Barros Mattos Junior and Others v MacDaniels Ltd and Others Same v General Securities and Finance Company Ltd and another Barros Mattos Junior and Others v MacDaniels Ltd and Others Same v General Securities and Finance Company Ltd and another Barros Mattos Junior and Others v MacDanields Ltd and Others; Same v General Securities and Finance Company Ltd and another
| Jurisdiction | England & Wales |
| Judge | The Vice-Chancellor,Mr Justice Laddie |
| Judgment Date | 25 May 2004 |
| Neutral Citation | [2003] EWHC 1173 (Ch),[2004] EWHC 1188 (Ch) |
| Docket Number | Case No: HC0100699,Claim No. HC010069 |
| Court | Chancery Division |
| Date | 25 May 2004 |
[2003] EWHC 1173 (Ch)
The Vice-Chancellor
Case No: HC0100699
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Michael Briggs QC and Ms Kathryn Purkis (instructed by Messrs Peters & Peters) for the Claimants
Mr. Romie Tager QC and Mr. Philip Kremen (instructed by Messrs Brecher Abram) for the 42nd Defendant
Hearing dates: 13 th, 14 th and 15 th May 2003
I direct that pursuant to CPR PD 39A para 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
Approved Judgment
The Vice-Chancellor:
On 3rd February 2003 Mr Sunil Sunderdas Vaswani ("Mr Vaswani") was joined as the forty-second defendant to this claim and a world-wide freezing order, limited to US$6.5m, was made against him by Lightman J. The latter order was continued by subsequent orders and ultimately replaced by undertakings and security accepted by Jacob J on 11th March 2003. By this application, issued on 28th February 2003, Mr Vaswani seeks orders:
(i) setting aside the world-wide freezing orders, releasing the undertakings and returning the security on the grounds that the claimants were guilty of material non-disclosure and misrepresentation when applying for the order made on 3rd February 2003; and
(ii) setting aside the claim form and service thereof and staying the claim as against Mr Vaswani on the ground that this court is not the appropriate forum.
The claim relates to the misapplication of substantial sums belonging to Banco Noroeste SA ("the Bank"), a bank incorporated in Brazil, with branches there and elsewhere. In 1997 the shareholders in the Bank were negotiating to sell it to Banco Santander SA for $450m. In the course of the purchasers' investigation into its affairs, they discovered a deficiency of $242m. The sale proceeded but on terms that the sellers paid back $242m in return for the right to sue for the recovery of the moneys of the Bank previously misapplied so as to give rise to that deficiency.
The claim form was issued by the claimants on behalf of themselves and all other former members of the Bank on 19th December 2001. The Particulars of Claim, as they now stand, describe the Bank's Cayman Islands branch (paras 7 to 10), relevant matters concerning Mr Sakaguchi the principal perpetrator of the fraud (paras 11 to 15), the method of accounting between the Head Office of the Bank and its Cayman Islands branch (paras 16 to 19) and how the fraud was discovered (paras 20 to 26). Paragraphs 27 to 35 explain how, as the claimants allege, the fraud was committed. For present purposes the following summary is sufficient.
Between 1995 and 1998 $190m was transferred from US $ accounts held at the Cayman Islands branch of the Bank to accounts in England, Switzerland, Hong Kong and the USA through the SWIFT system. The transfers were not authorised nor made under or in furtherance of any genuine and proper transaction but were disguised by false accounting entries made by two officials of the Bank on the instructions of Mr Sakaguchi. These transfers are described as "primary transfers". They are fully documented and particularised in Schedule 1 to the Particulars of Claim.
The money did not long remain with the recipients under the primary transfers. Its onward transmission has also been traced by the claimants through what are described as secondary and third level transfers into the hands of those described as Substantive Defendants. In most cases those transfers are also fully documented and particularised in Schedules 1 and 2A to the Particulars of Claim. In cases where the subsequent transfers are not fully documented, particularised in Schedule 2B, the claimants invite the court to infer receipt by a specified Substantive Defendant.
In the light of these exercises it is the case for the claimants that, of the original $190m, $128m was "laundered" through Swiss Bank accounts with Lloyds Bank, Zurich and Citibank, Geneva controlled by Mr Naresh Asnani, a member of the Sindhi community living in Nigeria. Mr Oliver, the solicitor for the claimants, described what he called "the architecture of the claim" in the following terms:
"As this case has evolved and information has emerged and been passed round the worldwide litigation team, our understanding of the scam has taken a certain shape. It has become increasingly apparent that the characters involved at the heart of the scam were the two Nigerian self-styled Chiefs, Anajemba and Odinigwe (and possibly Chief Nwandu) and that they had two principal acolytes:
1. Sakaguchi, as the "mole" at the Bank (who may loosely be described as the accessory before and during the fact); and
2. Naresh Asnani, the money-launderer par excellence (or the accessory after the fact).
These two acolytes involved others as they worked. Naresh Asnani's connections are, for obvious reasons, those whom the claimants are interested in chasing down."
The claims against the Substantive Defendants are set out in paragraphs 42 to 60 of the Particulars of Claim. Paragraphs 42 to 50 deal with Primary Transfers as defined. It is alleged (para 42) that each Primary Transfer was made or procured by Mr Sakaguchi improperly, in breach of trust and his fiduciary duty to the Bank. In paragraph 43 it is asserted that the Primary Transfers to Substantive Defendants were misapplications of the Bank's money. Paragraphs 44 to 46 and 47 to 48 respectively allege that each recipient of money under a Primary Transfer had notice of the misapplication and knowingly assisted Mr Sakaguchi in his breach of duty and trust.
In paragraphs 51 to 60 comparable allegations are made against recipients under Second or Third Level Transfers. The claimants assert that in each such case the transfer was made in breach of the constructive trust imposed on the recipient under the Primary or preceding transfer and was a further misapplication of the Bank's money. They claim that the recipient of money under any such Second or Third Level Transfer had notice of such breach of trust and dishonestly assisted the transferor in committing it. Paragraphs 60AA to 60CC contain similar allegations against Schedule 2B defendants.
Paragraphs 60A to 60F allege a conspiracy between a number of defendants ("the Conspiracy Defendants") and Mr Sakaguchi and Mr Naresh Asnani. Paragraphs 62 to 83 deal with various defendants who were joined for the purposes of obtaining information and documents. The claims against the Substantive Defendants are for recovery with interest of the sums received by each of them respectively. The claims against the Conspiracy Defendants are for damages equivalent to the money of the Bank which has been misapplied with interest. As I have already indicated Schedule 1 sets out details of the transfers relied on as against each Substantive Defendant. Schedules 2A and 2B allege the facts relevant to each alleged receipt. The facts relied upon to support the claims in conspiracy are pleaded in Schedule 3.
As Mr Oliver observed these claims have been built up over time. The first step was a criminal investigation initiated in Switzerland in November 2000. Mr Sakaguchi and (much more recently) Mr Naresh Asnani were arrested and extradited to Switzerland. They remain in custody there. On 5th February 2001 the Investigating Magistrate froze the bank accounts in the names of Landmark and Excel with Lloyds, Zurich and Citibank, Geneva through which it is alleged that Mr Naresh Asnani laundered the money. He also froze an account with Citibank, Geneva in the name of Sarina which Mr Vaswani had opened on 11th July 1996. It held $125,000. These freezing orders were made as a matter of course in consequence of the criminal investigation, not on the application of the claimants in this action.
Initially there were only two defendants to the claim, Macdaniels Ltd and Chief Ezugo Dan Nwandu. Macdaniels Ltd is an English company and was served here. Although Chief Nwandu is resident in Nigeria, he accepted service in England through his solicitors. The claimants contend that each of them received $8.5m by means of Primary Transfers made in March and April 1997 and that each of them was a party to the alleged conspiracy. Though the proceedings against them were at a standstill while negotiations took place such negotiations have ceased and the proceedings against them are to be pursued to trial.
On 20th March 2002 the personal representatives of Chief Anajemba, his wife and companies associated with him were joined as the third to seventh defendants. It was alleged that they received substantial sums under Primary, Secondary and Third Level Transfers and that they were parties to the alleged conspiracy. Initially they challenged the jurisdiction of this court but that was abandoned. I gave summary judgment against them on the conspiracy claim on 1st May 2003. Unless and until that judgment is successfully challenged they will play no further part in this action.
On 13th September 2002 Chief Odinigwe, also known as Chief Emmanuel Ezenwanmadu, and his wife were joined as the eighteenth and nineteenth defendants. They are alleged to have received about $32m by means of Primary, Secondary and Third Level Transfers and to be parties to the alleged conspiracy. They have been duly served with these proceedings but have not put in any defence. Accordingly the claim against them is likely to be pursued.
On 27th September 2002 Mr and Mrs Dalamal were joined as the thirty-first and thirty-second defendants. They live in England and were served here. Mr Dalamal, but not Mrs Dalamal is alleged to have been a party to the alleged conspiracy. It is...
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