Horlick v Cavaco
| Jurisdiction | England & Wales |
| Judge | Mr Justice Freedman |
| Judgment Date | 18 November 2022 |
| Neutral Citation | [2022] EWHC 2935 (KB) |
| Docket Number | Case No: QB-2019-003679 |
| Court | King's Bench Division |
[2022] EWHC 2935 (KB)
Mr Justice Freedman
Case No: QB-2019-003679
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Robert Anderson KC and Andrew Thomas (instructed by The Khan Partnership LLP) for the Claimants
Matthew Watson and Chinmayi Sharma (instructed by Dentons UK & Middle East LLP) for the Second and Fourth Defendants
Hearing dates: 10, 11. 12, 13 & 18 May 2022
Supplementary submissions by the Claimants: 30 May 2022 and 1 June 2022
Supplementary submissions by the Second and Fourth Defendants: 30 May 2022 and 1 June 2022
Handed down in draft: 2 November 2022
Approved Judgment
This judgment was handed down remotely at 9.15am on Friday 18 November 2022 by circulation to the parties or their representatives by e-mail and by release to the National Archives
I Contents
| SECTION NUMBER | SUBJECT | PARAGRAPH NUMBER |
| I | Contents | |
| II | Introduction | 1–23 |
| III | The March 2012 Loan Claim (a) The March 2012 Agreement (b) The Guarantee | 24–30 |
| IV | The First Defence: Estoppel/Collateral agreement: understanding regarding repayment of the loan from funding to be secured or from a guarantee from Richard Horlick | 31 – 57 |
| V | The Second Defence: Release Was there a release, waiver or discharge of the March 2012 Agreement as result of the June 2015 Agreement? | 56–85 |
| VI | The Third Defence: Secret Commissions Did the payments amount to a secret commission and if so, is JVC entitled to rescission? | 86 – 108 |
| VII | The Expenses Claim Is DCL entitled to claim reimbursement of certain expenses from PMSA under the Engagement Agreements? | 109–151 |
| VIII | The Success Fee Claim | 152 – 165 |
| IX | Braganza Duty | 166 – 189 |
| X | The Good Faith Claim | 190 – 198 |
| XI | The Unjust Enrichment Claim | 199 – 238 |
| XII | Conclusions | 239–241 |
II Introduction
This case concerns the recovery of sums under multiple agreements entered into as part of a long-running venture concerning a mining licence for the Naburi and Moebase titanium mineral sands deposits in Mozambique.
The case comprises four claims:
(i) The Trust, named in the title of the action of which the First and the Second Claimants were trustees, claims repayment from the Second Defendant JVC under the loan facility, that is the March 2012 Agreement, for £225,900 plus interest (“the March 2012 Loan Claim”);
(ii) The Third Claimant (“DCL”) claims reimbursement of certain expenses from the Fourth Defendant (“PMSA”) under an Engagement Agreement dated 10 April 2012 for £116,263.50 plus interest (“the Expenses Claim”);
(iii) DCL claims from PMSA for the loss of a Success Fee under the Engagement Agreement for £750,000 plus interest (“the Success Fee Claim”), alternatively related claims based on a breach of a Braganza duty which led to DCL being deprived of the Success Fee and/or breach of a contractual duty of good faith; and
(iv) The First Claimant, Timothy Horlick, claims that PMSA was unjustly enriched by various payments made to it or for its benefit comprising a claim for £1,305,819.66 plus interest (“the Unjust Enrichment Claim”).
(a) The Parties
Mr Timothy Horlick is an investor resident in England. He is a trustee of the Suzanna Gayford Horlick Grandchildren's Trust (“the Trust”), together with the Second Claimant, Robert Gayford. By deed of assignment dated 2 August 2019, Mr Timothy Horlick is also assignee of his cousin Richard Horlick's claims against the Defendants. From here onwards, Mr Timothy Horlick will be referred to as “Mr Horlick”, his cousin will be referred to as “Richard Horlick”, and they will be referred to collectively as “the Horlicks”. The Third Claimant, Development Capital Limited (“DCL”), is a management consultancy company incorporated in England of which Mr Horlick at all material times was the sole director.
The First Defendant, Diogo Cavaco (“Mr Cavaco”), is a Portuguese lawyer and at the relevant times was a director and shareholder of PMSA, a Mozambique company which was formed in around September 2011.
The Second Defendant, JV Consultores Internacionais Limitada (“JVC”) is a Mozambique family investment company of the Veloso family. JVC has two directors: General Veloso, a retired Mozambiquan army officer, politician, and head of Mozambique's security services; and his daughter Miriam Veloso (referred to collectively as “the Veloso's”). Both are also shareholders; the other ultimate shareholders are other members of the Veloso family.
The Third Defendant, Companhia Mineira do Chibuto SA (“CMdC”), is a Mozambique company of which General Jacinto Veloso, Miriam Veloso and Mr Cavaco were all directors and shareholders at the relevant time. An unless order was granted against CMdC after it failed to exchange disclosure lists, having stated through Miriam Veloso, that it lacked the resources to participate in the proceedings. By Order of Master Eastman on 21 January 2022, judgment was entered against CMdC.
(b) History of the Mining Licences and The Pathfinder Minerals Litigation
JVC acquired a mining licence in 2005 to mine heavy mineral sands in an area in Naburi, Mozambique (“the Naburi Licence”). It was around this time that General Veloso met Mr Cavaco, who agreed with General Veloso to raise funding to develop the mine and to get it operational in return for a 50% interest in the licence. Mr Cavaco “handled most of the day-to-day activities on an operational level”: see the second witness statement of Mr Horlick para. 50.
By 2007, JVC had transferred the Naburi Licence to a Mozambique company, Companhia Mineira de Naburi (“CMdN”), in which Mr Cavaco was a shareholder and a director. CMdN acquired a further research licence to mine in Moebase, Mozambique (“the Moebase Licence”). On behalf of CMdN, Mr Cavaco met potential investors in England of International Mercantile Group Limited (“IMG”), who entered into a Share Option Agreement dated 10 February 2006 under which IMG acquired an option over the shares of CMdN, agreeing an option purchase price of USD 100,000, and a further USD 10 million to acquire the shares. It was agreed that 99.9% of the shares in CMdN would be transferred to a company called IM Minerals Limited, in which the Horlicks also acquired shares. IM Minerals Limited then reversed into a publicly traded AIM shell called Pathfinder Minerals Plc (“Pathfinder Plc”). On 13 July 2011 the Mozambique Ministry amalgamated the Naburi and Moebase Licences into a fresh licence, which became “Licence 4263C” and which was issued to PMSA.
In around 2009, Mr Horlick and Richard Horlick were introduced to the project by a friend who knew Messrs Baldwin, Trew and Dickie. The Horlicks decided to invest in IM Minerals Limited which reversed into Pathfinder PLC as above referred to. They were also introduced to Mr Cavaco.
From around August 2011, a dispute arose between the Veloso's, their companies and Mr Cavaco (referred to as “the Mozambique Parties”) and IMG (“the Pathfinder Minerals Litigation”). Pathfinder Plc had purported to exercise the option over the shares of CMdN. The Mozambique parties alleged that the exercise of the licence by CMdN was invalid and the option purchase price had not been paid to them. The Horlicks joined the side of the Mozambique parties.
Pathfinder Plc, IM Minerals Limited and International Mercantile Group Limited (“the claimants in the Pathfinders Minerals Litigation”) obtained an injunction in December 2011 against Mr Cavaco, General Veloso and JVC preventing them from interfering with shares in CMdN. CMdN obtained its own anti-suit injunction in the Mozambique courts on 15 April 2012. On 19 October 2012, the claimants in the Pathfinder Minerals Litigation obtained judgment in England and a permanent injunction regarding dealings in CMdN's shares: Pathfinder Minerals Plc & Ors v Cavaco & Ors [2012] EWHC 2856 (Comm). The Mozambique courts did not recognise this judgment and in October 2013 found that Pathfinder Plc had no right to CMdN's shares. In March 2015, the Mozambique authorities confirmed that Licence 4263C was validly issued to PMSA.
(c) The Agreements
The current proceedings concern a series of agreements entered into between the parties. The first relevant agreement is a loan agreement dated 11 July 2011 (“the July 2011 Agreement”), under which the Horlicks agreed to advance a loan facility to Mr Cavaco of up to £200,000 to incorporate a holding company of CMdC and two other proposed project companies for the purposes of a project to obtain an exploration and development licence to mine the Chibuto heavy mineral sands in Mozambique. Mr Cavaco provided security in the form of shares in Pathfinder Plc. The documentation for the July 2011 Agreement was prepared by a firm of solicitors called Smithfield Partners (“Smithfield”) through their managing partner, Nick Foster.
Mr Horlick set out in his witness statement that as part of the July 2011 Agreement, in addition to the Horlicks lending money to Mr Cavaco, and to Mr Cavaco and the Veloso's jointly, the Horlicks were to have an option to 40% of the projects.
To facilitate the July 2011 Agreement, Smithfield opened a client account ledger in the name of Tim and Richard Horlick with reference “HOR002/007”,...
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