Grupo Torras SA v Al-Sabah

I will ask Lord Justice Tuckey to give judgment.

This hearing has been concerned with unfinished business following a reserved judgment of this court handed down on 2nd November 2000 and an order (perfected on 1st December 2000) giving effect to that judgment. The order contemplated that further argument might be necessary if the parties could not agree, and in the event the parties have not been able to agree.

This court's order (and the House of Lords' refusal on or about 1st December 2000 of a petition for permission to appeal) marked the end of protracted, hard-fought and expensive litigation in which the claimants were a Spanish company, Grupo Torras SA ("GT") and its wholly-owned English subsidiary, Torras Hostench London Ltd ("THL"). These companies were owned and controlled (through other holding companies in the Netherlands Antilles) by the Kuwait Investment Authority ("KIA"), an official body established in Kuwait in 1982. The KIA has since 1982 controlled the Kuwait Investment Office ("KIO") in London. The KIO is in effect a branch of the KIA and is not a separate legal entity.

During the 1980s the KIO became interested in investment opportunities in Spain. GT was acquired (firstly as a partly-owned venture) and THL was formed for those purposes. The individuals involved in their control and management included a Spanish banker, Mr Francisco de la Rosa, a Spanish lawyer, Mr Juan Folchi and (based mostly in London) Sheikh Fahad (who was chairman of the KIO from 1984 until 1992), Mr Fouad Jaffar (the deputy chairman and general manager from 1984 to 1990) and Sheikh Fahad's distant relative and protegé Sheikh Khaled (who was educated in England and became deputy general manager in 1989).

Sheikh Fahad, Mr Jaffar, Mr de la Rosa and Mr Folchi were respectively the first, third, fifth and ninth defendants in proceedings which GT and THL commenced in 1993 in consequence of a series of massive frauds. Sheikh Khaled was later joined as the 53rd defendant. There were in all 56 defendants, although many of them dropped out of the proceedings or played little active part.

The series of frauds were carried out between 1988 and 1992. The various fraudulent transactions were referred to at trial as Croesus (May 1988), Oakthorn 1 (July 1989), Oakthorn 2 (June 1990), Pincinco (October 1990) and Wardbase (May 1992). Pincinco occurred during the period of the Iraqi invasion and occupation of Kuwait (the invasion took place on 2nd August 1990 and Kuwait was not liberated until the end of February 1991).

The central claim in the action was a claim for damages for conspiracy. The chief conspirators were alleged to be Sheikh Fahad, Mr Jaffar and Mr de la Rosa. Mr Folchi and Sheikh Khaled also faced claims for conspiracy, dishonest assistance, knowing receipt and breach of duty as a director. In Sheikh Khaled's case the claims were limited to a single transaction, Pincinco.

In the course of the litigation there were many interlocutory hearings and some interlocutory appeals. These included freezing orders, and undertakings given in connection with freezing orders, which it will be necessary to come back to, as they constitute a major part of the unfinished business. Eventually the trial took place before Mance J, who handed down a long reserved judgment on 24th June 1999. 9. Mance J found conspiracy proved to the requisite high standard, against Sheikh Fahad, Mr Jaffar and Mr de la Rosa. He also found Sheikh Khaled liable (in respect of Pincinco) for conspiracy, dishonest assistance, breach of director's duty and knowing receipt of $20 million. He was ordered to pay sums (denominated in various currencies) totalling well over $300 million, with interest and indemnity costs.

Mr Folchi and Sheikh Khaled appealed from Mance J's orders. On 2nd November 2000 this court (consisting of Lord Justice Robert Walker LJ, myself and Sir Murray Stuart-Smith) dismissed Mr Folchi's appeal but allowed Sheikh Khaled's appeal. We held that the serious allegations against Sheikh Khaled (amounting not merely to the gravest dishonesty but also to treachery, since they took place during the Iraqi occupation of Kuwait) had not been proved to the requisite high standard. The judge's orders against Sheikh Khaled were set aside as regards both damages, costs and various freezing and ancillary orders which it will be necessary to come back to in detail. In relation to these orders this court's order provided:

"The form of order in relation to the consequences of the discharge of these orders (including any continuing or restored undertakings by the Claimants and for liberty to apply for an inquiry) be deferred for agreement by the parties or, if no agreement can be reached, further application to the Court of Appeal."

It also gave Sheikh Khaled a general liberty to apply to this court.

Mr Laurence Cartier, Sheikh Khaled's solicitor, has made a witness statement dated 13th July 2001 in support of his application. It exhibits draft minutes of order which have since been amended. These raise nine different issues. These are (1) the continuation or reinstatement of the claimants' cross-undertakings as to damages given in connection with freezing orders; (2) a similar issue as to the undertakings to pay third party costs; (3) a similar issue as to ancillary undertakings in relation to bank guarantees; (4) a similar issue as to undertakings as to proceedings in other jurisdictions; (5) a similar issue as to undertakings about confidentiality in connection with information disclosed by Sheikh Khaled under compulsion; (6) a similar issue as to providing information that the freezing orders have ceased to have effect; (7) whether there should be an order for a further interim payment on account of costs in this court and at first instance (the claimants have already paid £1.5 million); (8) liberty for Sheikh Khaled to apply for a costs order against KIA; and (9) liberty for Sheikh Khaled to apply for an order for an inquiry as to damages pursuant to the cross-undertaking.

Not all these matters are of equal weight. As regards the two applications for liberty to apply, the position taken by Mr Andrew Popplewell QC (appearing with Mr Paul Wright for GT and THL) is not that those courses of action are in any way barred, but that it is unnecessary or misconceived to make any application to this court in relation to them. The right course, he has correctly observed, is to make an application to the Commercial Court. That is so. But in the rather unusual of circumstances of this case and subject to one proviso there is no objection in principle, and there may be some small advantage in terms of clarifying the position, if this court's further order contains paragraphs on the lines of paragraphs 5 and 6 of the draft order, but referring specifically to the Commercial Court. The proviso is that it must be clearly understood (as it will be from a transcript of this judgment) that we are expressing no view at all on any relevant issue of law or as to how the Commercial Court should exercise its discretion on either matter.

That leaves seven issues which need to be addressed in more detail. Six of those issues relate to the undertakings and we will deal with those first. We have still to hear argument about the costs issue.

In considering the undertakings, as a preliminary it is necessary to refer to the somewhat complicated history in which they were given. This history is well summarised in the GT's skeleton argument, prepared by Mr Popplewell:

"7. On 3 March 1985 Mance Lj granted a worldwide freezing injunction against Sheikh Khaled's assets (`the 1995 Order'). At Schedule 1 the order contained the usual undertakings. In particular:

(1) By undertaking (1) the Respondents gave a cross undertaking in damages to Sheikh Khaled.

(2) By undertaking (2) the Respondents undertook to (a) pay the reasonable costs of anyone other than Sheikh Khaled incurred in complying with the order and (b) meet any order for compensation awarded to any such person because of loss suffered as a result of the order.

(3) By undertaking (3) the Respondents undertook to put up security for undertakings (1) and (2) in the form of a bank guarantee in the sum of £500,000. (4) by undertaking (4) the Respondents undertook 'not without the leave of the court to begin proceedings against [Sheikh Khaled] in respect of the same subject matter as this action in any other jurisdiction. Nor will they use information obtained as a result of this order for the purpose of civil or criminal proceedings in any other jurisdiction.'

8. On 7 October 1997 Mance LJ granted the Respondents a worldwide freezing injunction against, amongst others, Sheikh Khaled in respect of assets held by trusts connected with Sheikh Khaled, as defined in paragraph 1 of the Order, (`the Trusts Order'). The Respondents gave, amongst others, the following undertakings:

(1) by undertaking 1 the Respondents gave a cross...