On the obligation to fulfill warranty obligations and eliminate defects free of charge by making repairs
On March 14, 2023, the Judicial Board for Civil Cases of the Supreme Court of the Republic of Kazakhstan, consisting of: the presiding judge S., judges G., K., with the participation of a representative of the plaintiff B., a representative of the defendant K., considered in open court via mobile videoconference a civil case on claims of a Limited Liability Partnership (hereinafter referred to as – LLP) "P" to "Ky" LLP, with the involvement of third parties on the defendant's side who do not declare independent claims on the subject of the dispute, "C" LLP, "E" LLP, "R" LLP, "Bal" LLP, "Energo" LLP, "W" LLC, "Kray" LLC "FUR", Joint-Stock Company "Project Prom", on the obligation to fulfill warranty obligations and eliminate defects free of charge by making repairs,
received at the request of "P" LLP for a review of the ruling of the Judicial Board for Civil Cases of the Pavlodar Regional Court dated November 29, 2022,
LLP "P" appealed to the court to LLP "K" with claims for the obligation to fulfill warranty obligations and eliminate defects in the main hub bearing of the wind power plant (hereinafter referred to as wind turbines) free of charge by repairing No. 5 and the main gearbox of wind turbine No. 7, since their breakdown occurred during the warranty period stipulated by the Contract.
By the ruling of the specialized Interdistrict Economic Court of the Pavlodar region (hereinafter referred to as the CMEC) dated July 28, 2022, the cases on these claims were combined into one proceeding.
By the decision of the Council of Europe on September 2, 2022, the claim was partially satisfied. The court ordered K LLP to eliminate the defects of the main hub bearing of wind turbine No. 5 and the main gearbox of wind turbine No. 7 free of charge within a reasonable period of time, upon the entry into force of the court decision. Regarding the satisfaction of the requirements for specifying a way to eliminate deficiencies (repair of the gearbox), it was refused. Court costs have been distributed.
In addition, on September 2, 2022, the court of first instance issued rulings.:
- the refusal to satisfy the defendant's request for the appointment of a forensic technical examination;
- the refusal to satisfy the defendant's motion to dismiss the claim for the elimination of defects in the main gearbox of wind turbine No. 7.
By the ruling of the Judicial Board for Civil Cases of the Pavlodar Regional Court dated November 29, 2022, the judicial acts of the Council of Europe were annulled in this case, namely:
- the decision of September 2, 2022 dismissing the claim on the basis of subparagraph 5) of Article 279 of the Civil Procedure Code of the Republic of Kazakhstan (hereinafter referred to as the CPC);
- the ruling of September 2, 2022 on the refusal to satisfy the defendant's motion to dismiss the claim without consideration, due to non-compliance with the pre-trial dispute settlement procedure.
In the petition, the plaintiff's representative requests to cancel the ruling of the court of appeal and to dismiss the appeal of K LLP, citing a violation of substantive and procedural law, as well as a violation of uniformity in the interpretation and application of legal norms by the court.
In the response, the defendant's representative points out the legality and validity of the ruling of the appeals board.
Having heard the plaintiff's representative, who supported the arguments of the petition, the objections of the defendant's representative, having studied the case materials, having discussed the arguments of the petition and the withdrawal, the judicial board believes that the contested ruling is subject to cancellation with the referral of the case for a new hearing to the court of appeal on the following grounds.
In accordance with the fifth part of Article 438 of the CPC, the grounds for the cassation review of judicial acts that have entered into force are significant violations of substantive and procedural law, which led to the issuance of an illegal judicial act.
Such violations were committed during the consideration of the case.
It follows from the case file that, based on the agreement on the establishment of the consortium (simple partnership) dated March 15, 2013, No. 3, it consisted of: BI LLP - participant 1; FUR LLC - participant 2; W LLC - participant 3; C LLP - participant 4.
On April 26, 2013, P LLP (the Customer) and the leader of the consortium BI LLP (the Contractor) signed Contract No. 30-OI for the design, supply and construction of a turnkey wind power plant near the city of Ye with a capacity of 45 MW (EPC) (hereinafter referred to as the Facility, WPP).
The facility was put into operation by the Act of the State Acceptance Commission dated August 14, 2015.
On December 9, 2015, BI LLP was re-registered as K LLP.
During the warranty period, the Customer detected a breakdown of the main hub bearing of wind turbine No. 5 and the main gearbox of wind turbine No. 7, and certificates of defects were drawn up on June 3, 2019, April 8, 2020.
The plaintiff sent orders to the defendant to eliminate defects, with the provision of a plan for repair and restoration work.
The defendant ignored the requirements specified in the order.
LLP "P" has filed a lawsuit with the court.
The Court of first instance, partially satisfying the claims, proceeded from the provisions of Articles 272-273, 633-635 of the Civil Code of the Republic of Kazakhstan.
The Court of Appeal, canceling the court's decision and leaving the claim without consideration, reasoned that the parties to the Contract had determined the jurisdiction of the dispute to arbitration.
However, such conclusions do not correspond to the actual circumstances of the case and the norms of current legislation.
By virtue of Article 4 of the CPC, the tasks of civil proceedings are to protect and restore violated or disputed rights, freedoms and legitimate interests of legal entities, respect for the rule of law in civil turnover and public law relations, ensure full and timely consideration of the case, promote the peaceful settlement of disputes, prevent offenses and form a respectful attitude towards the law and the court in society.
In accordance with paragraph 1 of Article 8 of the Law of the Republic of Kazakhstan "On Arbitration" (hereinafter referred to as the Law), a dispute may be submitted to arbitration if there is an arbitration agreement concluded between the parties.
According to paragraph 1 of Article 9 of the Law, the arbitration agreement is concluded in writing. An arbitration agreement is considered concluded in writing if it is contained in the form of an arbitration clause in a document signed by the parties, or concluded through the exchange of letters, telegrams, telephone messages, faxes, electronic documents or other documents defining the subjects and content of their will.
Paragraph 41.1 of the above-mentioned Contract dated April 26, 2013 stipulates: "If the Parties are unable to resolve the dispute through negotiations within 30 (thirty) days, the dispute or disagreement may be submitted by either Party and is subject to final arbitration in accordance with the arbitration rules provided for in Annex 1, the provisions of which are considered to be included by reference in this paragraph 41.1 and for these purposes: (a) the number of arbitrators shall be three (3), one (1) of whom shall be appointed by each Party, and the chairman shall be appointed by two arbitrators, (b) the place of arbitration is the place specified in Annex 1; and (c) the language used in the arbitration is the language established by the competent court of the Republic of Kazakhstan."
That is, all conditions are determined by agreement of the parties.
Since the arbitration clause specified in the Contract does not provide for specific arbitration, and no agreement has been reached between the parties on this issue, the Partnership cannot, on its own initiative, refer the dispute to any specific arbitration.
It has been reliably established that the plaintiff has repeatedly taken measures to conclude an arbitration agreement with K LLP, for which appropriate letters were sent, as well as a proposal to resolve the dispute in the arbitration center of the National Chamber of Entrepreneurs of the Republic of Kazakhstan Atameken.
In addition, on May 30, 2022, the Partnership, pursuant to paragraph 10 of Article 8 of the Law, sent requests to the Ministry of Energy of the Republic of Kazakhstan and the Ministry of Finance of the Republic of Kazakhstan for consent to conclude an arbitration agreement with K LLP.
According to the responses of the above-mentioned Ministries (dated June 15, 2022 ex. No. 05-08/000001, dated June 29, 2022 ex. ZT-2022-0000) the consent of the authorized body of the relevant industry to conclude an arbitration agreement is not required.
Thus, more than three months have elapsed since the Partnership initiated the proposal to conclude an arbitration agreement, while no final response has been received from K LLP, arbitration has not been determined, which indicates the refusal of K LLP to resolve the existing dispute through arbitration.
According to the rules of the second part of Article 76 of the CPC, the circumstances established by a court decision or decision that entered into force in a previously considered civil case are binding on the court. Such circumstances are not proven again in other civil cases involving the same persons.
It should be noted that in a similar dispute between the same parties (under the same Contract), there are judicial acts that have entered into force, which resolve the issue of the jurisdiction of this dispute to the court.:
1) The ruling of the Judicial Board for Civil Cases of the Pavlodar Regional Court dated December 19, 2019, which overturned the ruling of the Council of Economic and Social Council dated November 6, 2019 on abandoning the claim of LLP "P" to LLP "K" on the obligation to fulfill obligations under the Contract without consideration on the basis of subparagraphs 1) and 5) of Article 279 of the CPC, and the case It was sent for consideration on the merits to the same court.
At the same time, the appellate instance found that the plaintiff repeatedly approached the defendant with a proposal to select arbitrators and conclude an arbitration agreement, and this proposal was brought by the defendant to the attention of the consortium participants, while the plaintiff did not receive a response on the merits of the issue.
2) The decision of the Council of Economic Cooperation of January 13, 2021 on the partial satisfaction of the claim of LLP "P" to LLP "K" in a similar dispute on the elimination of defects in the main gearbox of wind turbine No. 21, which entered into force on the basis of the decision of the judicial board for Civil Cases of the Pavlodar Regional Court dated April 6, 2021.
The term "pre-trial dispute settlement procedure" refers to the stipulation in a contract or law of the conditions for sending a claim or other written notification from one disputing party to the other, setting deadlines for a response and other conditions that allow the dispute to be resolved without going to court.
The pre-trial (claim) procedure for the settlement of economic disputes is a mutual action of the parties aimed at resolving the differences that have arisen without the intervention of judicial authorities.
Based on the provisions of Part six of Article 8 of the CPC, the pre-trial dispute settlement procedure may be established by law or provided for by contract.
It has been established that there have been disputes between the parties over the quality of the work performed under the Contract for several years.
The Appeals Board did not take into account that the object of the Contract was a wind farm consisting of a group of wind turbines (wind power plants) connected by electrical connections and general maintenance. At the same time, the plaintiff's claims related to the elimination of deficiencies in part of the Facility.
Thus, the contested definition infringes on the Customer's right to file a lawsuit and protect his legitimate rights and interests.
In addition, the court committed the following procedural violations.
It follows from the case file that "K" LLP filed an appeal against the decision of the Council of Economic and Social Council of September 2, 2022, which contains arguments only about disagreement with the conclusions of the court of first instance regarding the satisfaction of the claim on the merits, that is, concerning the judicial act in the form of a decision.
In the operative part of the appeal, the defendant indicated that he was asking to cancel the decision and rulings of September 2, 2022, without specifying which of the two rulings issued by the court. The defendant did not make any further clarification to the court in this regard.
That is, in essence, the appeal against the appeal of the rulings did not comply with the requirements of Article 404 of the CPC.
In addition, according to the rules of Article 429 of the CPC, a private, rather than an appeal, complaint may be filed against the ruling of the court of first instance.
It follows from the introductory part of the ruling of the court of appeal that the case is being considered based on the defendant's appeal against the court decision.
In the descriptive part of the ruling, the appeals board, on its own initiative, indicated that the defendant in the appeal appeals, among other things, the ruling on the dismissal of the claim without consideration.
There is no justification for this definition in the reasoning part of the judicial act, and there is no reference to subparagraph 1) of Article 279 of the CPC.
Thus, the ruling of the court of appeal is subject to cancellation as a whole.
Taking into account the above, the contested judicial act is subject to cancellation with the referral of the case for consideration on the merits to the court of appeal, with a different composition of judges.
Guided by subparagraph 5) of the second part of Article 451 of the CPC, the judicial board
DECIDED:
The ruling of the Judicial Board for Civil Cases of the Pavlodar Regional Court of November 29, 2022 in this case should be canceled.
The case should be sent for a new hearing to the judicial board for civil cases of the Pavlodar Regional Court with a different composition of judges.
Partially satisfy the petition of LLP "P".
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