First Modular Gas Systems Ltd v Citibank Europe Plc and Others
| Jurisdiction | Ireland |
| Judge | Mr Justice Rory Mulcahy |
| Judgment Date | 05 September 2023 |
| Neutral Citation | [2023] IEHC 514 |
| Court | High Court |
| Docket Number | Record No.: 2023/3 MCA |
In the Matter of An Intended Arbitration
And in the Matter of the Arbitration Act 2010
[2023] IEHC 514
Record No.: 2023/3 MCA
THE HIGH COURT
Injunction – Interim measure – Fraud – Applicant seeking an interlocutory order – Whether the injunction sought was an interim measure within the meaning of Article 17 of the Model Law
Facts: The applicant, First Modular Gas Systems Ltd (First Modular), on 7 January 2023, sought and obtained on an ex parte basis an order pursuant to Order 56, Rule 3(a) and or 3(h) of the Rules of the Superior Courts for an interim measure of protection under Articles 9 and/or 17J of the Model Law, in this case, an injunction in aid of an intended arbitration. The order restrained the first respondent, Citibank Europe plc (Citibank), from making any payment on foot of a letter of credit to the benefit of the third respondent, Bosai Energy Technology Corporation (Bosai). The order gave First Modular liberty to issue and serve an originating notice of motion and notice of motion seeking interlocutory relief, both of which were duly served on the respondents. First Modular sought, in effect, a continuation of the injunction pending the determination of the arbitration proceedings. The respondents sought to have the injunction discharged. The second respondent, Ennovate Consultants Incorporated, and Bosai also issued a motion on 27 February 2023 seeking to set aside the orders made by the High Court on 7 January 2023. The application sought to restrain an Irish registered company, Citibank, as an interim measure in aid of an arbitration in Nigeria to which Citibank was not, and could never be, a party, and it involved a claim for payment by Bosai for goods purportedly dispatched by Bosai from China to Nigeria which First Modular claimed were never ordered or, in the alternative, were never dispatched at all. First Modular claimed that Bosai’s request for payment on foot of the letter of credit was a sham.
Held by Mulcahy J that the injunction sought was not an interim measure within the meaning of Article 17 of the Model Law since there was no underlying arbitration or obligation to enter arbitration between the parties to whom the injunction was directed. He was satisfied that the appropriate threshold for the grant of an injunction in this case was that identified in Construgomes and Anor v Dragados Ireland Ltd and Ors [2021] IEHC 79: a seriously arguable case that the only reasonable inference that the claim for payment on foot of the letter of credit is fraudulent. He was not satisfied that the applicant had met the necessary threshold for seeking injunctive relief and would, therefore, have refused the injunction on that ground even had the Court’s jurisdiction pursuant to Article 17 been properly engaged. He noted that in Construgomes, the Court determined that it was not necessary to consider the question of the balance of convenience having concluded that there was no clear case of fraud such as to justify the grant of an injunction; the Court noted that there was a divergence between the Irish and English case law on the approach to the balance of convenience in these types of cases and that a resolution of any such differences should await a case in which they would be determinative. Other than noting that the applicant had not set out any basis for arguing that damages were not an adequate remedy other than an asserted difficulty in recovering damages from a Chinese company, Mulcahy J adopted the same approach in this case.
Mulcahy J proposed making an order refusing the applicant’s application for an interlocutory order and vacating the interim order previously made. His provisional view was that the respondents, having been successful in their opposition to the injunction, were entitled to their costs as against the applicant in the applicant’s motions. It did not seem necessary to him to make any order on foot of the second and third respondent’s motion, and he proposed making no order on that motion.
Application refused.
JUDGMENT of Mr Justice Rory Mulcahy delivered on 5 September 2023
On 7 January 2023, the Applicant (“ First Modular”) sought and obtained on an ex parte basis an Order pursuant to Order 56, Rule 3(a) and or 3(h) of the Rules of the Superior Courts for an interim measure of protection under Articles 9 and/or 17J of the Model Law, in this case, an injunction in aid of an intended arbitration. The Order restrained the first Respondent (“ Citibank”) from making any payment on foot of a letter of credit, bearing the number ALC2021C02347C (“ the Letter of Credit”) to the benefit of the third Respondent (“ Bosai”).
The Order gave First Modular liberty to issue and serve an originating notice of motion and notice of motion seeking interlocutory relief, both of which were duly served on the Respondents. First Modular seeks, in effect, a continuation of the injunction pending the determination of the arbitration proceedings. The Respondents seek to have the injunction discharged. The second and third Respondents also issued a motion on 27 February 2023 seeking to set aside the Orders made by the Court on 7 January 2023. The parties were all agreed that the three motions raised identical issues and could be dealt with together.
The underlying dispute to this application is striking in a number of respects. It involves a dispute between Nigerian, Canadian and Chinese companies regarding the performance of a contract in Nigeria to design and manufacture a gas processing plant. This application seeks to restrain an Irish registered company, Citibank, as an interim measure in aid of an arbitration in Nigeria to which Citibank is not, and could never be, a party. And it involves a claim for payment by Bosai for goods purportedly dispatched by Bosai from China to Nigeria which First Modular claims were never ordered or, in the alternative, were never dispatched at all. Put otherwise, First Modular claims that Bosai's request for payment on foot of the Letter of Credit is a sham.
The parties have filed a number of affidavits and, notwithstanding, the claim by First Modular that Bosai has perpetrated a fraud by claiming payment on the Letter of Credit, much of the factual background is not in dispute. Having regard to the interlocutory nature of this application, its resolution turns on two issues. The first is whether the injunction sought falls within the jurisdiction of this Court pursuant to Order 56 of the Rules of the Superior Courts and the Model Law at all, i.e. can it properly be characterised as an interim measure in aid of arbitration? If not, then the injunction must be discharged. If the application does fall within the parameters of Order 56, then the second issue to be determined is whether the Applicant has met the very high threshold required to restrain payment on foot of a letter of credit.
The parties' affidavits have laid out in detail the factual background to this application. It is necessary for the purpose of this judgment to provide only a summary of that background.
In June 2021, First Modular, a Nigerian company, and the second Respondent (“ Ennovate”), a Canadian company, agreed Heads of Terms for the design and manufacture of a gas processing plant in Anambra State, Nigeria. Those parties executed a main contract (“ the EPC contract”) on 8 February 2022.
The third Respondent (“ Bosai”) was retained by Ennovate as a subcontractor to manufacture components for the plant. On 5 October 2021, Bosai issued a pro forma invoice to First Modular for “ONE COMPLETE New Bosai Natural Gas Processing Plant” (“ the Pro Forma Invoice”). The delivery term was described as CFR, meaning ‘Cost and Freight’. In general terms, this meant that the purchaser was liable for the goods while they were in transit. The Pro Forma Invoice included a list of 31 accessories for the gas plant, which included, at Item 15, 11 CNG (compressed natural gas) storage skids. The total price was USD$4,717,415 and the method of payment was a confirmed letter of credit.
On 17 February 2022, the fourth Respondent (“ Access Bank”) issued a letter of credit with Citibank as the confirming bank and Bosai as the beneficiary. The Letter of Credit was amended 12 times between March and November 2022 to increase the value of the credit.
Although the contract documents were executed on 8 February 2022, it is not disputed that there were further discussions and negotiations between the parties thereafter. Ennovate and Bosai claim that First Modular instructed them to get whatever equipment they could for the gas plant “off-the-shelf” as a matter of urgency having regard to the falling value of the Naira, the currency of Nigeria. This is not expressly denied by First Modular in its affidavits. On foot of those instructions, Bosai claims that it issued a purchase order for certain long lead items, including 11 CNG storage cylinders, on 1 March 2022.
In May 2022, First Modular wrote to Ennovate and Bosai asking them to stay any action on procurement and/or equipment production until they had resolved an issue with the feedgas owner. In June 2022, all three parties met in order to discuss a new project location. There were further video meetings between the parties throughout the summer of 2022.
On 8 September 2022, Mr Dipo Lawore of First Modular called Mr James He of Bosai to tell him that First Modular was cancelling the project. Mr Lawore called Mr Khalid Saleh of Ennovate the following day to tell him that the project was being cancelled and that Ennovate was free to arbitrate in Nigeria. On 12 September 2022, First Modular requested, through Access Bank, the cancellation of the Letter of...
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