COMDEL COMMODITIES LTD. v. SIPOREX TRADE S.A.

A claimant enjoying a Mareva injunction must prosecute the underlying proceedings diligently. A substantial and unexplained period of inactivity may justify discharge, particularly where the injunction has already remained in force for many years and bears heavily on the defendant.

An error in the judge’s detailed exercise of discretion does not require reversal where it was immaterial and the order remains justified by the correct governing principle. Assertions by counsel about materially disputed facts cannot, without agreement, substitute for evidence.

Comdel appealed from Colman J’s order of 24 November 1995 discharging a Mareva injunction obtained in support of an arbitration against Siporex. The injunction restrained approximately US$1.89 million paid to Siporex under performance bonds. Comdel sought to recover any amount exceeding Siporex’s contractual loss.

The underlying dispute had continued for about ten years. An umpire dismissed Comdel’s arbitration claims for want of prosecution following, among other matters, an unexplained period of 19 months during which Comdel took no step. Its appeal to the FOSFA Board of Appeal remained pending.

The principal question was whether errors in Colman J’s reasoning required the Court of Appeal to reverse his discretionary decision to discharge the injunction.

1. Appeal dismissed unanimously. Potter LJ delivered the judgment, with which Peter Gibson LJ and Butler-Sloss LJ agreed. Although Colman J made two identifiable errors, they did not undermine his conclusion that the injunction should be discharged.

2. The judge wrongly treated correspondence exchanged in January 1994 as an agreement that time was to be frozen for the purposes of a future application to discharge the Mareva injunction. The correspondence dealt separately with dismissal for want of prosecution and discharge of the injunction. Siporex merely reserved its right to seek discharge. Nevertheless, its pursuit of dismissal, coupled with that express reservation, neither waived that right nor gave Comdel a reasonable sense of security. The earlier delay had not become merely historic.

3. The judge also erred by accepting counsel’s unsupported assertion that the injunction had stopped Siporex trading and crippled it financially. On a materially disputed issue, an assertion by counsel should neither be made nor received as a substitute for evidence unless the parties agree. The restrained money had not previously formed part of Siporex’s trading capital, and the available evidence instead suggested an unanticipated windfall. This error was, however, only a makeweight in the judge’s reasoning.

4. The governing consideration was the strict duty of a claimant benefiting from a Mareva injunction to pursue the underlying proceedings diligently. Such injunctions may bear extremely heavily on defendants. Comdel’s wholly unexplained inactivity for 19 months occurred when the dispute and injunction were already exceptionally old. Its conduct was inconsistent with the principles of the Mareva jurisdiction and justified discharge despite the likelihood that Comdel would then abandon an apparently strong substantive claim.

5. The apparent strength of the substantive performance-bond claim did not alter the result. Potter LJ considered, without deciding, that a performance bond ordinarily anticipates a later accounting between the contracting parties and does not constitute agreed damages. That consideration was offset by the absence of reason to expect the pending FOSFA appeal to overturn the dismissal for want of prosecution.

Colman J’s order was affirmed, with costs. Permission to appeal to the House of Lords was refused. The injunction was continued temporarily on conditions governing a prompt application for permission to the House.

1. Court of Appeal (Civil Division): The appeal was dismissed unanimously and Colman J’s order discharging the Mareva injunction was affirmed: [1997] EWCA Civ 925; [1997] 1 Lloyd's Rep 424.

2. High Court, Commercial Court: On 24 November 1995 Colman J discharged the Mareva injunction because of Comdel’s unexplained delay, but stayed execution pending this appeal. No citation is stated.

3. Arbitration: On 2 November 1995 the umpire dismissed Comdel’s claims for want of prosecution under section 13A of the Arbitration Act 1950. Comdel’s appeal to the FOSFA Board of Appeal remained pending.

4. House of Lords: In earlier proceedings the House held that section 27 of the Arbitration Act 1950 empowered the court to extend time despite an arbitral power to do so: [1990] 2 Lloyd's LR 207.