Bank of Tokyo Mitsubishi Ltd and Another v Baskan Gida Sanayi Ve Pazarlama as & Others

Approved Judgment

I direct that pursuant to CPR PD 39A paragraph 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

INTRODUCTION

This is an application by the twelfth defendant Mr Shabbir Abidali to strike out the claimant Banks' claims against him pursuant to CPR 3.4(2) and, in the alternative, for defendant's summary judgment on all claims against him pursuant to CPR 24.2.

Mr Abidali was added as a defendant to these proceedings on 2 ^nd February 2007. The proceedings are listed for an eight week trial commencing in October this year. The Banks' claims against Mr Abidali are set out in Re-Amended Particulars of Claim (“RAPOC”), pursuant to permission to re-amend given on 10 ^th May 2007. Mr Abidali's application was made on 30 ^th November 2007, and was based upon the following four grounds:

(1) The RAPOC is “unreasonably vague, wanting in particularity and discloses no reasonable grounds for bringing the claims against the twelfth defendant”.

(2) The Claimants have no real prospect of success against the twelfth defendant.

(3) It would be oppressive and unfair to require the twelfth defendant to defend the claims.

(4) There is no compelling reason for a trial of the claims against the twelfth defendant.

It is convenient to deal briefly with grounds (3) and (4) first. In support of ground (3) Mr Werbicki for Mr Abidali focussed his submissions on the substantial inequality of arms as between the Banks and Mr Abidali, who is, according to disclosure made by him pursuant to a freezing order which I made in February 2007, an individual of relatively limited financial means, his assets consisting of illiquid interests in real property amounting to less than £400,000. I was told that he has funded his defence to the proceedings thus far by means of borrowings from his family and a former business associate (now deceased) in an aggregate amount well in excess of his net assets and that, (which I can well understand), he doubts his ability to fund a full and comprehensive defence to the claim all the way to the conclusion of an eight week trial.

By contrast Mr Werbicki points to the relatively unlimited resources of the claimant Banks, to the fact that these proceedings constitute, viewed as a whole, very heavy, long and complex commercial litigation in which the other active defendants are also well resourced, and to the likelihood that even sympathetic case management will make it difficult for Mr Abidali to absent himself without some risk from large parts of the trial, if the case is to proceed against him.

Taking those factors together, Mr Werbicki submits that the Overriding Objective requires the court to apply a more than usually stringent standard or test to the questions whether, under CPR 3.4(2) the RAPOC discloses reasonable grounds for bringing the claim, or whether under CPR 24.2 the Banks can show that they have a real prospect of succeeding on their claim against him. In his helpful skeleton argument Mr Werbicki summarises that submission by proposing that the RAPOC should show “very clear grounds” to support the Banks' claims and that, in face of the CPR 24.2 application, the Banks should be “required to show very real prospects of succeeding in order to justify Mr Abidali's involvement in continuing proceedings and an eight week trial”.

While I have considerable sympathy with the plight of any private individual (other than perhaps the most wealthy) drawn into a long and complex conflict between sophisticated and well-resourced companies, I have not been persuaded that those considerations call for some different or more rigorous test to be applied on applications under CPR 3.4(2) or CPR 24.2 than those which are now the subject of substantial, consistent and well-settled authority. CPR 24.2(a)(i) imposes what is sometimes called a reality test. It is designed to distinguish between the realistic and the fanciful or hopeless, and between cases where the outcome can only properly be determined by a trial, and cases where it can be seen without the need for a trial that the claim (or as the case may be the defence) is bound to fail. The hurdle facing an applicant for a striking out order under CPR 3.4(2)(a) is no less steep, albeit that it focuses upon the relevant statement of case rather than the party's evidence in support of it.

Mr Werbicki frankly acknowledged that he could point to no authority supporting his submission that in cases of an inequality of arms, some different or more rigorous test was applicable. In my judgment the Overriding Objective is achieved both under CPR 3.4(2) and CPR 24.2 by ensuring that unreal, fanciful or hopeless cases (or defences) are dealt with without the effort and expense of a trial, for the simple reason that a trial has been shown to be unnecessary. By contrast, where a statement of case discloses reasonable grounds for a claim or the evidence relied upon in answer to a claim for defendant's summary judgment discloses a real prospect that the claim will succeed, then the core of the Overriding Objective, namely enabling the court to deal with cases justly, set out in CPR 1.1(1), can only be achieved by a trial, albeit that the court will use its case management powers to minimise inequality of arms, and to ensure that the case is dealt with proportionately, expeditiously and fairly. It follows that Mr Abidali's ground (3) affords him no assistance if he fails on grounds (1) and (2). I should add for completeness that the claimants allege that Mr Abidali is in truth the beneficial owner of substantially more assets than he has chosen to declare. For the reasons which I have given it is unnecessary for me to resolve that issue.

As for ground (4), Mr Wardell QC for the claimant Banks accepts that if the materials thus far deployed in evidence in response to Mr Abidali's application fail to disclose a real prospect of success, this is not a case where there is some other compelling reason why the case should go to trial as against Mr Abidali. It follows that the outcome of this application turns first upon the question whether the RAPOC discloses reasonable grounds for the Banks' claim against Mr Abidali and secondly, if it does, whether in the light of the evidence relied upon by the Banks, they have a real (i.e. more than fanciful) prospect of success as against him.

THE PLEADED CLAIM AGAINST MR ABIDALI

The Banks' claims arise out of a written loan facility agreement dated 14 ^th December 2001 pursuant to which they agreed to provide trade finance to the first defendant (“Baskan Gida”) up to an aggregate of US$35 million. The purpose of the facility was to enable Baskan Gida to finance the purchase of hazelnuts (up to a maximum of the lesser of 90% of sales contract value and 100% of the purchase price payable), between the period of purchase and on-sale to customers.

By mid-February 2002 the Banks had advanced an aggregate of €22.8 million odd to Baskan Gida, against contracts to on-sell hazelnuts to the value of €25 million odd with the eighth defendant as agent for the ninth to eleventh defendants (all Ferrero companies), to which I shall refer collectively as Ferrero. There was supposed to be a security in favour of the Banks over hazelnuts purchased with the use of that lending constituted by Baskan Gida depositing hazelnuts in one of its warehouses in Giresun, Turkey (“Warehouse 2”) to be held on the Banks' behalf by a custodian (“SGS”) pursuant to a Master Pledge Agreement, pending release in order to enable Baskan Gida to satisfy sale contracts made with Ferrero.

It is alleged that, beginning in mid-January 2002, Baskan Gida transferred substantially the whole of its assets and business to two companies, Aksu Gida (the sixth defendant) and Baskan Yuksel, including the bulk of the hazelnuts which had by then been deposited in Warehouse 2, and which were recovered from the security arrangement upon the false basis that they were to be on-sold by Baskan Gida to the Ferrero companies. The alleged consequence was that when repayments to the Banks began to become due in mid-February 2002, Baskan Gida was to all intents and purposes a worthless shell. Hazelnuts transferred to Asku Gida were then sold by it to Ferrero in return for direct payment, bypassing the arrangements for payment to the Banks contemplated by the loan facility, with the overall result that, save for a little over €2 million (being the aggregate of a payment by Ferrero Italy, a payment by Baskan Gida and proceeds of the sale by the Banks of the remaining hazelnuts in Warehouse 2) the Banks have made no recoveries in relation to their substantial loan.

The Banks' claims include:

(1) A debt claim against Baskan Gida.

(2) A conversion claim against Ferrero in relation to hazelnuts obtained by them allegedly contrary to the Banks' security.

(3) Claims in deceit...