KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
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CONTAX PARTNERS INC BVI |
Claimant |
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- and - |
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(1) KUWAIT FINANCE HOUSE (KFH-KUWAIT) (2) KUVET TURK BANK (KFH-TURKEY) (3) KUWAIT FINANCE HOUSE BAHRAIN (KFH-BAHRAIN) |
Defendants |
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David Kinnear and Michael Reason (direct access) appeared to represent Contax Partners LLC
Hearing date: 30 January 2024
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Crown Copyright ©
Mr Justice Butcher :
Introduction
(1) What was said to be the arbitration agreement, in Arabic and in an English translation, dated Muharram 23, 1443 AH, corresponding to 31 August 2021, and apparently signed by Hamad Abdul Mohsen Al-Marzouq, Chairman of the Board of Directors of the KFH Group, and by Mr Fantechi;
(2) The Award, to which I will return;
(3) What was identified as the Kuwait Commercial Court of Appeal decision, dated 1 February 2023;
(4) A profile of Contax BVI;
(5) Identification documents of Mr Fantechi, including his passport;
(6) Contax BVI's registration certificate and list of directors;
(7) Documents relating to KFH group accounts and products; and
(8) A document, in Arabic and in translation, said to be a statement of Mr Mohamed Sarkhou, saying that attempts to enforce the Award and Court of Appeal ruling in Kuwait had been unsuccessful.
The Applications to set aside the August Order
(1) A witness statement of Mr Thomas of Jones Day, which stated that his clients had instructed him that the arbitration proceedings were a fabrication. He produced a comparison between parts of the Award and Picken J's judgment in Manoukian showing passages lifted and adapted from the latter to the former. He exhibited a letter from the Secretariat General of the KCAC confirming that no cases had been brought in that forum against any of the Defendants; a letter from the Kuwait Ministry of Justice, Court of First Instance, confirming that there was no record of any proceedings between the parties between 2000 and November 2023; and a letter from the State of Kuwait Ministry of Justice, stating 'Contax Partners Inc (BVI) has no legal disputes against Kuwait Finance House'.
(2) Witness Statements from Mr Raed Ajawi and Mr Rashid Alkhan, each named in the Award as having given evidence and as having been cross-examined, to the effect that they had no knowledge of the arbitration and had not participated in any such proceedings.
(3) A statement from Filippo Fantechi dated 9 November 2023, stating that Druces LLP had been instructed to act on his behalf and on behalf of Contax BVI. The witness statement said that he had been totally unaware of these proceedings or of the underlying arbitration proceedings/award until he received a phone call from the Third Defendant's legal department on 1 November 2023. The witness statement continued that he was not aware of any claim by Contax BVI against the KFH Defendants or against Ahli United Bank; he had not authorised or participated in any such arbitration or these proceedings; and Contax BVI had not instructed H&C Associates, on this matter or at all: 'I do not know who they are and have no communication with them.' He said that Contax BVI does not have an address at 1 Washington Mall, Boston, or an email address contaxpartus@gmail.com. There was also a witness statement from Mr Stephen Ronaldson, a partner of Druces LLP, which said that he had met Mr Fantechi in person.
(4) A statement of Mazin Al Mardhi, a partner of Charles Russell Speechleys LLP, based in that firm's Bahrain office. He gave evidence that he had contacted Prof. Ashraf Shams El Din, named as counsel for the Defendants in the Award and the Appeal Judgment. Prof Ashraf Shams El Din had confirmed that he was unaware of any alleged proceedings involving KFH Group and had not participated in any such proceedings. He had also contacted Dr Mukerrem Basar, named as an expert witness for Contax BVI in the Award, who had confirmed that he had had no involvement in the case.
The hearing on 17 November 2023
Developments after the hearing of 17 November 2023
(1) A further witness statement of Mr Thomas of Jones Day. This exhibited an opinion of Mr Ahmed Abdel Aziz Al-Adwani, a qualified and practising Kuwait lawyer, to the effect that the Award and Court of Appeal judgment could not be genuine as it is mandatory under Kuwaiti law for the Award and the judgment to be in Arabic; and that the Court of Appeal judgment could not be genuine as there are no Kuwaiti Court of Appeal judges with the names used in the purported judgment.
(2) A witness statement of Mr Hamad Abdulmohsen Al-Marzouq, the Chairman of the First Defendant, and the ostensible signatory of the alleged arbitration agreement dated 31 August 2021. Mr Al-Marzouq's witness statement says that he had not previously been aware of the existence of this agreement; he had not signed it; and the signature used was not his.
(3) A further witness statement of Mr Filippo Fantechi. This said that the identification and company profile documentation which had been produced to the Court in August 2023 appeared to be genuine. He said that he was astonished to see those documents and had no idea how they had come to be exhibited to the application to enforce the Award. He was concerned that it was documentation which had been obtained for the purposes of opening a bank account with Revolut, and which had been misappropriated for fraudulent purposes.
(4) A further witness statement from Mr Al Mardhi, to the effect that the 'statement' of Mr Mohamed Hamza Sarkhou exhibited to Mr Adesanu's witness statement in support of the application to enforce the Award was not a court document, did not record any court-ordered enforcement step as having been taken, and did not give any evidence of any proceedings for enforcement having been commenced in Kuwait, Bahrain or Turkey.
The arguments on the hearing of the application to set aside the August Order
(1) Mr Gregory said that his involvement was as Secretary of Addax Petroleum Ltd, which is a Director of Contax LLC, along with Filippo Fantechi and Contax BVI. H&C Associates have acted for Addax Petroleum in other matters over the years. Mr Gregory, without properly identifying the source of his information, stated that Mr Fantechi had contacted H&C Associates on 2 May 2023 for assistance in enforcing the Award; and had asked H&C Associates to open a UK bank account and later a US bank account, to receive payment of the Award. Mr Gregory said that Addax Petroleum Ltd had opened an account for Contax BVI in the first week of June 2023, with TSB Bank, and that for that purpose Mr Fantechi had provided a sample signature card, and had remitted a small sum from his bank account in Bahrain to the TSB account, to verify that the account was opened and working properly. A copy of a TSB bank statement was exhibited showing a receipt of £110 from Mr Fantechi on 8 June 2023.
(2) Mr Gregory went on to state that Mr Fantechi's lawyer, by which he meant Nabeel Saeed, apparently a Bahraini Attorney at Law and Legal Consultant, had then sent a General Power of Attorney signed by Mr Fantechi and apparently dated 5 June 2023. On its face this Power of Attorney was in favour of Mr Saeed, but in a covering letter to H&C Associates dated 8 June 2023, Mr Saeed had said that this Power of Attorney was 'transferr[ed] jointly to your firm'. Mr Gregory also said that Mr Fantechi had subsequently asked H&C Associates to assist him in setting up a SPV, to take the benefit of the enforcement of the Award, namely Contax LLC, of which the shareholders were Contax BVI, Mr Fantechi and Addax Petroleum Ltd.
(3) Mr Gregory also said, again without any proper identification of the source of this account, that there had been a phone call with Mr Al Marzouq of KFH on 9 September 2023, during which Mr Al Marzouq had, in effect, recognised the existence of the debt to Contax BVI.
(4) Mr van Huyssteen's witness statement says that he is a Director of H&C Associates. He gives various explanations of the nature and functioning of H&C Associates. He also refers to a report of a handwriting consultant Ms Margaret Webb. This supposed report states at the bottom 'Provisional opinion only not intended for legal purposes.' It examines certain signatures of Mr Al Marzouq and Mr Fantechi, and then says, 'Despite examining copies rather than originals, it is impossible to provide a conclusive opinion on copies whether the questioned signature is a forgery.' As Mr Edwards submitted, 'Despite' there seems to mean 'As a consequence of'.
Analysis
Authority to bring the proceedings
Was the Award genuine?
(i) The language of the Award
Award | Picken J's judgment |
[5] … As a result, his position is (or was heading into the trial) precarious: any delay in the resolution of the present proceedings could potentially deny Contax Partners Inc BVI an effective remedy. It was for this reason, indeed, that the trial which took place before me was expedited: Contax Partners Inc BVI issued the proceedings on 1 December 2021; pleadings closed on 4 April 2022, and expedition was ordered at a hearing which took place on 21 June 2022. [6] In further consequence of the need for expedition, I indicated at a hearing which took place on 7th December 2021 that Contax Partners Inc BVI claim was successful, specifically his primary case that the Banks are contractually obliged to effect the transfers to where he wish. I made an order, indeed, to that effect. In the circumstances, this judgment does not deal with other aspects at all or, at least, in any particular detail. |
[3] … As a result, his position is (or was heading into the trial) precarious: any delay in the resolution of the present proceedings could potentially deny Mr Manoukian an effective remedy. It was for this reason, indeed, that the trial which took place before me was expedited: Mr Manoukian issued the proceedings on 19 December 2020; pleadings were closed on 6 April 2021, and expedition was ordered at a CMC which took place on 8 June 2021. [4] In further consequence of the need for expedition, I indicated at a short hearing which took place on 25 February 2022 that Mr Manoukian's claim was successful, specifically his primary case that the Banks are contractually obliged to effect the transfers. I made an order, indeed, to that effect. In the circumstances, this judgment does not deal with other aspects either at all or, at least, in any particular detail. |
Award | Picken J's judgment |
7. It is appropriate that I say something about each of the factual witnesses and record, in particular, that, in my view, each of them did their best in their evidence to assist the Court. 8. Specifically, as for Mr Filippo Fantechi himself, his evidence was concerned with his company consequential loss claim for lost investments. That is not an issue which I need address given that I have decided that his company Contax Partners Inc BVI succeeds with his primary case. Be that as it may, it was clear, either in cross-examination and Judiciary Panel questioning or during the course of closing submissions, that, in giving this evidence, Mr Filippo Fantechi was clear and straightforward. … 9. The second factual witness called by KFH was Mr Rashid Khalid Alkhan (Head of Wealth Management KFH Bahrain). Dr Jamil Abdulbaqi Al Sagheer took issue in closing observation that Mr Alkhan gave his evidence candidly. He submitted, indeed, that Mr Alkhan was prepared to give evidence that was untruthful and contradictory. Although I don't wholly accept that this was the case, the submission isn't entirely without merit since it was notable, amongst other effects, that he was unfit to give a satisfactory explanation as to why he'd signed a particular document but not others, suggesting kindly incredibly that he signed all documents which he entered notwithstanding the fact that none of the other transfer requests in the documents are signed. Likewise, it's unclear why Mr Alkhan only mentioned that he'd kept a note of all of the transfer requests made by his clients when he was being cross-examined and not in his substantiation statement; the more so, since no similar spreadsheet had been disclosed or bared in the course of these proceedings. |
5. It is appropriate that I say something about each of the factual witnesses and record, in particular, that, in my view, each of them did their best in their evidence to assist the Court. 8. Specifically, as for Mr Manoukian himself, his evidence was concerned with his consequential loss claim for lost investments. That is not an issue which I need address given that I have decided that Mr Manoukian succeeds with his primary case. Be that as it may, it was not suggested, either in cross-examination or during the course of closing submissions, that, in giving this evidence, Mr Manoukian was anything other than straightforward. … 9. The other factual witness called by SGBL was Mr Elie Jeffy, the Head of its Private Banking Unit. Mr Toledano QC took issue in closing with Mr Wilson QC's observation that Mr Jeffy gave his evidence candidly. He submitted, indeed, that Mr Jeffy was prepared to give evidence that was untruthful and contradictory. Although I do not wholly accept that this was the case, the submission is not entirely without merit since it was notable, amongst other things, that he was unable to give a satisfactory explanation as to why he had signed a particular document but not others, suggesting somewhat implausibly that he signed all documents which he received notwithstanding the fact that none of the other transfer requests in the documents are signed. Likewise, it is unclear why Mr Jeffy only mentioned that he had kept an analysis of all of the transfer requests made by his clients when he was being cross-examined and not in his witness statement; the more so, since no such spreadsheet had been disclosed in the course of these proceedings. |
Award | Picken J's judgment |
15. A number of matters were raised in this connection. I do not propose to rehearse all of them. It suffices to give a single example. This was the suggestion made by Dr. Miikerrem Onur Basar that a particular custom (as will appear, custom is important in this case) was a custom which had come into being since end of November 2019 (and so, again as will appear, after Contax Partners Inc BVI had made their first transfer requests). As Dr Jamil Abdulbaqi Al Sagheer rightly submitted, that simply cannot be relevant as a matter of Turkish law (and, indeed, common sense) since what matters is the custom which existed at the time that the Claimant Contax Partners Inc BVI first entered into a contractual relationship with the Banks. Notwithstanding this, it was only with a marked reluctance that Dr. Hasan PULASLI the Defendant Turkish Law Expert ultimately accepted that the alleged new custom which he had identified was of no relevance at all. 16. That said, I also agree with Dr Jamil Abdulbaqi Al Sagheer when he submitted that there were aspects of Dr. Hasan PULASLI evidence which were likewise open to criticism. It was notable, for example, that on a few occasions, Dr Hasan PULASLI referred in cross-examination to having spoken to various Turkish academic, Professor Dr. Mustafa ATES – Dean Kutahya Dumlupinar University Islamic Law, about certain points and obtained his agreement that what he (Dr PULASLI) was saying about his writings was right. That evidence is incapable of being tested and hinted at a somewhat partisan approach. However, ultimately, at least when asked questions at the level of principle, Dr PULASLI for the most part did not engage and sought to assist the Court in his answers. |
13. A number of matters were raised in this connection. I do not propose to rehearse all of them. It suffices to give a single example. This was the suggestion made by Dr Moghaizel that a particular custom (as will appear, custom is important in this case) was a custom which had come into being since November 2019 (and so, again as will appear, after Mr Manoukian had made his first transfer requests). As Mr Toledano QC rightly submitted, that simply cannot be relevant as a matter of Lebanese law (and, indeed, common sense) since what matters is the custom which existed at the time that Mr Manoukian first entered into a contractual relationship with the Banks. Notwithstanding this, it was only with a marked reluctance that Dr Moghaizel ultimately accepted that the alleged new custom which he had identified was of no relevance at all. 14. That said, I also agree with Mr Wilson QC when he submitted that there were aspects of Mr Najjar's evidence which were likewise open to criticism. It was notable, for example, that on a few occasions, Mr Najjar referred in cross-examination to having spoken to a Lebanese academic, Professor Nammour, (whose writings, as will appear, are relevant in this case) about certain points and obtained his agreement that what he (Mr Najjar) was saying about his writings was right. That evidence is incapable of being tested and hinted at a somewhat partisan approach. However, like Dr Moghaizel, ultimately, at least when asked questions at the level of principle, Mr Najjar for the most part engaged and sought to assist the Court in his answers. |
Award | Picken J's judgment |
The issues 22. At least at the start of the trial, the parties were agreed that the following issues arose: (i)whether an international transfer right exists under the contract with each of the Banks (the 'Contractual Transfer Right Issue') - and, in (ii) the case of KFH Group, whether a particular exclusion clause is applicable; (iii) further or alternatively, whether an international transfer right exists as a matter of Turkish, Kuwait, and Bahrain law (the 'General Transfer Right Issue') - and, again in the case of KFH Group, whether a particular exclusion clause is applicable; and the whole Banks Group is liable for the transfer Individually and/or Collectively. (iv) alternatively, in the event that an international transfer right does not exist, in the case of KFH-Turkey, whether it acted in abuse of its rights or in bad faith by exercising its discretion in bad faith or in abuse of rights, by making payments as a result of factors such as nepotism, favouritism or the status of the client; and (v) the impact of any article of law in these jurisdictions Kuwait's the Banking Law of 1968, Turkey Banking Law No. 5411 and Currency No. 1567, and Bahrain Central Bank of Bahrain and Financial Institutions Law 2006 ( ' CBB Law') or any Global Banking Standard that tender and deposit procedure on Contax Partners Inc BVI's Claim. 23. There were other issues also, specifically an issue concerning the appropriate currency applicable in the Turkish Banking Jurisdiction context, but it was agreed that it was irrelevant since the guarantor of all transaction are banks operating under the umbrella of Kuwait Finance House regardless if its location, such issues did not need to be determined. As a result, I say no more about them. |
The issues 39. At least at the start of the trial, the parties were agreed that the following issues arose: (i) whether an international transfer right exists under the contract with each of the Banks (the 'Contractual Transfer Right Issue') - and, in the case of Bank Audi, whether a particular exclusion clause is applicable; (ii) further or alternatively, whether an international transfer right exists as a matter of Lebanese law (the 'General Transfer Right Issue') - and, again in the case of Bank Audi, whether a particular exclusion clause is applicable; (iii) alternatively, in the event that an international transfer right does not exist, in the case of SGBL, whether it acted in abuse of its rights or in bad faith by exercising its discretion in bad faith or in abuse of rights, by making payments as a result of factors such as nepotism, favouritism or the status of the client; and (iv) the impact of the Article 822 tender and deposit procedure on Mr Manoukian's claim. 40. There were other issues also, specifically an issue concerning the appropriate currency applicable in the Article 822 context, but it was agreed that such issues did not need to be determined. As a result, I say no more about them. |
Award | Picken J's judgment |
31.In his written closing submissions, Prof. Ahraf Sham El-Din had maintained an argument that, even if there were a transfer right (whether contractual or under the general law), this would nonetheless still permit the Banks to meet Contax Partners Inc BVI's claim by invoking transfer internal banks circular in Turkey. However, when addressing the Court orally, Prof. Ashraf Sham El-Din explained that the Banks no longer took that position. He accepted, indeed, that the (Tender and Deposit) Issue would not fall to be considered if the Court were to decide either the Contractual Transfer Right Issue or the General Transfer Right Issue in Contax Partners Inc BVI's's (sic) favour. Prof. Ashraf Sham El-Din went on to explain that, in the circumstances, the Banks' reliance on such element was limited to Contax Partners Inc BVI's's alternative claim in debt, in the event, that the Court were to decide that there was no transfer right and so that specific performance should not be ordered. | 129. In his written closing submissions, Mr Wilson QC had maintained an argument that, even if there were a transfer right (whether contractual or under the general law), this would nonetheless still permit the Banks to meet Mr Manoukian's claim by invoking Article 822. However, when addressing the Court orally, Mr Wilson QC explained that the Banks no longer took that position. He accepted, indeed, that the Article 822 (Tender and Deposit) Issue would not fall to be considered if the Court were to decide either the Contractual Transfer Right Issue or the General Transfer Right Issue in Mr Manoukian's favour. Mr Wilson QC went on to explain that, in the circumstances, the Banks' reliance on Article 822 was limited to Mr Manoukian's alternative claim in debt, in the event, that the Court were to decide that there was no transfer right and so that specific performance should not be ordered. |
(1) The text of the Award, in significant measure, derives from the text of Picken J's judgment. This is obvious inter alia from: (i) the use of exactly the same, far from standard, defined terms (eg 'General Transfer Right Issue'); (ii) the use of English legal terms (eg 'claim in debt', 'exclusion clause', 'specific performance'); (iii) exactly the same phraseology being used, including the argot of English judgments ('be that as it may', 'the submission is not entirely without merit', 'that said', 'fall to be considered'); (iv) the use of the same punctuation, even when it was not obvious, and arguably incorrect (eg in paragraph 129 of Picken J's judgment, '…in debt, in the event, that the Court…', both commas also appearing in the Award).
(2) The issues identified in the Award as arising in the arbitration were the same, largely word for word, as those which arose in Picken J's case.
(3) The almost identical assessment of factual and expert evidence could not, in my view, have been the result of chance.
(4) The mirroring of the terms of Picken J's judgment in the Award is not the result of the adoption of transposable legal reasoning. In many instances it relates to what is supposed to have happened during the course of the two sets of proceedings. In the example I have given in paragraph [44] above, if the Award were genuine, it would involve a second case in which, although a case had been maintained in written closing submissions, it was not maintained in oral closing submissions because it was accepted that if the Court were 'to decide either the Contractual Transfer Right Issue or the General Transfer Right Issue' in the claimant's favour it would not fall to be considered. It is to my mind inconceivable that there were two cases in which there was a concession, at exactly the same stage, of a similar argument, on the basis of a recognition that if one or other of two issues (identically expressed in each case) was decided in the claimant's favour, then that argument did not need to be considered.
(ii) Evidence of Kuwaiti law
(iii) The Kuwaiti judgment
(iv) Positive evidence
(v) Negative evidence
Conclusion