Babanaft International Company S.A. v Bassatne

JurisdictionEngland & Wales
JudgeLORD JUSTICE KERR,LORD JUSTICE NEILL,LORD JUSTICE NICHOLLS
Judgment Date29 June 1988
Judgment citation (vLex)[1988] EWCA Civ J0629-4
Docket Number88/0559
CourtCourt of Appeal (Civil Division)
Date29 June 1988
Babanaft International Co. S.A.
Respondents
and
(1) Bahaedine Bassatne
(2) Walid Mohamed Bassatne
Appellants

[1988] EWCA Civ J0629-4

Before:

Lord Justice Kerr

Lord Justice Neill

Lord Justice Nicholls

88/0559

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

(MR. JUSTICE VINELOTT)

Royal Courts of Justice

MR. GAVIN LIGHTMAN Q.C., MISS BARBARA DOHMANN Q.C. and MR. PAUL GODDARD (instructed by Messrs. Theodore Goddard) appeared for the Appellants (Defendants).

MR. ANTHONY CLARKE Q.C., MR. SIMON MORTIMORE and MR. CHARLES HADDON-CAVE (instructed by Messrs. Holman, Fenwick & Willan) appeared for the Respondents (Plaintiffs).

LORD JUSTICE KERR
1

On 29th March 1988, after a trial which had lasted several weeks, Vinelott J. gave judgment for the plaintiff company ("Babanaft") against both defendants in a total sum which exceeded $15 million inclusive of interest. On the following day, on an ex parte application on notice, he made an order for the disclosure by the defendants of their assets world-wide pursuant to R.S.C. Order 48 and for the oral examination of the defendants in relation to their assets. He also granted a Mareva injunction covering any assets of the defendants in this country, but refused to extend this to assets outside the jurisdiction. He said that he concluded, with some regret, that he was precluded from doing so by the reasoning of the decision of this court in Reilly v. Fryer in which Mustill L.J. had delivered the main judgment on 14th September 1987 (see F.T. Law Reports 6th May 1988). The plaintiffs appealed against this refusal on the same day, the last day of the term, and sought a "holding order" freezing the defendants' assets world-wide pending a full hearing of their appeal after the Easter vacation. A division of this court consisting of Slade, Mustill and Russell L.J.J. declined to make any order to this effect and adjourned the plaintiffs' appeal. However, in the course of the discussion, in particular as the result of comments from Mustill L.J., it became apparent to the plaintiffs' advisers that neither the decision nor the reasoning in Reilly v. Fryer would have precluded Vinelott J. from granting the world-wide Mareva which they sought. They therefore renewed their application to him on 15th April 1988 to extend the injunction to assets outside the jurisdiction. That application was heard inter partes. Upon seeing the notes of what had been said in the Court of Appeal on 30th March, Vinelott J. agreed that Reilly v. Fryer did not stand in the way of the order which he had wanted to make, and it is now common ground that he was correct in this view. We have accordingly not been referred to Reilly v. Fryer and I say no more about it. Having heard the application, the learned judge then granted a Mareva injunction on 19th April 1988 precluding the defendants from dealing with any of their assets world-wide without giving five days prior notice to the plaintiffs' solicitors in every case. On the following day he gave a further brief judgment in which he refused the defendants' application to restrain the plaintiffs from giving notice of the injunction to persons such as banks or other institutions who might hold assets of the defendants. In pursuance of that judgment the plaintiffs' solicitors notified some 47 entities in various countries of the terms of the injunction, including some 24 banks and two international credit card companies.

2

The defendants appealed against both of these judgments. We heard the appeals on 12th and 13th May. On 18th May we allowed the appeals, discharged the order of 19th April and substituted an order limited to the defendants personally, as explained below, which expressly excluded any effect on any third party. We also ordered that all persons who had been informed of the previous order should be notified that they should now disregard it, since it had been discharged and replaced by an order which merely affected the defendants personally. We announced that we would put our reasons in writing and give them as soon as convenient. We adopted this course because of the urgency of the situation and of pressures of time which would not have enabled us to give full judgments before the Spring vacation and during the absence of two members of the court for some weeks, also bearing in mind that the case obviously raises issues of general importance.

3

Before giving my reasons for allowing the appeals to that extent I must summarise the history. It is most unusual, and judgments of the order of $15 million against individual defendants are of course also not common. Although we all concluded that the orders made by Vinelott J. could not stand, one can readily see why he considered that drastic measures were necessary.

4

The defendants are brothers and I will refer to them as "B.B." and "W.B.". Babanaft is a Panamanian company which was incorporated in 1976 but insolvent and in members' voluntary liquidation since May 1985. Its incorporators, shareholders, directors and officers were B.B. as the President and W.B. as Secretary and Treasurer respectively, together with a Mr. Aladin Hassan Bahri as Vice-President, who is believed to have died in August 1979 when travelling in a private jet which crashed in the desert on a flight to Jeddah. These three persons had until then operated highly successfully in shipping and oil transactions through a number of companies, and from about 1978 they decided to combine their operations into a joint venture which was channelled through Babanaft. But, after the death of Mr. Bahri, the moving spirit in the shipping business, and also due to trade recessions in oil, the business of the company deteriorated, and it was evidently stripped of its assets, which had been very substantial. There was a lengthy and highly complex history of B.B. and W.B.'s dealings with the company's assets and of proceedings concerning the estate of Mr. Bahri, which were closely examined in the lengthy judgment of Vinelott J. in the action. But for present purposes it is only necessary to refer to the matters which gave rise to the judgment against the defendants. In 1979 Babanaft had entered into a long term time charter for a new-building, subsequently named the "Eastern Venture", with Beeston Shipping Limited, a Liberian company. The vessel was delivered in December 1980, but in March 1982 Babanaft ceased to pay hire. In May 1982 Beeston treated the charterparty as repudiated and brought proceedings in the Commercial Court. These resulted in a judgment for some $700,000 against Babanaft for unpaid hire, and a reference to arbitration to assess the full damages to which Beeston were entitled. This led to a default award against Babanaft for about $12 million and an additional sum of £41,000, and judgment in terms of the award was entered in March 1987.

5

A Mr. C. T. E. Hayward had meanwhile been appointed as Receiver of Babanaft in January 1985. He brought the present action in the name of Babanaft against B.B. and W.B. in the Commercial Court, and the action was subsequently transferred to the Chancery Division. The substance of the plaintiff's allegation was that, although B.B., W.B. and Mr. Bahri had nominally merely been shareholders and directors of Babanaft, in truth they had carried on a joint venture as partners which used Babanaft as a vehicle and as a screen to protect them from personal liability, with the result that they were jointly and severally liable to indemnify Babanaft in respect of (inter alia) the judgment debt owed to Beeston. This is the allegation which Vinelott J. found to be established and which resulted in the judgment for over $15 million against the defendants. We understand that the defendants intend to appeal.

6

It is now necessary to say something about them. They are unusually peripatetic in their life-style and elusive in the way they do business and hold assets. Both are Lebanese nationals, but it is not clear whether they are still domiciled in the Lebanon. B.B. is mainly resident in Switzerland and W.B. mainly in Greece. However, three substantial residential properties are also available to B.B. in this country (which are comprised in the domestic Mareva injunction) and the brothers are also joint owners of a number of properties in the Lebanon. Both are described as oil traders in a very substantial way, and B.B. says that he has an income from transactions and commissions of the order of $400,000 to $500,000 a year. All "their" assets appear to be held in the names of a large network of companies incorporated in many countries in which they or members of their families hold bearer shares. The properties available to B.B. in this country appear to be owned in this way. He appears to spend considerable time here and was served with these proceedings when he was here in hospital after an attack with a knife, following which he says that both brothers received anonymous threats to their lives and demands for money. W.B. has no apparent connection with this country but submitted to the jurisdiction after the proceedings had been served on his brother. Thereafter both defendants have complied with the orders made for the disclosure of their assets pursuant to Order 48, but the true nature and location of their assets remains unclear, and they are due to be cross-examined on their affidavits in the near future. In his judgment of 30th March 1988, when he granted the domestic Mareva but at that stage refused to extend it abroad, Vinelott J. said:

"I should at the outset say that in the course of the hearing, extending over a long period in which both defendants gave evidence and in the course of which I had to go through a very...

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