Merchant International Company Ltd v Natsionalna Aktsionerna Kompaniia Naftogaz Ukrainy
| Jurisdiction | England & Wales |
| Judge | Mr Stephen Hofmeyr |
| Judgment Date | 04 June 2015 |
| Neutral Citation | [2015] EWHC 1930 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2010445 |
| Date | 04 June 2015 |
[2015] EWHC 1930 (COMM)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
Mr Stephen Hofmeyr QC (Sitting as a Deputy High Court Judge)
Case No: 2010445
Mr Jonathan Crow QC & Mr Michael Lazarus (instructed by HOGAN LOVELLS INTERNATIONAL LLP) appeared on behalf of the Claimant
Mr David Head (instructed by WRAGGE LAWRENCE GRAHAM & CO LLP) appeared on behalf of the Defendant
(As Approved)
Mr Stephen Hofmeyr QC (sitting as a Deputy Judge of the High Court)
Introduction
This is an application by the claimant ("MIC") under section 37 of the Senior Courts Act 1981 for the appointment of a Receiver by way of equitable execution in respect of "all and any of the Defendant's rights, titles, interests (whether vested or contingent or otherwise) powers or expectations in, or in respect of, the sum of $25,000,000 (and any payment of that sum in furtherance of such rights, titles, interests, powers or expectancies) which the Defendant paid to Bank of New York Mellon on or about 30 September 2013 all the proceeds thereof …". MIC also applies for ancillary directions.
The application is the latest step in MIC's attempt to enforce a judgment which it obtained against the defendant ("Naftogaz") in February 2011. As of today the sum outstanding, including post-judgment interest, is almost $25,000,000. There is no suggestion that Naftogaz is unable to pay the judgment and interest; and it is clear from the material before the court that Naftogaz will do whatever it can to avoid having to satisfy the judgment and interest.
The fund to which the application relates is the balance remaining in an account held by Bank of New York Mellon ("the Bank") in the name of Naftogaz for payments made by Naftogaz to the Bank by way of coupon – that is, interest – due to note holders under $1,595,017,000 9.5 per cent Guaranteed Notes due 30 September 2014 ("the Notes") in respect of which Naftogaz was the Issuer. Curiously, or so it seems, the fund is currently the subject of a freezing injunction obtained by MIC in 2010.
By a written agency agreement dated 5 November 2009 ("the Agency Agreement") the Bank was appointed Principal Paying Agent in respect of the Note issue. Pursuant to the terms of the Agency Agreement, Naftogaz made substantial periodic payments to the Bank in respect of coupon due to be paid to noteholders. In particular, on 30 September 2013, Naftogaz made a payment of US$75,763,307.50 ("the First Coupon Payment"). As a result of applications made by MIC for Third Party Debt Orders, Naftogaz was obliged to make a further payment in the same amount to the Bank on 8 October 2013 ("the Second Coupon Payment") in order to avoid a default under the terms of the Notes. The further payment was made pursuant to a written agreement ("the Supplemental Agreement") concluded on 8 October 2013 between Naftogaz and the Bank. The Supplemental Agreement expressly confirmed that the First Coupon Payment would "… continue to be held by [the Bank] on the same basis as originally paid, being subject to the terms of the Agency Agreement".
In the context of three applications issued by MIC in September and October 2013 for Third Party Debt Orders this Court has already considered in some detail both the rights and obligations of Naftogaz and the Bank under the terms of the Agency and Supplemental Agreements and the status of funds paid by Naftogaz to the Bank. Those applications came before Blair J on 7 February 2014. On 26 February 2014 the learned judge dismissed each of the Third Party Debt Order Applications on the ground that there was no "debt due or accruing due" from the Bank to Naftogaz and thus no jurisdiction to grant a Third Party Disclosure Order and discharge the Interim Third Party Debt Orders that MIC had obtained on a without notice basis. The judgment of Blair J is reported at [2014] EWHC 391 (Comm).
MIC appealed against the decision of Blair J on the 3 rd Third Party Debt Order Application alone. The appeal was dismissed in a judgment handed down on 10 December 2014. The leading judgment of Lord Justice Davis, with which Lady Justice Arden and Lord Justice Sales agreed, is reported at [2014] EWCA Civ 1603. Whilst the decisions of Blair J and the Court of Appeal provide important background to the issues which I am called upon to decide today, the issues which I have to decide are distinct.
The pertinent facts
Most of the relevant factual background is set out in the judgment of Blair J at paragraphs 3 to 19 and in the judgment of Davis LJ at paragraphs 5 to 25 and need not be repeated. The following further facts and matters are also, in my view, pertinent.
(1) The notes matured were redeemed and were redeemed on 30 September 2014 and have subsequently been cancelled. Accordingly, the agency agreement has been substantially performed and its primary purpose achieved.
(2) There are four indications in the evidence which has been placed before me that, if Naftogaz were to make a demand, the Bank would pay to Naftogaz the fund to which the application relates. First, the Bank has already repaid Naftogaz in excess of $50,000,000 of the First Coupon Payment, being the portion that was not affected by the freezing order of Hamblen J, upon Naftogaz's first demand for repayment made on 22 October 2013. Second, on the same day as the Court of Appeal handed down its judgment (in which it held that the Bank did not owe Naftogaz a debt in relation to the First Coupon Payment at the date of the 3 rd Interim Third Party Debt Order), Naftogaz demanded repayment of $24,700,000 of the $25,000,000 retained by the Bank. Naftogaz plainly expected the Bank to repay it on demand, even after the Court of Appeal's decision that the money did not represent a debt. Third, Naftogaz has spent and is continuing to spend considerable sums in legal costs resisting MIC's attempts to obtain payment from the Bank of the judgment and interest. Naftogaz must therefore expect the Bank to repay it the US$24,700,000 in the event that MIC's attempts ultimately fail. Fourth, on 25 February 2015 Naftogaz asked the Bank to respond to part of MIC's argument on this application. In its response (by its solicitors, Norton Rose Fulbright) dated 27 March 2015, the Bank stated that it has no interest in the dispute between MIC and Naftogaz. It follows that the Bank has no claim to retain the $24,700,000 under any circumstances. This is consistent with the Bank's accepting in the same letter that it held the sum subject to the freezing order and that Norton Rose Fulbright's email of 10 December 2014, expressing the Bank's wish to know "what is to be done with the relevant funds". The Bank understands itself to be in a position of an interpleader.
In addition to the clauses of the agency agreement referred to or quoted in the judgments of Blair J and Davis LJ, the following further clauses are in my view arguably relevant to the issues before me today.
(1) First, the recitals shed light on the commercial purpose of the agency agreement, which was concerned with the provision of agency services in relation to the Note issue.
(2) Second, clause 14 deals with Commissions and Expenses and, at clause 14.1, records that Naftogaz was to pay the Bank for account of the Agents "such commissions in respect of the services of the Agents … as agreed between" Naftogaz and the Bank.
(3) Clause 17 deals with the termination of the Bank's appointment as agent. It provides, at clause 17.1, that the appointment of any agent may be terminated at any time on certain conditions.
(4) Finally, clause 22, which is the applicable law and jurisdiction clause, contemplates, at clause 22.1, that, not only contractual obligations will be governed by English law, but that non-contractual obligations arising out of or in connection with the agency agreement shall be similarly governed by English law. In other words, the parties contemplated the relevance, or potential relevance, of non-contractual obligations to any dispute between them.
The arguments — in summary
In these circumstances MIC contends that the court has jurisdiction to appoint a Receiver on one of two bases.
(1) First, although the contractual arrangements between Naftogaz and the Bank have succeeded in preventing the Bank becoming Naftogaz's debtor in relation to the fund, Naftogaz has other rights against the Bank which it is entitled to exercise and which would result in its obtaining payment of that sum, and those rights may be the subject of receivership; alternatively
(2) Even if the contractual arrangements between Naftogaz and the Bank have successfully prevented Naftogaz acquiring any legally enforceable rights at all against the Bank, Naftogaz nevertheless has a sufficient expectation of being paid by the Bank to make it appropriate to appoint a receiver in respect of that application of that expectation.
The first ground is put forward in three different ways, as I shall explain.
For its part, Naftogaz contends that the application is without merit and should be dismissed for the following reasons;
(1) First, the Bank does not owe fiduciary duties and/or any duty to account to Naftogaz in relation to the proportion of the First Coupon Payment retained by the Bank and, accordingly, Naftogaz does not have any rights against the Bank in relation to the First Coupon Payment. Such duties are expressly excluded by the terms of the Agency Agreement and the Supplemental Agency Agreement and, since Naftogaz has no rights against the Bank in relation to the...
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Judgments - February 9, 2016
...receiver by way of equitable execution Merchant International Company Limited v. Natsionalna Aktsionerna Kompaniia Naftogaz Ukrainy [2015] EWHC 1930 (Comm) The Claimant (MIC) got judgment against Naftogaz in February 2011. The amount currently outstanding under that judgment is almost US$25......