FMO v Société Bengaz and West African Gas Pipeline Company Ltd

Hearing date: 8 March 2024

Draft judgment circulated on:

Approved Judgment

(A) INTRODUCTION

On 8 March 2024, I heard an application by the Claimant (“ FMO”) for permission to apply for summary judgment against the First Defendant (“ Bengaz”), in the absence of any Acknowledgement of Service or Defence; and for summary judgment. At the end of the hearing, I granted both applications and indicated that written reasons would follow. This judgment sets out my reasons for granting both applications.

The applications were supported by the 5 ^th and 6 ^th affidavits of Mr Ardil Jabbar Salem, a partner in FMO's solicitors, Hogan Lovells International LLP. Bengaz did not file any evidence in response. The Second Defendant (“ WAGPCO”) served, in response to the applications, the 2 ^nd affidavit of Mr Odey Simon Adamade, WAGPCO's General Counsel.

FMO's claims arise from a Credit Agreement, under which as at the date of the hearing Bengaz owed approximately US$56 million to FMO (including interest), and associated security documentation. As explained below, Bengaz is a shareholder in WAGPCO, and in that capacity has received and continues to receive substantial sums from WAGPCO over which FMO claims proprietary and other rights.

For the reasons set out below, I concluded that FMO's claims succeeded in full, and gave summary judgment accordingly together with ancillary relief.

(B) FACTS

(1) The parties

FMO is a company incorporated in the Netherlands and majority-owned by the government of the Netherlands. It operates as a bank and lends funds with a view to promoting economic development in emerging markets.

Bengaz is a company incorporated in Benin which operates as a special purpose vehicle for the purpose of holding investments in WAGPCO.

WAGPCO is a company incorporated in Bermuda. It owns and operates the West African Gas Pipeline which supplies gas from Nigeria to certain other West African countries pursuant inter alia to a West African Gas Pipeline Project Agreement dated 22 May 2003 between WAGPCO and the governments of Benin, Ghana, Nigeria and Togo.

(2) WAGPCO shareholders' agreements

The rights of WAGPCO's shareholders are (so far as material) regulated by:

i) a Shareholders Agreement dated 19 May 2003 between WAGPCO and its shareholders, governed by English law, subsequently amended by seven amendment agreements dated 16 December 2004 (two agreements), 27 July 2005, 11 August 2005, 18 May 2007, 10 February 2022 and 23 June 2022 (together “ the Shareholders Agreement”); and

ii) an Escrow Agreement dated 19 May 2003 between WAGPCO, its shareholders and Standard Chartered Bank, governed by English law, supplemented by a further agreement dated 19 May 2003 and amended by an agreement dated 11 August 2005 (together “ the Escrow Agreement”).

Since 2005, pursuant to a transaction reflected in the fourth amendment to the Shareholders Agreement and the first amendment to the Escrow Agreement, Bengaz has been a 2% shareholder in WAGPCO and a creditor of WAGPCO in respect of substantial shareholder loans.

Bengaz's acquisition of its shareholding and other rights in respect of WAGPCO was financed by lending from FMO, as I explain below.

The shareholders of WAGPCO, including Bengaz, have from time to time become entitled, and continue to become entitled, to payments from WAGPCO pursuant to their various rights as shareholders, as creditors in respect of shareholder loans, and as parties to the Shareholders Agreement and the Escrow Agreement (together “ Shareholder Payments”, further defined at § 83.ii) below). Clause 9.1 of Amendment No. 1 to the Shareholders Agreement obliges WAGPCO to make payments due to its shareholders into such bank accounts as they shall from time to time specify in writing. As set out in § 56 below, FMO has, by its Particulars of Claim, exercised that right on Bengaz's behalf, acting as Bengaz's receiver pursuant to powers set out in the Security Agreements referred to below.

(3) The Credit Agreement between FMO and Bengaz

FMO and Bengaz entered into a Term Facility Agreement originally dated 11 August 2005 to govern the lending provided by FMO to Bengaz, subsequently amended and restated on four occasions by Supplemental Agreements dated 11 August 2006, 22 January 2007, 26 November 2007 and 2 April 2009 (together “ the Credit Agreement”).

Clause 2(a) of the Credit Agreement provides that:

“Subject to the terms of this Agreement, FMO makes available to the Borrower [Bengaz]: (a) a term facility in an amount of $24,459,710…”

This term facility is defined as “ Facility A” in clause 1.1, which sets out the definitions used in the Credit Agreement.

By clause 2(b), FMO made available to Bengaz a further term facility, defined as “ Facility B”. That facility is not the subject of the present claim, though FMO reserves the right to pursue further claims in respect of Facility B (by way of amendment or in separate proceedings).

The Availability Period of Facility A is defined as “ the period from and including the date of this Agreement to and including: (a) in the case of Facility A, October 15, 2010…”.

Footnote 1 to clause 2(a) adds that, for the avoidance of doubt, on the last day of the Availability Period, the aggregate of all Capitalised Interest Amounts (defined as “ the amount of accrued interest determined at the Fixed Rate and capitalised pursuant to Subclause 8.3 (Payment of Interest)”) shall not exceed US$6,777,085, making the total Facility A provided equal to an amount not exceeding US$31,236,795.

Clause 3(a)(i) requires the Borrower to apply all amounts borrowed under Facility A for the purpose of financing the Borrower's investment in WAGPCO.

Clause 6.1 requires that “ The Borrower shall repay the Facility A Loans in full on the Termination Date”, defined as “ in respect of Facility A, 15 April, 2020”.

Clause 8 includes the following provisions as to interest:

i) Clause 8.1(a): “ The rate of interest on: (i) each Facility A Loan is the Fixed Rate”, defined as “ 6 per cent. per annum”.

ii) Clause 8.3(a): “ Subject to paragraphs (b) and (c) below, the Borrower shall pay accrued interest: (i) on each Facility A Loan on each Interest Payment Date…”, defined as 15 ^th April and 15 ^th October in any year.

iii) Clause 8.3(b):

“From the first Utilisation Date up to (and including) the last day of the Availability Period any accrued interest on each Facility A Loan will be capitalised on each Interest Payment Date and the Capitalised Interest Amount in respect of that Facility A Loan shall not be paid by the Borrower but instead shall be capitalised so as to form part of that Facility A Loan and each amount of accrued interest shall bear interest together with the rest of that Facility A Loan in accordance with Subclause 8.1 (Calculation of interest) and as set out in Schedule 8 (Calculation of Interest).”

“ Utilisation Date” is defined as “ the date of a Utilisation, being the date on which a Loan is to be made”, and “ Utilisation” is defined as “ the utilisation of a Facility”.

iv) Clause 8.3(d):

“All amounts of accrued interest (including, for the avoidance of doubt, any deferred interest pursuant to paragraph (c) above) shall be repaid in full no later than on the Termination Date.”

Clause 12.2 (“ Other indemnities”) states:

“The Borrower shall, within 5 Business Days of demand, indemnify FMO against any cost, loss or liability incurred by FMO as a result of: (a) the occurrence of any Event of Default; [or] (b) a failure by the Borrower to pay any amount due under any Finance Document on its due date…”

Under clause 14.3 (“ Enforcement costs”):

“The Borrower shall, within 5 Business Days of demand, pay to FMO the amount of all costs and expenses (including legal fees and any travel expenses) incurred by FMO in connection with the enforcement of, or the preservation of any rights under, any Finance Document.”

“ Finance Document” is defined as “ this Agreement, the Supplemental Agreement, the Accounts...