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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Gulf Azov Shipping Company Ltd & Anor v Idisi & Ors [1999] EWHC 283 (Comm) (26 November 1999)
URL: http://www.bailii.org/ew/cases/EWHC/Comm/1999/283.html
Cite as: [1999] EWHC 283 (Comm)
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IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 26th November 1999
| (1) GULF AZOV SHIPPING COMPANY LTD (2) THE UNITED KINGDOM MUTUAL STEAM SHIP ASSURANCE ASSOCIATION (BERMUDA) LTD |
Claimants |
|
| - v - | ||
| (1) CHIEF HUMPHREY IRIKEFE IDISI (2) LONESTAR DRILLING NIGERIA LTD (3) LONESTAR OVERSEAS LTD |
Defendants |
The Hon. Mr Justice Langley
COPIES OF THIS JUDGMENT ARE AVAILABLE IN WORD 6 for WINDOWS 3.1 ON PROVISION OF A CLEAN DISC. APPLY TO THE CLERK TO THE HONOURABLE MR JUSTICE LANGLEY Telephone 0171-936-6395
Mr Justice Langley:
There are three substantive applications before the Court. The Claimants seek an order that the Defendants should be prohibited from appearing on or submitting evidence in opposition to the Claimants' application for summary judgment or in support of the Defendants' own application to set aside a judgment for $3m entered by the Claimants in default of defence.
The grounds of the first application are that the Defendants have committed serious and deliberate contempts of orders made by this court in these proceedings and have remained in contempt over a sustained period of time despite the court giving opportunities for the contempts to be purged. The last of those opportunities before the present hearing is reflected in the Order made by Cresswell J on 3rd November in the context that all three applications were to be heard on Monday 8th November. The final opportunity arose in the course of the hearing before me which began on 8th November, continued over the following two days and was then concluded, after a short break, on Tuesday and Wednesday 16th and 17th November.
The background to the applications can be stated shortly. A world-wide freezing order was granted against the Defendants by Timothy Walker J on 23rd April 1999. It applied to the Defendants' assets up to the value of $12.3m. The order contained the usual disclosure provisions. The evidence which the judge found justified the making of the order is undoubtedly of an exceptional nature and involves serious allegations against the First Defendant. There is, it is accepted, no relevant distinction to be drawn between the First Defendant and the two corporate defendants which can be considered to be under his control and beneficial ownership.
In summary it is the Claimants' case and evidence that, in order to extort wholly unjustified sums from them, the general cargo vessel "Dubai Valour" and the crew (or members of the crew) were unlawfully and forcibly detained by or on the orders of the First Defendant at a river berth opposite the second Defendant company's premises in Sapele in Nigeria for some 21 months. The first Claimant owns the Dubai Valour, which is entered with the second Claimants' P & I Club.
The vessel was contracted to carry two dismantled second-hand oil rigs from India to Nigeria for the Defendants. It arrived in Nigeria on 16th July 1997 and at Sapele in early August. There is no dispute that some parts of the consigned equipment were not delivered. The Claimants say the parts were lost overboard in heavy seas during the voyage. The Defendants dispute that. There is also a dispute as to the value of the lost equipment. The Defendants sought and obtained from the Nigerian courts an order for the arrest of the vessel. The Claimants offered to provide a standard P and I Club letter of undertaking in the sum of $1m for the release of the ship. They allege, supported by documentary evidence, that the release of the vessel was agreed between the Nigerian legal advisers of the parties on that basis on 14th August 1997. The agreement, if made, (and that, too, is disputed) was not honoured. There have been several further applications in the Nigerian courts. There is also evidence of the violent seizure of the vessel on an occasion in September 1997 when it made an attempt to leave Sapele (supported by a court order allowing it to do so) and that thereafter it and the crew were compelled to return to and remain at Sapele, the vessel being moored alongside a forest with oil rigs or similar structures blocking it in at both bow and stern.
For the purposes of this judgment it suffices to record that the conditions in which the ship and crew were held at Sapele were, on the evidence, appalling. The crew, save for the master and three officers, were only able to leave in July 1998 and the vessel and master and three officers finally left in May 1999. The final departure of the vessel and the remaining crew was the result of a "settlement agreement" made by the Claimants with the First Defendant whereby the First Defendant was to be paid $3m for their release. The Claimants say this agreement was only made under duress, in particular the duress arising from the unlawful detention of the remaining crew. In the event the vessel left Nigeria before the $3m left this jurisdiction and the Claimants were able to freeze it here under the terms of the Order made by Timothy Walker J. It is this sum which is the subject of the default judgment.
Despite Mr Bhalla's submissions to the contrary, there is an overwhelming inference on the evidence as well as compelling direct evidence that the First Defendant was responsible for the detention of the vessel and crew for the purpose of obtaining money from the Claimants as supposed compensation for the lost equipment. The stark unreality of Mr Bhalla's response is demonstrated by his submission that there was an alternative inference on the evidence namely that the Claimants themselves were responsible for the detention of the crew at Sapele because they perceived the suffering of the crew to be to their advantage in obtaining the release of the vessel which was their only concern. The Claimants had no presence or influence in Sapele or its neighbourhood. I say "supposed" compensation because on the Defendants' own evidence (Mr Ahonkhai) the missing equipment was valued at about $1.5m in 1997 or 1998 and cost about $1.5 to $2.0m to replace in 1999. The Claimants' evidence is that its actual value was very substantially less than that namely some $200,000 to $300,000. Further there undoubtedly was at least discussion that a letter of undertaking in the sum of $1m was appropriate security for any claim the Defendants might have, and acceptance by a Nigerian Court, after a hearing at which both parties were represented, that such an undertaking in such a sum was appropriate. But the Defendants' original claim in the Nigerian courts in August 1997 was expressed to be for the Naira equivalent of about $17m. An even larger figure (18.8m) appears in the defence to the English proceedings served on July 30 1999. Those figures and some of the items which are said to give rise to them (for example the value of both rigs and the loss of drilling contracts) are almost entirely contradicted by the evidence, and in particular the Defendants' own evidence, now before this court. Neither rig suffered a total loss of value. One has been fully employed and earning substantial sums under a contract for some years. The other only required the replacement of the missing equipment. The evidence of lost contracts is, to say the least of it, neither compelling nor convincing. Mr Bhalla has offered no sensible explanation or justification for the amount of the claim and it can only be concluded that it was put before the courts by the Defendants in the knowledge that it was without any foundation.
The freezing order was served at the end of May 1999 on all 3 Defendants. It is not in dispute that the Defendants were aware of it by the beginning of June. In the course of June, on the express instructions of the First Defendant, and in breach of the freezing order, a sum of $350,000 was transferred out of the 3rd Defendant's control in this country to various payees out of the jurisdiction. That was and admittedly was a contempt of court.
There were also breaches of the disclosure orders included in the freezing order. That led to a further order on 14th July, requiring the First Defendant and the finance manager of the 2nd Defendant (Mr Ahonkhai) to attend for cross-examination on the First Defendant's assets and the assets of the corporate defendants. The basis of that order, also made by Timothy Walker J, was that "there is good reason to believe that there are substantial undisclosed assets". The order also required specified scheduled documents to be produced by the First Defendant and Mr Ahonkhai for the purpose of their cross-examination.
On 12th August the matter came before Mr Justice David Steel. By then the transfer of the $350,000 was known to the Claimants and the court. Steel J fixed 6th September as the date for the cross-examination, ordered that the scheduled documents be produced by 31st August and ordered that writs of sequestration should be executed unless by 8th September the sum of $350,000 was returned within the jurisdiction to an account at which it would be subject to the freezing order. Steel J also ordered that the Claimants' costs of £13,980 be paid by the Defendants by 10th September. Finally on 3rd November Cresswell J made orders requiring the return of the US $ 350,000 by close of business on Friday 5th November, that the scheduled documents, so far as not produced, be produced by the same time, that the costs of £13,980 be paid by that time, and that the First Defendant and Mr Ahonkhai attend for cross-examination at 10.30 on Monday 8th November.
I began this hearing at 10.30 on 8th November. Mr Ahonkhai did attend for and was cross-examined. The First Defendant did not attend. A medical certificate was produced which stated that he was seriously ill in Nigeria and unfit to come to court or undergo cross-examination. As regards the status of the other orders and their breaches I shall say more in a moment, but no money had been returned to the jurisdiction and no costs had been paid and, as will appear, there remained in my judgment serious and significant breaches of the disclosure orders including failures to disclose some of the scheduled documents.
Before turning further to that I should seek to summarise the law. The jurisdiction of the court to prohibit a contemnor from participation in proceedings in the same action in which the orders of which he is in contempt were made is not in doubt: see X Ltd v Morgan-Grampian Ltd [1991] 1 AC 1.
In a decision (as yet unreported) of Arden J in Federal Bank of the Middle East v Hadkinson & Others (26th May 1999) Arden J summarised the conclusions and the law in a passage at page 11 of the transcript in words which both counsel agreed were an accurate summary of the law and which I gratefully adopt, as follows:
These decisions show that, while I have a discretion as to whether to allow the ... Defendant (contemnor) to make an application, I should bear in mind "the paramount importance" of ensuring "the prompt and unquestioning observance of Court orders" and exercise my discretion in a way which would be in the best interests of achieving justice in the particular case while at the same time recognising the importance of upholding the interests of justice generally. I must also ensure that the sanction which the Court imposes is in proportion to the gravity of the non-compliance.
It has not been submitted to me that there is any difference in principle or difference in this case between the operation of the law so stated to the Defendants' application to set aside what is a regular judgment and the Claimants' application for summary judgment. Despite that I do think different considerations might arise between the two. In some cases it may be proportionate to preclude a party in contempt from seeking the court's positive assistance where it would not be so to shut out the defence of an application or claim.
I accept without hesitation the submissions by Mr Bhalla for the Defendants that an order of this kind should only be made as a last resort and that in a case such as this, involving as it does serious allegations, even greater caution is required. The factors which I think are most material are the gravity of the contempts and in particular their effect upon and the need to ensure the achievement of justice between the parties before the court. Thus, in my judgment, if the contempts are themselves such as to satisfy the court that the Defendants concern is to be able to argue what he wishes to argue but to ignore orders the court may make which do not suit his purpose but which the court has made in the interests of doing justice between the parties then that must be an important factor in the court's decision. That is because such conduct is not to seek justice but its negation. It is in effect to emasculate the powers of the court to do justice between the parties as it concludes it should be done. As to the gravity of the contempts it must also be a factor that they have, if they have, been persisted in and opportunities to purge them have been ignored without any or any good reason. I would add that this is not a case where the defendants have ever applied to set aside or vary in any respect material to the issues before this court the orders of which they are in contempt. For that reason alone the orders must be taken as having been properly made when and in the terms they were made. I do not mean by that that I have any doubts about the grounds or terms of the orders. On the contrary I am quite satisfied that they were well founded and the fact that the Defendants have not sought to make a case to the contrary, despite hinting at it, only serves to confirm that conclusion.
I return then to the present position.
The $350,000. As I have said, the money was removed from the jurisdiction in June 1999 on the direct instructions of the First Defendant who was aware of the freezing order and its terms at the time. The somewhat half-hearted attempt to explain this as being the result of a misapprehension of the advice of solicitors is wholly unconvincing if not fanciful. It is belied by the evidence which demonstrates that the firm acting for the defendant at the time and which the defendants' own evidence confirms was consulted was under no illusions as to the effect of the order. I am quite satisfied the Defendants' conduct was deliberate and a deliberate contempt.
That conclusion is also fully supported by subsequent events. Despite a number of suggestions that $350,000 was to be or about to be returned to the jurisdiction from or via a number of sources, no money had been received where it would be subject to the freezing order by the time the court rose on Wednesday 10th November. The length of the hearing had been fixed for only two days to end on 9th November. When the hearing resumed on Tuesday 16th November, again despite statements to the contrary, no money had been received. Finally, by the end of that day, it was established that the sum had been paid to a relevant account to which it would be credited the next day. If ever the expression getting blood out of a stone was appropriate it is appropriate here. But, even if beyond the 12th hour, the money has come and to that obviously important extent the contempt has been purged.
The Costs of £13,980. The costs were not paid either as ordered by Steele J or Cresswell J. At the resumed hearing on Tuesday 16th November a Bankers' Draft for the sum was delivered to the Claimants' solicitors.
Disclosure. Documents have been drip-fed ever since the freezing order was made. That continued throughout the hearing before me. Nonetheless I am quite satisfied that the defendants have deliberately concealed and continue to conceal their assets, told untruths about them, and remain in serious contempt of the disclosure orders made by the courts.
I should set out what is not in issue (or is incontestably established by the evidence before the court):
(a) Over about the three years prior to the freezing order sums of the order of $18m were credited to accounts of the First and Third Defendants at a branch of the Natwest bank in London. Those sums were derived from drilling contracts made between the Second Defendant and various oil or oil exploration companies in Nigeria. The credits were divided about $9m to the First Defendant's account and $9m to the account of the Third Defendant company.
(b) Following the freezing order only one further credit of some $380,000 was made to these accounts. But the defendants failed to disclose the bank statements for periods after mid to late June. They said the bank had been told to provide them. That also, when examined, seems to have been done, or effectively done, only during the first three days of this hearing.
(c) There is now ample evidence to show that since the freezing order at least two drilling contracts have continued under which substantial further sums were payable to the second (or First) Defendant. There are invoices which demonstrate this. There is a letter in August seeking payment of $1.25m from one company (Pan Ocean). The invoices suggest that a sum of at least the order of $800,000 was also due by the end of August from another oil company (SNEPCO) and some $470,000 due thereafter from a third company (Elf). The sum of $1.25m itself does not represent the full amount due from Pan Ocean (at least about $2.1m). The Defendants case before me was that these sums had not been paid. They certainly did not appear in any bank statements or other documents disclosed by the Defendants. Yet no explanation was offered as to why they had not been paid. None of the contracts were cancelled for non-payment or otherwise. Mr Bhalla said he was instructed it was a coincidence that payments stopped at about the time when the freezing order was served. No documents from the oil companies had been produced to establish or explain the position from their standpoint. The court was simply asked to believe that such sums had not been paid although it was also asked to believe that the Second Defendant company was in desperate need of funds and the defendants had sought variations of the freezing order to allow expenditure from sums which had been frozen under it on the basis that they had no other assets from which to meet trading expenditure.
(d) There was also evidence (Mr Ahonkhai) that in early August 1999 the rig in respect of which equipment was not delivered remained inoperative and in need of replacements for the missing items at a cost of about $1.5m. But the Defendants also produced a report from Knight Frank in Lagos dated 22nd September 1999 valuing their assets which recorded that Knight Frank had inspected the rig at Sapele and it was "ready for operation at any time the contract may demand". Yet there was nothing to explain how or from where the equipment was financed. It has now been suggested that the Knight Frank report is wrong. But it was produced for the court to meet the disclosure order, the First Defendant has expressly verified its accuracy, and its purpose was to seek to establish that the assets of the Defendants exceeded the limit in the freezing order.
(e) By the conclusion of the hearing on Wednesday 8th November it had been spelt out to the Defendants, who should in any event have been well aware of it, the respects in which their disclosure was seriously insufficient. It was also made clear how hard evidence should be available and provided to explain how it was that invoices had not been paid or if paid when, where and to whom they had been paid.
When the hearing resumed on Tuesday 16th November information was provided by the Defendants which showed that quite contrary to their previous evidence and submissions :
(i) SNEPCO had made payments to the Second Defendant between June and October 1999 in a total amount of $1.278m.
(ii) Those payments had been collected by Oceanic Bank International (Nigeria) Limited between 13th July ($581,000) and 19th October 1999. On the information before the court an arrangement was made for Oceanic Bank to utilise one of its own accounts at a correspondent bank to collect the $ payments made to the Second Defendant which had previously been paid into Natwest accounts. This arrangement began after the freezing order and immediately prior to the Defendants application to vary it to obtain access to the frozen funds which was made on the basis that the defendants had no other funds available to them to meet obligations such as expatriate salaries due outside Nigeria. The effect of the arrangement was of course that the payments were not credited to any account in the Defendants' name and the statement that the payments had by coincidence stopped after the freezing order was made was untrue.
(iii) A "statement of account" from Oceanic Bank shows that the SNEPCO payments were used to meet overseas salaries and also for a number of substantial round sum transfers which remain unexplained.
(iv) Elf Nigeria had paid the Second Defendant the sum of $198,125. Mr Bhalla's instructions were that the Defendants had not been notified of receipt of this payment. No information was provided as to when, how or to where it was paid.
There was no further information concerning the payments undoubtedly long due from Pan Ocean in very substantial sums. It was said they still remained unpaid.
It is this evidence that satisfies me that the Defendants have been and remain guilty of cynical and deliberate breaches of the disclosure orders of the court. It remains wholly probable that they are still concealing their assets. For the same reasons such expressions of apology or regret as have been made are, I think, not sincere. The court is indeed faced with parties of whom it can fairly be said that they will comply only with orders to the extent that they think it in their interests to do so or when last last chances are given.
In the course of the hearing, on Wednesday 10th November, once submissions on the contempt issue had been completed, and because the hearing had already overrun its time estimate, I proceeded to hear the Claimants' submissions on the other applications. The Defendants were in court throughout and I then made no ruling on the contempt issue because I was concerned to see if matters might be affected by the conduct of the Defendants (in particular whether any money and further information was forthcoming) during the short break in the hearing which itself arose because of other intervening commitments on the part of the court.
That remained the case until the hearing itself concluded and I therefore heard full submissions by Mr Bhalla for the Defendants on both the contempt issue and the two other applications. It follows that in a real sense the contempt application has been rendered academic but I should nonetheless express my conclusion upon it. Had the Defendants not provided the sum of $350,000 and/or maintained their stance that no dollar sums had been paid since the freezing order in my judgment the court would have been fully justified in making the order sought by the Claimants. In the events which have happened, whilst the contempts have been both serious and deliberate and, as I have said, as regards disclosure of assets probably continue, I do not think such an order appropriate. It was because there was, on Mr Bhalla's instructions, a prospect of reaching the latter conclusion that the hearing was conducted as it was.
I will now turn to the applications to set aside the default judgment and for summary judgment
THE DEFAULT JUDGMENT
The judgment was entered regularly albeit the defence was served only a matter of some minutes late. The claim is for payment of the $3 m "paid" under the "settlement agreement ". It alleges payment by duress. The circumstances in which that agreement came to be made are such that I can see no realistic prospect of a defence to the claim and hence no basis on which the judgment should be set aside. At no time and on no basis could detention of the crew of the vessel be justified. And the evidence and commonsense establish that it was the defendants who were responsible for the detention of the crew. Nor is there any reason to doubt the evidence that it was the detention of the crew, no doubt as well as the vessel, which was the reason for the payment.
It follows that the Defendants' application to set aside the judgment is rejected.
SUMMARY JUDGMENT
(A) LIABILITY
The Claimants put their claim on three bases. The claim is made only against the First and Second Defendants.
(1) Damages for breach of the agreement made on 14th August 1997 to release the ship against a letter of undertaking in the sum of $1m.
(2) Damages for wrongful interference arising from the unlawful detention and forcible return of the vessel to Sapele when the vessel had sought to leave at a time (August 22 to September 30, 1997) when there was a court order in Nigeria allowing it to do so and the vessel was not under arrest.
(3) Damages for wrongful arrest and detention of the vessel and crew, the arrest of the vessel being procured by the deliberately false assertion that the Defendants' claim was for some $17m and the detention of the crew having no possible justification in law or any order of the Nigerian courts.
The sum claimed by the Claimants is $7,836,087.07 and interest of $888,089.90. Mr Bhalla has not contended that these causes of action are not available to the Claimants provided of course that they are established in evidence.
On the evidence before the court whilst there is an issue on the first basis of the claim which I think just merits a defence I am satisfied that on one or both of the other bases, for the reasons which I have stated at the beginning of this judgment, there is no realistic prospect of either the First or Second Defendant establishing any defence to liability for the Claimants' claims. I am therefore satisfied that the Claimants are at least entitled to a judgment for damages to be assessed.
The large part of the damages claimed and pursued on this application relates to the loss of use of and damage to the vessel (claimed as some $4.5m and $377,000 respectively) together with claims for expenses incurred in providing treatment and assistance to the crew and vessel of in excess of $0.5m and the cost of a replacement crew in excess of $0.25m. On the other hand :
(i) there is undisputed evidence that some equipment was lost and so not delivered. There is a genuine dispute as to liability and the cause of its loss. There is also a dispute as to the value of the equipment. No credit is given in the claim for this, but it is right to record both that no claim has been pleaded by the Defendants for the loss and that the Claimants have provided a letter of undertaking to secure such a claim up to $1m pursuant to para (6) of Schedule 2 to the order of Timothy Walker J made on 23rd April 1999.
(Ii) The original arrest of the vessel might have been justified.
(iii) the claim includes claims for legal expenses the basis of which might give rise to genuine disputes and other claims have not been finalised.
(iv) the evidence in support of the actual figures claimed is generally not as final or documented as it ought to be. Indeed the Claimants themselves say that some of the figures may yet increase or there may be other claims yet to be made and accept and indeed seek not only a money judgment but also a judgment for further damages to be assessed.
It follows that in my judgment further evidence is required from the Claimants to establish their precise loss and I think the present evidence justifies no more than the entry of a judgment for damages to be assessed. On the other hand the claims for the loss of use of and damage to the vessel, and many of the expense claims are sufficiently evidenced to satisfy me that the Claimants are likely to obtain a final judgment for a substantial sum for those losses even after giving credit for any reasonable sum (which I am satisfied would not be likely to exceed $1m) to account for the loss of equipment. In my judgment that sum, even ignoring interest, would be at least $3m and therefore, under CPR part 25, I have jurisdiction to order that an interim payment not exceeding a reasonable proportion of that sum should be made by the First and Second Defendants. In this case I do think it just to make such an order. I also think that a reasonable proportion of that sum would be two-thirds of it.
The payment ordered will therefore be $ 2m.
I shall therefore make the following orders on the Claimants' application for summary judgment:
(1) Judgment for damages to be assessed.
(2) An order that the First and Second Defendant make an interim payment in the sum of $ 2m.
I will also give the Claimants permission to amend the claim to reflect what they say are the correct and up-to-date figures on which they rely, as I cannot see any prejudice to the defendants from the making of the amendments.
I will hear the parties as to the consequences of this judgment (if any) for the terms of the freezing order and the future conduct of the proceedings.