Integral Petroleum S.A. v Petrogat Fze
| Jurisdiction | England & Wales |
| Judge | David Edwards |
| Judgment Date | 18 January 2023 |
| Neutral Citation | [2023] EWHC 44 (Comm) |
| Docket Number | Case No: CL-2021-000287 |
| Court | King's Bench Division (Commercial Court) |
[2023] EWHC 44 (Comm)
David Edwards, KC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: CL-2021-000287
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF
ENGLAND & WALES
COMMERCIAL COURT (KBD)
Rolls Building
Fetter Lane, London, EC4A 1NL
David Peters and Lorraine Aboagye (instructed by Seddons Law LLP) for the Claimant
Chris Smith, KC (instructed by Stephenson Harwood Middle East LLP) for the First to Fourth Defendants
Hearing date: 7 December 2022
This judgment was handed down by the Judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10:30 on Wednesday 18 January 2023.
David Edwards, KC:
Introduction
The present application is an application by the Claimant, Integral Petroleum S.A. (“ Integral”), for judgment on its claim under section 423 of the Insolvency Act 1986. Integral seeks a declaration that certain monetary transfers involving the First Defendant, Petrogat FZE (“ Petrogat”), were transactions defrauding creditors and consequential relief.
Although not stated expressly in the Application Notice, as I had surmised and as was confirmed to me orally the application is made under CPR 3.5(5) in circumstances where, pursuant to an order made by Cockerill J on 21 March 2022, the Second to Fourth Defendants' Defence has been struck out and they have been debarred from defending Integral's claim.
The parties
Integral and Petrogat are both oil and petroleum trading companies, the former based in Geneva, Switzerland and the latter in the United Arab Emirates.
So far as Petrogat is concerned, as was admitted by the Defendants in their (struck out) Defence:
i) Petrogat is legally owned by the Fourth Defendant, Mr Kanybek Beisenov (“ Mr Beisenov”). According to his first witness statement, which describes him as Petrogat's “registered” owner, Mr Beisenov was Petrogat's sole ( de iure) director; and
ii) The Second Defendant, Ms Mahdieh Sanchouli (“ Ms Sanchouli”), and her father, the Third Defendant, Mr Hosseinali Sanchouli (“ Mr Sanchouli”), are both de facto directors of Petrogat. Ms Sanchouli exercised day-to-day control over Petrogat.
The Contract
On 16 September 2017 Integral, as buyer, and Petrogat, as seller, entered into a contract (“ the Contract”) for the sale of quantities of medium and low sulphur fuel oil (“ the Cargo”). Petrogat's obligations were guaranteed by a German company, San Trade GmbH (“ San Trade”), which Mr and Ms Sanchouli also operated. The Contract was governed by English law and provided for disputes to be resolved in London by LCIA arbitration.
On 12 January 2018, following a tip-off, Integral applied for an injunction to prevent the conversion by Petrogat and San Trade of part of the Cargo. An injunction was granted by Morgan J on 13 January 2018, which was continued by HHJ Waksman, QC on 26 January 2018. On 29 January 2018, in breach of the injunction, Petrogat and San Trade converted 37 railway tank cars (“ RTCs”) of the Cargo by diverting them to Iran.
On 30 April 2018, Integral applied to commit Mr and Ms Sanchouli, as owners and/or principals and/or directors of Petrogat and San Trade, to prison for contempt of court for breaching the injunction. A challenge was made by them to the service of the committal application and to the jurisdiction of the English court, but this was dismissed by Moulder J in a judgment delivered on 17 October 2018.
On 12 March 2020 Foxton J found that, in their capacity as de facto directors of Petrogat, Mr and Ms Sanchouli had deliberately and consciously breached the injunction and that committal was appropriate. They were subsequently sentenced by Foxton J to terms of imprisonment of three months (Ms Sanchouli) and two months (Mr Sanchouli), in each case suspended for 12 months.
The arbitration
In parallel with the contempt proceedings, Integral pursued arbitration against Petrogat and San Trade seeking an injunction compelling them to deliver the 37 RTCs and/or damages for conversion, misappropriation or breach of contract in respect of their failure to deliver the converted RTCs and their alleged failure to deliver the balance of the Cargo.
The LCIA tribunal (“ the Tribunal”), seated in London, issued three Partial Awards and a Final Award:
i) In its Partial Award dated 20 November 2018 the Tribunal determined that Petrogat and San Trade had converted the Cargo loaded in 26 RTCs. The Tribunal ordered them to pay Integral £135,351 in respect of the costs of the Commercial Court injunction proceedings, but it declined at that stage to deal with Integral's claim for damages;
ii) On 21 January 2019 the Tribunal issued a further Partial Award determining applications that had been made by Integral in relation to the costs of the application for the first Partial Award and the costs of Integral's claim in the arbitration in respect of the costs of the injunction proceedings;
iii) In its Partial Award dated 3 September 2019 the Tribunal held that Petrogat and San Trade were liable for damages, inter alia, for conversion and for non-delivery of parts of the Cargo. The total sum awarded to Integral (after taking into account certain small sums awarded in Petrogat and San Trade's favour) was US$439,448.37.
iv) In its Final Award dated 4 November 2019 the Tribunal ordered that Petrogat and San Trade should pay Integral (simple) interest on the amount awarded at a rate of 4.77% per annum from 31 January 2018 and that they should pay costs of CHF860,000 and £55,834.58 with interest on those amounts also running at 4.77% per annum.
On 22 November 2019, pursuant to sections 66(1) and (2) of the Arbitration Act 1996, Waksman J gave Integral leave to enforce the Tribunal's 3 September 2019 and 4 November 2019 awards in the same manner as a judgment and entered judgment against Petrogat and San Trade in the amounts set out in those awards, on the same day appointing a receiver over their assets by way of equitable execution.
No part of the Tribunal's awards or Waksman J's judgment has been paid by Petrogat or San Trade. In an email sent by Stephenson Harwood Middle East LLP (“ Stephenson Harwood”), solicitors for Petrogat and San Trade, on 7 November 2019, shortly after the issuance of the Tribunal's Final Award and at a stage when the committal proceedings were ongoing, Stephenson Harwood said this:
We confirm that our clients will not be making payment of the sums awarded in the Partial Final Award [or] Final Award to Integral. Enforcement of those awards will not be fruitful.
Our clients fully intend to defend the committal proceedings as they have previously done. In reality, however, they have little concern regarding the result of those proceedings as they have no need to visit England & Wales. Given that any order for committal cannot be exported out of England & Wales it would therefore be a pyric [sic] victory even if Integral were successful in obtaining a prison sentence against these individuals (which in any event seems unlikely to us).
Calver J, in his 14 May 2021 judgment granting a worldwide freezing order, referred to below, described this as “an extremely contemptuous letter”.
The transfers out of Petrogat's accounts
On 27 March 2020 Grant Thornton UK LLP, the receivers appointed by the court over Petrogat and San Trade's assets, wrote to Mr and Ms Sanchouli seeking information as to the two companies' affairs. Further requests were subsequently made by Grant Thornton and by Siassi McCunn Bussard Avocats & Solicitors, replacement receivers appointed by Foxton J on 19 August 2020 (“ the Replacement Receivers”).
Following what it considered to be inadequate compliance with the receivers' and the Replacement Receivers' requests, on 19 October 2020 Integral issued an application against Petrogat, San Trade, Mr and Ms Sanchouli and Stephenson Harwood, in effect for a mandatory injunction requiring them to provide information about assets, in the case of Stephenson Harwood information about the source from which its bills had been paid.
In response to the application, and prior to any order being made by the court, a second affidavit was served by Ms Sanchouli dated 16 November 2020 in which she set out the current status of Petrogat, explaining why it did not have any assets capable of satisfying the Tribunal's awards and the judgment, and what had happened to the cash balances which at an earlier stage had been identified as held by Petrogat in its bank accounts.
What Ms Sanchouli said in her second affidavit, in essence, was that, following the publication of Moulder J's 17 October 2018 judgment, which had revealed that Mr and Ms Sanchouli were Iranian nationals, Petrogat's UAE bankers, Abu Dhabi Islamic Bank (“ ADIB”), had intimated that it wished to exit its relationship with Petrogat and had refused to process international transfers from Petrogat's USD account.
Commenting on transfers made out of Petrogat's USD and AED (Dirham) accounts from 27 November 2018 onwards (“ the Transfers”) that had been disclosed in bank statements provided to the receivers, Ms Sanchouli explained that:
As soon as it became clear that Petrogat would be unable to use its USD bank account the remaining funds were transferred out of Petrogat's USD bank accounts on 6 December 2018.
…
On 2 January 2019 a payment for Stephenson Harwood's legal fees of AED 628,133.40 was returned by ADIB to the account. Again, the only option remaining was to withdraw the remaining funds from the AED accounts.
Petrogat's USD account with ADIB, she said, was closed on 31 December 2018 and the AED account was closed on 3 January 2019.
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