanta in the financial years 2013 to 2015 in certain identified categories and to serve a witness statement providing a full narrative explanation of all payments made by KCM to any Vedanta Group company in those financial years. The Judge also gave directions for the service of pleadings in the Inquiry.

  9. The parties subsequently agreed to a Consent Order dated 20 January 2017 which varied the payment terms in the Default Judgment and permitted KCM to pay the Judgment sum in a series of instalments. Also on that day KCM served a third witness statement of Daniel Smith of Latham & Watkins in purported compliance with the terms of the Default Judgment. Although some further information was given this statement did not provide the full narrative explanation called for by the Default Judgment.

  10. ZCCM served its Points of Claim in the Inquiry on 24 February 2017 and on the same day demanded payment of the Final Instalment together with interest. KCM's Points of Defence were served on 17 March 2017 and...

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