Nml Capital Ltd v Chapman Freeborn Holdings Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Tomlinson,Lord Justice Floyd,Lord Justice Jackson |
| Judgment Date | 23 May 2013 |
| Neutral Citation | [2013] EWCA Civ 589 |
| Docket Number | Case No: A3/2013/0156 |
| Court | Court of Appeal (Civil Division) |
| Date | 23 May 2013 |
[2013] EWCA Civ 589
Lord Justice Jackson
Lord Justice Tomlinson
and
Lord Justice Floyd
Case No: A3/2013/0156
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
MR JUSTICE COOKE
[(2013) EWHC 266 (Comm)]
Royal Courts of Justice
Strand, London, WC2A 2LL
Andrew Onslow QC and Matthew Parker (instructed by Dechert LLP) for the Appellant
Peter De Verneuil Smith (instructed by Taylor Wessing LLP) for the Respondent
Hearing dates: 7 th May 2013
Approved Judgment
This appeal is concerned with the scope of the Norwich Pharmacal jurisdiction – Norwich Pharmacal v Customs and Excise Commissioners [1974] AC 133. It arises in the context of an attempt by a judgment creditor to enforce a judgment against a judgment debtor determined to resist enforcement. If successful, it would, in the words of Longmore LJ in granting permission to appeal to this Court,
"be the first case in which a bona fide company doing business with a judgment debtor would find itself on the receiving end of a Norwich Pharmacal order merely to assist a judgment creditor in enforcing his or her judgment."
The Appellant NML Capital ("NML") is a judgment creditor of the Republic of Argentina. The Third Respondent Chapman Freeborn Airchartering Limited ("Chapman Freeborn") is an English company, part of a group of companies specialising in aircraft charter broking for commercial and private users of both cargo and passenger aircraft ("the group"). The group has an international reputation, with associated group offices in 26 countries. Its clients include a number of sovereign states, NGOs (including relief organisations such as the UN), heads of state and a range of companies and wealthy individuals. The group is widely regarded as a leading aircraft charter broker but operates in a highly competitive price-sensitive global market, with many of its competitors being based outside the UK. Chapman Freeborn is the UK group operating company for aircraft charter broking.
The circumstances in which NML became a judgment creditor of Argentina are described by Lord Phillips in his judgment in NML Capital Limited v Republic of Argentina [2011] UKSC 31. Those are the proceedings in which NML obtained an English judgment against the republic. Paragraph 1 of the speech of Lord Phillips reads, in relevant part, as follows:—
"The appellant ("NML") is a Cayman Island Company. It is an affiliate of a New York based hedge fund of a type sometimes described as a "vulture fund". Vulture funds feed on the debts of sovereign states that are in acute financial difficulty by purchasing sovereign debt at a discount to face value and then seeking to enforce it. This appeal relates to bonds issued by the Republic of Argentina in respect of which, together with all its other debt, Argentina declared a moratorium in December 2001. Between June 2001 and September 2003 affiliates of NML purchased, at a little over half their face value, bonds with a principal value of US$ 172,153,000 ("the bonds"). On 11 May 2006, NML, as beneficial owner, obtained summary judgment on the bonds for a total, including interest, of US$ 284,184,632.30, in a Federal Court in New York. NML brought a common law action on that judgment in this jurisdiction and succeeded before Blair J in the Commercial Court. That judgment was reversed by the Court of Appeal, which held that Argentina is protected by state immunity…"
The Supreme Court held that Argentina was not protected by state immunity. NML turned its attention to enforcement of the English judgment, after many unsuccessful attempts to enforce the New York judgment.
In late December 2012 the Chapman Freeborn group received a tender enquiry from the Office of the Argentinian President, ("the Office"), which enquiry was also made to other potential charter brokers. The Chapman Freeborn group had previously sub-chartered an aircraft to the Office. Sub-chartering is the normal method by which the group deals with its customers, including sovereign states and NGOs. The group is typically approached by potential customers wishing to charter aircraft by way of enquiry and then contacts operators of aircraft with a view to matching the customer's requirements to a suitable aircraft. Relevant issues include the itinerary and schedule, availability and price. Although the group companies act as broker, the standard practice is for a group company to enter into back to back contracts as principal. The group company enters into a charter contract with the operator and then into a corresponding sub-charter with the customer. It follows therefore that any change or alteration to the sub-charter can only take place if the operator agrees to amend the head charter.
On receipt of the enquiry from the Office, Chapman Freeborn in turn made enquiries of several aircraft operators in order to establish the availability of suitable aircraft and price. The Office stipulated a number of requirements including the class of aircraft, routing, schedule, catering and crew expertise. Chapman Freeborn reverted to the Office with a number of potential solutions, one of which was accepted.
Chapman Freeborn duly entered into a sub-charter contract with the Office on 29 December 2012 and on 3 January 2013 entered into a charter agreement with the operator, which is registered in the European Union. Attached to both contracts is a flight programme which is very specific given the need for, inter alia, pre-flight permissions, airport scheduling, re-fuel planning and crew rostering. The fully inclusive contract price in the sub-charter was US$880,000. The price payable by Chapman Freeborn to the operator was US$770,000. The balance of US$110,000 is Chapman Freeborn's broking fee. The unique itinerary, given the routing, started in Argentina on 10 January 2013 and involved visits to Cuba, the UAE, Indonesia, Vietnam and refuelling stops in the Canaries and the Seychelles. Return to Argentina was scheduled for 22 January 2013. By 15 January 2013, a date the significance of which will become apparent hereafter, the flights to Cuba and the UAE had already taken place.
NML got to hear of this arrangement, although not of course the details, on or by 14 January 2013. It was no secret. On 8 January 2013 there appeared in the Argentine newspaper Clarin an article attributing to the Office confirmation that the Government would not use the Presidential plane TO1 for President Kirchner's forthcoming tour of Asia "out of fear of it being seized by hedge funds". To replace it, "a plane was leased from a British company".
NML took the view that the unexpired portion of the charter might have some realisable value. Accordingly, on 14 January 2013 NML made a without notice application to Cooke J in the Commercial Court for Norwich Pharmacal relief. It sought details of the charter agreement with a view to realising its value to Argentina to the extent that it had not been fully performed. It also sought information about the bank accounts from which any payment under the charter agreement might have been made. It pointed out that such information might assist it in identifying other potential assets, such as bank accounts, against which it could pursue enforcement remedies.
Cooke J made the Order as sought but set the time limit for compliance so as to enable the Respondents the opportunity to appear in order to object to the making of the Order.
On 15 January Chapman Freeborn appeared at very short notice in order to object. From its evidence it was clear that the seven day balance of the charter had no realisable value, and this was accepted by NML. NML held out however for information concerning the bank account. US$440,000 had been paid, and the balance of a further US$ 440,000 was due 10 days after completion of the charter. Cooke J had therefore to decide whether it was appropriate to compel disclosure of the account or accounts from which those sums had been or presumably would be paid.
There was and is no suggestion that Chapman Freeborn either knew or suspected that the Office was entering into the sub-charter agreement with a view to avoiding the impounding of a state owned aircraft so as to protect it from execution in order to satisfy, albeit only in part, the judgments obtained against Argentina in respect of its sovereign debt.
The judge had before him, as did we, extensive evidence as to the efforts made by Argentina to frustrate enforcement of the judgment entered against it in New York. There was also evidence to the effect that Argentina is able to meet the judgment but that it is determined not to do so. Its Minister of Finance has recently been reported as saying that Argentina will not pay the vulture funds.
Although describing it as "somewhat uncharted territory" the judge accepted that Chapman Freeborn had become innocently caught up in the arrangement of a charter which had, from the Republic's point of view, the objective of avoiding attachment of its assets in order to pay judgment debts and "that that element of the criteria which apply to the exercise of [the Norwich Pharmacal] jurisdiction is made good." The judge also apparently accepted that the Norwich Pharmacal jurisdiction is available post-judgment in aid of execution. The judge had no need to give detailed consideration to either of these points as he was satisfied that relief should be refused...
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