Arduina Holdings Bv v Celtic Resources Holdings Plc
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE TOULSON |
| Judgment Date | 10 October 2006 |
| Neutral Citation | [2006] EWHC 3155 (Comm),[2006] EWHC 2553 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Claim No: 2006 Folio 308; 2006 Folio 165,2006-165 |
| Date | 10 October 2006 |
[2006] EWHC 2553 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Mr Justice Christoper Clarke
2006-165
MISS CATHERINE NEWMAN QC and MR G BANNOR (instructed by Kermans) appeared on behalf of the Applicant.
MR D OLIVER QC, MR M HOYLE and MR T HAMMOND (instructed by Healys) appeared on behalf of the Respondent.
Digital Transcript of Smith Bernal Wordwave Limited 183 Clarence Street Kingston-Upon-Thames Surrey KT1 1QT Tel No: 020 8974 7300 Fax No: 020 8974 7301 (Official Shorthand Writers to the Court) Email Address: Tape@wordwave.co.uk
No of Folios —105
No of words – 7564
MR JUSTICE CHRISTOPHER CLARKE: I have before me an application by Celtic Resources Holdings plc ("Celtic") to continue a freezing injunction against Arduina Holdings BV ("Arduina") granted by me without notice on 27 th March 2006 in the sum of £1.5 million and subsequently continued on the return date of 31 st March. I also have before me an application by Arduina for further discovery.
The freezing order was granted in aid of the execution of a judgment entered by Celtic against Arduina. Arduina had brought a claim against Celtic in which it alleged that Celtic had induced it to enter into what was described as a "Framework Agreement" by misrepresentation and had broken that agreement. That claim was the subject of arbitration proceedings initiated by Arduina, which resulted in an Interim Award dated 12 th December 2005. Under that award the arbitrator, Mr Christopher Style, held that Arduina's claim failed and Celtic's counterclaim succeeded.
On 22 nd February 2006 the arbitrator made a Costs Award in which he ordered Arduina to pay Celtic £67,163.11 in respect of arbitration costs and £849,176.17 in respect of legal costs, a total of £916,338.28. Interest of some £36,000 has since accrued.
On 8 th March Colman J gave Celtic permission to enforce Mr Style's Costs Award as a judgment and entered judgment in Celtic's favour in that sum. In giving permission to enforce the costs award, Colman J ordered that if an application was made within 14 days to set aside his order, then execution of the Award should be stayed until the disposal of the application.
On 31 st March Arduina filed an arbitration claim seeking to challenge both awards under sections 67, 68 and 69 of the Arbitration Act 1996. On 11 th April 2006 Arduina applied to set aside Colman J's order and judgment on the grounds that the underlying awards were being challenged. Arduina's application was made within the time specified by Colman J and accordingly the awards cannot be enforced until that application is determined. That cannot, in practice, be until Arduina's challenge to the awards is disposed of.
The basis of the challenge to Mr Style's awards is that he wrongly addressed matters of Russian law that were and are the subject of ongoing litigation in the Russian courts which had exclusive jurisdiction and, further, that there was serious misconduct on his part. At the very end of the hearing, counsel for Arduina confirmed that no complaint was made of the arbitrator's conduct of the hearing. Rather, the claim is made that the arbitrator should not have made findings as to the existence of a condition precedent (to which I am about to refer) and whether or not it had been fulfilled. There is also a complaint that, taken as a whole, his Interim Award is so deeply flawed as to its findings as to amount to a serious irregularity. I express no view as to the validity or otherwise of these complaints.
The Framework Agreement between Celtic and Arduina of 22 nd November 2002 related to ten assignment agreements. Under those assignments, which were in form absolute and which were executed by Celtic, Celtic assigned to Arduina debts owed to Celtic by a Russian gold mining company named South Verkhoyansk Mining Company ("SVMC"). SVMC had a licence to exploit a goldmine in Russia, Nezhdaninskoye, one of the largest gold fields in the world. Celtic was, or was said by it to be, a 50% shareholder of SVMC.
The Framework Agreement provided:
"(1) The parties hereby agree that the payment of any amount, and the obligations of the Parties under any of the Assignment Agreements, shall be subject to the condition precedent (the 'Condition Precedent') that the State Committee for Precious Metals of the Republic of Sakha (Yakutia) shall have agreed with the Assignee to transfer to the Assignee [Arduina] or its nominee or subsidiary all its shareholding in the Borrower (the 'Transfer') on terms and conditions satisfactory to the Assignee (the 'Terms') and that such Transfer has taken place and been duly undertaken, registered and recorded in the books and share register of the borrower. (2) For the avoidance of doubt, (a) the Assignor shall take all steps and do all acts so as to encourage the State Committee for Precious Metals of the Republic of Sakha (Yakutia) to agree to transfer to the Assignee or its nominee or subsidiary its shareholding in the Borrower and to cause the due registration of such transfer in the books and share register of the Borrower and (b) the Assignee shall and may in its own discretion set the Terms and accept or decline the Transfer in whole or in part…
(3) If the Assignee does not notify the Assignor in writing that the Condition Precedent is wholly or partially satisfied (as the Assignee in its sole discretion shall decide) within twelve (12) months of the date hereof, this agreement and the obligations hereunder shall terminate and the Assignment Agreements shall be null and void and of no effect."
By clause 4 the Agreement was to be governed and construed in accordance with English law and provision was made for arbitration in accordance with the rules of the London Court of International Arbitration.
The breach of the Framework Agreement relied upon by Arduina in the arbitration was a breach of the obligation under 1(a) to encourage the State Committee to agree to transfer its shareholding to Arduina.
The background to the Framework Agreement was that Celtic had invested heavily in SVMC. The Yakutian government, through its President, had apparently given indications that it might seek to impose on Celtic a new 50% shareholder in SVMC. Mr Foo of Celtic was introduced to a Mr Beny Steinmetz of a group called BSG and by him to a Mr Mashkevich, who is one of the beneficial owners of a group called Eurasian. Mr Foo and Mr Steinmetz agreed an Outline Plan which involved BSG/Eurasian forming a new company, in the event Arduina, and Celtic selling SVMC's debt to the new company. In the event the assignments were made without consideration. The new company would approach the Yakutian authorities with a proposal to purchase their 50% share of SVMC and, as the plan put it, "If resistance, use debt instrument, even threat of liquidation of SVMC, as lever". Arduina would thus acquire 50% of SVMC, which would end up in Celtic, in which BSG/Eurasian would have a substantial stake, apparently through Arduina, which was intended, so it would appear, to be the vehicle for their investment in SVMC. As is apparent, the leverage was to be acquired by the appearance on the scene of Arduina as SVMC's new creditor by virtue of the assignments. Such leverage pre-supposed that the debts had in truth been assigned to Arduina, which, if the assignments were subject to an unfulfilled condition precedent, was not the case, at any rate in English law.
In his Interim Award Mr Style made the following declarations:
"(1) I declare that the Framework Agreement contained a condition precedent to the operation of the Assignment Agreements, such condition precedent being that SUE Komdragmetal shall have agreed with Arduina to transfer to Arduina or its nominee or subsidiary all its shareholding in SVMC on terms and conditions satisfactory to Arduina and that such transfer has taken place and been duly undertaken, registered and recorded in the books and share register of SVMC.
(2) I declare that the said condition precedent had not been fulfilled either wholly or partially by 22 nd November 2003, and that accordingly the Framework Agreement terminated on 22 nd November 2003."
The freezing order provided for Arduina to swear an affidavit of its assets above the value of £50,000. On 7 th April Dr Sittard, the director of Arduina, signed a statement, which was verified by an affidavit of 10 th May, which revealed that the assets of Arduina above £50,000 consisted of:
(1) $15,276,822.28 in receivables owed to it by SVMC pursuant to ten awards issued in its favour by arbitral tribunals which Arduina was in the process of enforcing. These were awards made by the International Commercial Court of Arbitration in Moscow in respect of the purportedly assigned loans.
(2) 27,233,406 shares in Emperor Mines Limited ("Emperor"), a company listed on the Australian Stock Exchange and held for it by a nominee; and
(3) €87,646 in IMG Bank.
It is now apparent from the statement of Mr Michael Wood, Arduina's solicitor, that Arduina built up its shareholding in Emperor in July 2004 from 1,228,482 to its present total, which allows for rights issues in November 2004 and December 2005, of 27,233,406. The total cost to it of acquiring this shareholding was Aus $20 million. Dr Sittard's affidavit revealed that the then current value of the Emperor shares was Aus $16,340,044, that they represented about 2.9% of the company, and that Emperor owns an interest in four gold mines, including 100% of two mines in Fiji. The current value of the shareholding is about Aus$9.3 million, or about £3.8 million.
On 12 th March 2006 Celtic applied without notice to the Western Australian Supreme Court to register Colman J's judgment...
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