Mengiste & Anor v Endowment Fund for the Rehabilitation of Tigray & Ors

This is an application by the claimants for permission to appeal against the judgment of Peter Smith J dated December 2014 and his consequential order dismissing the claimants’ application to lift a stay that the judge had himself imposed on the proceedings by order dated 22 March 2013. The application for permission was considered by Sir Robin Jacob on the papers and by order dated 17 March 2015 he adjourned it to an oral hearing which has come on before me today. He also gave the defendants permission to appear at this hearing. The claimants have been represented at this hearing by Mr Lance Ashworth QC. The defendants have been represented by Mr Oliver Assersohn.

For the purposes of this application the background may be summarised as follows. The first claimant was the General Manager of and a majority shareholder in the second defendant, a pharmaceutical company incorporated under Ethiopian law. The second claimant, another company incorporated under Ethiopian law, was established by the first claimant with a colleague in March 1993 and is engaged in the production and distribution of machinery for use in the pharmaceutical industry. It has a factory in Tigray.

In 1998 the second defendant, allegedly at the instigation of the first defendant, initiated proceedings against the claimants in Ethiopia. The second defendant alleged that the first claimant, whilst still employed by the second defendant, entered into a contract for the supply of goods by the second claimant to the second defendant, which the second defendant duly paid for but which were never delivered.

At a hearing in January 2001 and at a further hearing in January 2003 the Regional Supreme Court of Tigray gave judgment against the claimants. It found that the first claimant had acted dishonestly and in bad faith and ordered the claimants to pay to the defendants the sum of $1,550,000.

The claimants appealed against these judgments, but their appeals were dismissed by the Federal Supreme Court in March 2003 and a subsequent petition by the claimants to the Regional Supreme Court to have the original judgments reviewed under Article 6 of the Ethiopian Civil Code was dismissed in June 2004.

The claimants then petitioned the Cassation Division of the Federal Supreme Court in relation to the refusal by the Regional Supreme Court to undertake a review, but this was dismissed without reasons in February 2005. The original judgments were enforced against the claimants and the first claimant was required to sell his shareholding in the second defendant.

In April 2010 the claimants began these proceedings in England alleging that the Ethiopian judgments had been procured by fraud and that the defendants had deliberately withheld material evidence. They applied to the High Court for permission to serve these proceedings on the defendants out of the jurisdiction. In support of their claims, the claimants relied, in particular, upon an inventory report dated October 2005 which they claimed had only come to light after the conclusion of the Ethiopian proceedings and which they maintained showed that the second defendant had indeed received the goods which the second claimant had agreed to supply.

The defendants responded to the proceedings by issuing an application challenging their continuation within the jurisdiction on the ground that England was not the appropriate forum for their resolution and that the claimants should pursue their contentions in Ethiopia. The claimants met this challenge by arguing that they had exhausted the avenues open to them in Ethiopia and in any event would not have a fair hearing in that jurisdiction.

The matter came on before Peter Smith J who, after a hearing which took 12 days and extended over many months, gave judgment on 22 March 2013. He came to the conclusion that the claimants had failed to provide any cogent evidence that the original proceedings before the Ethiopian courts, based on the evidence before those courts, had been conducted in a way that was unfair to the claimants. Further, the claimants had failed to provide cogent evidence that the Ethiopian courts would not now provide the claimants with a fair hearing. Nevertheless, he had concerns about the inventory and also about the involvement in the proceedings of Judge Mehretab. Judge Mehretab is a judge in the Tigray Supreme Court and is the wife of a Mr Gebrue who held a senior position in the first defendant from 1995 to 2001 and then again from 2008 to 2011. Notwithstanding this relationship, Judge Mehretab had a significant role in the Ethiopian proceedings in that she was present at the very first hearing and on 20 separate occasions in the months that followed. The claimants accept that she was not one of the three judges who gave judgment in the Tigray Supreme Court, but she was one of the three judges who heard the evidence.

Peter Smith J concluded that it was impossible to know what the input of Judge Mehretab into the judgments of the Tigray Supreme Court was. In all these circumstances he decided that there was a clear case to take the matter back to the Ethiopian courts and he therefore stayed the claim in this jurisdiction and gave the claimants an opportunity to make the various matters to which I have referred the subject of a review application in Ethiopia. As he further explained, if that application were to fail then it might equip the claimants with more compelling evidence that it was not possible for them to have a fair hearing in Ethiopia.

In April 2013 the claimants duly issued a petition in the Tigray Supreme Court seeking a review of the decisions that court gave in January 2001 and January 2003. They relied on the inventory report of 3 October 2005, the involvement of Judge Mehretab and evidence given in the course of the proceedings in England including, in particular, evidence given by Mr Gebrue that he was married to Judge Mehretab.

In October 2013 the Tigray Supreme Court dismissed the petition. A further application to the Court of Cassation was also dismissed. The claimants therefore returned to England and applied to Peter Smith J to lift the stay he had imposed in March 2013. He declined to do so. He considered (and the claimants accept) that the Court of Cassation found that the claimants’ complaints were raised too late and that it was not permissible to undertake a review under Article 6 unless the application had been made within one month of discovering the ground on which it was based. This the claimants had failed to do. The conclusion of the Court of Cassation was, said Peter Smith J, a perfectly reasonable one for it to have reached.

Sir Robin Jacob observed when giving the direction to which I have referred that there were, on the face of it, serious questions as to the impartiality and fairness of the Ethiopian proceedings. I respectfully agree. Mr Ashworth has pointed to aspects of the reasoning of the Court of Cassation which he submits are at the very least concerning. In so far as the court appears to have expressed a conclusion about the first claimant’s knowledge of the relationship between Judge Mehretab and Mr Gebrue, this is a finding which was made without hearing any oral evidence and it appears that it may be contrary to the finding made by Peter Smith J in his judgment of 22 March 2013. Further, he contends that there is no or no adequate recognition by the Court of Cassation of the involvement of Judge Mehretab in hearing the evidence which formed the basis of the judgments of January 2001 and January 2003. Likewise, continues Mr Ashworth, she was one of the three judges who dismissed the preliminary objection to the authority of a Mr Asgedom to instigate proceedings, he having only been appointed in March 1998 and not in June 1997. Moreover, there is, says Mr Ashworth, no basis for the apparent finding of the Court of Cassation that it had ascertained Judge Mehretab’s impartiality.

As for the Article 6 time bar, Mr Ashworth has persuaded me that the claimants have an arguable case that they have been subjected to a real risk of injustice throughout the Ethiopian proceedings up to and including the last hearing before the Court of Cassation. The right to be judged by an impartial tribunal is so fundamental, argues Mr Ashworth, that it is not something which should be governed by any time limit, let alone one of 30 days. So also, a system which provides such a limited time period in which a point of this kind can be raised is very unfair. In short, Mr Ashworth argues, Article 6 and the one month time limit it contains either does not apply to the claimants’ submissions and arguments in relation to the position of Judge Mehretab or, if it does apply, it in and of itself leads to irremediable unfairness. Moreover, I it is, I think, arguable that in assessing the merits of the claimants’ submissions in relation to the issues I have summarised, Peter Smith J set the bar too high in his judgment of 11 December 2014 in considering whether the claimants had shown compelling evidence that they had not obtained a fair trial and hearing in relation to the matters on which they now rely, and that the judge ought rather to have considered whether the matters to which I have referred would have led a fair-minded and informed observer to conclude that there was a real possibility that the claimants had not obtained a fair trial and hearing. As I say, although not without some hesitation, I have come to the conclusion that these are all points which the claimants should be permitted to develop before this court, subject to the matter to which I now come.

That brings me to the second issue upon which I have been addressed this morning. Mr Assersohn submits that the claimants face a further insuperable obstacle arising from their failure to comply with an order requiring them to pay £200,000 on account of costs following the judgment of 22 March 2013. By way of background, the claimants were originally ordered to pay £400,000 on account of costs by 19 April 2013. This order was subsequently varied by consent, both as to the sum to be paid and the date for payment with the consequence that the claimants agreed and were ordered to pay £200,000 by 31 March 2014. No part of this sum has yet been paid and so the claimants were at the time of the second hearing before Peter Smith J in breach of this order.

This default by the claimants gave rise to two further applications before Peter Smith J. The first was an application by the claimants dated 27 March 2014 for an order releasing them from their obligation to pay the £200,000 on the ground that they could not afford to pay it. The first claimant was cross-examined at the hearing on this issue and it became clear that, despite having been ordered to do so, he had failed to provide full disclosure of his assets and liabilities. The judge was wholly unpersuaded by his evidence as to his inability to pay.

The second was an application by the defendants dated 15 April 2014 for an order dismissing the claim in the light of the claimants’ failure to pay the £200,000. As to this, the judge accepted the submission made by the claimants that he should first decide whether to accede to the claimants’ application in relation to the stay, and in the event it succeeded, proceed to consider whether payment of the £200,000 should be made a condition of the relief sought.

As I have explained, the application for an order lifting the stay failed and so the judge then proceeded to draw the threads of his various conclusions together. He decided that the litigation in this country having now come to an end and the claimants having failed to provide full disclosure of their assets, there was no justification for varying the costs order. Further, in relation to the defendant’s application, the action should indeed now be dismissed. However, the judge continued, the claimant’s default would not bar them from making an application to this court for permission to appeal against his order.

In light of these matters Mr Assersohn submits that it would be unjust to expose the defendants to the costs and inconvenience of an appeal in circumstances in which the claimants have flouted and continue to flout an order of the court requiring them to pay a substantial sum on account of costs.

Mr Ashworth responds that it is clear that the judge regarded their default in relation to the costs order as a subsidiary issue because he proceeded to decide their application to lift the stay first and indicated that, if that was successful, he would then consider whether the claimants should be required to pay the £200,000 as a condition of securing the relief sought. Moreover, continues Mr Ashworth, it was clear that the judge did not consider his order striking out the claim to be a bar to an appeal against his decision not to lift the stay.

The judge having taken the approach he did at the hearing before him, I am not persuaded I should refuse permission to appeal simply because the claimants are still in default of the costs order. However, as Mr Ashworth recognised, I must also consider whether I should make the grant of permission to appeal conditional upon the claimants complying with the costs order within a further specified time period. In that regard there can be no doubt that this court has the power to make such a conditional order and in my judgment. in the circumstances of this case, including, most importantly, the failure by the claimants to satisfy the judge that the costs order was one with which they could not comply, such a conditional order is plainly justified. In my judgment, it would be wholly unjust to expose the defendants to the costs of an appeal while the claimants continue to defy an order which required them to pay to the defendants £200,000 on account of costs as long as 31 March 2014. Mr Ashworth submits that I should simply require the claimants to pay that sum of £200,000 into court as a condition of giving them permission to appeal. Mr Assersohn submits in response that the defendants have already incurred very substantial costs in relation to these proceedings and it would be wrong to deny them the £200,000 which, as I have said, it was ordered by agreement they should receive in March 2014. I accept that submission and I am not prepared to order that the sum simply be brought into court.

That leaves the question of the time by which the condition must be satisfied. Mr Ashworth invites me to say that it must be satisfied by 31 March 2016. He has told me on instructions that the first claimant is now in a position to sell his own home and that this will provide sufficient funds to enable him to comply with the order. He says that to give the claimants until 31 March 2016 provides a realistic long-stop for payment.

I have come to the conclusion that it would be appropriate to give to the claimants until 31 March 2016 to comply with the condition and I would make it clear in so doing that this is the long-stop and they should not anticipate any further extension. If the costs order is not complied with by 31 March 2016 then they will not have permission to appeal.