Jersey Unreported Judgments

[2010]JRC033

court of appeal

17^th February 2010

Before     :

W. J. Bailhache, Esq., Deputy Bailiff, sitting alone.

 

Advocate N. F. Journeaux for the Appellant.

Advocate N. M. Santos-Costa for the Third and Fourth Respondents.

judgment

the deputy bailiff:

Background

1.        On 11th December, 2009, the appellant presented to the Royal Court a Representation in which it claimed various relief, as assignee of two arbitration awards made by an arbitral tribunal operating under the International Court of Arbitration, the awards being made against the First Respondent and Société Nationale D'Electricité, a company incorporated and organised in accordance with the laws of the Congo.  The appellant claimed that the awards remained unsatisfied, and that when adding principal, contractual interest, penalty interest and arbitration expenses, the total amount by which the First Respondent was jointly and severally indebted to the appellant was in the sum of $116,048,069.37, with interest accruing daily at the rate of $27,500. 

2.        The Royal Court received and granted, ex-parte, an application by the appellant for interim conservatory relief against the Third and Fourth Respondents, imposing on them an immediate injunction or arrêt entre mains from making payment of any part of the monies due by the Third Respondent to the Second Respondent in the sum of $113.6m which sum was the consideration for the purchase of the stock of Kibali Goldmines SPRL under a contract known as the Stock Purchase Agreement (the SPA) to which the Second and Third Respondents were parties.  The hearing before the Royal Court on 11th December took place in private, and in addition to making the interim injunction referred to above, there were sundry other orders for interim conservatory relief and disclosure made against the Second, Third and Fourth Respondents.

3.        On Monday 14th December, the Royal Court sat, once more in private, to receive an application by the Third and Fourth Respondents, at that stage described as the first and second parties cited, to be discharged from the proceedings and consequently to be released from the immediate injunctions and disclosure orders imposed against them.  After hearing argument from the Third and Fourth Respondents and from the appellant, the Court did discharge the Third and Fourth Respondents from the proceedings.  At very short notice, by reason of the matters which follow, the Court prepared a summary of reasons.

4.        Having noted that the appellant had acquired its rights under the arbitration awards made against the Democratic Republic of Congo by way of assignment, and was seeking to enforce those awards both in Jersey and in other jurisdictions, the Court went on to describe the facts as follows:-

"3. The first party cited [the Third Respondent] which is a Jersey incorporated company, has a 70% interest in the Kibali Goldmine operation in the Democratic Republic of Congo.  The remaining 30% is owned by the Second Respondent [Okimo] which is wholly owned by the Democratic Republic of Congo and which the Representor [the Appellant] maintains is an organ of the State.  The first party cited is in turn owned by the second party cited [the Fourth Respondent] (and another company Anglo-Gold).  The second party cited is a publicly quoted company.

4. On 30th November 2009 the second party cited gave notice of an EGM for the approval of its acquisition (through the first party cited) from Okimo of a further 20% in Kibali Goldmines, bringing its total ownership up to 90%.  The consideration payable is US$113,600,000.  The acquisition was contingent upon a number of factors including the approval of the shareholders at the EGM due to be held this Wednesday at 8.30 a.m.

5. The Representor applied to the Court ex-parte on Friday 11th December to injunct that contingent debt and to seek disclosure of the Share Purchase Agreement (SPA) and other documents referred to in the SPA, together with information that any of the parties cited might have about other assets of the first and second respondents including any bank account details.  Those injunctions were granted and are set out in the two acts of court issued that day for service upon the parties cited affected in the early evening of Friday 11th December.

6. The Representor's application was premised upon the SPA (not then disclosed) creating a debt in favour of the Second Respondent upon which it could distrain.  It was asserted that the parties cited were innocent parties who are not likely to collude with the First or Second Respondents.

7. The Court was concerned as to the impact of the injunctions upon the SPA and received written submissions from the Representor which will be available.  Crucially it was submitted that the injunctions would not prevent the parties completing the SPA - indeed the injunctions had been carefully worded so as to ensure that the parties were able to conduct business as usual.  The Court accepted those submissions for the purposes of the ex-parte application."

5.        Having recited this history in relation to the hearing on 11th December, the Royal Court noted in the context of the hearing on Monday 15th December that it had been advised that the SPA and all of the named documents sought by the appellant under the disclosure orders had in fact been available to public inspection since 30th November, 2009, at La Motte Chambers in Jersey and at the offices of Ashursts a firm of solicitors in London.  This had not previously been drawn to the attention of the Court.  The Court also noted that the SPA was subject to the proper law of the Republic of Congo, and that it provided on its face that title to the shares would only pass to the Third Respondent after receipt by the Second Respondent of the purchase consideration in the manner specified.  The Court considered that the appellant had not only failed to obtain and disclose to the Court the relevant provisions of the SPA, but it had also failed to produce expert evidence of Congolese law to support its central submission that the SPA gave rise to a debt upon which it could distrain.

6.        The Third and Fourth Respondents did produce a letter dated 13th December, 2009, emanating from a Congolese lawyer, advising that under Congolese law the payment of the sale price into the account specified by the Second Respondent - in other words, the manner of payment was a fundamental term of contract and that the Second Respondent would not be bound to perform its obligations under the SPA if the Third Respondent failed to pay the sale price as agreed.  This would enable the Second Respondent to terminate the SPA, and, in the circumstances, it was submitted by the Third and Fourth Respondents that maintaining the injunctions would simply result in the sale of shares not being completed.  They would be unable to pay the consideration in the manner prescribed and the Second Respondent would therefore not transfer the shares.  In effect, no debt in Jersey would be created upon which the appellant could distrain and so, said the Third and Fourth Respondents, the injunction should be set aside.

7.        The Royal Court took the view that the maintenance of the injunctions constituted an unwarranted interference in the commercial activities of innocent third parties (including the Third and Fourth Respondents) and was thus inequitable.  In the circumstances the injunctions were set aside, and given that all the documents sought by the appellant were in fact publicly available and given the confirmation that the Third and Fourth Respondents had no information in respect of bank accounts of the Second Respondent, the disclosure orders could also be set aside.

8.        An application was made to the Royal Court by the appellant for a stay pending appeal and the reinstatement of the injunctions, pending appeal, but this was refused. 

9.        At approximately 6.45 p.m. on 14th December, 2009, an application was made to me as a single judge of the Court of Appeal by Advocate Journeaux acting for the appellant.  It was made ex parte on the grounds that interim conservatory relief was needed to prevent injustice and it was not possible to convene the Respondent.  I agreed to receive the application notwithstanding the absence of any staff from the Judicial Greffe to maintain a record of the process.  In making his application, Mr Journeaux made it plain that it was only the interim conservatory relief in relation to paragraph (1)(b), namely the imposition of the immediate injunction or arrêt entre mains on the Third and Fourth Respondents that concerned him.  He submitted that it was common ground that payment could not be made until Wednesday that week at the earliest.  All but one of the conditions precedent had been complied with under the SPA, and the remaining condition precedent should, he thought, be satisfied on 16th December.  He confirmed that the application by the Third and Fourth Respondents to be discharged from the proceedings had been successful that day with reasons to be delivered later, and he thought the Commissioner had been persuaded that a debt could not arise because the injunction prevented the condition precedent from being satisfied.  He added that he had not seen the contract documentation until that day, but these had been publicly available for inspection, and he thought that the Commissioner might have thought that the appellant should have taken advice under Congo law.  He asserted that his client's failure to notice the documents which were publicly available for inspection was innocent and inadvertent that in any event the information which would have been obtained would have made no difference to the application, and that the underlying proposition of his clients, namely that when obtaining an arrêt entre mains in Jersey, the payment by the garnishee to a judgment creditor would operate as a discharge to the judgment debtor in respect of that debt, and the judgment debtor is not thereby exposed to double recovery, had been wrongly disregarded by the Royal Court. 

10.      In his view the learned Commissioner had wrongly been persuaded that if the payment was not made under the SPA, the shares would not be delivered under that agreement and he asserted that to grant the stay pending appeal would be to enable the matter to be heard inter-partes and to ensure that there was no injustice. 

11.      Advocate Journeaux was accompanied by Miss Amy Brown, representing his client.  She told me that she had heard a comment by representatives of the Fourth Respondent, she believed, concerning assignment and concerning assets out of the jurisdiction.  Her understanding was that between Monday and Wednesday, if so minded, the Fourth Respondent could assign the rights which the Third Respondent had under the SPA to a party outside the jurisdiction and there would then be no debt in Jersey for the appellant to attack.  She said that she did not hear that language in terms, but that was the thought in her mind as a result of what she heard.

12.      Advocate Journeaux concluded that although the effect of reinstating the injunctions could cause the Fourth Respondent problems given it was a Jersey public company, it was possible on the information which the appellant had that the Fourth Respondent might divert funds to make the necessary payment.  He mentioned that the Fourth Respondent was already a 50% shareholder in the Third Respondent.  I was asked to "hold the ring" pending appeal.

13.      On the basis of that information, I agreed to reinstate the orders in paragraphs 2 and 3 of the Act of the Court of 11th December, 2009, for a period of forty-eight hours commencing at 7.30 p.m. on 14th December.

14.      Notice of that order was clearly communicated that evening to Advocate Santos Costa, acting on behalf of the Third and Fourth Respondents.  The ease with which that information was apparently passed on to Advocate Santos Costa, one might think, rather belies the suggestion that it was necessary to make the application to me as a single judge ex-parte.  It goes without saying that when such an application is made, all the same principles which apply to the obtaining of ex-parte orders from the Bailiff or from the Royal Court apply with equal vigour.  In particular it is the duty of counsel for the applicant to ensure that the single judge of the Court of Appeal is made aware of every circumstance that might militate against making the orders which were sought. 

15.      The speed with which the matter came before me and the absence of a Greffier to note the submissions made bring their own problems, but regrettably Advocate Journeaux, in my view, fell short of performing that duty with the required rigour.  In particular, if he informed me that there was to be a special general meeting of the Fourth Respondent on Wednesday 16th December, and I have no note that he did, he did not emphasise, as he should have emphasised, the importance of that meeting and the particular difficulties which the granting of the injunctions for 48 hours would cause.  When Advocate Santos Costa contacted me during the evening of 14th December, following notification of the orders which had been made to ask me to sit urgently inter partes the following day, I agreed to do so, because I had not been informed of any difficulties that a stay might cause, which was unfortunate.  The purpose of sitting on 15th December was to remove the stay, which I had imposed, on the Royal Court's order of 14th December, lifting the injunctions and discharging the Third and Fourth Respondents, and to enable the appellant to apply inter partes for the grant of the stay.  I made it plain to counsel on 15th December that it was for the appellant to show why the stay of execution should be ordered pending appeal.

The application

16.      The competing arguments in relation to the application for a stay pending appeal were these.

17.      Advocate Journeaux, on behalf the appellant - no notice of appeal having yet been lodged, but a draft notice of appeal having been shown to me with an assurance it would be filed - put the case on the basis that his client was entitled to pursue the garnishee process as a matter of law and the Court should not pay attention to the commercial pressure or potential difficulties which the Fourth Respondent might face if the garnishee proceedings continued.  Under the SPA, shares were to be sold by the Second Respondent to the Third Respondent, which as a result had an obligation to pay for them.  That obligation amounted to a debt which was due to the Second Respondent, and he claimed that the appellant was entitled to distrain on the underlying debt through garnishee proceedings.  The debt had arisen as soon as the Third Respondent became committed under the SPA to buy the shares, and, with one exception, all the conditions precedent to completion had been satisfied.  In this case, there was one condition precedent yet to be satisfied, but that did not prevent the garnishee order continuing, because a contingent debt under Jersey law could be attached.  He essentially put five propositions:-

(i)        The Court has power to order the arrest of a contingent debt;

(ii)       There was no failure on his client's part to obtain the SPA documents, but if there was, that failure was excusable.  Notice that the SPA documents were available for inspection was, it is true, given at paragraph 10 of part 6 of the convening notice for an extraordinary general meeting of the Fourth Respondent, which appeared at page 95 of a 132 page document, but the appellant should not be blamed for not identifying that fact.  In any event, his client would not have wanted to put the Respondents on notice of its interest in the matter;

(iii)      Under the law of the contract, which was Congolese law, payment to the garnishor is good payment, as it is under Jersey law, and to suggest as the Third and Fourth Respondents did that the terms of payment set out in the SPA were a condition of payment appeared to be an attempt to contract out of the law of garnishment;

(iv)      The evidence provided by the Respondents showed that there was no real commercial pressure.  Referring me to various parts of the affidavit evidence, he submitted that the First Respondent would procure that the contract obligations of the Second Respondent towards the Third Respondent would be met.

(v)       Even if the fourth proposition were not correct and there were to be commercial pressure, that should not lead the Jersey courts to flout the general principle that commercial pressure of itself should not render it inequitable to make a garnishee order absolute.  In that context he placed specific reliance on the speech of Lord Goff of Chieveley in Deutsche Schachtbau- Und Tiefbohr Gesellschaft MBH-v-Shell International Petroleum Co Ltd [1990] 1AC 295 with special reference to the passage commencing at page 352E.

18.      Advocate Journeaux submitted that the appeal would be rendered nugatory if the interim injunctions were not reinstated because the Court would in effect lose its jurisdiction over the sum due under the contract. 

19.      For the Third and Fourth Respondent, Advocate Santos Costa opened by saying that the Court was asked to sit in private because of the price sensitivity in relation to the shares in the Fourth Respondent, which was a public company.  The appellant had no objection to this.  Although the Court sat in private for the purposes of hearing the application, the judgment will be published not least because it raises some issues of principle which have not as yet been the subject of a reasoned judgment in Jersey.

20.      An extraordinary general meeting in the Fourth Respondent had been called for 8:30 a.m. on Wednesday 16th December.  The purpose of the meeting was to seek shareholder approval for the proposed indirect acquisition of 10% of the issued share capital of Kibali Goldmines SPRL.  The shareholding arrangements were slightly complex, but in effect the Fourth Respondent and a company called AngloGold Ashanti Limited currently owned together 70% of Kibali Goldmines, and the SPA would enable the two companies to extend their joint venture interest to 90%.  Okimo, the Second Respondent, would hold the remaining 10% stake.  In summary, the propositions made by Advocate Santos Costa were these:-

(i)        If the injunction were to be re-imposed, the Fourth Respondent would have to call off the EGM fixed for 16th December, and explain to shareholders why that had been done;

(ii)        The Third Respondent was committed under Congolese law to make payments in a particular way, and the injunction would require the Third Respondent to break the contract which it had made with the Second Respondent.  As a result of its breach of that contract, the Third Respondent would not get the shares in the Kibali project.  In his submission it was clear that the Second Respondent would not deliver the shares unless payment was made;

(iii)      Even if payment of the debt due by the First Respondent to the appellant through the garnishee proceedings in Jersey amounted in law to a discharge of the obligations of the Third Respondent to the Second Respondent pursuant to the SPA, which at its lowest was a proposition which was not admitted, the practical consequence was that the Third Respondent would not receive the shares in the joint venture company from the Second Respondent.  That would mean that the Third Respondent would have to take proceedings in the Congo for specific performance of the SPA which would be inequitable.  Furthermore it would be unfair to the Fourth Respondent's partner in the joint venture agreement to commit that company in effect to satellite litigation;

(iv)      These practical consequences had the effect that, if the EGM had gone ahead, the directors of the Fourth Respondent would have to advise shareholders to vote against the transaction, and in that event the condition precedent at paragraph 3.1(a) of the SPA would not be satisfied.  That condition could not be waived under the Listing Rules which affected the Fourth Respondent, hence the conclusion that the EGM would have to be called off;

(v)       The appellant was, Advocate Santos Costa claimed, a vulture fund which had acquired at a discount eight years ago a debt some thirty years old and was now seeking to make a profit upon that debt through these garnishee proceedings.  If the Court permitted this to happen, then either the shares in the Kibali project would not be delivered, or alternatively then the Third Respondent would in effect have to pay twice for the shares in order to secure that delivery.  The Arbitration award upon which the appellant wished to take garnishee proceedings was nothing to do with the Third and Fourth Respondents, and the Fourth Respondent and its joint venture partner would suffer estimated losses of $1.1billion if the transaction did not proceed.  The Third and Fourth respondents placed heavy reliance upon the findings of the fact by the Royal Court as set out at paragraph 14 of the Court's summary of reasons. 

21.      On 15th December I gave judgment that I would not reinstate the injunctions as requested by the appellant, and that reasons would follow later.

Reasons

22.      It would seem that the current application is likely to be determinative of the appeal in the sense that on the one hand the appeal will be rendered nugatory if the injunctions are not re-imposed, and on the other hand, the directors of the Fourth Respondent will not recommend the transaction to shareholders, the condition precedent in the SPA will therefore not be met and there will consequently be no debt upon which the appellant can distrain by garnishee proceedings, if the injunctions are re-imposed.  It is extremely difficult for the Court that the application comes to be argued in those circumstances, without a full judgment from the Court below, full written contentions and on an application to a single judge as opposed to the full Appeal Court, which could not be convened in the time available.  Nonetheless, that is the position I have had to face.

23.      It is right to say at the outset that questions of state immunity, and as to whether the First Respondent can carry responsibility for the obligations of the Second Respondent, and whether the assets of the Second Respondent, including the right to receive monies under the SPA, can be treated as available to discharge the debts of the First Respondent, were not argued before me.   I have proceeded on the basis that, without deciding any of these questions, the principles of state immunity do not apply, and that the assets of the Second Respondent can in principle be properly distrained upon to meet the debts of the First Respondent.

24.      I have also assumed, without deciding it, that the appellant has taken all appropriate steps under the Arbitration (Jersey) Law 1998 with a view to enforcing the arbitration award and that there is no material under the New York Convention which would suggest a basis for not enforcing the award in the Island.  I was not addressed on these points, and have proceeded on the assumption that none arise.

25.      I have noted that in England and Wales, the attachment of a debt by way of garnishee is now covered by the Third Party Debt Orders provisions at Order 72 of the Civil Procedure Rules.  By contrast, the Royal Court Rules 2004 do not contain similar provision.  Nonetheless there is a well known procedure in Jersey for restraining assets in the hands of third parties in order to satisfy a debt due, or, using the language of that procedure when first developed, the obtaining of an arrêt entre mains.  Such orders have been known to the Island's courts for some time.  I note from the case of Richardson-v-Bernard (1894) 216 Ex 371 that the plaintiff there proceeded by way of Ordre Provisoire against the defendant Marie Bernard, seeking confirmation of the provisional order in respect of various heifers and cows which were in the possession of third parties but allegedly belonged to the defendant.  The claim there was for outstanding rent and assurance for future rent.  Before confirming the Ordre Provisoire, the Court ordered that the third parties in whose possession the various animals were to be found, should be convened and the interim arrests were left in place in the interval. 

26.      In the case of J W Huelin Ltd-v-Elloury (1935) 238 Ex 326, the Plaintiff company sought confirmation of a distraint made in accordance with an Ordre Provisoire on the movables and effects of the defendant.  The Treasurer of the States was also made a party to the proceedings in order for the plaintiff to seek confirmation of the distraint which had been made over a debt due by the Treasurer to Mr Elloury.  The facts of the case were that the States had made an agreement with the defendant for the construction of two houses and appurtenances for the sum of £1,260.  By the terms of the contract, the cost of the construction of the buildings was payable to the defendant by stage payments on certificates given by the Engineer of the States, save for a retention which was payable nine months after the finishing of the properties.  Stage payments had been made to the defendant, leaving a balance due to him under the contract of £310.  The Treasurer argued that the distraint on monies in his hands which were owed to the defendant should only be for the total that the States might or would owe him after exhaustion of all claims which the States might have against the defendant arising out of the contract for the construction of the houses.  The defendant not having appeared, the distraint on the movables and effects was confirmed and permission to sell according to usage was given to the plaintiff.  However the Court ordered that the distraint made on as much as the Treasurer of the States might owe to the defendant or have in his hands was also confirmed only for the total that the States might owe him after exhaustion of all claims against him under the contract.  The case is of interest not only for showing the way in which the arrêt entre mains could operate in practice, but also in demonstrating the discretion which the Court has in relation to the granting of such an order.

27.      I have taken these examples of Ordre Provisiores from the materials submitted by counsel, but of course it remains the case that the mechanism for obtaining an arrêt entre mains by Ordre Provisiore is very well established under the customary law of this Island.  This process is not dissimilar to the garnishee process, or indeed to the Third Party Debt Orders under Order 72 of the Civil Procedure Rules.

28.      What the cases and custom and practice establish is that there is a discretion in the Royal Court as to whether or not to grant the confirmation of a provisional order obtained on assets in the hands of third parties which either are or might be deemed to be assets of the defendant.

29.      It is worth noting at this stage, therefore, that when the Royal Court was called upon to determine whether or not an injunction over an asset, if it were such, of the Second Respondent which was in the hands of the Third Respondent should be granted, that was a matter for the discretion of the Royal Court.  In that context, the rules for determining whether an appellate court would interfere with the exercise of discretion by the Royal Court might be a relevant factor as to whether there should be a stay pending appeal, in the sense that the appellant would be obliged to demonstrate before the Court of Appeal, in order to be successful in the appeal that either the Royal Court had not directed itself according to the correct principles; or that it had failed to take into account all relevant matters or considered irrelevant matters; or that it had reached a decision which was plainly wrong.  This test has been the subject of consideration on a number of occasions the most recent example of which appears to be United Capital Corporation-v-Bender [2006] JLR 269. 

30.      For the avoidance of doubt, a fourth ground for persuading the appellate court to intervene is where there has been a material change of circumstances since the date of the Royal Court's decision, see Abdel Rahman-v-Chase Bank (CI) Trust Co Ltd [1984] JJ 127 but this does not apply in this case.

31.      The Royal Court did not have the opportunity of delivering a fully reasoned judgment as a result of the matters set out in paragraphs 5 to 9 above.  However, the learned Commissioner did at very short notice indeed produce a summary of reasons over the night of 14/15th December, which has been available to me for the purposes of this application and I am most grateful to him.   It is clear from the Commissioner's summary of reasons that the injunctions were granted ex parte on the basis of a submission that they would not impede the completion of the sale of shares and would give rise to a debt upon which the Representor could distrain, but there had been a failure to disclose the SPA to the Court and to adduce evidence as to its effect as a matter of Congolese law.  The Royal Court was satisfied on the evidence which it received from the Third and Fourth Respondents that in fact the continuation of the injunctions would frustrate the completion of the sale and would not therefore give rise to any debt upon which the appellant could distrain.  Because the Court accepted that if the injunctions were maintained, the purchase of the share would simply not take place, the maintenance of the injunctions constituted an unwarranted interference in the commercial activities of innocent third parties, not least because the appellant had no material assets with which to meet its undertaking in damages and thus the only parties to suffer would be the innocent Third and Fourth Respondents.  In the circumstances, the Royal Court found the maintenance of the injunctions would be inequitable.

32.      This was plainly a not unreasonable exercise of discretion by the Royal Court, and given that there was not identified before me any error of law, it would seem that there would be a slim prospect of success for the appellant on appeal.  In the circumstances where the granting or otherwise of a stay pending appeal might be determinative in practice of the appeal itself, in particular so where the consequences for either the appellant or the Third Respondent would be so significant, it seemed to me that the likelihood of success on appeal was a factor which I was entitled to take into account in the exercise of my discretion as to whether or not a stay on the Royal Court's order should be granted pending appeal.

33.      However, this was only an additional factor.  In any event, I think the Royal Court was substantially right in the decision which it took. 

34.      Advocate Journeaux placed great emphasis on the Deutsche Schactbau-und TiefbohrGesellschaft MBH-v-Shell International Petroleum Co Ltd a judgment in the House of Lords.  It is right to review momentarily the facts of that case as revealed by the headnote.  In 1976 the plaintiffs and the defendants, both foreign companies, had entered into an agreement for the exploration of oil.  There was a provision which required settlement of all disputes by arbitrators appointed under the rules of the International Chamber of Commerce.  Such a dispute had been referred to arbitration in Geneva in accordance with this clause and a substantial award had been made in favour of the plaintiffs.  At much the same time, the defendants instituted proceedings in a foreign court and obtained rescission of the whole of the agreement and damages on the ground of misrepresentation.  Neither of the parties took any part in the proceedings instituted by the other, and neither the award nor the judgment was enforced.  Subsequently the plaintiffs discovered that an English company had been buying petroleum from, and therefore owed money to, the defendants.  With the intention of satisfying the arbitration award out of the payments due to the defendants from that company, the plaintiffs applied for and were granted leave to enforce the award in England as a judgment.  They obtained an injunction restraining the defendants from removing any assets from the jurisdiction.  The defendants sought to enforce the judgment of the foreign Court and to discharge the injunction and set aside the leave granted to the plaintiffs to enforce the arbitration award in England.  These applications were refused.  The plaintiffs' application to set aside the leave granted to the defendants to serve their writ out of the jurisdiction was granted.  Appeals by the defendants against the refusal to discharge the injunction and against the refusal to set aside the leave to intervene and against the refusal to set aside the leave to enforce the arbitration award were dismissed by the Court of Appeal, and the defendants appealed.  In the meantime the plaintiffs obtained a garnishee order against the third party, and the Court of Appeal dismissed the third party's appeal against the making of the order absolute.  The third party appealed to the House of Lords. 

35.      It is of interest to note that counsel for both the appellants and the Respondents agreed that whether or not the garnishee order ought to be made absolute was a matter for discretion, a discretion to be exercised judicially in accordance with established principles.  The majority speeches were in substance those of Lord Oliver of Aylenerton and Lord Goff of Chieveley.  Both of their Lordships agreed that this was a matter calling for the exercise of discretion.  Lord Oliver of Aylenerton said at page 341F-/G:-

"In considering, therefore, whether, as a matter of discretion, the garnishee order should be made absolute there are two questions which require to be answered.  First, there being clearly some risk of double jeopardy, does Sitco demonstrate a risk of sufficient substantiality to justify withholding the ordinary process of execution of a regularly obtained judgment in favour of DST?  Secondly, even assuming the substantiality of the risk, does the circumstance of that jeopardy arises from a judgment against Sitco obtained only by the exercise and exorbitant jurisdiction require that it should be ignored or discounted?"

36.      The structure of Lord Goff of Chieveley's speech makes it plain that he took it as a given that the first court had a discretion to exercise.  At page 347, F-/G, Lord Goff said this:-

"On the issue of discretion, he [the trial judge] reviewed the authorities (to which I shall refer later) and concluded [1988] 2 Lloyd's Rep. 294, 301, on the basis in particular of Lord Sumner's speech in Employers' Liability Assurance Corporation Limited-v-Sedgwick, Collins & Co. Ltd [1927] AC 95, 106: 

"The garnishee, if he is to resist the order absolute, must show that he is exposed to a real risk of being required by a foreign court to pay the debt again.  If he can do so, as opposed to raising a mere speculative possibility, he has established the ground for exercising the discretion in his favour, even though the judgment of the foreign court might not be one which the English courts would recognise or regard as a proper application of the recognised rules of private international law". "

37.      As I have mentioned at paragraph 17 above, Mr Journeaux placed considerable reliance upon the passage from the Deutsche Schachtbau- und TiefbohrGesellschaft MBH case commencing at page 352 E.  The logic of his case was that there was an existing contractual obligation which, subject to the extraordinary general meeting yet to be held, required the Third or Fourth Respondent to pay a cash sum to the Second Respondent.  In return for that cash sum, it is true that the Second Respondent would have an obligation to deliver shares in the Kibali project, but the Court was entitled to, and should, disregard that.  Furthermore, if the Court were minded to consider the matter at all, the fact that the Third Respondent might be obliged to commence proceedings in the Congo or elsewhere requiring the second Defendant to deliver the shares in the joint venture company in the Congo, was immaterial.  A debt had arisen contingently already, and the contingency would be removed after the extraordinary general meeting of the Fourth Respondent when it was anticipated that the shareholders would authorise the continuation of the purchase and as a result the SPA would become unconditional. 

38.      It is at this point that it seems to me that the argument for the appellant becomes commercially unreal.  If no obligation to pay the debt arose in the Third Respondent, then it would follow that the discharge of the injunctions would be ordered.  On the other hand, if the legal reality was that the obligations of the Second Respondent would continue in full force so that the Third Respondent would owe a debt to the Second Respondent one could see how an injunction over the sale price which the Third Respondent would otherwise have to pay out might achieve some good.

39.      I am satisfied by all that I have read and heard that if the injunctions remained in place, the directors of the Fourth Respondent would be obliged to advise shareholders at the extraordinary general meeting on 16th December of their intention to vote against the content of their own resolution.  In reaching that conclusion I have also had regard to the views expressed by the Commissioner in the Court below.  It does not seem to me to be consistent with what I know of commercial reality to think that the Second Respondent would perform its obligations to deliver the shares if it had not received the consideration for them.  In those circumstances, the Third Respondent would be committed to litigation very possibly if not probably in the Republic of Congo to establish its entitlement to receive the shares.  Not only would there be inevitably some doubt about the outcome of that litigation, but the company would be committed to the expense and uncertainty of that litigation for a considerable period to come.  In those circumstances, notwithstanding the losses which might be sustained by taking such a decision, I accept Advocate Santos Costa's submission that the directors of the Fourth Respondent would be obliged not to recommend the transaction to the shareholders in general meeting, and as a result the condition precedent would be unlikely satisfied.  Once one had reached that position, there would in fact be no debt in the Island of Jersey upon which the appellant could in fact distrain.

40.      It is, of course, possible that the Fourth Respondent could have reached the conclusion that, because of the potential losses it would sustain if the transaction did not proceed, it would be better to pay twice for the shares in question.  If that were so, it would seem to me to be entirely inequitable and it would be inconsistent with authority to put the directors of the Fourth Respondent in such a position.  Accordingly, if it were a question of the Royal Court being asked to consider whether it should confirm an Ordre Provisiore in these circumstances, I think it would not do so.  Because in my view the Royal Court would not do so, it would be unreasonable to impose the injunction pending appeal.  The same principles apply.

41.      Putting the matter at its lowest, it seems to me that there would indeed be a real risk that either the Fourth Respondent would not be able to proceed with the transaction or it would have to pay twice for the shares in question.  Neither risk would be acceptable.  I am satisfied that the Third and Fourth Respondents to this appeal have established the existence of such a risk, and in those circumstances, as a matter of discretion, I would not be prepared to impose the injunctions which have been requested by the appellant pending appeal. 

42.      In reaching this conclusion, I have not had regard to allegations that the appellant is a vulture fund without assets to support the undertaking in damages which has been given.  Such considerations would have been relevant if I had decided that it might have been appropriate to re-impose the injunctions.  On the face of what I have read, the substantiality of the undertaking in damages must at least be in doubt although in the circumstances the point was not argued in detail before me.  However, I do not think it is fair in equity to intervene in the contractual arrangements of the third defendant in the circumstances, quite apart from the question as to whether or not the undertaking in damages could be met.  There is in my judgment a significant difference between a debt owed by a third party to a judgment debtor where there is no reciprocal obligation on the part of the judgment debtor, and a position where the third party's debt arises only in consequence of an obligation owed to it by the judgment debtor.  In the former case, there is unlikely to be any risk imposed upon the third party as a result of the garnishee proceedings.  In the latter case however, there is substantial risk placed on the third party, and I would be unwilling to hold that it is equitable to transfer the claimant's risk to that of an innocent third party subsequently transacting with the judgment debtor in good faith.

43.      For all these reasons I have therefore refused to re-impose the injunctions pending appeal by the appellant as requested.

Authorities

FG Hemisphere and Dom Rep Congo [2009] JRC 244B.

Deutsche Schachtbau- Und Tiefbohr Gesellschaft MBH-v-Shell International Petroleum Co Ltd [1990] 1AC 295.

Arbitration (Jersey) Law 1998.

Royal Court Rules 2004.

Civil Procedure Rules.

Richardson-v-Bernard (1894) 216 Ex 371.

J W Huelin Ltd-v-Elloury (1935) 238 Ex 326.

United Capital Corporation-v-Bender [2006] JLR 269.

Abdel Rahman-v-Chase Bank (CI) Trust Co Ltd [1984] JJ 127.