A Dubai Islamic Bank PJSC v PSI Energy Holding Company BSC [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Beatson J. |
| Judgment Date | 19 April 2011 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 19 April 2011 |
[2011] EWHC 1019 (Comm)
Queen's Bench Division (Commercial Court).
Beatson J.
Stephen Phillips QC and Fred Hobson (instructed by Hogan Lovells International LLP) for the claimant.
Max Mallin (instructed by Archerfield Partners LLP) for the first and second defendants.
The third defendant was represented on an ad hoc basis by a non-practising solicitor.
The following cases were referred to in the judgment:
AP Moller-Maersk A/S (t/a Maersk Line) v Sonaec Villas Cen Sad FadoulUNK [2010]EWHC 355 (Comm).
Aratra Potato Co Ltd v Egyptian Navigation Co (The El Amria)UNK [1981] 2 Ll Rep 119.
Australian Commercial Research and Development Ltd v ANZ McCaughan Merchant Bank LtdUNK [1989] 3 All ER 65.
BEA Hotels NV v Bellway LLC [2007] EWHC 1363 (Comm); [2007] 1 CLC 920.
Breams Trustees Ltd v Upstream Downstream Simulation Services IncUNK [2004] EWHC 211 (Ch).
British Aerospace plc v Dee Howard CoUNK [1993] 1 Ll Rep 368.
Cherney v Deripaska (No. 2) [2008] EWHC 1530 (Comm).
China National Foreign Trade Transportation Corp v Evlogia Shipping Co SA of Panama (The Mihalios Xilas)[1979] 1 WLR 1018.
De Dampierre v De DampierreELR [1988] AC 92.
Donohue v Armco Inc [2002] CLC 440.
Downing v Al Tameer EstablishmentUNK [2002] EWCA Civ 721; [2002] CLC 1291.
EI du Pont de Nemours & Co v AgnewUNK [1987] 2 Ll Rep 585.
Highland Crusader Offshore Partners LP v Deutsche Bank AG [2009] 2 CLC 45.
Import Export Metro Ltd v Compania Sud Americana de Vapores SA [2004] 2 CLC 757.
Mercury Communications Ltd v Communication Telesystems International [1999]2 All ER (Comm) 33.
Motor Oil Hellas (Corinth) Refineries SA v Shipping Corp of India (The Kanchenjunga)UNK [1990] 1 Ll Rep 391.
Rederi Kommanditselskaabet Merc-Scandia IV v Couniniotis SA (The Mercanaut)UNK [1980] 2 Ll Rep 183.
Svendborg A/S D/S v WansaUNK [1996] 2 Ll Rep 559.
Swiss Reinsurance Co Ltd v United India Insurance Co [2003] EWHC 741 (Comm).
World Pride Shipping Ltd v Daiichi Chuo Kisen Kaisha (The Golden Anne)UNK [1984] 2 Ll Rep 489.
Freezing order — Jurisdiction — Banking — Receivables fraud — Breach of restructuring agreement containing exclusive English jurisdiction clause — Proceedings in Bahrain by bank in breach of jurisdiction clause — Breach not repudiatory — Primary motive for instituting proceedings in Bahrain to obtain protective relief — No waiver of right to rely on jurisdiction clause or estoppel — English proceedings not stayed on forum grounds — freezing order continued.
These were applications by defendants to set aside a freezing order and challenging the jurisdiction of the English court.
The claimant bank alleged that it was the victim of a receivables fraud perpetrated by the second to the fifth defendants. The parties entered into a restructuring agreement (RSA) under which the fifth defendant and its parent company agreed to repay some US$501m to the bank and the second to fourth defendants agreed to guarantee the companies' obligation and to disclose their assets and to provide security over and transfer to the bank proceeds derived from advances made by the bank to the companies.
The bank sought a freezing order in relation to a transaction proposed by the first defendant (PSI), a Bahrain company controlled by the second defendant (C), which the bank feared would lead to a dissipation of assets.
The jurisdiction challenge by PSI and C had two strands: first, that the effect of proceedings in Bahrain, namely a claim by the bank and a counterclaim by the defendants, was that the parties were no longer bound by an exclusive jurisdiction agreement in the RSA in favour of the English court. It was submitted that the bank was either in repudiatory breach of the agreement, which breach was accepted by the defendants as discharging it, or that the bank was estopped from relying on the agreement. The second strand assumed that there was jurisdiction, but maintained that there were strong reasons for the court not to exercise it both because the multiplicity of proceedings gave rise to the risk of conflicting judgments and because it was the bank which first instituted proceedings in Bahrain which it now proposed should be stayed.
The defendants' counterclaim in Bahrain sought an order that part of the security given under the RSA, in respect of a lease of property called Plantation, was worth more than the value of the debt under the RSA and that the bank, having taken title to it, should repay the difference. C's case was that, shortly before the bank took legal title, Plantation had been valued at US$ 1.1 billion, and the bank had been paid its debt in full and he was entitled to deal with his remaining assets entirely as he saw fit. The Bahrain court had appointed an expert to consider whether the bank had in fact acquired Plantation and to establish the debtor/creditor position of the conflicting parties.
The bank's case was that the primary purpose of the Bahrain claim was to enable the bank to apply for attachment orders over the defendants” assets because it was concerned that C in particular was dissipating his assets and failing to account for “Proceeds Assets” in accordance with his obligations under the RSA; an application for an attachment order had to be accompanied by substantive proceedings in Bahrain.
Held, dismissing the challenge to the jurisdiction and the application to set aside the freezing order:
1. In the present case in commencing proceedings in Bahrain the bank was clearly in breach of the jurisdiction agreement in the RSA, but the institution of the Bahrain proceedings in the circumstances was not a repudiatory breach of the jurisdiction agreements. There was an explanation for the bank's conduct which meant that the court could not infer an intention to repudiate. The bank believed that some US$50 million of its money had been spent in Bahrain and was advised that the only quick way of freezing assets in Bahrain was by instituting proceedings. The considerations which precluded the institution of proceedings in Bahrain being a repudiatory breach also precluded them giving rise to an unequivocal representation that the bank waived the jurisdiction agreement for all time and for all purposes or elected so to do.
2. There should be no stay of the English proceedings on discretionary grounds. The mere existence of the Bahrain proceedings was not of itself sufficient reason for displacing the bank's prima facie entitlement to enforce the jurisdiction clause in the contract. In the circumstances a stay against C did not make sense and would not remove the multiplicity of proceedings. The third defendant had accepted English jurisdiction and PSI was not a party to the RSA or to the Bahrain proceedings. It was also relevant that the primary motive for the bank instituting the proceedings in Bahrain was to get protective relief. The fact that the claim was not pleaded so as to be limited to that was the result of the advice of its Bahraini lawyer. This was not a case where the multiplicity of proceedings meant there was a strong reason to depart from the contractual choice of forum.
3. In the circumstances there were no good grounds for discharging the injunction.
Beatson J:
1. On 5 October 2010 Gloster J granted the claimant, Dubai Islamic Bank PSJC (hereafter “the Bank”) worldwide freezing and related relief including permission to serve out of the jurisdiction against the first to fifth defendants on a without notice basis. The Bank, one of the largest banks in the Middle East, alleges that it was the victim of a receivables fraud perpetrated by the second to the fifth defendants. The second and third defendants, Ryan Cornelius and Charles Ridley, have been in custody in Dubai since May 2008. They are charged with criminal fraud against the bank.
2. The relief was sought and granted in respect of the Bank's claim under a Restructuring Agreement (“the RSA”) made between it and the second to the fifth defendants on 19 August 2007. Under the RSA the fifth defendant, CCH (Europe) GmbH, and its parent CCH International plc (hereafter “the CCH companies”) agreed to repay some US$ 501 million to the Bank and the second to the fourth defendants agreed to guarantee the CCH companies” obligation and to disclose their assets and to provide security over and transfer to the Bank proceeds derived from advances made by the Bank to the CCH companies. The immediate catalyst for the application that came before Gloster J was a transaction whereby a relatively illiquid shareholding owned by the first defendant, PSI Energy Holding Company BSC (hereafter “PSI”), a Bahrain company controlled by Mr Cornelius, was to be exchanged for shares in Afren plc, a company listed on the London Stock Exchange and in the FTSE 250 index. On the return date, 29 October, it was agreed at the hearing before Simon J that the freezing relief should continue with amendments which are not material for present purposes but that the defendants should have permission to apply to set aside or discharge the injunction without having to show a material change of circumstances.
3. I have before me two applications. The first, issued on 25 November 2010 by PSI and Mr Cornelius, is to discharge or set aside Simon J's order. The third defendant, Charles Ridley, also applies for the discharge of Simon J's order. The second application is a jurisdiction challenge by PSI and Mr Cornelius seeking the staying or dismissal of the proceedings issued on 6 October on the basis that the court has no jurisdiction or should decline to exercise such jurisdiction as it has. These defendants indicated their intention to challenge the jurisdiction of the English court on 10 November 2010 and the application was issued on 31 December. The third defendant, Charles Ridley, does not challenge the jurisdiction of this court. By the time the application challenging jurisdiction was...
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