Kuwait Finance House (Bahrain) BSC(c) v Teece [2014] NZHC 3162 (11 December 2014)

Last Updated: 11 December 2014

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV-2013-442-000289 [2014] NZHC 3162

BETWEEN	KUWAIT FINANCE HOUSE (BAHRAIN) BSC(c) Plaintiff
AND	DAVID JOHN TEECE Defendant

Hearing:	25 and 26 November 2014 (Heard at Christchurch)
Appearances:	R G Smedley and L Taylor for Plaintiff S Mills QC, R J Hollyman and H E McQueen for Defendant
Judgment:	11 December 2014

_{JUDGMENT OF ASSOCIATE JUDGE MATTHEWS}

[1] Kuwait Finance House (Bahrain) BSC(c) (KFH Bahrain) is a Bahraini company, a wholly-owned subsidiary of Kuwait Finance House – Kuwait, and a provider of Islamic retail commercial and investment banking services.

[2] The defendant (Dr Teece) is a New Zealand citizen, resident in Berkeley, California.

[3] On 9 February 2012 the Bahrain Chamber for Dispute Resolution (the Chamber) in the Kingdom of Bahrain ruled that Dr Teece is liable to pay KFH Bahrain the sum of USD 3,401,250, together with case expenses and attorneys’ fees. Dr Teece has not paid any part of this sum.

[4] KFH Bahrain now sues Dr Teece on the ruling of the Chamber, and claims

_{judgment against him for the sum stated. This judgment determines KFH Bahrain’s}

KUWAIT FINANCE HOUSE (BAHRAIN) BSC(c) v TEECE [2014] NZHC 3162 [11 December 2014]

application for summary judgment against Dr Teece. It expressly relies on common law rules relating to the enforcement of foreign judgments in this country.

[5] Dr Teece opposes the entry of summary judgment.

Summary judgment

[6] Rule 12.2 of the High Court Rules provides:

12.2 Judgment when there is no defence or when no cause of action can succeed

(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.

...

[7] The principles the Court is to apply on an application for summary judgment are summarised in Krukziener v Hanover Finance Ltd:¹

[26] The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1986] NZCA 112; [1987] 1 NZLR 1 (CA) at 3. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ

84 (CA).

[8] In Auckett v Falvey, Eichelbaum J said:²

On a summary judgment application, the onus is on the plaintiff to show that there is no defence. On the present facts, the plaintiffs are able to pass an evidential onus to the defendants by exhibiting the contract which on its face, entitles them to the remedy they now seek. The defendants are then in a position of having to demonstrate a tenable defence. However, the overall

¹ _{Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307.}

² Auckett v Falvey HC Wellington CP296/86, 20 August 1986.

position concerning onus on the application is that at the end of the day the question is whether the plaintiffs have satisfied the Court as to the absence of a defence.

[9] I take from these authorities that the correct approach of the Court to analysis of the case is:

(a) Does the evidence for the plaintiff establish a position which on its face would entitle it to the remedies it now seeks?

(b) If so, has the defendant demonstrated a tenable defence?

(c) The onus which shifts to the defendant is an evidential one only; the burden of proving that the defendant does not have a defence rests throughout with the plaintiff.

The transaction which gave rise to the claim in the Chamber

[10] In 1999 Dr Teece led a consortium of investors which purchased a New Zealand company, Lane Walker Rudkin Ltd. The company was then delisted, restructured and its name changed to Canterbury Ltd. Expansion of its operations placed pressure on cashflow. In November 2003 KFH Bahrain invested $20,000,000 of equity in Canterbury Ltd, through a subsidiary. KFH Bahrain became the majority shareholder. The holding of Dr Teece was diluted. Although it is not entirely clear on the evidence, it appears he then held 35 per cent. He remained a director.

[11] Over the next few years Canterbury Ltd’s funding through banks regularly operating in New Zealand was replaced by funding from Islamic banks.

[12] During 2007 and 2008 the company’s financial performance was such that further shareholder investment was necessary. In March 2008 Dr Teece invested USD 1,200,000 as an advance structured as secondary convertible debt. He says that this advance was made under some pressure from KFH Bahrain which also advanced funds to Canterbury Ltd and required Dr Teece to make an advance pro rata.

[13] By October 2008 the financial position had deteriorated further, to the point that Dr Teece advised the CEO of Canterbury Ltd that “There won’t be a company unless $$$ are put in Canterbury this week (or next). This correspondence sounds surreal.” The CEO responded with a list of six funding options, one of which was a further advance from Dr Teece. He immediately informed KFH Bahrain that he did not have additional financial capacity, so this was not a prospect.

[14] It was then arranged that KFH Bahrain would provide funding of USD 3,000,000. The way in which this provision was structured forms the basis of the dispute which is now before the Court.

[15] According to Dr Teece, Mr Paul Mercer, legal counsel for KFH Bahrain, told him that the latter would have liked to advance to Canterbury Ltd the funding required but was not able to because of a Bahraini regulatory issue that prevented it from making any further direct investment in Canterbury Ltd. Dr Mercer has sworn an affidavit in this proceeding and does not take issue with this, nor explain the regulatory issue concerned. The inability of KFH Bahrain to advance funds directly to Canterbury Ltd led to a sequence of transactions by which Dr Teece became an intermediate party. It was also necessary to structure the transactions in a way that did not involve the charging of interest, because the transactions were governed by Islamic law, and under Islamic law interest may not be charged on funds advanced.

[16] Dr Teece, KFH Bahrain and Canterbury Ltd executed six documents at the conclusion of a board of directors meeting of Canterbury Ltd held in Manchester, England, on 29 October 2008:

(a) Dr Teece and KFH Bahrain signed a Desire and Purchase Promise. By this document Dr Teece expressed a desire to purchase USD 3,000,000 worth of commodities from KFH Bahrain. Commodities are defined as “Shari’a compliant metals and commodities listed on a qualified exchange, which has [sic] a readily available market price, as [KFH Bahrain] may decide.” In this case the stipulated commodity was aluminium. KFH agreed to buy the commodities on execution of this document. Dr Teece promised to buy the commodities from KFH

Bahrain for an exercise price calculated as the initial intended commodities price, USD 3,000,000, and “profit on the sale of the commodities as calculated pursuant to the Commodities Murabaha Agreement”. In this case, the exercise price included a further sum of USD 401,250.

(b) Dr Teece and KFH Bahrain signed a Murabaha Agreement. This is the agreement on which KFH Bahrain relies in this proceeding. In essence, Dr Teece agreed to buy from KFH Bahrain the commodities that KFH Bahrain had purchased from a commodities dealer in reliance on the Desire and Purchase Promise. He agreed to pay the total sum of USD 3,401,250 by three instalments in March, May and June 2009 of USD 100,312.50 each, and a final payment on 29 November 2009 of USD 3,100,312.50.

(c) Dr Teece and Canterbury Ltd then entered a second Murabaha Agreement by which Canterbury Ltd agreed to purchase the commodities from Dr Teece for a total price of USD 3,393,750, by instalments on the same dates as Dr Teece was to pay for the commodities he had bought from KFH Bahrain, though each payment was less than Dr Teece’s obligation by USD 1,875. Although this document is in terms that refer to an earlier Desire and Purchase Agreement by which Canterbury Ltd might have expressed a desire to buy aluminium from Dr Teece, and promised to do so, no such preceding agreement was entered.

(d) Dr Teece and Canterbury Ltd executed a Promise to Sell Shares by which Dr Teece was given an option to purchase shares in Canterbury Ltd to the value of USD 3.390,000 at USD 0.02 per share.

(e) Dr Teece and KFH Bahrain executed a Deed of Assignment by which Dr Teece assigned to KFH Bahrain, with the consent of Canterbury Ltd, all his rights and interests in the Promise to Sell Shares Agreement. The right of KFH Bahrain to exercise the option arose only on default under the first of the two Murabaha agreements. In turn KFH Bahrain

agreed to reassign those rights and interests to Dr Teece after he had discharged in full his obligations under that agreement.

(f) The three parties then signed a further Deed of Assignment by which Dr Teece is said to have assigned to KFH Bahrain all his rights in the second Murabaha Agreement. Although in the background clauses to this document it is stated that Dr Teece had agreed to assign all of his rights in this Murabaha Agreement to KFH Bahrain, with the consent of Canterbury Ltd, this is not in fact recorded in the clauses described as the effective terms of the deed. For present purposes I do not think this has any consequence.

[17] Under the sequence of transfers of commodities envisaged by the Murabaha Agreements, it seems it was intended that the commodities dealer would be paid by KFH Bahrain, and commodities bought by Canterbury Ltd would then be sold by Canterbury Ltd back to the commodities dealer and Canterbury Ltd would receive the funds it needed. In fact, KFH Bahrain transferred USD 3,000,000 direct to Canterbury Ltd. The intended effect of the assignments is that Canterbury Ltd would pay these monies and the stipulated profit back directly to KFH Bahrain, if Dr Teece did not do so. Whether the documents have these effects is moot. Mr Mills undertook a detailed analysis of them, with a view to demonstrating that ownership of the aluminium may not have passed back to the commodities dealer; I pass over it for the present.

[18] Canterbury Ltd was placed into receivership in mid-2009 and did not pay any sum to KFH Bahrain or Dr Teece. In June 2009 KFH Bahrain advised Dr Teece that it may seek to enforce the first Murabaha Agreement against him. Dr Teece formally recorded his position, that his part in the transaction I have described was merely as a conduit for what was, in substance, an advance by KFH Bahrain to Canterbury Ltd.

[19] In January 2011 KFH Bahrain filed a claim in the Chamber. The claim was filed in Arabic. Although Dr Teece acknowledges that he received some documents in Arabic, and the decision of the Chamber records that he was served, there is no evidence that he was formally served with the proceeding which was issued, nor of

which documents he is said to have received. Dr Teece did not participate in the process before the Chamber. In due course it considered the claim and issued the decision which KFH Bahrain now seeks to enforce in this application.

Principles applying to enforcement of foreign judgments

[20] The application by KFH Bahrain is based on the common law rules relating to enforcement of foreign judgments. It is common ground that three criteria must be satisfied:³

(a) The foreign court must have jurisdiction to give judgment. (b) The foreign judgment must be for a definite sum of money. (c) The foreign judgment must be final and conclusive.

[21] Only the first of these propositions is in issue. Dr Teece accepts that the decision of the Chamber was for a definite sum of money and that it is a final and conclusive determination. He says, however, that for the first of these criteria to be satisfied it must be shown that the Chamber was a court, and that it had jurisdiction over the dispute.

[22] It is also common ground that there are two relevant defences to an application to enforce a foreign judgment:

(a) That enforcement would not be contrary to natural justice. (b) That enforcement would not be contrary to public policy.

[23] Dr Teece puts both these defences in issue.

[24] Accordingly the issues for determination in this case are: (a) Is the Chamber a court?

³ Reeves v One World Challenge LLC [2005] NZCA 314; [2006] 2 NZLR 184 (CA) at [36]- [37]: Lawrence Collins

(ed) Dicey, Morris and Collins on the Conflict of Laws (15th ed, Sweet and Maxwell, London,

2012) at 673.

(b) Did the Chamber have jurisdiction over the dispute between KFH Bahrain and Dr Teece?

(c) Was the decision made in accordance with the principles of natural justice?

(d) Should the decision be enforced in New Zealand as a matter of public policy?

[25] If the answer to the first of these issues is that the Chamber is not a court, that is determinative of the application. If the Chamber is a court it is necessary to consider whether it had jurisdiction to determine KFH Bahrain’s claim, and only if that question is answered in the affirmative is it necessary to consider the two affirmative defences raised.

[26] In considering these issues, it is important to reiterate that on an application for summary judgment it is necessary for the plaintiff to sufficiently establish the position in accordance with the principles I have set out. The defendant need do no more than establish an evidentiary foundation for a contrary position.

First issue - Is the Bahrain Chamber a court?

[27] On 29 June 2009 Hamad bin Isa Al Khalifa, King of the Kingdom of Bahrain, promulgated “Legislative Decree number 30 for the year 2009 with respect to the Bahrain Chamber for Economic Financial and Investment Dispute Resolution”. This decree established the Chamber.

[28] KFH Bahrain filed an affidavit from Mr Hasan Ali Radhi, a senior partner in a firm in Bahrain with 40 years experience practising law in the courts in Bahrain. After explaining recent changes to the law of Bahrain based on the laws of “Western countries” Mr Hasan Ali Radhi says:

... The recent development of the Bahrain Chamber for the resolution of economic, financial and investment disputes (the “BCDR”...) is consistent with the trend in Western countries, including the United States of America and the United Kingdom, to create specialised commercial courts for the efficient adjudication of significant financial and commercial disputes. Bahrain has also improved the access of parties to such disputes to

arbitration, authorising the BCDR to administer under its auspices voluntary arbitration under rules ... identical to the rules of the International Centre for Dispute Resolution (the international branch of the American Arbitration Association) (the “AAA”) in cases where the parties consent to such arbitration ... . The BCDR is supported by the AAA through a management support agreement with the objective of maintaining quality control in matters subject to arbitration.

[29] Neither this witness nor any other witness for KFH Bahrain specified the

“specialised commercial courts” to which he was referring.⁴

[30] After noting that judges in Bahrain are “independent and subject to no power except that of the law in the discharge of their duties” Mr Hasan Ali Radhi expressed his considered opinion that:

The adjudication of the Disputes Resolution Tribunal of the BCDR is fair, unbiased, impartial, independent and is in line with the highest judicial standards. The BCDR is a judicial authority and has been entrusted with the judicial function of determining disputes between the parties in accordance with the provisions of Article 9 of the BCDR law.

Article 9 sets out the jurisdiction of the Tribunal to which I refer shortly.

[31] KFH Bahrain also filed an affidavit from Mr Lucas Pitts, a partner in a law firm with offices in Bahrain. Mr Pitts says that the Chamber (also referred to as the BCDR) was established in partnership with the American Arbitration Association. He says that pursuant to the legislative decree to which I have referred:

The BCDR provides a forum for arbitrations pursuant to an agreement by both parties, and also provides statutory alternative dispute resolution tribunals ... for any claim exceeding BD 500,000 which would have come within the jurisdiction of the courts of Bahrain and involves either:

(a) an international commercial dispute, or

(b) a party licensed by the Central Bank of Bahrain.

[32] Mr Pitts says that:

The statutory tribunal proceedings follow a timetable and structure very similar to that applied by all international arbitral rules. The tribunal

⁴ If the reference was, in part, to the Commercial Court in England, that is a specialist List in the Queen’s Bench Division. It bears little if any resemblance to the Chamber. It is presided over by Judges of the High Court; it issues judgments of that Court. Further reference may be made to the Civil Procedure (Amendment No 5) Rules 2001 (UK) and published guidelines on the Admiralty and Commercial Courts.

comprises three judges, one of whom has relevant expertise to the matter in dispute.

[33] Mr Pitts gives brief details of the experience of his firm with the Chamber, and says that foreign nationals receive a fair hearing in the Chamber regardless of nationality or identity and regardless of the nationality or identity of the opposing party. At no point in any of the statutory tribunal proceedings, as he calls them, in which his firm has been involved has it had any concern about the fairness of the hearing afforded to any of the firm’s clients.

[34] Dr Teece filed an affidavit from a personal assistant to Mr Mills QC to which a number of documents downloaded from the web are exhibited. Five of them are articles published about the Chamber. Whilst Mr Smedley did not take specific exception to my considering these articles, I accord them only limited weight. They express opinions by persons who are not giving sworn testimony before the Court as accredited experts; I review three of them to provide some context for the inception of the Chamber.

[35] First, in an article by Norton Rose Fulbright, a multi-national law practice published in February 2010 on its website the firm says:

• The BCDR aims to provide a modern effective ADR service that results in final and binding resolution of commercial disputes.

• The BCDR Rules very closely follow those of the International Centre for Dispute Resolution (ICDR). The ICDR is the international division of the AAA, and its rules are tried and tested, and generally regarded as of international standard.

• The creation of the BCDR should enable parties to resolve their disputes in Bahrain in an efficient and timely manner before a neutral tribunal and provide them with an award that should be readily enforced.

[36] The second article is from Charles Russell, another international law firm. I

note the following passages from the article, also published in February 2010:

• The launch of the BCDR “is a significant step in a joint venture between the Bahrain Ministry of Justice ... and the American Arbitration Association (AAA)”.

• ... There is no doubt that there is established a unique hybrid system

for the resolution of high value “international commercial disputes”.

• The implementing regulation goes one step further towards the classic model of arbitration in permitting the parties by agreement to choose two of a three person tribunal. There are no qualifications requirement [sic] in respect of such appointees. They may, for example, be retired judges, law professors, lawyers or other professors.

[37] The article then discusses the BCDR in terms which make it clear that the firm regards its procedure as a form of arbitration noting, for example, the ability to choose, at least in part, the constitution of the tribunal, the procedures the tribunal may follow, and the limited rights of review of the decisions it makes. I need only quote briefly from the concluding paragraph:

What is most striking about these new Bahraini instruments relating to arbitration is how confidently and maturely they embrace the quintessential non-interventionism of ... arbitration.

... The Gulf states have created structures which will deliver them expertise

on the practical workings of state-of-the-art modern arbitration.

In Bahrain ... experienced local judges will continue to supervise classic arbitrations by agreement and review awards proceeding from them. But local judges will also have the advantage of dealing with substantive commercial matters alongside global experts and apparently certain matters of arbitration procedure as well, given that the review system for statutory arbitration awards appears to disclose certain characteristic features of review of arbitration awards in the classical sense.

[38] The third article is from Al Tamimi & Co published on its website in 2014. It describes the BCDR as “the latest in a number of arbitration centres to open in the region”, a reference to the Middle East.

[39] To determine whether the Chamber is a court it is necessary to carefully examine the legislative decree, and then review its provisions against the principles which apply to deciding whether a decision-making body is a court for the purposes of enforcement, in New Zealand, of its decisions.

[40] The decree contains a preliminary chapter, and five further chapters. The preliminary chapter contains definitions. Chapter 1 contains provisions establishing and organising the operation of the Chamber. Chapter 2 is divided into two parts. Section 1 relates to disputes which must be decided by the Chamber. Section 2

provides for the Chamber to have jurisdiction over disputes which are referred to it by agreement. Chapter 3 contains provisions regulating the operation of the Chamber. Chapter 4 allows other dispute resolution institutions to be licensed to practise in Bahrain, and Chapter 5 contains general provisions relating to the Chamber’s operation.

[41] Both counsel took me through the decree, and referred to provisions in it which they consider to be of relevance to the issue under discussion.

[42] The Chamber has jurisdiction to determine certain disputes which were “originally within the jurisdiction of Bahrain courts or other entities having judicial jurisdiction.” The value of each claim must exceed BHD 500,000, and the disputes must either be between financial institutions licensed according to the provisions of the law of the Central Bank of Bahrain, or between these institutions and other institutions, companies and individuals.

[43] Cases brought before the Chamber are determined by a Dispute Resolution

Tribunal. This is defined:

One or more natural person(s) designated to settle the disputes. In all disputes conducted under the provisions of section 1 of chapter 2 of this law, the Tribunal shall include one or more Judges deputised by the Supreme Judicial Council upon a request from the Minister. A majority of the Tribunal shall consist of deputised Judges.

[44] The Chamber has the authority “to appoint whom it deems to resolve the dispute no matter what procedural rules are to be applied to the dispute”. However, each of the two parties to a case may nominate a person to serve as a member of the Tribunal. In that event the third member of the Tribunal will be a judge, “deputised by the Supreme Judicial Council upon a request from the Minister”, who is defined as the Minister Concerned with Judicial Affairs. Deputised judges must form a majority of the Tribunal. The members of the Tribunal are required to be “neutral and independent”.

[45] The Tribunal may appoint an expert to inquire into and report on aspects of a case before it. (As an example, in the present case the Tribunal appointed an accountant to perform that function. The accountant held six meetings with

representatives of KFH Bahrain and filed a report. He did not examine any of the persons he spoke to on oath, nor was his report presented as sworn testimony.)

[46] The parties may agree upon the language in which the dispute resolution procedure is to be conducted but Arabic is the language to be used, in default.

[47] The parties may agree the law which is to apply to the dispute, provided that the provisions of the agreed law do not “contradict the public order in the kingdom”. The law of Bahrain applies in the absence of agreement otherwise.

[48] Non-Bahraini lawyers may not represent parties to the dispute unless accompanied by a Bahraini lawyer.

[49] Rules specified in the civil and commercial procedures law, and the law of evidence in civil and commercial matters of Bahrain apply to proceedings before the Chamber, in so far as they do not contradict “the nature of the Chamber’s jurisdiction and the situations before it”.

[50] An officer is appointed by the Chamber to deal with all preliminary issues including service of the proceeding and all required notices on the defendant.

[51] An award issued by the Chamber is deemed to be a final judgment issued by the Courts of Bahrain.

[52] The top court in the hierarchy of courts in Bahrain is called the Cassation Court. A decision of the Chamber is called an award. Either party may apply to the Cassation Court for nullification of the award in eight circumstances:

1. The challenging party was not properly served a notice of the appointment of a member of the Dispute Resolution Tribunal or the dispute resolution procedures, or was not enabled to present his defence.

2. The composition of the Dispute Resolution Tribunal or the dispute resolution procedures is contrary to what is stipulated in the regulation.

3. The award of the Dispute Resolution Tribunal contradicts the public order in the Kingdom of Bahrain.

4. If an act of deception or fraud that influenced the Dispute Resolution

Tribunal award was committed by a party or his representative.

5. If after the Dispute Resolution Tribunal award, an admission that papers upon which the award was based were forged or were adjudicated forged, or if the award was based upon testimony of a witness which was adjudged false.

6. If after the Dispute Resolution Tribunal award, a party obtained decisive papers of the case, the submission of which was obstructed by his opponent.

7. If the Dispute Resolution Tribunal award ruled in a matter not claimed by the opponents or by more than what had been claimed. However, if it was possible to isolate the orders related to the claims of the opponents from the other orders, then it is not permissible to annul from the dispute resolution tribunal award other than that part which contains the orders related to the matters which the award had adjudicated in matters not claimed by the opponents or by more than they claimed.

8. If the dispute resolution tribunal award contradicts another award having res judicata status provided that all the opponents in both cases are the same persons and status and the subject matter of the case is the same subject matter in the previous case.

There is no general right of appeal. In the ordinary court system of Bahrain there are two tiers of appeal.

[53] The principles to be applied when deciding whether a decision-making body is a court were discussed in Attorney-General v British Broadcasting Corp.⁵ The House of Lords had to determine whether a local valuation court was a court. The judgments of Lord Scarman and Lord Edmund-Davies contain passages which assist me in this case. Lord Edmund-Davies said:⁶

It is comparatively easy to identify and discard those tests which are not sure guides to the meaning of “court” for our present purposes. In Shell Co of Australia Ltd v Federal Commissioner of Taxation [1931] AC 275, Lord Sankey LC said, at pp 296-297:

The authorities are clear to show that there are tribunals with many of the trappings of a court which, nevertheless, are not courts in the strict sense of exercising judicial power ... . In that connection it may be useful to enumerate some negative propositions on this subject: 1. A tribunal is not necessarily a court in this strict sense because it gives a final decision. 2. Nor because it hears witnesses on oath. 3. Nor because two or more contending parties appear before it between whom it has to decide. 4. Nor because it gives decisions which affect the rights of subjects. 5. Nor because there is an appeal to a court.

_{6. Nor because it is a body to which a matter is referred by another body.}

⁵ _{Attorney-General v British Broadcasting Corp [1981] AC 303 (HL).}

⁶ At 347.

It may, however, be open to doubt if a tribunal which lacks any of those “trappings” is a court. But, as Lord Diplock rightly observed in Ranaweera v Ramachandran [1970] AC 962, 972F, Lord Sankey’s list of negatives “... throws little light upon what characteristics are conclusive either of its exercising judicial functions or of its exercising executive or administrative functions.” And there are still other features the presence of which is not decisive of the matter. They include the following:

(1) The fact that the tribunal is called a “court”, as in the case of the local

valuation court.

(2) The necessity of sitting in public.

(3) The fact that the tribunal has power to administer oaths and hear evidence on oath.

(4) The fact that prerogative writs may issue in relation to the tribunal’s

proceedings.

(5) The fact that absolute privilege against an action for defamation protects those participating in its proceedings.

[54] His Lordship then said:⁷

At the end of the day it has unfortunately to be said that there emerges no sure guide, no unmistakable hallmark by which a “court” or “inferior court” may unerringly be identified. It is largely a matter of impression.

[55] Lord Scarman said:⁸

... I would identify a court in (or “of”) law, i.e. a court of judicature, as a body established by law to exercise, either generally or subject to defined limits, the judicial power of the state. In this context judicial power is to be contrasted with legislative and executive (i.e. administrative) power. If the body under review is established for a purely legislative or administrative purpose, it is part of the legislative or administrative system of the state, even though it has to perform duties which are judicial in character. Though the ubiquitous presence of the state makes itself felt in all sorts of situations never envisaged when our law was in its formative stage, the judicial power of the state exercised through judges appointed by the state remains an independent, and recognisably separate, function of government. Unless a body exercising judicial functions can be demonstrated to be part of this judicial system, it is not, in my judgment, a court in law.

[56] Mr Smedley presented submissions for KFH Bahrain on the meaning of the

word “court” by reference to passages from the fourth edition of Halsbury’s Laws of

_England:⁹

⁷ _{At 351.}

⁸ _{At 359.}

⁹ Halsbury’s Laws of England (4^th ed, 1975) vol 10 Courts at [701]-[702] and [704].

701. Meaning of ‘court’. ... Courts are tribunals which exercise jurisdiction over persons by reason of the sanction of the law, and not merely by reason of voluntary submission to their jurisdiction. Thus, arbitrators, committees of clubs and the like, although they may be tribunals exercising judicial functions, are not ‘courts’ in this sense of that term.

702. What is a court in law. ... In determining whether a tribunal is a judicial body the facts that it has been appointed by a non-judicial authority, that it has no power to administer an oath or affirmation, that the chairman has a casting vote, and that third parties have power to intervene are immaterial, especially if the statute setting it up prescribes a penalty for making false statements; elements to be considered are (1) the requirement for a public hearing, subject to a power to exclude the public in a proper case; and (2) a provision that a member of the tribunal shall not take part in any decision in which he is personally interested, or unless he has been present throughout the proceedings.

704. Creation of courts. Courts are created by the authority of the Sovereign as the fountain of justice, her authority being exercised either by statute, by charter, by letters patent or by Order in Council.

(footnotes omitted)

[57] He does not argue against the approach to analysis Mr Mills took by reference to Attorney-General v British Broadcasting Corp. Rather, he relies on the evidence of Mr Hasan Ali Radhi to which I have referred, and says that the Chamber is a commercial court. He supports this by distinguishing between Sections 1 and 2 of Chapter 2 of the decree the latter of which, Mr Smedley says, sets up an arbitration system under which the parties may reach agreement to refer disputes to the Chamber. In contrast Section 1 sets up a court. Mr Smedley says that whilst Article 15 provides that an award by the Chamber is deemed to be a final judgment issued by the courts of Bahrain, that means that in essence it is a final judgment of the courts of Bahrain, not that it is a judgment of a different status.

[58] In Daimler AG v Sany Group Co Ltd, the Court of Appeal discussed the meaning of the term “inferior Court” as defined in s 2 of the Judicature Act 1908, as “any court of judicature within New Zealand of inferior jurisdiction to the High Court”.¹⁰ The Court of Appeal noted that the term “court of judicature” is not defined in the Judicature Act, and adopted the definition of Lord Scarman in

_{Attorney-General v British Broadcasting Corp, which I have quoted at [55] above.}¹¹

¹⁰ _{Daimler AG v Sany Group Co Ltd [2014] NZCA 421, [2014] NZAR 1159.}

¹¹ At fn 7.

[59] The Court then considered four factors identified by the judgment of Chambers J in the Court of Appeal in Waikato/Bay of Plenty District Law Society v Harris (Waikato) as relevant to determining whether a court is a court of judicature.¹²

[60] After citing the passage from Attorney-General v British Broadcasting Corp above, Chambers J noted the following passage from the judgment of Lord Scarman:¹³

But, in my judgment not every court is a court of judicature, i.e. a court in law. Nor am I prepared to assume that Parliament intends to establish a court as part of the country’s judicial system whenever it constitutes a court. The word “court” does, in modern English usage, emphasise that the body so described has judicial functions to exercise; but it is frequently used to describe bodies which, though they exercise judicial functions, are not part of the judicial system of the kingdom. Fry LJ made the point in the passage I have quoted and there is an abundance of modern instances of this usage of the word. When, therefore, Parliament entrusts a body with a judicial function, it is necessary to examine the legislation to discover its purpose. The mere application of the word “court” label does not determine the question; nor, I would add, does the absence of the label conclude the question the other way.

[61] Consistent with this approach, Chambers J identified four factors which he found were relevant to the issue of whether the tribunal then under consideration (the New Zealand Law Practitioners Disciplinary Tribunal) was a court, in terms of Lord Scarman’s analysis. In Daimler AG v v Sany Group Co Ltd the Court of Appeal undertook its analysis of the issue before the Court by reference to the four identified factors. They are:¹⁴

(a) Are the members of the relevant body appointed by the state? (b) Does the relevant body fulfil a public function?

(c) Does the relevant body have power to enforce any orders it makes?

(d) Do the statutory provisions by which the relevant body is constituted

_{refer to proceedings before it as “judicial proceedings”?}

¹² _{Waikato/Bay of Plenty District Law Society v Harris [2006] 3 NZLR 755 (CA).}

¹³ _{At [144] citing Attorney-General v British Broadcasting Corp, above n 5, at 358.}

¹⁴ At [148]-[151].

[62] I will refer to these four elements after outlining Mr Mills’ analysis of the statutory provisions by which the Chamber is constituted.

[63] Mr Mills says that the Court must, after considering all the relevant material before it, form an impression on whether the Chamber is a court. He undertook a close analysis of the decree. He submits that the following provisions in it lead to a clear impression that the Chamber is not a court whose judgment should be recognised in New Zealand. He draws specific attention to the following, all of which, he says, show a distinction between the Chamber and the Bahrain Courts:

(a) Article 7 provides that the Chief Executive of the Chamber, who is appointed by the Board of Trustees of the Chamber, is to be the head of the administrative and technical apparatus of the Chamber, and “shall represent the Chamber before the courts and in dealings with others”. Mr Mills says this shows that the Chamber is a body which can be presented before the courts, as a party and is therefore not intended to be a court itself.

(b) Article 8 provides that the Chamber shall have an independent budget based on “commercial pattern”. There is to be an external audit. Mr Mills says the Chamber is a commercial operation.

(c) Article 9 gives the Chamber jurisdiction to settle disputes “originally within the jurisdiction of Bahrain courts” implying that cases are removed from the courts and put before the Chamber which cannot therefore be itself one of those courts.

(d) Article 11 permits the parties to a dispute to agree on the applicable law. This is inconsistent with the Chamber being a court and consistent with it being an arbitral tribunal.

(e) Article 13, which provides eight grounds of challenge to an award of the Chamber, refers to the Cassation Court “nullifying” that award. Mr Mills notes as well that every one of the eight grounds for nullification refers to an award. In contrast to this the official website of the Ministry of Justice and Islamic Affairs of the Kingdom of Bahrain,

which describes the court system in Bahrain, refers in every instance to judgments being issued by the courts.

(f) Contrary to the submission of Mr Smedley, Mr Mills says that the provision in Article 15 that an award issued by the Chamber “shall be deemed to be a final judgment” issued by the courts of Bahrain in itself shows that the Chamber is not a court. As Mr Mills puts it, a deeming provision is generally for the purpose of treating (for certain purposes) things to be within the meaning of a word that would not normally be

within it.¹⁵

(g) Article 16 provides that until the Chamber commences operation “the courts and the entities that have judicial jurisdiction shall continue to adjudicate the cases that fall in the jurisdiction of the Chamber ...”. Mr Mills says this distinguishes the Chamber from the courts.

(h) Article 17 provides that “the Cassation Court alone shall have the jurisdiction to determine whether the Chamber or one of the courts has the jurisdiction to settle a dispute ... in relation to jurisdiction.” As well it provides that the Cassation Court has jurisdiction to settle a dispute concerning execution of “two contradictory judgments, one issued by the Chamber and the other issued by one of the courts”.

(i) The effect of Article 26 is that the civil and commercial procedures law, and evidence law of Bahrain, which apply in the courts apply in the Chamber but only so far as they do not contradict “the nature of the Chamber’s jurisdiction and the situations before it.”

(j) Article 35 appears to reiterate that the civil and commercial procedures laws and evidence laws of Bahrain do not apply to disputes before the Chamber if they contradict the disputes resolution process set out in the

_decree.

¹⁵ See J F Burrows and R I Carter Statute Law in New Zealand, (4th ed, LexisNexis, Wellington,

2009) at 430-431.

(k) Article 36 provides for personal liability of members of the Chamber for acts “with bad intention” or as a result of “gross mistake”.

[64] After careful consideration of the terms of the decree setting up the Chamber, the submissions of counsel, and the evidence of Mr Hasan Ali Radhi and Mr Lucas Pitts I conclude that the Chamber is not a court. I accept that its decisions come with judicial authority, more so when in any given case the Tribunal comprises three judges, and I accept that it has been entrusted with a judicial function by Article 9. This is a public function, so this accords with the second factor identified in Waikato.

[65] However, I have concluded that the view expressed by Mr Lucas Pitts is correct. The Chamber provides a statutory alternative dispute resolution tribunal for certain specified claims. The indicia supporting this view are numerous, and include the flexibility relating to the constitution of the Tribunal for any given case and the ability of the parties to have input into how it is constituted,¹⁶ the flexibility in the law which is to be applied, the ability to appoint experts to enquire into and report on aspects of a case, and the flexibility allowed for in the language to be used in the Tribunal, the right of the Tribunal to engage an expert who may garner and present

evidence without witnesses or the expert being on oath, and finally, and by no means least, the lack of a general right of appeal and very limited grounds for “nullification” of an “award”.

[66] Consistent with the concept of the Bahrain Chamber being a statutory alternative dispute resolution service, the Chamber is run as an autonomous business unit under the governance of a board of trustees and the management of a chief executive, with a separate budget and public reporting obligation which is subject to audit, and there is a statutory provision for its representation before the Courts of Bahrain.

[67] The wording of many of the Articles in the Decree shows that a distinction is drawn between the Chamber and the ordinary courts of Bahrain. I refer to Articles 7,

_{9, 13, 15, 16, 17, 26 and 35, which I have discussed in more detail in paragraph [63].}

¹⁶ In this respect it is not consistent with the first factor identified in Waikato.

And, notably, the Chamber convenes a Dispute Resolution Tribunal which issues an award. This is not consistent with the fourth factor identified in Waikato.

[68] Finally, the Chamber does not have power to enforce any orders it makes – they are enforced by the Bahrain courts, under Article 15. This is inconsistent with the third factor identified by Chambers J in Waikato.

[69] Counsel were able to refer me to only one case where a decision of the Chamber has been enforced in another jurisdiction.¹⁷ An award of USD 25,000,000 was issued in favour of Standard Chartered Bank by the Chamber. Standard Chartered Bank sought to enforce it in New York State, before the Supreme Court, New York County. The defendants contended that the proceeding before the Chamber was the “functional equivalent of compulsory arbitration, in that the decision-makers were not professional judges, evidence was unreasonably curtailed, and rights of appeal were so limited as to be non-existent”. Thus it was said that

the procedures employed by the Chamber were not compatible with due process and the judgment should not be recognised.

[70] Mr Hasan Ali Radhi, to whose evidence in this case I have already referred, gave evidence to the New York Supreme Court that the decree set up the Chamber as a procedure for adjudicating significant commercial disputes, and that Section 1 of Chapter 2 creates a commercial court, the Chamber, while Section 2 creates a commercial arbitration institute.

[71] Significantly, counsel for the defendants in Bahrain presented an affidavit to the New York Court but the Court records that nowhere in that affidavit did she express an opinion that the proceeding in Bahrain was in effect an arbitration. Quite the reverse: she stated that the Chamber “is not an arbitration tribunal ... but a judicial body”.

[72] The Court in New York, given that evidence, did not undertake a detailed analysis of the Chamber, but rather proceeded on the basis that it was being asked to

¹⁷ Standard Chartered Bank v Ahmad Hamad El Gosaibi and Bros.Co 110 AD 3rd 578 (NY App

Div 2013).

enforce a judgment of a court. It did refer to the composition of the Tribunal which made the decision in question, and to the admission of fact finding reports of experts, as in this case.

[73] The Court found that due process had been followed by the Chamber. The defendants had fully presented their arguments and the lack of a full right of appeal did not, as the Court put it, offend due process.

[74] The cardinal distinction between the facts in that case and the present facts is the concession by the defendant in New York that the Tribunal convened by the Chamber is a judicial body. Unsurprisingly, given this concession, there is no analysis in the case of whether that is in fact the position. Argument as presented to me, which I have discussed in this judgment, has drawn to my attention features of the processes undertaken by the Chamber which lead me to the opposite conclusion. I decline to follow this decision.

[75] I conclude therefore that KFH Bahrain has not established to the requisite standard for the entry of summary judgment that the Chamber is a court. As a result the application for summary judgment cannot succeed.

[76] Given this, it is not necessary to determine the second, third and fourth issues set out in paragraph [24]. Nor is it appropriate that I do so. All of these issues were the subject of evidence and comprehensive submissions, but if KFH Bahrain continues this proceeding to trial all will be live issues at that point. Any indication I might give, obiter, on any of these issues would be irrelevant. If the effect of this judgment were that the entire proceeding was determined, I would proceed with at least a brief discussion on the remaining issues. As that is not the case I refrain from doing so.

Outcome

[77] The application for summary judgment is dismissed.

[78] As agreed with counsel, costs are reserved. If they cannot be agreed

_{memoranda not exceeding three pages in length may be filed by 31 January 2015.}

J G Matthews

Associate Judge

Solicitors:

Anthony Harper, Christchurch.

MDS Law (Lindsay Lloyd), Christchurch.