Société Générale v Goldas Kuyumculuk Sanayi Ithalat Ihracat A.S. and Others
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Popplewell |
| Judgment Date | 03 April 2017 |
| Neutral Citation | [2017] EWHC 667 (Comm) |
| Docket Number | Case No: CL-2008-000305 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 03 April 2017 |
2017 EWHC 667 (Comm)
The Hon. Mr Justice Popplewell
Case No: CL-2008-000305
Case No: CL-2008-000311
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Alexander Gunning QC & Rangan Chatterjee (instructed by Clifford Chance LLP) for the Claimant
Stephen Moverley Smith QC & Hugh Miall (instructed by Morgan Rose Solicitors) for the Defendants
Hearing dates: 24, 25, 26 & 30 January 2017
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
There are applications and cross applications in two actions. Société Générale ("SocGen"), the well-known international bank registered and headquartered in France, is the Claimant in both actions. The Defendants are various members of the Goldas group, which was at all material times a multinational gold jewellery manufacturer and retailer with its head office in Istanbul, Turkey. At the time in question the group comprised over 50 companies with a combined turnover of approximately US$8 billion, employing more than 3,500 people worldwide with retail outlets in many jurisdictions as well as mining concessions in Turkey and Mali. Goldas was responsible for some two thirds of all gold imports to Turkey in 2007, of which some 163 m.t, worth about US$3.6 billion, was purchased from SocGen. The actions arise out of particular supplies of gold bullion by SocGen to the Goldas group in 2007 and early 2008, worth about US$483 million, for which Goldas has failed to pay despite having used it in jewellery manufacture or sold it on. The majority was supplied to Goldas companies in Turkey, but one shipment went to a group company in Dubai, UAE.
The First to Third Defendants (respectively "Kuyumculuk", "Kiymetli", and "Meydan") in CL-2008-000305, formerly Folio No 267 of 2008 ("Folio 267"), are companies incorporated in the Republic of Turkey. Kuyumculuk was a public company listed on the Istanbul Stock Exchange. The Fourth Defendant ("Goldas Dubai") is a company incorporated in Dubai, UAE. In CL-2008-000311, formerly Folio No 329 of 2008 ("Folio 329"), the First Defendant is Kuyumculuk. The Second Defendant ("Goldart") is a company incorporated in the Republic of Turkey.
The claim form in Folio 267 was issued on 18 March 2008. It followed a freezing order granted by Kitchin J on Saturday 15 March 2008 at a without notice hearing. The freezing order was continued on 2 April 2008 by Burton J, who granted a further freezing order in support of the Folio 329 claim, which was commenced by a claim form issued on 4 April 2008.
SocGen purported to serve the claim forms on the Turkish Defendants in Turkey and on Goldas Dubai in Dubai. The Defendants contended at the time that service in Turkey was not validly effected, and did not enter acknowledgements of service. It is now common ground that there was no valid service on the Turkish Defendants in Turkey. There remains a dispute as to whether service was validly effected on Goldas Dubai. SocGen took no further steps to progress the claims in England, but focused on protracted litigation with the Defendants in Turkey, including in particular insolvency proceedings in which claims to payment for the gold were advanced.
By application notices issued on 9 February 2016, the Defendants seek orders that:
(1) the claim forms be struck out and/or dismissed, on the grounds that:
(a) the claim forms have not been served and the time for doing so under CPR Rule 7.5 has expired;
(b) alternatively the failure to progress the claims amounts to an abuse of process;
(2) the freezing orders be discharged on the grounds that:
(a) the claim forms are struck out and/or dismissed; alternatively
(b) there were misrepresentations and/or a failure to make full and frank disclosure in obtaining them;
(3) there be an inquiry as to damages under the cross undertaking given in support of the freezing orders.
By application notices issued on 12 May 2016, SocGen sought orders:
(1) to overcome invalid service in Turkey and (if necessary) Dubai by one of three alternative routes, namely:
(a) an order for deemed service by an alternative method with retrospective effect pursuant to CPR Rule 6.15; or
(b) an order dispensing with service pursuant to CPR Rule 6.16; or
(c) an order extending time for service of the claim form pursuant to CPR Rule 7.6(3); this third ground has been abandoned;
(2) for summary judgment under CPR Part 24, including permission to apply for summary judgment prior to the filing of an acknowledgement of service under CPR Rule 24.4(1)(i).
The dispute
SocGen had been supplying gold bullion to the Goldas group in increasing quantities since 2003. SocGen's case is that it did so "on consignment", that is on terms that the bullion remains the property of the bank as consignor unless and until it is priced and purchased by the consignee. In respect of each shipment SocGen and the relevant Goldas company executed a Bullion Consignment Agreement ("BCA"). The terms of the BCAs provided as follows:
(1) SocGen agreed to make available for supply to Goldas, at a defined location (typically the Goldas' company's registered office or as might subsequently be agreed elsewhere), a quantity of bullion up to a specified maximum.
(2) There were two stages to the supply. Goldas was entitled to call for delivery to it on consignment by requesting a shipment. Goldas could thereafter purchase the bullion or part of it by making a purchase request. Any unpurchased bullion at the end of the availability period was returnable to SocGen at the latter's request.
(3) Stage 1 was triggered by a shipment request by Goldas, which was to be confirmed by a shipment notice from SocGen accompanied by a proforma invoice in a specified form. The specified form of proforma invoice included an entry for a price, premium and consignment fee rate, but the terms of the BCA did not require any payment by Goldas on shipment or for so long as the bullion remained on consignment. Payment was not due unless and until Goldas decided to purchase by issuing a purchase request. Shipment was to be arranged by SocGen at Goldas' risk but with SocGen procuring insurance.
(4) Stage 2 was triggered by Goldas issuing a purchase request, whereupon the price was determined on a spot market basis plus an agreed premium. The purchase was to be followed by a final invoice in agreed form, which then fell for payment on the identified settlement date.
(5) Clause 6(a) of the BCA provided that title in the bullion was to remain with SocGen until the date of receipt of payment of the price. Clause 8 provided that until payment or return, Goldas was to hold the bullion on consignment at its vaults in safe custody on behalf of SocGen. Clause 8(b) provided that until purchase, Goldas was not to "commingle, deal, sell, use, invest, assign or otherwise dispose of any part of the Consigned Bullion".
(6) Clause 12 provided that upon an event of default, which included failure by Goldas to pay an amount due or to perform or observe any of Goldas' obligations, SocGen was entitled to cease shipments, demand payment of any outstanding amounts and demand the return, at Goldas' cost, of all Consigned Bullion.
(7) Clause 14(e) provided for English law and the submission by Goldas to the jurisdiction of the High Court in England.
Goldas' case is that as a result of conversations and a course of dealing over the years, the gold supplied in 2007/2008 was not supplied on the terms of the BCAs; that, in particular, it was agreed that Goldas could use the gold in the manufacture and retailing of its jewellery once shipped and before paying for it, that being the very purpose of having such large quantities of gold delivered to it; and that property in the gold was treated as passing to Goldas at the latest on import, so that any claim in respect of the gold can only be for a money sum in contract, not for a contractual or proprietary remedy for delivery up of the gold or for damages for failure to do so.
On 18 February 2008 Goldas' Mr Binatli told Mr Teboul of SocGen that Goldas had been using and selling gold on consignment before it had been purchased. At that date there were 15.725 metric tonnes of gold which had been shipped and not paid for, with a total value of approximately US$483 million. Of that quantity 4.425 MT had been the subject of purchase requests and priced, but remained to be paid for; the remaining 11.3 MT had not been the subject of purchase requests or priced. None of that gold has ever been paid for or returned to SocGen by Goldas. Kuyumculuk has also failed to repay three outstanding loans from SocGen totalling approximately US$9 million.
The procedural history
Prior to commencing proceedings, SocGen applied for a freezing order supported by the first affidavit of Mr Teboul, the first affidavit of Mr Pinnell, a skeleton argument and a supplementary skeleton argument. After a hearing on Saturday 15 March 2008, Kitchin J granted a freezing order which included the following:
(1) by paragraph 5(1) a worldwide freezing order against Kuyumculuk in the sum of US$127,330,215.21;
(2) by paragraph 5(2) a worldwide freezing order against Kiymetli in the sum of US$257,703,343.07;
(3) by paragraph 5(3) a worldwide freezing...
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