Energy Venture Partners Ltd v Malabu Oil and Gas Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Tomlinson,Lord Justice McFarlane,Sir David Keene: |
| Judgment Date | 09 October 2014 |
| Neutral Citation | [2014] EWCA Civ 1295 |
| Docket Number | Case No: A3/2012/0250 |
| Court | Court of Appeal (Civil Division) |
| Date | 09 October 2014 |
[2014] EWCA Civ 1295
Lord Justice Tomlinson
Lord Justice McFarlane
and
Sir David Keene
Case No: A3/2012/0250
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION, COMMERCIAL COURT
Mr Justice Hamblen
[2012] EWHC 79 (Comm)
Royal Courts of Justice
Strand, London, WC2A 2LL
Fionn Pilbrow (instructed by McGuireWoods London LLP) for the Appellant
Charles Graham QC and Andrew Lodder (instructed by Edwards Wildman Palmer UK LLP) for the Respondent
Hearing date: 17 July 2014
This is an appeal against an Order made by Hamblen J in the Commercial Court on 13 January 2012 requiring the Appellant to provide fortification of its cross-undertaking in damages. It raises for the first time at appellate level the question what is the appropriate test to apply when determining whether such fortification should be provided. The principal litigation in which this interlocutory order was made is at an end. The Appellant was largely successful in the litigation and will recover 90% of its reasonable costs of fortifying its cross-undertaking pursuant to an order made by the trial judge, Gloster LJ as she had by then become, on 17 July 2013. The appeal is thus very largely academic, although the Appellant contends that a decision in its favour would entitle it to invite Gloster LJ to revisit that order and also entitle it to pursue an application that certain other costs to which it is accepted it is entitled, including the costs of this appeal incurred in the period up to October 2013, should be assessed on the indemnity rather than on the standard basis. Since the court has already determined that the appeal must fail on the three grounds for which permission to appeal has been given, I do not need to dwell further on the possible costs consequences of a decision in the Appellant's favour. I merely assume that those possible consequences represent a sufficient interest in the Appellant to entitle it to pursue this appeal. These are my reasons for concluding that the appeal should be dismissed.
The Appellant ("EVP") is a British Virgin Islands company of which a Nigerian, Mr Obi, was at all material times the sole director and shareholder. It operated in an entrepreneurial capacity in relation to transaction and exploration opportunities within the global oil and gas industry, with special reference to Nigeria. Mr Obi had many years of experience acting for and advising the Federal Government of Nigeria, in particular in relation to, and in connection with, privatisation transactions.
The Respondent ("Malabu") is a Nigerian company. Its principal witness at trial was Chief Etete who was at all material times a consultant to the company. In April 1998, at a time when Chief Etete was the Minister of Petroleum Reserves in the Government of General Sani Abacha, the Respondent was awarded by the Federal Government a 100% ownership interest in an oil prospecting licence for Block 245, an oilfield located in the Eastern Niger Delta in the offshore territorial waters of Nigeria ("the OPL Assets").
In the underlying litigation EVP claimed that, pursuant to an oral variation of a written agreement concluded between EVP and Malabu in about January 2010, ("the EVP Exclusivity Agreement"), Malabu agreed to pay a minimum figure of US$200 million to EVP in respect of its fees for services provided in connection with the sale of the OPL Assets. In the alternative EVP claimed the like or some other sum by way of quantum meruit.
The transaction which EVP claimed gave rise to its right to commission was a settlement agreement, called a "Resolution Agreement", dated 29 April 2011 ("the First Resolution Agreement") and made between Malabu and the Federal Government of Nigeria. Under that agreement Malabu was due to be paid US$1,092,040,000 by the Federal Government of Nigeria in return for the surrender of the OPL Assets. Under a related agreement ("the Second Resolution Agreement") made between the Federal Government of Nigeria and affiliate companies of Shell and the Italian oil company ENI SpA it was agreed that the Federal Government of Nigeria would issue a fresh oil-prospecting licence in respect of Block 245 to the affiliate companies in return for a signature bonus payment of US$207,960,000 and the payment of a sum of the same value as that paid under the First Resolution Agreement.
Payments of at least US$1,092,040,000 were made by the Shell and ENI companies into an account held by the Federal Government of Nigeria with JP Morgan Chase Bank NA in London.
EVP claimed that it was wrongly excluded from the transaction between Malabu and the Federal Government of Nigeria, and the discussions and agreements leading up to it, having previously worked pursuant to the EVP Exclusivity Agreement to source potential purchasers of the OPL Assets, including the ENI interests. Malabu contended that EVP had done nothing to source either the ENI interests or any other potential purchaser and denied the claim in its entirety.
On 3 July 2011 EVP obtained, without notice, from Griffith Williams J, a Worldwide Freezing Order in respect of the assets of Malabu up to the value of US$215 million. There were (at least) three further hearings in July 2011 before David Steel J. The upshot of those hearings was that:-
i) The Freezing Order was continued subject to various modifications;
ii) An arrangement was sanctioned whereby the Federal Government of Nigeria could give a payment instruction to JP Morgan for US$215 million to be paid into court with the balance of US$801,450,000 being paid to Malabu;
iii) EVP was required to fortify its cross-undertaking in damages by means of a written guarantee in favour of Malabu in the sum of US$150,000, a level which reflected the fact that the sum of US$215 million had not yet been paid into court; and
iv) Malabu had liberty to apply for an increase in the amount by which EVP should fortify its cross-undertaking in the event that JP Morgan paid US$215 million into court on the instructions of the Federal Government of Nigeria.
By August 2011 US$215 million had been paid into court by JP Morgan out of the funds frozen by the Freezing Order.
Malabu's application for further fortification of the cross-undertaking came before Hamblen J at the first CMC in the action on 13 January 2012. The money in court attracted interest at the rate of 0.15% per annum. Malabu said that it was entitled to further fortification because of the losses being caused to it by being kept from the use of the substantial sum of money in court. It put its claim on the basis of the likely borrowing cost to it if it had borrowed the sum of US$215 million on the international market from a bank in the United States. It submitted that those costs could not be less than the US Prime Rate, then 3.25%. US Prime Rate was the rate at which lending would be provided to the most creditworthy companies.
Importantly, the evidence before the judge showed that:-
i) the cost of borrowing in Nigeria would have been higher than 3.25%; and
ii) the deposit interest rates which would have been available to Malabu had it deposited US$215 million in a Nigerian bank in Nigeria would have been considerably higher than 3.25%.
It was obvious that if EVP lost its claim for US$200 million and was called upon to pay pursuant to its cross-undertaking, the extent to which Malabu would be out of pocket was, theoretically, in the light of the principal sums involved, on any view considerable, running into millions of dollars. It did not appear to David Steel J that EVP was good for money of this order, and he gave a clear indication that it should produce its accounts in order to substantiate its financial position. No evidence or information substantiating EVP's financial position was produced before Hamblen J and there was before him simply no evidence whatever that EVP would be able to meet its cross-undertaking if called upon to do so.
It was contended by Malabu before Hamblen J that it had a good arguable case to be entitled to fortification pursuant to the principles set out by Mr Michael Briggs QC, as he then was, sitting as a Deputy Judge of the Chancery Division in Harley Street Capital v Tchigirinski [2005] EWHC 2471 (Ch). Mr Briggs identified three requirements which a defendant seeking fortification must in such circumstances satisfy. Those requirements are, first, that the court has made an intelligent estimate of the likely amount of loss which might result to a defendant by reason of the injunction; secondly, that the applicant for fortification has shown a sufficient level of risk of loss to require fortification; and, thirdly, that the contemplated loss would be caused by the grant of the injunction. Mr Briggs derived those requirements in turn from the judgments of Millett J and Mann J in Re: DPR Futures Limited [1989] 1 WLR 778 and Sinclair Investment Holdings v Cushnie [2004] EWHC 218 (Ch) respectively. He cited the following passage from Mann J's judgment:-
"24. I have already identified the evidence in this case which indicates that the cross-undertaking is of very uncertain value, but that does not automatically mean that fortification is required. In the light of the authorities just cited, it is both appropriate and necessary for me to consider the extent to which a risk of loss has been shown. In many cases the fact that there is a risk of loss will be obvious merely from the general situation, and while it may not be possible to...
To continue reading
Request your trial
-
Arcelormittal USA LLC v Mr Ravi Ruia
...the evidence falls well short of what is necessary to justify fortification having regard to the principles stated in Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2015] 1 WLR 2309; [2014] EWCA Civ 1295 at §§ 52–54. AMUSA submits that VTB has provided no evidence to support the re......
-
PJSC Bank “Finance and Credit” v Kostyantin Valentynovich Zhevago
...no fortification of the cross-undertaking was necessary. Applying the principles confirmed by the Court of Appeal in Energy Venture Partners v Malabu Oil and Gas Ltd [2014] EWCA Civ 1295; [2015] 1 WLR 2309, there was no evidence of any likely loss that would be suffered as a result of the......
-
JSC Mezhdunarodniy Promyshlenniy Bank and Another v Sergei Viktorovich Pugachev
...possible difficulties of enforcing a cross-undertaking in Russia, was enough to justify an order for fortification. In Energy Venture Partners Ltd v Malabu Oil And Gas Ltd [2014] EWCA Civ 1295 (a case decided after Rose J had given judgment in our case) this court approved the distillation......
-
Dario Ovidio Schettini v Nicola Silvestri
...the amount of £100,000 is excessive, and was arrived at without going through the three-stage process required by Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2014] EWCA Civ 1295, [2015] 1 WLR 2309. Third, it is said on his behalf that he is unable to comply with the undertaking,......
-
Cash Or Security: The Cost Of An Interim Injunction In BVI Proceedings
...Webster JA identified among other things, the three step criteria, as set out in Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2014] EWCA Civ 1295 ("Malabu Gas") and followed in PJSC National Bank Trust and another v Boris Mints and others [2021] EWHC 1089 (Comm) ("Malabu / Mints te......