Continental Tranfert Technique Ltd v Federal Government of Nigeria & 3 Others
| Jurisdiction | England & Wales |
| Judgment Date | 16 November 2009 |
| Neutral Citation | [2009] EWHC 2898 (Comm) |
| Docket Number | Case No: 2008 Folio 1280 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 16 November 2009 |
[2009] EWHC 2898 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Jonathan Hirst QC, Sitting as a Deputy Judge of the High Court
Case No: 2008 Folio 1280
Rhodri Davies QC (instructed by Edwards Angell Palmer & Dodge UK LLP) for the Fifth Defendant
John Lockey QC (instructed by Eversheds LLP) for the Claimant
Hearing date: 10 November 2009
Mr Hirst QC:
The Fifth Defendant ("NNPC") applies to discharge two interim charging orders and a third party debt order made ex parte on the application of the Claimant.
The background
On 14 August 2008, a panel of arbitrators, consisting of Sarosh Zaiwalla, Chief Assam E. Assam and Bruce Harris, issued a Final Award in favour of the Claimant against the 1 st-3 rd Defendants in the sum of Naira 29,660,166,207.48 (equivalent to about £139,250,000) plus US$247,500 costs and the arbitrators' fees. The hearings had taken place in London but the seat of the arbitration was in Nigeria. The dispute which led to this Award related to a contract made between the Claimant, a Nigerian company, and the 3 rd Defendant for the provision of identity cards. It had nothing to do with NNPC.
The 1 st-3 rd Defendants did not honour the Award. On 9 December 2008, the Claimant applied under section 101 of the Arbitration Act 1996 for permission to enforce it in accordance with CPR 62.18. The Defendants to the application were the 1 st-4 th Defendants. On 10 December 2008, Paul Walker J granted the Claimant permission to enforce the award against the 1 st to 4 th Defendants and to enter judgment in the amounts of Naira 29,660,166,207.48 and US$247,000. No challenge having been made to that order, a subsequent order was made by Andrew Smith J on 24 June 2009 confirming that the judgment was absolute and that the Claimant was entitled to apply for enforcement of the judgment.
In September 2009, the Claimants applied for permission to join NNPC as 5 th Defendant and for Interim Charging Orders against (1) NNPC's property at 157/159 Hammersmith Road ("the Property") estimated to be worth £10–12 million and (2) its shares in a wholly owned subsidiary, Duke Oil Services (UK) Limited ("the Shares"). NNPC was not given notice of these applications. They were supported by a witness statement made by Stuart Dutson, a partner in Eversheds, the Claimant's solicitors. The witness statement alleged that NNPC was an integral part of the State of Nigeria and that it was an organ of the State, such that a judgment against the State could be enforced against the assets of NNPC. Mr Dutson set out a series of facts which, he contended, showed that NNPC was an organ of the State. These averments included that the Chairman of NNPC is a minister of the Nigerian Government, that the Managing Director is appointed by the National Council of Ministers and that NNPC appears to exercise governmental powers and regulatory functions.
The applications came before Christopher Clarke J. on 28 September 2009. I have seen a note of the hearing prepared by Eversheds at the request of the Judge. The Claimants were represented by Paul Key of counsel. NNPC were not represented. The Judge ordered that "upon it appearing that [NNPC] is the owner of the assets …" NNPC be joined as 5 th Defendants and that Interim Charging Order be made in respect of the Property and the Shares. The Orders recorded that the Court would consider at a further hearing whether the charges should continue or be discharged. Directions were given for service on all five Defendants in Nigeria.
On 19 October 2009, the Claimant applied for interim Third Party Debt Orders against HSBC Bank plc, Union Bank (UK) plc, FBN Bank UK) Ltd, Fortis Bank and Access Bank (UK) limited in respect of bank accounts held by NNPC. The application stated that the Judgment Debtor was NNPC and that the Banks owed money to NNPC. The application was supported by a witness statement made by Gregory Falkof, an assistant solicitor at Eversheds, which stated that the Court had already held that NNPC was an organ of the State of Nigeria. It also explained that the judgment had been entered against the 1 st-4 th Defendants and that NNPC was liable to enforcement as an organ of the State. No notice of the application was given to NNPC. On 28 October 2009, Master Kay made an Interim Third Party Debt Order ordering that the Banks must not pay the Judgment Debtors, which included NNPC, any sum of money due or accruing due save to the extent that it exceeded £151,980,467.67 plus a Court fee of £500.
In returns made to the Court and to the Claimant, FBN Bank and HSBC disclosed that they held a number of accounts in London in the name of NNPC and that there were substantial sums standing to the credit of NNPC. I do not need to set out the figures in this judgment. It is enough to observe that the total credits in the accounts were nothing like sufficient to meet the amount of the judgment. The result is that the accounts are frozen. FBN Bank and HSBC are due to meet payments under a number of letters of credit in favour of third parties.
The first NNPC came to know of these orders was when Nuhu Shittu, its General Manager Group Treasury in Abuja, received a text message on 3 November 2009 from FBN Bank informing him that the accounts had been frozen
On 6 November 2009, NNPC applied to this Court to set aside the Interim Charging Orders and the Third Party Debt Order. The application came before Beatson J. on 6 November 2009, but it was impossible to complete the hearing that day, and the application was heard by me as an urgent matter on 10 November.
NNPC
NNPC was established by section 1 of the Nigerian National Petroleum Corporation Act 1977 as a body corporate with perpetual succession. It is charged with a number of duties including exploring, prospecting for, refining and marketing petroleum and generally engaging in activities that would enhance the petroleum industry in the overall interest of Nigeria. By section 6(1), NNPC was granted the powers to hold, manage and alienate movable and immovable property and to enter into contracts. The Act prevents execution against NNPC and provides that judgments are to be paid from the general reserve fund of the corporation.
NNPC's main business is Nigeria and it encompasses the oil and petro-chemical industry in the country with exclusive responsibility for upstream and downstream development. The downstream plants include four refineries and three petro-chemical plants. NNPC has also had a London office for many years from which it conducts its overseas operations. In his witness statement, James Maton, a partner in Edwards Angell, NNPC's solicitors, states that the Third Party Debt Order has had a draconian impact. It has crippled NNPC's London operations and is causing significant damage. NNPC is prevented even from utilising its accounts for trading purposes. The accounts are used to pay contractors, staff wages, PAYE, utilities, rates and other business expenses. There are 17 outstanding letters of credit.
The submissions in summary
I should record that there is a great deal of dispute between the parties as to the status of NNPC. The Claimant contends that that it is a department of the Nigerian State. That is strongly disputed by NNPC. Although both parties rehearsed before me some of their arguments, it was agreed before Beatson J. and before me that this dispute cannot be resolved at this hearing.
Mr Davies QC, for NNPC, submitted that the Interim Charging Orders and the Interim Third Party Debt Orders should be discharged immediately. The procedures that had been adopted by the Claimant were illegitimate and wholly wrong. He complained that the Orders had been made without notice. NNPC had not been a party to the arbitration proceedings and had no prior involvement. It was not the judgment debtor. On the Claimant's arguments, a third party's bank accounts could be frozen totally, for as long as it took to resolve the issue, on the basis of an arguable case that the bank accounts belonged to someone else. The Order was made without any of the protections that would usually apply if a freezing injunction were granted, such as a cross-undertaking in damages and a saving for payments made in the ordinary course of business. Furthermore, the Claimant had gained access to confidential information as to the state of NNPC's bank accounts without NNPC being given any opportunity to protest.
He made the following principal submissions:
(1) NNPC is a separate entity and a body corporate with its own legal personality. It is entitled to hold assets in own name.
(2) The Award was not against NNPC and it followed that the Award could not be enforced against it.
(3) Under CPR 72.1(1) a third party debt order could only be made in respect of a debt owed to the judgment debtor. The bank accounts were all in the name of NNPC and it was not the judgment debtor.
(4) More broadly, there was no basis upon which the assets of NNPC, as a separate corporation, could be taken in execution of a judgment debt against the 1 st-4 th Defendants, even assuming that NNPC was to be treated as an organ of the Nigerian State.
In response, Mr Lockey QC for the Claimant submitted that NNPC had misunderstood the Claimants' case. As an organ of the Nigerian State, NNPC's assets were amenable to execution by way of enforcement of a judgment against the State. It was not necessary for the Claimant to enter judgment against NNPC because judgment against the 1 st-4 th Defendants...
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