COMPAGNIE NOGA DIMPORTATION Et DEXPORTATION SA and AUSTRALIA and NEW ZEALAND BANKING GROUP Ltd and Mrs MARYAM ABACHA and Mr MOHAMMED SANI ABACHA as Personal Representatives of GENERAL SANI ABACHA deceased and CHIEF ANTHONY A. ANI and ALI ABACHA and ME
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Langley |
| Judgment Date | 18 November 2004 |
| Neutral Citation | [2004] EWHC 2601 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 1999 Folio 404;1999 Folio 405;2004 Folio 630 |
| Date | 18 November 2004 |
[2004] EWHC 2601 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon. Mr Justice Langley
Case No: 1999 Folio 404;1999 Folio 405;2004 Folio 630
Miss V. Selvaratnam QC (instructed by Stephenson Harwood) for the Claimants
Mr R. Bright (instructed by Allen & Overy LLP) for the 1st Defendant
Mr P. Stanley and Miss J. Mance (instructed by Byrne and Partners) for Defendants (5) (9) (10) and (13)
Mr A. Aderemi (instructed by Lawson Adefope Solicitors) for the 3rd Defendant
Hearing dates: 1 st and 2 nd November 2004
Approved Judgment
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.
The Applications
The major applications to which this judgment relates are:
i) An application by Nessim Gaon ("Mr Gaon") to be joined as a claimant on the basis that the present company claimant ("Noga") has assigned the claims to Mr Gaon.
ii) Applications by the first (ANZ) and fifth, ninth, tenth and thirteenth defendants for security for costs against Noga and, if he is joined, Mr Gaon.
The fifth, ninth, tenth and thirteenth defendants are referred to as "The Byrne and Partners Defendants" after the name of their solicitors. In Case No 1999 Folio 404 the only other active defendant is the third defendant, Chief Ani, who was Finance Minister in the Government of the late President of Nigeria, General Sani Abacha. The other named defendants have either not been served or the proceedings against them have been stayed or discontinued. In Case No 1999 Folio 405, it is Noga's belief that the first defendant, the Government of the Russian Federation, has been served in accordance with an Order made by Colman J dated 26 March 1999. Chief Ani was represented at the present hearings but made no submissions on the applications. The Russian Government was neither present nor represented.
The Issues
The applications raise both questions of principle and issues which require some detailed factual analysis. They may also have to be re-visited as the claims proceed if they do proceed. The defendants challenge the joinder of Mr Gaon and submit that, even if permitted, permission should be conditional on the provision of security. They seek orders for the provision of security against Noga pursuant to CPR 25.13(2)(c) and Section 726(1) of the Companies Act 1985 (inability to meet an order for costs) and against Mr Gaon pursuant to CPR 25.13(2)(f) (nominal claimant unable to pay costs) and/or (g) (taking steps in relation to his assets that would make it difficult to enforce an order for costs against him). Noga and Mr Gaon submit that any order for security would stifle their claims, and that in the case of Mr Gaon the circumstances do not meet the provisions of either 25.13 (2)(f) or (g), and that there is no power to make joinder conditional on the provision of security.
CHRONOLOGY
Introduction
Whilst what follows has been derived from the evidence before the court and is, I think, sufficiently reliable to enable the issues to be addressed, it is not intended to suggest that it is necessarily wholly accurate or capable of proof at any trial of the substantive issues between the parties.
The Ajaokuta Steel Project and the Bills of Exchange
In the late 1970s a Soviet entity ("TPE") contracted to build a steel project in Nigeria. Payment included 20 bills of exchange drawn by TPE and accepted by the Nigerian purchaser payable to the order of the Bank of Foreign Trade of the USSR. The bills were payable on various dates between April 1983 and October 1992. Each bill was numbered. The present proceedings concern bills numbered 8–15 and 18–20. The obligations of the Nigerian purchaser and payment of the bills were guaranteed by the Federal Government of Nigeria both to TPE and government to government between the Federal Government of Nigeria and the Soviet Ministry of Foreign Economic Relations.
By the early 1990s some of the bills had become overdue and been rescheduled; others remained unpaid and overdue.
The steel project contract provided that the bills were not negotiable and that the rights under the contract were not assignable save with the consent of the other party.
Noga
Noga is a Swiss company incorporated in 1957. In witness statements served on behalf of Noga and Mr Gaon for the present hearing Mr Gaon has been described as the "principal" shareholder in Noga. However, in the course of the hearing, Miss Selveratnam QC told the court, on instructions, that the share capital of Noga was held as to 12,497 shares by Mr Gaon, 12,500 shares by his wife and 1 share each by their 3 children. Joel Herzog, a son-in-law of Mr Gaon, was a director of Noga.
Noga built up a substantial trading relationship with the USSR and subsequently the Russian Federation. The major trade involved the supply of goods by Noga in exchange for crude oil.
The July 1992 Agreement
An Agreement dated 22 July 1992 was signed by Noga and the Ministry of Foreign Economic Relations of the Russian Federation representing itself, TPE and the Bank of Foreign Economic Affairs of the USSR. Noga thereby agreed to purchase the bills of exchange numbered 8–15 and 18–20. The Agreement was subject to Swiss Law. The total face value of these bills with interest exceeded 2.125 billion German marks. The price to be paid by Noga was 75% of the face value of the two overdue (18 and 19) bills and 62% of the face value of the other bills (some 1.138 billion German marks).
The July 1992 Agreement provided that it would come into force upon signature and fulfilment of certain conditions precedent including the consent of the Nigerian Government to the sale to Noga and payment by Noga of a sum of about 413m marks. It also provided, by Clause 15(b), that: "This Agreement shall not be assigned without the written consent of all Parties hereto".
Neither condition precedent was fulfilled. It is Noga's case, and the foundation of Noga's claim in Folio No 404, that it acquired an equitable proprietary interest in the bills. Noga alleges that the want of consent from the Nigerian Government was caused by "bad faith and misconduct on the part of corrupt servants and/or agents in positions of power in the Governments of Russia and Nigeria", and that, as a matter of Swiss law, the existence of such bad faith and misconduct means that Noga is entitled to treat the condition as if it had been satisfied. Noga says it discovered the bad faith and misconduct in 1995. It relies in particular on Clause 12 of the July 1992 agreement which provided that:
"The Parties hereto further agree that any and all payments … if any, made by the Employer and/or by [Nigeria] in relation to the bills of Exchange … after the date hereof shall be promptly transferred in German marks to [Noga] …. Until so paid, the Ministry, [TPE] and the Bank shall hold such amount in trust for [Noga]."
Noga and Russia
By mid-1992 Russia was in default in making deliveries of oil to or for the account of Noga which Russia was required to make under the terms of various loan agreements with Noga. In the course of an arbitration between Noga and Russia, which resulted in a final Award dated 13 March 2001, it was Noga's case that these breaches by Russia of the loan agreements had caused Noga very substantial damage by depriving Noga of the means to earn substantial profits. It was Russia's case that Noga's business had already started to decline before it had any dealings with Russia. The Arbitrators found that Noga's undoubted financial difficulties in 1992 and 1993 were not caused by Russia's default but "resulted from a pre-existing difficult financial situation combined with engagements of a much larger size than Noga had the resources to manage in a new market (Russia) which looked very promising but turned out not to be sufficiently stable for such big undertakings by a company without the necessary capital".
On 14 th December 1992 Noga declared Russia in default under the loan agreements. In 1993, Noga obtained a freezing order over certain Russian assets in respect of debts said to be owed by Russia totalling some USD280m. Attachment orders were obtained in Luxembourg on Russian assets held by some 30 local banks. The attachments are opposed and, until resolved, Luxembourg law does not enable Noga to know what, if any sums, have in fact been attached.
In June 1993 Noga commenced an arbitration against Russia. The seat of the arbitration was Stockholm. The claim by Noga at that time was for sums due under the loan agreements but not for the damages referred to in paragraph 13.
At various times between August 1993 and August 1994 Noga assigned to a number (4) of banks various amounts the subject of its claims against Russia in the arbitration. In late 1994, Noga and Russia negotiated a settlement of the arbitration. The arbitrators eventually held, contrary to Noga's case, that the settlement never became final and binding.
The 1996 Transactions
In 1996, the sixth defendant, a company called Parnar Shipping Corporation ("Parnar") obtained bills 8–15 and 20 from the Russian holders. Noga alleges Parnar paid only 19.06% of the face value of the bills to acquire them. Although named as a defendant in...
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