Rasu Maritima S.A. v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Government of the Republic of Indonesia intervening)

JurisdictionEngland & Wales
JudgeTHE MASTER OF THE ROLLS,LORD JUSTICE ORR
Judgment Date09 March 1977
Judgment citation (vLex)[1977] EWCA Civ J0309-1
Docket Number1976 R. No. 3074
CourtCourt of Appeal (Civil Division)
Date09 March 1977
Rasu Maritima S.A.
Plaintiffs
(Appellants)
and
Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina)
Defendants
(Respondents)

[1977] EWCA Civ J0309-1

Before:

The Master of the Rolls (Lord Denning) and

Lord Justice Orr

1976 R. No. 3074

In The Supreme Court of Judicature

Court of Appeal

On Appeal from the High Court of Justice

Queen's Bench Division

(Mr. Justice Kerr)

MR. N. PHILLIPS and MR. R. BUCKLEY (instructed by Messrs. Waltons & Morse, Solicitors, London) appeared on behalf of the Plaintiffs (Appellants).

MR. M. MUSTILL, Q.C. and MR. J. STEYN (instructed by Messrs. Ince & Co., Solicitors, London) appeared on behalf of the Defendants (Respondents).

MR. A. EVANS, Q.C. and MR. B. RIX (instructed by Messrs. Markby, Solicitors, London) appeared on behalf of the Interveners, The Republic of Indonesia.

1

REVISED JUDGMENT

THE MASTER OF THE ROLLS
2

This case, and others like it, are said to involve the huge sum of 1000 million United States dollars. It has nothing to do with England. It arises out of events in the Far East. Its only connection with England is that there are goods lying in the West Gladstone Dock at Liverpool which are worth 12 million United States dollars. The owner of the goods wants to remove them to Hamburg. But a creditor applies to stop them from being taken out of the jurisdiction of the court. The application is made under a new procedure which was introduced by this court a year or two ago known as the Mareva procedure. The case is reported in (1975) 2 Lloyd 509.

3

The story starts in Indonesia. It is an archipelago of thousands of islands. It extends 5,000 miles across the South Pacific with a population of 130 million people. It became independant soon after the war. The first President was General Sukano, but he fell and was replaced by President Soeharto. Second only to the President of Indonesia was the man who fills the pages of evidence in this case General Ibnu Sutowo. I will call him, as everybody has, "the General". He was the man in charge of the commercial activities of the country. He did it in his capacity as the head of the state- owned company called, for short, Pertamina.

4

Everything dates from the discovery of oil there in 1960. Within a few years Indonesia became one of the major oil producing countries of the world. Big companies came in from the United States of America to exploit the oilfields. They paid a share of the proceeds to Pertamina. At first 60 per cent to Pertamina, but now 85 per cent. These payments were made to Pertamina in United States dollars in New York. This was the main source of revenue for Pertamina. It made use of these sums to develop many activities in and for the benefit of Indonesia. These included the provision of a tanker fleet.It acquired not only vessels already in service but also those on the stocks or only on paper. Pertamina entered into huge commitments at the time when the tanker market was at high tide - at the very flood. There was unprecedented demand and universal confidence. It was on this tide from 1970 to 1973 that the General entered into the transactions that are in question in these proceedings. He did it all on his own on behalf of Pertamina.

5

The break came in October and November 1973. The oil producing countries put up the price of oil by four times. The oil using countries cut down their consumption. The tanker market fell to pieces. Charterers could not pay the hire. Ship owners re-took the vessels. Many were laid up out of work. Some debtors defaulted and went out of business. Others sought to re-negotiate their contracts. Amongst these was Pertamina. In the latter half of 1975 it entered into intensive negotiations to reduce the payments due under the contracts. The General took charge himself, but was afterwards replaced by two Ministers of the Government. The climax came in March 1976. The General was ousted from Pertamina and became an adventurer at large.

6

There was a huge trail of wreckage left behind. Not only the liabilities under charters but also incomplete construction work. Many ambitious projects had been commenced by the General, including a fertiliser plant. It was a by-product of oil because the fertiliser made use of ingredients from oil. This plant was ordered in 1973 by Pertamina from a Swiss company of contractors. It was to cost more than 150 million United States dollars. The plan was to use two ships called the "Mary Elizabeth" at Liverpool and the "Dominique" at Ghent and to convert them into a floating fertiliser plant. This meant fitting them with special equipment of all kinds. Pumps,pipes, valves, motors, transformers, and distribution gear. Quite recently, however, this plan was altered. It was thought better to have the plant on dry land in Indonesia and not on the water. For this purpose the equipment is to be collected together in Hamburg and sent out from there to Indonesia. But much of it is in Liverpool at the Vest Gladstone Dock. There is some uncertainty as to whom it belongs. Some is said to belong to the contractors. Some to Pertamina. But it is said that on the 13th December, 1976 it was transferred to the Government of Indonesia itself. The value of the equipment at Liverpool is said to be 12 million United States dollars at cost, but if sold for scrap it would only be $300,000.

7

Now the unpaid creditors of Pertamina seek to get something out of the wreck. Some of them have come to terms. But others have not. We are concerned with one creditor in particular, a man called Bruce Rappaport and his companies.

8

Bruce Rappaport is a character as colourful as the General himself. He is based in Geneva with an office overlooking the lake. His origins are not told to us, but he is said to be a lawyer now turned into a banker and shipping magnate. He has been closely associated with the General ever since 1966. He has been the middleman between the builders of ships like Sanko of Japan and the purchasers and charterers of them like Pertamina of Indonesia. He operates by means of a Swiss company, a Panamanian company, and other companies registered in Liberia and other countries.

9

The General and Rappaport developed together a huge tanker fleet for Pertamina. This divided itself into two parts. In the first place, there was the domestic fleet for supplying the internal needs of Indonesia with its many islands. Between 1968 and 1972 the General and Rappaport provided 51 vessels in all for this domestic fleet - 30 supply vessels and 21 domestictankers. The charters were all signed on behalf of Pertamina by the General himself alone on his sole authority as head of Pertamina. This domestic fleet has kept in service all through the years. It has not been seriously affected by the collapse of the world tanker market. The charters have been honoured, as far as we know, by all concerned.

10

In the second place, there was an ocean tanker fleet for supplying the world at large beyond Indonesia. This project only began in 1970. The General in the name of Pertamina negotiated with Rappaport in the names of his various companies: and with other companies also. The General on behalf of Pertamina hire-purchased 23 big ocean tankers and two off-shore tank barges. He did it mostly through brokers in New York. The terms were unusual in that the vessels were time-chartered for long terms of 10 or 11 years at a high rate of hire in United States dollars. Most of them were not strictly hire purchase agreements, because Pertamina did not have an option to purchase. They were really credit sales in which the property was to pass to Pertamina when the last instalment was paid, Four of these vessels were owned by one of the Rappaport companies called Martropico and six of them by another called Rasu Maritima S.A. That is a Liberian company. The name "Rasu" is said to be an invented name derived from the two adventurers, RA for Rappaport and SU for Sutowo, Another vessel was owned by another Rappaport company.

11

It was this ocean tanker fleet which was affected by the collapse of the tanker market. There was little or no work for the giant tankers. Some were laid up. All were eating their heads off. The builders wanted the payments due from Rappaport. He wanted the payments due from Pertamina. The situation became so serious that late in 1975 Rappaport and the General met in New York. They were of course by this time bosomfriends. Then and there the General showed that he was good at handwriting. At the request of Rappaport he signed 1,600 promissory notes, ready printed. They were for sums corresponding to the monthly sums due under the charters. He signed them all on behalf of Pertamina, Rappaport says, no doubt correctly, that these notes were to be used to re-assure financial investors. The General says that they were spurious and obtained by fraud.

12

Rappaport also looked after his friend the General well. It is said that, when the General travelled in Europe, Rappaport provided him with a private jet for his personal use and paid all his expenses on business and pleasure. In addition, in April 1975, one of Rappaport's companies provided the General with a draft for 2 ½ million United States dollars payable to the General personally. He put it into his private account at the Chase Manhattan Bank. Rappaport says that it was for the purpose of an investment in an Indonesian bank. But the General says it was an interest-free unsecured personal loan of which he has repaid nothing.

13

It is said, too, that in 1974, when the tanker chartering market was in an extremely depressed state, the General committed Pertamina to obligations to buy tankers from Rappaport at a high price which was beyond all commercial prudence: see bundle 3, pages 6 and 29.

14

The present case concerns one of the giant tankers called the "Manhattan Duke". The charterparty was on Shell-time No.3 Form. It was entered into at the height of the market on the...

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