Merchant International Company Ltd v Natsionalna Aktsionerna Kompaniia Naftogaz Ukrainy The Bank of New York Mellon (Third Party)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Davis,Lord Justice Sales,Lady Justice Arden |
| Judgment Date | 10 December 2014 |
| Neutral Citation | [2014] EWCA Civ 1603 |
| Court | Court of Appeal (Civil Division) |
| Date | 10 December 2014 |
| Docket Number | Case No: A3/2014/0783 |
[2014] EWCA Civ 1603
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION, COMMERCIAL COURT
MR JUSTICE BLAIR
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Arden
Lord Justice Davis
and
Lord Justice Sales
Case No: A3/2014/0783
and
Mr Jonathan Crow QC and Mr Michael Lazarus (instructed by Hogan Lovells International LLP) for the Appellant
Mr Adrian Beltrami QC and Mr David Head (instructed by Wragge Lawrence Graham & Co LLP) for the Respondent
The Third Party did not appear and was not represented
Hearing date: 18 November 2014
Introduction
The parties appear to be engaged in cat and mouse litigation. The claimant ("MIC") has the benefit of an English judgment, obtained on 28 February 2011, against the defendant ("Naftogaz"). As at 20 September 2013, over $21.75 million remained outstanding on the judgment. MIC has been very anxious to gain satisfaction of its judgment. Naftogaz has been no less anxious to avoid meeting its obligations under the judgment. There has been extensive litigation over the preceding years between the parties. The present proceedings concern an attempt by MIC to achieve satisfaction of the judgment by obtaining third party debt orders under the provisions of CPR Part 72.
Blair J, sitting in the Commercial Court, ruled against MIC in its latest efforts to gain satisfaction of the judgment. By reserved decision of 26 February 2012 ( [2014] EWHC 391 Comm) he discharged three interim third party debt orders which were obtained on a without notice basis by MIC on 20 September 2013, 8 October 2013 and 22 October 2013.
No point of law of wider general importance, as I see it, arises on this appeal. The outcome is to be decided by reference to the particular contractual documentation entered into at the time, which raises points of interpretation, and by reference to the facts and circumstances of the case. The judge held that, properly construed, the contracts made gave rise to no debt due or accruing due from the third party, The Bank of New York Mellon ("BNYM"), to Naftogaz. Accordingly there was no jurisdiction to make the third party debt orders. In the alternative, he held that he in any event, in his discretion, would have declined to make final third party debt orders and would have discharged the interim orders.
The question is whether his decision was wrong.
Background
The general background can be briefly summarised for present purposes. It gives some context as to how the third party debt order applications came to be made.
MIC is a company registered in Delaware, USA. As long ago as 28 December 1998 it took an assignment of contractual rights of a certain Russian company against Naftogaz. Naftogaz is a nationalised energy company owned by the State of Ukraine. There was thereafter extensive litigation between MIC and Naftogaz in the Ukrainian Courts. Eventually on 21 April 2006 judgment was given in favour of MIC by the Kiev Commercial Court. On 29 June 2006 the Supreme Commercial Court of Ukraine varied the judgment by reducing it in amount but otherwise upholding it. The Supreme Court of Ukraine on 7 September 2006 refused, on Naftogaz's application, to permit a Cassation appeal and ruled that the judgment of the Supreme Commercial Court was final. The judgment amount was at that stage $24,719,564 (and costs).
Law No. 2711 of 2005 had meanwhile been passed in Ukraine. That suspended enforcement of judgments against Ukrainian energy companies; and doubtless it had the effect of precluding MIC from enforcing its judgment against Naftogaz in Ukraine.
MIC thereafter commenced proceedings on 13 April 2010 in the High Court in London to enforce its judgment. On 11 May 2010 it obtained a freezing order from Hamblen J against all the assets of Naftogaz in England and Wales, up to a value of $25 million. After a lengthy dispute relating to the service of the proceedings judgment in default was eventually entered by MIC on 28 February 2011, in the sum of $24,719,564 (plus interest and costs).
Naftogaz, however, had by now applied to the Supreme Commercial Court in Ukraine to revisit the decisions of 21 April 2006 and 29 June 2006 on the basis of alleged newly discovered circumstances. In due course the Supreme Commercial Court on 7 April 2011 acceded to this request and remitted the matter for re-trial. On 3 November 2011, at the retrial, the Commercial Court in Kiev this time found in favour of Naftogaz. An appeal by MIC was subsequently dismissed on 27 January 2012.
Naftogaz applied, basing itself on these latest Ukrainian decisions, to set aside the English judgment. Its efforts did not prosper: see the judgment of the Court of Appeal dated 29 February 2012: [2012] EWCA Civ 196. Attempts at enforcement by MIC, however, have thus far yielded only relatively modest amounts.
This short review of the background at least gives something of the flavour of what was going on. It may be, I know not, that Naftogaz considers that what has subsequently been decided by the Ukrainian courts justifies it in its stance of refusing to pay on the English judgment. But that cannot govern the position under English law or affect the validity of the English judgment.
Involvement of BNYM
On 5 November 2009 Naftogaz had issued $1,595,017,000 9.5% Guaranteed Loan Notes, due for repayment on 30 September 2014. The State of Ukraine was the guarantor. There had been a detailed Prospectus publicised in advance and through that MIC was aware of the Loan Note issue.
The documentation relating to the Loan Note issue was, as is usual in such transactions, highly complex. There were a Trust Deed, a Guarantee, an Agency Agreement and the Notes themselves. All were stated to be governed by English Law. BNYM (London Branch) was the Principal Paying Agent. BNYM was also – having, of course, a separate function for this purpose – the Trustee under the Trust Deed. MIC was not itself a Noteholder and it was not then aware of the precise terms relating to the issue.
For present purposes a key document is the Agency Agreement, which was dated 5 November 2009. Parties to it included (but were not limited to) Naftogaz, as issuer, and BNYM, both in its capacity as Principal Paying Agent and in other capacities.
Central to the argument before us were the provisions of Clause 6. That provided as follows, in the relevant respects:
"6.1 In order to provide for the payment of principal and interest in respect of the Notes as the same becomes due and payable, the Issuer (failing which, the Guarantor) shall pay to the account specified by the Principal Paying Agent on or before the date which is one Local Banking Day before the day on which such payment because due, an amount equal to the amount of principal and/or (as the case may be) interest falling due in respect of the Notes on such date.
….
6.3 The Principal Paying Agent shall be entitled to deal with each amount paid to it under this Clause 6 in the same manner as other amounts paid to it as a banker by its customers; provided, however, that:
(a) it shall not exercise against the Issuer, the Guarantor or the Trustee any lien, right of set-off or similar claim in respect thereof; and
(b) it shall not be liable to any person for interest thereon.
6.4 The Principal Paying Agent shall apply each amount paid to it under this Clause 6 in accordance with Clause 7 and shall not be obliged to repay any such amount unless the claim for the relevant payment becomes void under Condition 9, in which event it shall refund at the written request of the Issuer or (as the case may be) the Guarantor such portion of such amount as relates to such payment by paying the same by credit transfer in U.S. dollars to such account with such bank in Kyiv as the Issuer or (as the case may be) the Guarantor has by notice to the Principal Paying Agent specified for the purpose."
(I add that it was common ground before us that nothing has happened to bring into play Condition 9 of the Notes.)
Clause 7 related to making payment to Noteholders. Clause 15, in part, provided as follows:
"15.1 Save as provided in Clauses 6 and 8 and in sub-Clause 15.3 of this Clause, the Principal Paying Agent shall be entitled to deal with money paid to it by the Issuer or the Guarantor for the purposes of this Agreement in the same manner as other money paid to a banker by its customers and shall not be liable to account to the Issuer or the Guarantor for any interest or other amounts in respect of the money. No money held by any Paying Agent need be segregated except as required by law.
15.2 Save as provided in Clause 8, in acting under this Agreement and in connection with the Notes the Agents shall act solely as agents of the Issuer and the Guarantor and will not assume any obligations towards or relationship of agency or trust for or with any of the owners or Holders of the Notes."
Clause 23 provided as follows:
"This Agreement may be amended by all of the parties, without the consent of any Noteholder, either:
(a) for the purpose of curing any ambiguity or of curing, correcting or supplementing any manifest or proven error or any other defective provision contained in this Agreement; or
(b) in any other manner which the parties may mutually deem necessary or desirable and which shall not be inconsistent with the Conditions and shall not, in the...
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