Kuwait Finance House (Bahrain) B.S.C. v Teece [2016] NZHC 498 (22 March 2016)

Last Updated: 1 April 2016

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2013-442-000289 [2016] NZHC 498

BETWEEN	KUWAIT FINANCE HOUSE (BAHRAIN) B.S.C. Plaintiff
AND	DAVID JOHN TEECE Defendant

Hearing:	22 February 2016
Appearances:	J B M Smith QC and R G Smedley for Plaintiff S J Mills QC and R J Hollyman for Defendant
Judgment:	22 March 2016

_{JUDGMENT OF DUNNINGHAM J}

Introduction

[1] In 2012, the Bahrain Chamber for Dispute Resolution (BCDR), ordered that the defendant, Dr Teece, pay the plaintiff, Kuwait Finance House (Bahrain) BSC(c) (KFH), the sum of USD $3,401,250. KFH now wants to enforce that award in New Zealand and, in 2015, sought summary judgment against Dr Teece.

[2] Dr Teece opposed the application on the grounds that:

(a) the award of the BCDR was a decision of an arbitral tribunal, not a court;

(b) the BCDR lacked jurisdiction over the dispute between the parties;

_{(c) the hearing before the BCDR involved breaches of natural justice; and}

KUWAIT FINANCE HOUSE (BAHRAIN) B.S.C. v TEECE [2016] NZHC 498 [22 March 2016]

(d) it would be a breach of public policy to enforce the award of the

BCDR as a judgment of the High Court of New Zealand.

[3] This Court declined the application by KFH for summary judgment, finding that KFH had not established, to the requisite standard, that the BCDR was a court for the purposes of enforcement in New Zealand, and so the application for summary judgment was declined.¹

[4] At trial, Dr Teece will argue all the defences listed above in opposing enforcement of the decision of the BCDR. However, he has also applied for determination of a separate question prior to trial, being:

(a) whether the BCDR is a court for the purposes of enforcement in

New Zealand of the BCDR award against the defendant.

[5] The sole issue to determine, therefore, is whether it is appropriate to determine that question separately, having regard to the various considerations which may be taken into account in exercising the discretion to order split trials.

Background to the proceedings

[6] KFH is a Bahraini company, and a wholly-owned subsidiary of Kuwait Finance House – Kuwait. It provides Islamic banking services. Dr Teece is a New Zealand citizen but is resident in Berkeley, California.

[7] The relevant background to the claim is set out more fully in the decision on the summary judgment application. However, the material events which prompted the current proceedings in this Court are as follows.

[8] In 1999, Dr Teece led a consortium of investors which purchased a New Zealand company, Lane Walker Rudkin Limited. The company subsequently delisted, restructured and changed its name to Canterbury Limited. In late 2003, KFH invested $20,000,000 in Canterbury Limited, through a subsidiary, and became

_{the majority shareholder. However, during 2007-2008, the financial performance of}

¹ Kuwait Finance House (Bahrain) BSC(c) v Teece [2014] NZHC 3162, [2015] NZAR 36 at [75].

Canterbury Limited was sufficiently poor that further shareholder investment was necessary.

[9] KFH advanced further funds to Canterbury Limited and put pressure on Dr Teece to advance further funds on a pro-rata basis, which he did. However, by October 2008, additional funding was again required. Dr Teece explained he did not have any additional financial capacity. It was then arranged that KFH would provide funding of USD $3,000,000 and it was the way in which this funding was structured which led to the dispute which is now before the Court.

[10] For reasons that are not relevant to this decision, KFH asserts it was unable to advance funds directly to Canterbury Limited and, instead, structured a sequence of transactions which involved Dr Teece as an intermediate party. Dr Teece and KFH Bahrain signed two Murabaha agreements, being agreements which were structured to comply with Islamic law. The first involved an agreement by Dr Teece, to pay KFH the total sum of USD $3,401,250 by three instalments in March, May and June

2009, but it was part of a complex train of transactions recorded in a total of six documents. It is this first Murabaha agreement which is relied on in the suit against Dr Teece.

[11] What is important was that Canterbury Limited was placed into receivership in mid-2009 and did not pay any sum back to KFH or Dr Teece. At that point, KFH advised Dr Teece that it might seek to enforce the first Murabaha agreement against him. Dr Teece’s position was that his part in the transaction was merely as a conduit for what was, in substance, an advance by KFH to Canterbury Limited.

[12] Nevertheless, in January 2011, KFH filed a claim with the BCDR. The claim was filed in Arabic. While Dr Teece acknowledges he received some documents in Arabic, (and the decision of the BCDR records that he was served), there is no evidence that he was formally served with the proceeding. Nevertheless, Dr Teece did attempt to participate in the process before the BCDR, but he says he could not find a Bahraini law firm which was prepared to be instructed on his behalf. In due course, the BCDR considered the claim without input from Dr Teece, and issued the decision which KFH now seeks to enforce.

[13] In 2014, KFH applied to enforce the decision obtained from the BCDR, in the High Court of New Zealand. At the same time as filing its claim, it filed an interlocutory application for summary judgment on grounds which included that:

(a) the BCDR was a state court of the Kingdom of Bahrain;

(b) judgment was entered by the BCDR against Dr Teece on

9 February 2012 in the sum of: (i) USD $3,401,250; and

(ii) BHD $22,351.50 (being the plaintiff’s case expenses);

(c) Dr Teece had submitted to the jurisdiction of the BCDR by agreeing to the terms of the Murabaha Agreement which contained a term that “the courts of Bahrain would have non-exclusive jurisdiction to settle any dispute”;

(d) the judgment was final and conclusive between the parties; (e) Dr Teece had not paid the judgment sum;

(f) Dr Teece is a New Zealand citizen and owns assets in New Zealand;

and

(g) Dr Teece had no defence to KFH’s statement of claim.

[14] When the matter came before Associate Judge Matthews he first set out the common law principles governing the enforcement of foreign judgments. Based on those principles, he identified the issues for determination in the case were as follows:

(a) Is the BCDR a court?

(b) Did the BCDR have jurisdiction over the dispute between KFH 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?

[15] In the end, because Associate Judge Matthews concluded that the BCDR was not a court, but a “statutory alternative dispute resolution tribunal for certain specified claims”, he held that the application for summary judgment could not succeed.² As a consequence, he held that it was not necessary to determine the second, third and fourth issues, nor was it appropriate that he did so. He pointed out that:³

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 that 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.

[16] It is in light of this background that the defendant says there should be a split trial on the first issue, which was determined in his favour by Associate Judge Matthews. If the finding is that the BCDR is not a court, then the proceedings would be at an end and the balance of the issues need not be traversed.

The law

[17] Rule 10.15 of the High Court Rules provides for an order to be made for the decision of any question (whether of fact or law), separately from any other issue. The terms of the rule are unconstrained, simply providing:

The Court may, whether or not the decision will dispose of the proceeding, make orders for-

² _{Kuwait Finance House, above n 1, at [65].}

³ At [76].

(a) the decision of any question separately from any other question, before, at, or after any trial or further trial in the proceeding; and

(b) the formulation of the question for decision and, if thought necessary, the statement of a case.

[18] It is self-evident that the rule must be applied in light of the objective of the High Court Rules to “secure the just, speedy, and inexpensive determination of any proceeding”.⁴

[19] A common purpose of an order made under this rule is to expedite proceedings by limiting or defining the scope of the trial in advance, or by obviating the need for a trial altogether.⁵ However, as both parties accept, the starting point is that all matters and issues should be determined in one trial, as that will normally be the most expeditious and efficient manner for dealing with the proceeding.⁶ As a consequence, the onus is on the party applying for a split trial to satisfy the Court that the criteria justifying that order have been met. That burden has been variously described as “not insignificant”,⁷ “moderate”,⁸ and “heavy”.⁹

[20] There are a number of reasons for the Court’s reluctance to order split trials, as identified by Fisher J in Clear Communications:¹⁰

Split trials risk a number of difficulties. It is often difficult to define with sufficient precision the demarcation between those issues to be addressed at the first trial and those left for the second (see, for example, the Arklow litigation). It is not always easy to see what matters have become the subject of issues estoppel. It may be necessary to prepare issue estoppel schedules and hear argument as to their scope. A judge may inadvertently disqualify himself or herself by expressing views on matters yet to be fully addressed at the second hearing (Winton). Findings might be inadvertently made without the benefit of evidence and argument envisaged by a party as appropriate only for the second hearing. The second hearing can require the recalling of the same witnesses with needless extra time and cost to the parties and the public. There is duplication of time spent by counsel and the Court in re-acquainting themselves with issues imperfectly remembered from an earlier trial and the time spent retraversing those matters in Court. There can be multiple appeals (in extreme cases taking the matter to the Privy Council

⁴ _{High Court Rules, r 1.2.}

⁵ _{Innes v Ewing (1986) 4 PRNZ 10 (HC) at 18.}

⁶ Clear Communications Ltd v Telecom Corp of New Zealand Ltd (1998) 12 PRNZ 333 (HC) at

_334.

⁷ _{Haden v Attorney-General (2011) 22 PRNZ 1 (HC) at [46].}

⁸ _{KPMG New Zealand v Gemmell HC Auckland CIV-2008-404-4288, 27 March 2008 at [20].}

⁹ _{Clear Communications Ltd, above n 6 at 335.}

¹⁰ Clear Communications Ltd, above n 6, at 335.

as in Ryde v Sorenson) before returning to the Court of first instance to embark upon the second phase of the case. Even without appeals, there can be delay in embarking upon the second round of discovery and other interlocutory matters and amended pleadings following the first trial and then the delay of obtaining a fixture for the second hearing. There can be difficulties in ensuring that the same Judge is available for the second hearing, bearing in mind the usual commitments, sabbaticals, retirements and deaths which are the unhappy lot of the judiciary. If a different Judge has to preside at the second hearing there can be difficulties over earlier views as to credibility and the status of the notes of evidence from the first hearing. In my view these and other difficulties together place a heavy onus on any party seeking split trials.

[21] However, despite these risks, each case must be considered individually and, clearly, the rule envisages that there will be cases which are suited to split trials.

[22] As the defendant submits, the enquiry is essentially a practical one, involving consideration of a range of issues. The recent decision of Kós J in Haden v Attorney-General, summarised the key authorities and set out the key considerations in the form of five questions:¹¹

(a) Will there be difficult demarcation questions between those issues to be addressed at the first trial and those left for the second? (Kós J considered this to be the single most important issue).

(b) Will the separate question bring the proceedings to an end? (c) What potential time saving does the separate question offer? (d) How will appeals be dealt with?

(e) Are there any other practical considerations tending one way or the other?

[23] Those other practical considerations referred to in the fifth question generally involve the matters identified by Fisher J in the passage from Clear Communications

_{cited at [20] above.}

¹¹ Haden v Attorney-General, above n 7 at [50].

[24] The parties addressed their submissions to the five questions identified in

Haden, and I will address the question in the same manner.

Will there be difficult demarcation questions between those issues to be addressed at the first trial and those left for the second?

[25] The defendant argues that the issue to be addressed in the first trial can be precisely separated from the defences of natural justice and public policy. The issues are conceptually distinct and, importantly, there is very little evidential overlap between them. The defendant says this is apparent from the summary judgment decision. The Court was able to consider the separate question, hold that it determined the application, and that it did not have to deal with the other grounds raised.

[26] To elaborate, the defendant explains that the issue of whether the BCDR is a court turns on the nature of the BCDR itself, rather than on the particular circumstances of Dr Teece’s case. It will be determined having regard to expert evidence on the institutional nature of the BCDR and the Bahraini Court system, by reference to the legislation establishing the BCDR, and the procedures of that body.

[27] Those issues can clearly be seen as distinct from the other matters raised in the proceeding including:

(a) the issue of whether the BCDR has jurisdiction for other reasons (such as whether there was, in fact, service on Dr Teece);

(b) whether natural justice was observed in the particular circumstances of the case; and

(c) the “public policy” defence, which centres on whether there was a real risk that Dr Teece was unable to obtain justice due to systemic bias in the Bahraini judicial/political system.

[28] The defendant accepts that there is overlap between the first and second question as to jurisdiction because the parties agreed that disputes could be referred to the “courts of Bahrain”. Indeed he submits the answer to the first question will also decide the jurisdictional question, but says that does not point against the proposed split trial.

[29] KFH, however, asserts that this first question is “intertwined” with other issues involved in the proceedings, and the fact that Associate Judge Matthews was able to determine the application on this ground alone, should not be relied on to demonstrate that it can be easily demarcated from the other issues. In particular, the plaintiff says, the issue of whether the BCDR is a court can not be separated from the question of whether the BCDR had jurisdiction over the defendant. This is because New Zealand’s rules on the enforcement of foreign judgments follow what is known as the “obligation theory” which recognises that a judgment of a foreign court, which had jurisdiction over the defendant, creates an obligation to pay the sum awarded. If the New Zealand court is satisfied that the foreign court had jurisdiction over the defendant, for example, by way of submission in advance, that is relevant to the determination of the first question. Thus the question of what the defendant submitted to by agreement in terms of “the courts of Bahrain”, and whether the BCDR is such a court for the purposes of enforcement of a foreign judgment, are interlinked questions.

[30] In support of that submission KFH points out that Dr Teece himself initially described the issue as “whether the foreign court had jurisdiction recognised by New Zealand law”, and so implicitly accepted that the definition of “court” and the question of jurisdiction, are facets of the same issue. Similarly, in a recent New Zealand Law Society publication, the authors presented the issue as one

question – “the jurisdiction of a foreign court”.¹²

[31] KFH says it will argue that the analysis of what qualifies as a “court” must be understood in the context of the foreign tribunal’s jurisdiction because both concern

_{the foreign court’s claim to regulate the conduct of the defendant. That involves}

12. David Goddard QC and Campbell McLachlan QC Private International Law – litigating in the trans-Tasman context and beyond (New Zealand Law Society, Wellington, 2012) at 58.

what the defendant submitted to when he agreed, by the terms of the Murabaha agreement, that the “courts of Bahrain have non-exclusive jurisdiction to settle any dispute”. The plaintiff’s concern is that the Court will have to determine whether the BCDR qualifies as one of the “courts of Bahrain” for the purpose of the jurisdiction issue and says it would be “irrational and inefficient” for the court to determine the question of whether the BCDR qualified as a “court” for the purpose of the rules on enforcement of foreign judgments, separately from the question of whether the BCDR qualified as one of the “courts of Bahrain” for the purpose of determining the issue of jurisdiction.

[32] The plaintiff’s case is that, by agreeing to that jurisdiction clause, the defendant agreed that any dispute between the parties could be submitted to the judicial arm of the state of Bahrain. The Bahrain government decided that certain categories of disputes would be referred to the BCDR and, if the BCDR qualifies as a court for that purpose, it qualifies as a court for the purpose of enforcement.

[33] The plaintiff goes on to say that, in addition, the defendant’s allegations in

respect of breaches of natural justice and issues of public policy:

cannot be separated out from the first two issues, since the gravamen of the defendant’s complaint is that the procedures adopted by the BCDR and the standards of the Bahraini judicial system generally, fell short of what New Zealand law expects of foreign Court’s whose decisions are to be enforced.

[34] The plaintiff also says that the decision of the Associate Judge should not be relied on as a guide to the evidence that will be called at trial, nor should weight be placed on his analysis of the issues. The plaintiff considers that the Associate Judge was wrong in many of his findings which led him to conclude that the BCDR was not a court, including his findings:

(a) that the parties’ ability to have input into the constitution of the tribunal was inconsistent with it being a court;

(b) that the BCDR does not have power to enforce any orders that it makes;

(c) as to the effect of the use of the words “tribunal” and “award” in the translation from the Arabic, as KFH say that is not determinative as to the whether the BCDR is judicial;

(d) as to the flexibility the parties have in terms of the applicable law; and

(e) that the parties’ ability to appoint experts was inconsistent with it being a court.

[35] In summary, therefore, the plaintiff says it is not possible to demarcate the four issues, let alone to separate out the first issue from the rest. It also points out that the present case is distinguishable from recent cases where a split trial was ordered, such as Perpetual Trustees Co Ltd v Downey and Gordhan v Kerdemelidis, as in both those cases, the Court determined that demarcation issues were unlikely to

arise.¹³ Instead, there would be significant overlap in evidence and argument, and

the Court would be placed in a difficult position of being forced to reach a final conclusion on only one part of the dispute that has been “artificially extracted from the surrounding dispute”.

Discussion

[36] If the trials are to be split, the question sought to be addressed at the first trial appears to be both novel and important. I accept that in the cases cited to me, the question of whether the court had jurisdiction was expressed as a single issue. However, in those cases I am satisfied that the fact that a ‘court’ had given the

judgment was assumed or accepted.¹⁴ The real question was whether that court had

jurisdiction in the sense specified by Henry J in Gordon Pacific Developments Pty

Ltd (in liq) v Conlon, as a result of the application of one or more of the following circumstances:¹⁵

13. Perpetual Trustees Co Ltd v Downey (2011) 21 PRNZ 28 (HC) and Gordhan v Kerdemelidis HC Christchurch CIV-2010-409-2982, 6 August 2012.

¹⁴ See, for example Jet Holdings Inc. v Patel [1990] 1 QB 335 (CA); Von Wyl v Engeler (1998) 12

_{PRNZ 187 (CA).}

15. Gordon Pacific Developments Pty Ltd (in liq) v Conlon [1993] 3 NZLR 760 (HC) at 766-767 drawing on Dicey and Morris on the Conflict of Laws.

(a) the judgment debtor was at the time the proceedings were instituted resident (or possibly present) in the foreign country;

(b) the judgment debtor was a plaintiff in a counterclaim in the proceedings in the foreign court;

(c) the judgment debtor, being a defendant in a foreign court, submitted to its jurisdiction by voluntarily appearing in the proceedings;

(d) the judgment debtor, being a defendant in the foreign court, had before the commencement of the proceedings agreed in respect of the subject matter to submit to the jurisdiction of the courts of that country.

[37] The question here is whether the BCDR can be categorised as a judicial body with the relevant functions and powers of a court, such that its decisions can be recognised by the New Zealand Courts, all other factors being in the plaintiff’s favour. That question logically precedes both the issue of whether or not this court would decide that the BCDR had jurisdiction in the present case, and the issues raised in the pleaded defences of breach of natural justice and enforcement being contrary to public policy.

[38] From the plaintiff’s perspective, the BCDR is part of the judicial system of the foreign country, fulfilling a public function on behalf of the state, and accordingly, its decisions should be recognised and enforced except where (for some other reason), there is a lack of jurisdiction, or where the defences of breach of natural justice or of enforcement being contrary to public policy, are satisfied. However, I see no reason why that assertion cannot be argued in advance of, and separately from, the question of whether the Murabaha agreement is a submission to the BCDR’s jurisdiction or whether the pleaded defences apply in Dr Teece’s case. The arguments on the first issue will be based on an objective analysis of the legislative background to, and procedures of, the BCDR, irrespective of what happened in Dr Teece’s case. The evidence will be limited to those issues and I see

no realistic risk that the factual circumstances of this case will be relevant to that issue.

[39] I am therefore satisfied that this issue is a separate question from the question of jurisdiction (in the sense discussed in the Gordon Pacific Developments case), and can therefore be dealt with separately. If the first issue is decided in Dr Teece’s favour, the second question as to jurisdiction does not arise. If it is not, then the outcome of the first question will be directly relevant to the second question which is whether, by agreeing to submit to the jurisdiction of the courts of Bahrain, Dr Teece has agreed that the BCDR has jurisdiction. That is not, in my view, an impediment to it being heard in advance.

Will the proceedings be brought to an end?

[40] Both the plaintiff and the defendant agree that, if the answer to the first issue is that the BCDR is not a court, then the proceedings will be brought to an end. However, the plaintiff says that there is nothing particularly significant about that being the case, and it should not weigh heavily in my consideration.

[41] In response, the defendant submits that this is a factor which adds to the case for holding separate trials. Separate trials can be ordered where they will merely narrow the issues not just where they could conclusively end the case. The acknowledgment by the plaintiff that an answer which accords with the outcome of the summary judgment application would mean the case is at an end, is a powerful reason in favour of granting the application.

Discussion

[42] A split trial may usefully be ordered where it would simply narrow the issues to be addressed in a subsequent hearing. Where, as here, it is agreed that it could bring the case to an end and avoid a complex hearing involving factual disputes, then I consider that is a strong factor in support of the application being granted.

What potential time saving does the separate question offer?

[43] There was a significant divergence of opinion between the parties as to the potential time savings that a split trial would offer. There was general agreement that the first issue would take three to four days hearing time, and would primarily involve the same witnesses as gave evidence on the creation of the BCDR and its constitution and procedure in the summary judgment application. That primarily

came from senior lawyers brought as expert witnesses for KFH,¹⁶ and whose

evidence was relied on by the defendant. It would not require hearing of the more contentious evidence from witnesses such as Mr Lucas Pitts and Mr Ethan Chorin as to allegations of systemic bias within the BCDR, as that would be immaterial to this question. It would also not require evidence and cross-examination of Dr Teece on the question of service or his efforts to obtain legal representation.

[44] Where the parties differed, however, is in how long it would take to deal with the balance of issues, including the allegations of breach of natural justice and the concerns about the operation of the BCDR which underpin the public policy defence. Counsel for the defendant estimates that the full trial would take at least three weeks and involve 12 or 13 witnesses, almost all from overseas, whereas a hearing on the proposed separate question would involve only three or four witnesses and take three or four days. Accordingly, they submit that more than two weeks could be saved, as well as saving the cost of bringing the various witnesses from the United States and Bahrain to New Zealand for the trial. The plaintiff, on the other hand, suggests the hearing of the balance of issues would take much less time than that, and that the time savings are not so great as to warrant a split trial.

[45] A further factor to bear in mind is that the parties have been advised that a three week hearing could not be allocated in the Christchurch High Court until well into 2017, whereas a 3-4 day trial could be accommodated this year.

Discussion

[46] In my view, there will clearly be a saving of both time and cost if the first

_{question is decided in the defendant’s favour. While the exact saving of time is}

¹⁶ Being Mr Julil al Aradi, and Mr Hasan Ali Radhi.

impossible to quantify, it is clear that the issues which will be deferred to the second trial will be more contentious and time consuming than those that are traversed in the first trial.

[47] Mr Smith QC signalled that objection was likely to be taken to the evidence that would be called as to the independence of the BCDR. Those objections are likely to add to the time that the subsequent factual issues will take to hear, which would be avoided if the first issue is decided in Dr Teece’s favour. It also appears that further discovery will be required in relation to the natural justice and public policy issues and that time, too, would be saved if the first issue is determined in Dr Teece’s favour.

[48] Given the time saving in relation to the hearing, as well as the potential time saving in interlocutory steps, I consider that there is much to be said for separating off the comparatively academic question of whether the BCDR is a court for enforcement purposes, from these hotly-contested factual disputes about the independence of the BCDR and whether natural justice was observed in this case. I also accept this question could be brought on for hearing much sooner than the full trial, which further supports the case for splitting the trial.

How will appeals be dealt with?

[49] The plaintiff submits that this is a consideration which strongly militates against a split trial. This is particularly so because the defendant has not offered to stay any appeal until the determination of all issues in the proceeding. As a consequence, it may take as long to determine the first phase of the proceedings, (including, potentially, two levels of appeal) as it would take to obtain a final decision at first instance on all of the issues.

[50] Mr Smith QC emphasised that if the finding on the first issue was not in KFH’s favour, then there was a realistic prospect of appeals to both the Court of Appeal and to the Supreme Court, and that factor should be given strong weighting in any decision as to whether to consider the first issue in advance of the balance of the issues.

[51] Mr Mills QC acknowledged the risk of appeal and said, if considered important by the Court, a condition could be imposed deferring the defendant’s right of appeal if unsuccessful on the first issue until completion of the substantive hearing on the subsequent issues.

Discussion

[52] In my view, this is the more difficult issue. If the defendant succeeds on the first issue, then clearly, an order for a split hearing will prove the most expeditious route. However, I have to weigh that up against the situation if the defendant is not successful and there are effectively sequential trials and appeals on the first and then the subsequent issues. That delay will be exacerbated if there is more than one round of appeals.

[53] However, I consider that concern can be ameliorated by granting an order for a split trial on condition that, if the defendant is unsuccessful in the substantive hearing, he defers pursuing his appeal of that decision until the substantive hearing on the balance of the issues has taken place. I consider that if that condition was imposed, it would achieve a sensible balance between the savings of time and cost to be gained if there is a split hearing and the defendant is successful, as against the position if there is a split hearing, but the defendant is not successful on the first issue.

Are there any other practical considerations tending one way or the other?

[54] The plaintiff considers there are other practical considerations which should be brought to bear, saying that “the fact that the split trial would potentially save the defendant some time and cost does not mean that it should be ordered against the interests of the plaintiff and in light of the complications, delays and inequities that may result”.

[55] In support of that submission, the plaintiff asserts that the objective of the rule is not to provide the defendant “a preliminary opportunity to extract and attack a specific aspect of the plaintiff’s case at all costs”. The plaintiff also asserts that given the significant allegations made by the defendant, including breach of natural

justice and systemic bias in the Bahraini judicial system, he should not, by this application, “save himself the cost of making good those allegations until he has had a preliminary opportunity to defeat the plaintiff ’s case on other grounds”.

[56] The plaintiff also suggests there would be a real risk of “inadvertent findings” by the trial judge as well as difficulties identifying the precise scope of any estoppels, although how exactly those risks are likely to arise are not specified.

Discussion

[57] I do not think these further submissions add to the overall weighting of the factors. I consider the ability to order a split trial is necessarily intended to allow a party a “preliminary opportunity to extract and attack a specific aspect of the other party’s case”, where the Court is satisfied that the issue in question can be sensibly demarcated from the other issues.

[58] The fact that a hearing on the complex and hotly contested issues of breach of natural justice and systemic bias in the Bahraini judicial system could be avoided by ordering a split trial is, in my view, an argument in favour of a split trial. Applying similar reasoning to that applied by the Court in Gordhan v Kerdemelidis,¹⁷ there is much to be said for dealing with a preliminary question, where the relevant documents and witnesses are identified and reasonably uncontentious, from subsequent issues which will be fact intensive and complicated.

[59] In the absence of an explanation as to how the risk of “inadvertent findings” arises, I do not consider this to be a real risk in this case. For the same reasons as I consider there is a clear demarcation of issues, I consider that a finding that the BCDR is a court for the purpose of enforcement, can be made separately from a finding as to whether there was jurisdiction in this particular case, and there can be

_{no real risk of prejudice to the plaintiff by dealing with this issue in advance.}

¹⁷ Gordhan v Kerdemelidis, above n 13.

Conclusion

[60] Having considered all the above factors I am satisfied that the defendant has discharged the burden of showing that it is appropriate to direct the proposed separate question and the order sought is granted. However, it is granted on the condition that, should the finding be adverse to the defendant, the hearing of any appeal is to be postponed until all issues in the proceeding have been determined, so that all appeal issues are then dealt with together. As a consequence, the plaintiff will also be subject to constraints to allow the deferral of the hearing of an appeal by the defendant.

[61] Accordingly, the following orders are made:

(a) the following question is to be determined prior to any other question and prior to the trial of the proceeding:

Whether the Bahrain Chamber for Dispute Resolution (BCDR) is a court for the purposes of enforcement in New Zealand of the BCDR award against the defendant.

(b) should the finding be that the BCDR is a court for that purpose, and the defendant appeals that finding, the hearing of that appeal is to be postponed until all issues in the proceeding have been determined, so that all appeal issues are then dealt with together;

(c) the plaintiff is not to take issue with the delayed prosecution of an appeal in those circumstances, nor may it oppose an application being made by the defendant under r 43 of the Court of Appeal rules to extend time for the purpose of compliance with these orders.

[62] Costs are reserved. If they cannot be agreed, any memoranda on costs are to be filed within 20 working days of this decision, with any replies within a further

10 working days.

Solicitors:

Anthony Harper, Christchurch

MDS Law, Christchurch