Mattos Junior & Ors v Macdaniels Ltd. & Ors

On 3rd February 2003 Mr Sunil Sunderdas Vaswani (“Mr Vaswani”) was joined as the forty-second defendant to this claim and a world-wide freezing order, limited to US$6.5m, was made against him by Lightman J. The latter order was continued by subsequent orders and ultimately replaced by undertakings and security accepted by Jacob J on 11th March 2003. By this application, issued on 28th February 2003, Mr Vaswani seeks orders:

The claim relates to the misapplication of substantial sums belonging to Banco Noroeste SA (“the Bank”), a bank incorporated in Brazil, with branches there and elsewhere. In 1997 the shareholders in the Bank were negotiating to sell it to Banco Santander SA for $450m. In the course of the purchasers’ investigation into its affairs, they discovered a deficiency of $242m. The sale proceeded but on terms that the sellers paid back $242m in return for the right to sue for the recovery of the moneys of the Bank previously misapplied so as to give rise to that deficiency.

The claim form was issued by the claimants on behalf of themselves and all other former members of the Bank on 19th December 2001. The Particulars of Claim, as they now stand, describe the Bank’s Cayman Islands branch (paras 7 to 10), relevant matters concerning Mr Sakaguchi the principal perpetrator of the fraud (paras 11 to 15), the method of accounting between the Head Office of the Bank and its Cayman Islands branch (paras 16 to 19) and how the fraud was discovered (paras 20 to 26). Paragraphs 27 to 35 explain how, as the claimants allege, the fraud was committed. For present purposes the following summary is sufficient.

Between 1995 and 1998 $190m was transferred from US $ accounts held at the Cayman Islands branch of the Bank to accounts in England, Switzerland, Hong Kong and the USA through the SWIFT system. The transfers were not authorised nor made under or in furtherance of any genuine and proper transaction but were disguised by false accounting entries made by two officials of the Bank on the instructions of Mr Sakaguchi. These transfers are described as “primary transfers”. They are fully documented and particularised in Schedule 1 to the Particulars of Claim.

The money did not long remain with the recipients under the primary transfers. Its onward transmission has also been traced by the claimants through what are described as secondary and third level transfers into the hands of those described as Substantive Defendants. In most cases those transfers are also fully documented and particularised in Schedules 1 and 2A to the Particulars of Claim. In cases where the subsequent transfers are not fully documented, particularised in Schedule 2B, the claimants invite the court to infer receipt by a specified Substantive Defendant.

In the light of these exercises it is the case for the claimants that, of the original $190m, $128m was “laundered” through Swiss Bank accounts with Lloyds Bank, Zurich and Citibank, Geneva controlled by Mr Naresh Asnani, a member of the Sindhi community living in Nigeria. Mr Oliver, the solicitor for the claimants, described what he called “the architecture of the claim” in the following terms:

“As this case has evolved and information has emerged and been passed round the worldwide litigation team, our understanding of the scam has taken a certain shape. It has become increasingly apparent that the characters involved at the heart of the scam were the two Nigerian self-styled Chiefs, Anajemba and Odinigwe (and possibly Chief Nwandu) and that they had two principal acolytes:

1.

Sakaguchi, as the “mole” at the Bank (who may loosely be described as the accessory before and during the fact); and

2.

Naresh Asnani, the money-launderer par excellence (or the accessory after the fact).

These two acolytes involved others as they worked. Naresh Asnani’s connections are, for obvious reasons, those whom the claimants are interested in chasing down.”

The claims against the Substantive Defendants are set out in paragraphs 42 to 60 of the Particulars of Claim. Paragraphs 42 to 50 deal with Primary Transfers as defined. It is alleged (para 42) that each Primary Transfer was made or procured by Mr Sakaguchi improperly, in breach of trust and his fiduciary duty to the Bank. In paragraph 43 it is asserted that the Primary Transfers to Substantive Defendants were misapplications of the Bank’s money. Paragraphs 44 to 46 and 47 to 48 respectively allege that each recipient of money under a Primary Transfer had notice of the misapplication and knowingly assisted Mr Sakaguchi in his breach of duty and trust.

In paragraphs 51 to 60 comparable allegations are made against recipients under Second or Third Level Transfers. The claimants assert that in each such case the transfer was made in breach of the constructive trust imposed on the recipient under the Primary or preceding transfer and was a further misapplication of the Bank’s money. They claim that the recipient of money under any such Second or Third Level Transfer had notice of such breach of trust and dishonestly assisted the transferor in committing it. Paragraphs 60AA to 60CC contain similar allegations against Schedule 2B defendants.

Paragraphs 60A to 60F allege a conspiracy between a number of defendants (“the Conspiracy Defendants”) and Mr Sakaguchi and Mr Naresh Asnani. Paragraphs 62 to 83 deal with various defendants who were joined for the purposes of obtaining information and documents. The claims against the Substantive Defendants are for recovery with interest of the sums received by each of them respectively. The claims against the Conspiracy Defendants are for damages equivalent to the money of the Bank which has been misapplied with interest. As I have already indicated Schedule 1 sets out details of the transfers relied on as against each Substantive Defendant. Schedules 2A and 2B allege the facts relevant to each alleged receipt. The facts relied upon to support the claims in conspiracy are pleaded in Schedule 3.

As Mr Oliver observed these claims have been built up over time. The first step was a criminal investigation initiated in Switzerland in November 2000. Mr Sakaguchi and (much more recently) Mr Naresh Asnani were arrested and extradited to Switzerland. They remain in custody there. On 5th February 2001 the Investigating Magistrate froze the bank accounts in the names of Landmark and Excel with Lloyds, Zurich and Citibank, Geneva through which it is alleged that Mr Naresh Asnani laundered the money. He also froze an account with Citibank, Geneva in the name of Sarina which Mr Vaswani had opened on 11th July 1996. It held $125,000. These freezing orders were made as a matter of course in consequence of the criminal investigation, not on the application of the claimants in this action.

Initially there were only two defendants to the claim, Macdaniels Ltd and Chief Ezugo Dan Nwandu. Macdaniels Ltd is an English company and was served here. Although Chief Nwandu is resident in Nigeria, he accepted service in England through his solicitors. The claimants contend that each of them received $8.5m by means of Primary Transfers made in March and April 1997 and that each of them was a party to the alleged conspiracy. Though the proceedings against them were at a standstill while negotiations took place such negotiations have ceased and the proceedings against them are to be pursued to trial.

On 20th March 2002 the personal representatives of Chief Anajemba, his wife and companies associated with him were joined as the third to seventh defendants. It was alleged that they received substantial sums under Primary, Secondary and Third Level Transfers and that they were parties to the alleged conspiracy. Initially they challenged the jurisdiction of this court but that was abandoned. I gave summary judgment against them on the conspiracy claim on 1st May 2003. Unless and until that judgment is successfully challenged they will play no further part in this action.

On 13th September 2002 Chief Odinigwe, also known as Chief Emmanuel Ezenwanmadu, and his wife were joined as the eighteenth and nineteenth defendants. They are alleged to have received about $32m by means of Primary, Secondary and Third Level Transfers and to be parties to the alleged conspiracy. They have been duly served with these proceedings but have not put in any defence. Accordingly the claim against them is likely to be pursued.

On 27th September 2002 Mr and Mrs Dalamal were joined as the thirty-first and thirty-second defendants. They live in England and were served here. Mr Dalamal, but not Mrs Dalamal is alleged to have been a party to the alleged conspiracy. It is averred that certain payments to them in US or HK $s, equivalent to about £155,000, through transfers from the Swiss Bank accounts operated by Mr Naresh Asnani to an account of Sherina and thence via a nominee account in Hong Kong and a Panamian company, all as particularised in Schedule 2B, should be inferred to represent moneys of the Bank which had been misapplied. Discussions between the claimants and Mr and Mrs Dalamal are continuing but, unless they are successful, the claim against Mr and Mrs Dalamal is likely to proceed to trial.

On 16th December 2002 Mrs Payal Asnani, the wife of Mr Naresh Asnani, was joined as the thirty-sixth defendant. The claimants allege that she received $5.75m by means of five Primary Transfers made between June and August 1995 and a further $16m between September 1995 and March 1997 by means of Secondary Transfers from the Landmark account operated by her husband. She is also alleged to have been a party to the alleged conspiracy. Although she has from time to time been resident in London, she was not so resident when the claimants sought to serve her, and was ultimately duly served in Hong Kong. She has not acknowledged service or filed a defence.

Also on 16th December 2002 Mr Nariandas Parmanand Kirpalani and two companies associated with him were joined as the thirty-seventh to thirty-ninth defendants. They are alleged to have received $3.3m by means of secondary transfers from the Landmark account with Lloyds Bank, Zurich operated by Mr Naresh Asnani. None of them is alleged to have been party to the conspiracy. Each of them has been served but contends that the court in Switzerland, not this court, is the appropriate forum. Their application for a stay of these proceedings against them is pending.

Accordingly at the time the claimants applied to join Mr Vaswani as the forty-second defendant there were substantial claims against the first to seventh, eighteenth, nineteenth, thirty-first, thirty-second and thirty-sixth to thirty-ninth defendants based on knowing receipt or assistance and, in some cases, damages for conspiracy. The claims against the other defendants for information and documents were moribund. But there was no claim in England against Mr Naresh Asnani and certain associates of his. Civil proceedings had been commenced by the claimants against him in Geneva on 5th June 2001 but were set aside on 30th January 2003 on the grounds that the Swiss court had no jurisdiction. The claimants are appealing but wish, if possible, to join Mr Naresh Asnani as a defendant to these proceedings. There are obstacles in their path to which I shall refer in due course.

The application to join Mr Vaswani and for a world-wide freezing order was issued on 3rd February 2003 and made to Lightman J, without notice to Mr Vaswani, on the same day. The evidence in support of it consisted of the 23rd affidavit of Mr Oliver, comprising 39 pages, and the documents he referred to consisting of an exhibit “KEO 27”, comprising 367 pages, Ms McMillan’s 7th Affidavit, comprising 43 pages and the exhibits thereto contained in 7 lever arch files and a number of other affidavits and documents. The application bundles (excluding Ms McMillan’s and other prior evidence) and the skeleton argument of counsel were lodged with the court on Friday 31st January. It was suggested that the judge should pre-read the skeleton argument, the application notice and order sought and the 23rd Affidavit of Mr Oliver for which 30 minutes would be required.

The skeleton argument described the nature of the claim and the evolution of the proceedings in England. It set out in some detail the role Mr Naresh Asnani was alleged to have performed. The case against Mr Vaswani was encapsulated in paragraphs 21 to 23 in the following terms:

“The case against the proposed Vaswani Defendants

21)

The Claimants are aware that there is either a familial or a close friendly relationship between the Asnanis and Sunil Vaswani. Sunil Vaswani is the chairman of and a major shareholder in Reliance Bank Limited, a Nigerian Bank based in Lagos. He is also the CEO and managing director of the Stallion group of companies in Nigeria, which (amongst its other interests) has the franchise there for the importation of Honda cars, and to that extent is in the same way of business as Naresh Asnani, in what is a close-knit community. For this reason it may – at the very least – readily be imagined that Sunil Vaswani would have sufficient knowledge of the extent of Naresh Asnani’s legitimate activities to realize that he did not generate enough money himself to act as an unofficial bank; more than that, that acting in that way was of questionable legality under the laws of Nigeria.

22)

Against that backdrop, Sunil Vaswani received into a Swiss Bank account (codenamed “Sarina”), a few months after it was first opened, at least $6.5m in traceable funds from the Landmark/Evershine and the Excel accounts. The Claimants submit that they have a prima facie case against him for moneys had and received, and knowing assistance and knowing receipt.

Risk of dissipation

23)

The Claimants’ case is that Sunil Vaswani was party to a dishonest, elaborate and large-scale money laundering exercise. It is to be emphasized that the money in question was received between October 1996 and August 1997, and no freezing injunctions have yet been sought or made. However, he does have assets in this jurisdiction (and no doubt elsewhere) against which personal remedies may be enforced. There is a bank account at Barclays Bank in London containing some £90,000 and the real property at 16 Beverley House. In the light of the nature of the case, the Court is entitled to infer that there is a risk that (in the absence of a freezing order) he will seek to dispose of his assets both here and elsewhere.”

The transcript of the hearing before Lightman J records the judge’s statement that he had read the skeleton carefully. Leading counsel then described the nature of the claims made in the action and that $6.5m of the Bank’s money could be clearly traced into the hands of Mr Vaswani via the Landmark and Excel accounts operated by Mr Naresh Asnani in Switzerland. Counsel correctly anticipated that the defence of Mr Vaswani was likely to be that he had been a bona fide purchaser for value of the funds so received without notice of the relevant misapplications. As he pointed out this anticipation was prompted not by anything said by Mr Vaswani but because of the contents of an affidavit sworn by Mr Naresh Asnani in proceedings in Hong Kong and statements made by two other recipients from Mr Naresh Asnani. The suggested transaction was a currency exchange of nairas for US$s which counsel described as black market forex money-laundering transactions which were illegal in Nigeria. He added:

“It might be said that an ordinary man in the street would not think anything very wicked about that, but this gentleman of course is a chief executive and chairman of a Nigerian bank and for him to be engaging in black market Forex transactions is, on the face of it, a little surprising. Beyond that, we would simply say that it is a serious obstacle to anyone seeking to establish that he is ‘equity’s darling’ that the transaction was an unlawful transaction.”

There was a further exchange between counsel and the judge relating to similar decided cases. The matter was concluded by the statement of Lightman J:

“But, in any event, having read the skeleton, I have no difficulty in granting this relief at this stage on an ex parte application. It has always been a matter, it seems to me, for this defendant to apply to have it discharged, setting out the full facts of the case.”

Counsel then addressed various issues relating to service, the form of order and the proposed amendments.

The amendments consisted of the addition of the name of Mr Vaswani as a Substantive Defendant, the inclusion in Schedules 1 and 2A of the receipt by him of £6.5m in October 1996 to August 1997 by means of secondary transfers from the Landmark or Excel accounts to the Sarina account. The order, as initialled by Lightman J, recorded that he had read the 23rd Affidavit of Mr Oliver. As I have already indicated that order was continued on an inter partes basis on 17th February and 3rd March and superseded by the undertakings and security accepted by Jacob J on 11th March. The application now before me was issued on 28th February 2003.

This is the first part of the application and is conveniently dealt with first. The particulars of the non-disclosures or misrepresentations relied on in the application notice are those particularised in Mr Vaswani’s affidavit sworn on 28th February 2003. Further allegations were made in the skeleton argument submitted by counsel for Mr Vaswani on this application and yet more during the course of his oral argument, in each case without intervention by counsel for Mr Vaswani. They may be summarised as follows:

In his opening counsel for Mr Vaswani submitted that Lightman J had not seen the evidence or exhibits on which the claimants relied but had only read the skeleton argument. This was understood by counsel for the claimants to suggest that the judge had not read the evidence due to some act or omission on the claimants’ part. He indicated that the judge had been provided with the evidence and exhibits as well as the skeleton in good time to have read the evidence, though it was not suggested he would have read the exhibits. He pointed out that although the judge referred in terms to having read the skeleton argument that did not carry the implication, as suggested, that he had not read the 23rd Affidavit of Mr Oliver, particularly as it was on the suggested reading list and the judge had initialled the order which stated that he had. In his reply counsel for Mr Vaswani made it clear that he did not suggest that Lightman J had not read that affidavit. Consequently there is nothing in this point.

Counsel for Mr Vaswani pointed out that the facts relevant to the claim against Mr Vaswani had been known to the claimants for two years before the application was made. Their source of information had been the investigating magistrate in Geneva and the synopsis prepared from that and other material in June 2001 which was exhibited as KE08 to Mr. Oliver’s sixth affidavit and which, at pages 95, 96 and 132, set out the transfers from the Landmark and Excel accounts operated by Mr Naresh Asnani to the Sarina account and correctly identified Mr Vaswani and his wife as the beneficiaries thereof.

This is true, but it was disclosed in the 23rd Affidavit of Mr Oliver. Thus in paragraph 7.1 he referred to the tracing schedule, identified as the synopsis to which I have referred, as having been prepared in June 2001. In subsequent paragraphs he described what steps had been taken since then to recover the sums so traced. This included applications for information concerning the residence of Mr and Mrs Vaswani in Beverley House, 133-135 Park Road, NW8 7JD, the telephone lines used in that building and the accounts of Mr and Mrs Vaswani with Barclays Bank and American Express Ltd. In paragraph 9 Mr Oliver summarised the claim against Mr Vaswani and why the claimants considered that the $6.5m received to the credit of the Sarina Account in 1996 and 1997 and traced to him was recoverable. To my mind it is quite obvious to any reader of the material passages of Mr Oliver’s 23rd Affidavit that the claimants had known of the claim against Mr Vaswani since at least June 2001. I reject the contention that there had been any non-disclosure or misrepresentation in this respect.

The third matter relied on is the alleged failure to disclose to the judge that Mr Vaswani had bought a third flat, Flat 70 Beverley House, for the equivalent of £5.2m on 28th December 2001. That such a purchase had been made was disclosed in the exhibit to the 23rd Affidavit of Mr Oliver where, at page 253 there is a copy of the relevant entry in the register of title at the Land Registry showing the proprietor to be a company incorporated in the British Virgin Islands but that the flat was subject to a charge in favour of Barclays Bank plc. Page 236 of the same exhibit demonstrated that the telephone lines used in that property had been rented to Mr Vaswani. That Mr Vaswani had a flat in Beverley House (No.16), but not that bought in December 2001 (No.70), was specifically mentioned in paragraph 23 of the skeleton argument of counsel. That he had three flats in Beverley House (Nos 16, 50 and 70) was disclosed in paragraph 7 of the draft order attached to the application notice before Lightman J which he had been asked to read before the hearing.

It seems to me that the only fact not specifically disclosed in one or other of the documents the judge was invited to pre-read was the date of the purchase of Flat 70. Counsel for the claimants contends that such information adds nothing. I do not go that far for at least it shows more money coming into the jurisdiction after the time Mr Vaswani knew that the Sarina account had been frozen in Switzerland. But I do not consider that it was of sufficient materiality to make its non-disclosure in any way significant. The risk of dissipation was not materially decreased from what could be inferred from the fact that Mr Vaswani already had two flats in Beverley House (Nos. 16 and 50) which he had not disposed of since the Sarina account had been frozen.

The fourth matter relied on is the failure to bring to the judge’s attention internal memoranda of Lloyds Bank, Zurich concerning the operation of the Landmark account. It is not suggested that these documents were disclosed to Lightman J. The memoranda in question were contained in exhibit KEO 24 to the 20th Affidavit of Mr Oliver sworn on 16th December 2002 in support of the application to join the thirty-sixth to thirty-ninth defendants and for freezing orders against them. The memoranda are reports of Mr Rolf Wasmer of Lloyds Bank, Zurich to the legal department of the Bank and to his superiors within the Bank dated 10th December 1996 concerning the operation of the Landmark account. They were produced to the investigating magistrate on 19th February 2001 and by him to the claimants on some later date.

It is evident that the Bank was concerned that the Landmark account had been used as ‘a transit account’ and that in view of their concern the account was subsequently closed. They reveal that Mr Naresh Asnani was introduced to Lloyds Bank, Zurich by “our most important customer”, Mr Kirpalani, “and as a result of his support/pressure agreed to become involved in this transit account business”. Mr Wasmer reported, and I substitute the proper names of those referred to:

“For your records [Mr Asnani] has very large trading activities in Lagos, Nigeria (he himself is a “Sindhi”). For his imports, which he has to finance from outside Nigeria because Nigerian L/Cs are not accepted, he needs lots of USDs. As you probably know, it is not very easy to get USDs in a country like Nigeria and such foreign currency, very often, needs to be bought outside official markets. On the other hand from his sales in the local markets he is getting lots of Nairas. These Nairas are then sold to a “partner/friend” who has need for such currency in the local market and, because of this trading activities [sic] has USDs outside the country.”

In the second memorandum the description of the partner suggests that Mr Wasmer had Chief Odinigwe in mind. Reference was also made to another friend. Neither document referred to Mr Vaswani by name or necessary implication.

Counsel for Mr Vaswani contends that these memoranda were relevant to the claim against his client and should have been drawn to the attention of Lightman J because they demonstrated that Lloyds Bank was prepared to operate such an account in relation to foreign exchange transactions outside the official market in Nigeria. Accordingly notwithstanding that they did not refer to Mr Vaswani expressly or by necessary implication they were some support for the defence of Mr Vaswani which counsel for the claimants had correctly anticipated.

I do not accept that these documents should have been drawn to the attention of Lightman J. They do not refer to Mr Vaswani. They indicate that Mr Asnani might wish to buy US Dollars. But it is not alleged that he bought US dollars from Mr Vaswani. The issue may be whether he sold them to Mr Vaswani but neither memorandum deals with sales of US$s by Mr Asnani. I reject this contention.

The fifth complaint is that in paragraph 21 of counsel’s skeleton argument the similarity of the businesses of Mr Naresh Asnani and Mr Vaswani and the extent of their relationship was misdescribed. The question is not whether counsel got it wrong but whether the descriptions in the skeleton argument fairly represented inferences which might be drawn from the evidence then before the judge.

The complaint with regard to the business is that Mr Vaswani imports Hondas and rice, but Mr Naresh Asnani imports electrical goods. So, it is contended by counsel for Mr Vaswani, they were not in the same way of business, as stated in paragraph 21 of the skeleton argument. I reject this complaint. In paragraph 19(a) of the skeleton argument it was stated that Royal Crest Co Ltd was the Asnani Nigerian importation business. The similarity was plainly that both of them were importers of goods into Nigeria. It was and is quite irrelevant whether they imported similar goods.

The complaint with regard to the relationship is that the evidence did not establish that Mr Naresh Asnani and Mr Vaswani were related or close friends. The point was dealt with by Mr Oliver in paragraph 9.1.5 of his 23rd Affidavit by referring back to paragraph 9 of his 21st Affidavit. In that paragraph Mr Oliver stated that the precise connection or relationship between the Asnanis and Mr Vaswani was not then known. He suggested that there might be a family relationship and exhibited an invitation to the wedding of Mr Vaswani’s brother at the Dorchester Hotel in London found amongst the papers relating to one of the Swiss Bank accounts operated by Mr Naresh Asnani held by Citibank, Geneva.

I reject this complaint on the ground that it is not shown to be a misdescription at all. In his affidavit sworn on 28th February 2003 Mr Vaswani describes in paragraphs 53 to 60 his knowledge of and dealings with Mr Naresh Asnani. He accepts that both of them are members of the close-knit community of Hindu Sindhis resident in Lagos. He admits that he first met Mr Naresh Asnani in the early 1980s and that he met him at a wedding in London. He accepts that

“over the years Naresh and I and our families developed a social relationship but not one that could accurately be described as close”.

Accordingly the only issue is how close that relationship is. It is by no means established that the inference the claimants drew is wrong. In any event the question is what Mr Vaswani knew about Mr Naresh Asnani and his business not how close their relationship was.

The sixth complaint is that the reference by counsel in his oral presentation to Lightman J on 3rd February 2003 to the position of Mr Vaswani as the Chief Executive and Chairman of a Nigerian bank was misleading in that he did not occupy those positions at the time, in 1996 and 1997, of the receipts to the credit of the Sarina account from the Landmark and Excel accounts. This was, as counsel for the claimants frankly admits, a mistake for which he is responsible and for which he apologises. Equally it was a misrepresentation which was material in the sense that it would have some bearing on the defence of bona fide purchaser for value without notice on which it was anticipated that Mr Vaswani would rely.

The seventh and final complaint is that the claimants failed to disclose to Lightman J that the Sarina account had been frozen by the investigating magistrate in Geneva on 5th February 2001 and was still frozen. This fact was known to the claimants’ Swiss Lawyer but not to Mr Oliver. He had known about the equivalent freezing of the Kirpalani accounts and had disclosed it on the application for a freezing order against them. In the event the credit balances on those accounts were not taken into account in assessing the limit on the freezing orders made against the Kirpalani defendants.

In my view the existence of the freezing order against Mr Vaswani was known to the claimants through their Swiss lawyers and should have been disclosed, not least because it falsified the statement made in paragraph 23 of the skeleton argument that “no freezing injunctions have yet been...made”.

In summary I conclude that there was (a) non-disclosure of the date on which Flat 70 Beverley House was bought, (b) non-disclosure and consequential misrepresentation with regard to the freezing order made in Switzerland in relation to the Sarina account and (c) a misdescription of the position of Mr Vaswani at the time of the receipt of $6.5m to the credit of the Sarina account. What then is the consequence?

Both parties accept that the principles to be applied are those identified by Robert Walker LJ in Memory Corporation plc and another v Sidhuand another (no 2) [2000] 1 WLR 1443, 1455, namely:

“It will however always be necessary for the court, in deciding what should be the consequences of any breach of duty, to take account of all the relevant circumstances, including the gravity of the breach, the excuse or explanation offered, and the severity and duration of the prejudice occasioned to the defendant (which will include the question whether the consequences of the breach are remediable and have been remedied). Above all the court must bear in mind the overriding objective and the need for proportionality. As Balcombe L.J. said in Brink’s Mat Ltd. v Elcombe[1988] 1 W.L.R. 1350, 1358, this judge-made rule cannot itself be allowed to become an instrument of injustice. The relative degrees of culpability of the client and of his lawyers are not irrelevant but will seldom if ever be determinative.”

Alliott J and Mummery LJ agreed. Mummery LJ, at page 1459, added:

“It cannot be emphasised too strongly that at an urgent without notice hearing for a freezing order, as well as for a search order or any other form of interim injunction, there is a high duty to make full, fair and accurate disclosure of material information to the court and to draw the court’s attention to significant factual, legal and procedural aspects of the case. It is the particular duty of the advocate to see that the correct legal procedures and forms are used; that a written skeleton argument and a properly drafted order are prepared by him personally and lodged with the court before the oral hearing; and that at the hearing the court’s attention is drawn by him to the unusual features of the evidence adduced, to the applicable law and to the formalities and procedure to be observed.”

I do not consider that, applying the tests formulated by Robert Walker LJ, the three deficiencies I have identified justify setting aside the orders made on 3rd February 2003 and subsequently. So far as the merits of the claim are concerned the evidence clearly demonstrated that Mr Vaswani had received through the Sarina account $6.5m which could be traced from moneys of the Bank which had been misapplied. The claimants correctly anticipated Mr Vaswani’s likely defence but it was and is for him to establish it, not for them to refute it. If the defence is not established then the connections between Mr Naresh Asnani and Mr Vaswani will be shown to be much closer than Mr Vaswani has been prepared to admit and would itself be some indication of a risk of dissipation. This is why the judge observed that the grant of the injunction was justified leaving it to Mr Vaswani to apply to discharge it having disclosed the full facts.

I do not think that the three deficiencies gave rise to any injustice to Mr Vaswani. None of them was in my view blameworthy. Moreover I do not see that Mr Vaswani sustained any lasting prejudice from any of them. He put in two affidavits, one on 17th February as required by the order of 3rd February and the other on 28th February in support of this application. But this application is to set aside the original order and those, including the undertakings and security which replaced it, for non-disclosure or misrepresentation. Mr Vaswani did not oppose the continuation of the orders inter partes. He gave the undertakings and security in substitution for them voluntarily. He might have challenged the continuation of the freezing order against him. He might have refused to give the undertakings he did. In either of those events the claimants would have had to establish on all the evidence, including that put in by Mr Vaswani, that the continuation of the freezing injunction was justified. They might not have succeeded. But it is not open to Mr Vaswani to complain of lasting prejudice from the deficiencies in the claimants’ application on 3rd February when he did not take the steps open to him to terminate it.

For all these reasons I dismiss paragraphs 1 to 3 (inclusive) of the application notice now before me.

It is not disputed that this court has jurisdiction to try the claim made by the claimants against Mr Vaswani. Nor is it disputed that the European regulations (Council Regulation (EC) no 44/2001) and the two Conventions for regulating jurisdiction are inapplicable, because Mr. Vaswani does not seek a trial in Europe. It is common ground that the principles to be applied are those referred to by Lord Goff of Chieveley in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 and summarised in Dicey & Morris on The Conflict 13th Ed. p.385 in Rule 31(2) in the following terms:

“An English Court has power to order a stay of proceedings on the basis that England is an inappropriate forum (forum non conveniens) if:

(a)

the defendant shows there to be another court with competent jurisdiction which is clearly and distinctly more appropriate than England for the trial of the action, and

(b)

it is not unjust that the claimant be deprived of the right to trial in England.”

The submissions for the parties emphasised various other considerations by reference to passages in the speech of Lord Goff in Spiliada, other decided cases and excerpts from Dicey & Morris. I shall deal with most of them when considering the facts relevant to this application. But there is one issue of principle which I should resolve before that stage. In his speech in Spiliada (p.476C) Lord Goff summarised the basic principle to be that

“...a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum for the trial of the action, i.e. in which the case may be tried more suitably for the interests of all the parties and the ends of justice.”

Counsel for Mr Vaswani submits that the parties to whom Lord Goff referred are limited to those who are parties to the particular issues between the claimant and the defendant seeking a stay. Thus in a multi-party claim such as this the court should pay little, if any, regard to the consequences for the action as a whole if part of it is stayed so as to require the claimant to sue a particular defendant in a foreign jurisdiction. Counsel for the claimants submitted that this contention is inconsistent with what Lord Goff actually said and is in any event wrong.

I reject the submission of counsel for Mr Vaswani. First, the contention is inconsistent with what Lord Goff actually said. He referred throughout to the trial of the action, not to a particular issue. Second, at page 485B-E, Lord Goff referred expressly to the judge having been entitled to give weight to the consideration that the interests of justice required the claims against two defendants to be tried in one action. Third, it is apparent from The “Goldean Mariner” [1989] 2 Lloyd’s Rep 390, 400, Citi-March Ltd v Neptune Orient Lines Ltd [1996] 1 WLR 1367, 1376 and Dicey & Morris 13th Ed. para 12-027 that the court does consider the efficient conduct of litigation against a number of defendants.

In his affidavit sworn on 17th February 2003 as required by the order of Lightman J made on 3rd February Mr Vaswani accounted for the $6.5m he received to the credit of the Sarina account. He gives details of the importations in respect of which the sums so received were used. In his affidavit sworn on 28th February 2003 he gives details as to his personal and business background, his assets and considerable wealth and the need for and methods of acquiring foreign exchange for imports into Nigeria. He relates how and why he opened the Sarina account, his knowledge of and relationship with Mr Naresh Asnani and the course of the Swiss proceedings.

The case for Mr Vaswani relevant to this application is clearly set out in paragraphs 92 to 101 in which he states:

92.

So far as I am concerned I have no wish to challenge any of the Claimants’ allegations which they have made against those who they refer to as the substantive Defendants in these proceedings and those who they have identified as the Conspiracy Defendants.

93.

In other words, in relation to the claims which have been brought against me, I am prepared to accept that the USD 6.5 mil had been stolen from Banco Noroeste, and that prior to the transfer of the various sums totalling this amount into the Sarina account, those sums were held by Naresh Asnani – and (if relevant) other members of his family associated with his bank accounts – at Lloyds International in Zurich and Citibank in Geneva on a constructive or resulting trust in favour of the Claimants.

94.

However, my defence to the Claimants’ claim as against me is that I purchased the monies totalling USD 6.5 mil in good faith, believing that these dollars belonged to him and without having any reason to suspect that they represented the proceeds of a bank fraud, or were otherwise being laundered by him or through his bank accounts.

95.

I have been advised that if this defence is accepted it represents a complete answer to the Claimants’ claims against me.

96.

I contend that all of the relevant witnesses and other evidence that I would have to call and adduce are in Lagos, Nigeria and, indeed, it is only in that jurisdiction that I could have a fair trial of what is effectively a single and narrow issue as between the Claimants and me. I live most of the time in Nigeria where I operate my very substantial business empire. My visits to London are essentially for holiday purposes. It would be far more convenient for me to deal with lawyers in Nigeria than having to instruct solicitors and counsel in England.

97.

The witnesses who I would wish to call include a number of long-standing employees of my companies, who include Mr. Krishna and Mr. Prakash. It would cause a serious disruption to the financial operation of my Nigerian companies if they would have to travel to England to give evidence especially if I was having to attend here at the same time, during the trial of these proceedings.

98.

There are a large number of witnesses who I would wish to call in order to corroborate that part of my evidence that relates to my standing and reputation in the Lagos commercial community, and the practice of obtaining foreign currency on the parallel market as an everyday feature of import/export and related business activities in Nigeria.

99.

I would also wish to call a substantial number of witness who would corroborate my evidence as to the business reputation and standing of Naresh Asnani and his father in Nigeria in 1996 and 1997, and the fact that (as I firmly believed at the time) all who dealt with the Asnani family in parallel market transactions had every reason to be confident that there were dealing with reputable businessmen and with money that was not “tainted” in any way.

100.

I very much doubt that such witnesses could be persuaded to come to London to give evidence of these matters, and because of the seriousness of the Claimants’ allegations against me I am most anxious that the Judge who tries this case will have the benefit of seeing in the witness box all of the witnesses who are in a position to give this evidence and to corroborate what I say about these aspects of my defence.

101.

In addition, I have been advised that expert evidence will probably be required in order to deal with the Claimants’ suggestion that the parallel market transactions which I participated in with Mr. Asnani in 1996 and 1997 were illegal under Nigerian law. Quite clearly, it will be preferable for such matters to be dealt with by a Nigerian judge who would be (so I have been advised) in a far better position than an English Judge to determine whether or not these transaction were illegal, and the extent to which any illegality is to be treated as relevant when judging the question of good faith in my dealings with Mr. Asnani.”

The claimants’ response to this evidence of Mr Vaswani is contained in a witness statement made by Mr Ogundipe on 8th April 2003 and the 13th Affidavit of Jonathan Tickner, a partner in the firm of solicitors acting for the claimants, sworn on 15th April 2003.

Mr Ogundipe is a solicitor and advocate of the Supreme Court of Nigeria and a partner in the firm acting for the claimants in that jurisdiction. In paragraphs 4 to 11 of this witness statement Mr Ogundipe deals with the contention that Nigeria is the appropriate forum for the claim against Mr Vaswani. He refers to the conclusions of a working committee commissioned by the Lagos State Ministry of Justice in their report dated September 2002 and certain inferences he says can be drawn from them. In paragraph 10 he states:

“It is my experience that, were the Lagos High Court to embark on the trial of the claims made in this action against Mr Vaswani, such a trial is unlikely to commence for at least three years after the filing of the claims, and the trial itself is unlikely to be concluded within two years of commencement (i.e. five years in total), given the manner in which trials in the Lagos State High Court are conducted. Evidence is recorded manually and in long hand by the judge. Due to the congested nature of the lists of all judges, the case itself would be listed on several different days over a period of at least two years. During this time, the judge would probably only be able to permit hearings of about an hour on each occasion that the case was listed for hearing. This procedure will result in several hearings and increase the costs of the litigation which costs....are not awarded on an indemnity basis.”

In paragraphs 12 to 16 Mr Ogundipe also challenged the claim of Mr Vaswani to have the reputation in Nigeria for “honest dealing and commercial integrity”. This provoked an irate response from Mr Vaswani in paragraphs 25 to 61 of his affidavit sworn on 2nd May 2003 with a rejoinder from Mr Ogundipe in paragraphs 11 and 12 of his witness statement also made on 2nd May. I have paid no regard to these allegations and counter-allegations. It is not part of the claimants’ case that Mr Vaswani had any particular reputation in Nigeria and I cannot on this application determine the truth of any of the rival contentions.

Counsel for Mr Vaswani also contended that I should reject the evidence of Mr Ogundipe in its entirety because it failed to comply with the requirements of CPR Rule 35.10(2) and because his allegations relating to the reputation of Mr Vaswani showed him to be an entirely unreliable witness. I do not accept those submissions. First, the evidence of Mr Ogundipe I have quoted is not that of an expert at all. He is stating facts as he has perceived them in the course of his profession as a solicitor and advocate of the Nigerian Supreme Court. Second, I can see no reason why, having regard to the overriding objective, I should reject this evidence of Mr Ogundipe, notwithstanding the mandatory terms of CPR Rule 35.10(2), given the powers of the court for which CPR Rules 3.1(2)(m) and 3.10 provide. Third, as I am unable on this application to determine the truth or otherwise of Mr Ogundipe’s allegations they are no reason for rejecting his other evidence.

In response to the first witness statement of Mr Ogundipe Mr Vaswani relied on a witness statement of Mr Badejo made on 30th April 2003. He too is a solicitor and advocate in Nigeria and the sole proprietor of his own firm. He seeks to give expert evidence for Mr Vaswani for whom he has acted since 1987. In paragraphs 14 to 18 he deals with paragraphs 5 to 10 of Mr Ogundipe’s first witness statement. He considers that the report of the working party is now out of date and disputes an age analysis of cases to which the working party referred. He considers that any claim against Mr Vaswani would be concluded in two to three years. But, significantly, he makes no comment on the passage in the evidence of Mr Ogundipe I have quoted in paragraph 52 above. In those circumstances I proceed on the basis that Mr Ogundipe’s description of how an action against Mr Vaswani would be conducted in the Lagos High Court is accurate.

Mr Badejo also expressed the opinion that the foreign exchange dealings conducted by Mr Naresh Asnani in Nigeria were not made illegal by the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act 1995. This was disputed by Mr Ogundipe in paragraphs 8 to 10 of his second witness statement to which Mr Badejo responded in paragraphs 13 to 17 of a further witness statement made by him on 9th May 2003. Accordingly there is an issue whether the transactions Mr Vaswani claims to have conducted with Mr Naresh Asnani in Nigeria were illegal by the law of Nigeria.

In his 13th Affidavit Mr Tickner deals with the role of Mr Naresh Asnani in paragraphs 17 to 28. He concludes (para 27.9) that Mr Naresh Asnani operated as an unauthorised bank providing illegal banking services to Chiefs Odinigwe and Anajemba and to his family and friends in the Sindhi community “who were only too happy to turn a Nelsonian blind eye to the source of this ocean of stolen dollars”. In paragraphs 29 to 32 he deals with the position of Mr Vaswani. He emphasises that the claimants do not accept Mr Vaswani’s claim to have acted in good faith and explains why. He contends (para 32) that there are a number of factual issues in relation to Mr Vaswani’s defence and the claims against the Conspiracy Defendants, against Mrs Payal Asnani and the Dalamal and Kirpalani defendants. He indicates that his firm has been instructed to join Mr Naresh Asnani as a defendant to this action.

The joinder of Mr Naresh Asnani as an additional defendant to these proceedings is not entirely straightforward. The advice the claimants have received from their Swiss lawyer, Mr Schifferli, is that they cannot withdraw their appeal against the order of the Swiss Court in Mr Naresh Asnani’s favour that it has no jurisdiction to determine the civil claim against him or discontinue their claim against him without, in either case, abandoning their cause of action. If the appeal succeeds either party can apply to have the civil claim stayed until the criminal proceedings have been concluded in about two years time. But then, seemingly, the court here would be obliged, pursuant to Articles 21 to 23 of the Lugano Convention, to decline jurisdiction so long as there are civil proceedings in Switzerland. It would appear, therefore, that it is only if the appeal of the claimants in Switzerland fails that Mr Naresh Asnani could be sued to judgment in England.

In any event, as counsel for Mr Vaswani points out, why should it be assumed that Mr Naresh Asnani will defend proceedings brought against him here? He has no assets here, nor the means to defend the claims against him, and a judgment by default obtained here will not be enforceable against him or his assets elsewhere. There is force in these submissions. I do not assume that a trial of the action here will involve the active participation of Mr Naresh Asnani.

In their skeleton argument for use on this application counsel for the claimants referred to the possibility of the evidence of the witnesses Mr Vaswani wishes to call being given on commission or by video-link. The latter possibility was explored in an exchange of witness statements over the three days of argument before me. The upshot is that a video-link by satellite can be established between London and Lagos by which the evidence Mr Vaswani wishes to adduce could be transmitted to a judge in London. It would operate at 128 kb/s or more if more bandwidth is bought. But there is no evidence as to how reliable and effective such a link would be.

In these circumstances counsel for Mr Vaswani submits that the High Court in Lagos is clearly and distinctly more appropriate than the High Court in London for the trial of the claim against him. He relies on the points made in the evidence of Mr Vaswani which I have quoted, in particular that all the witnesses he wishes to call are in Nigeria. In relation to the serious allegations which have been levelled against him he points to the need for the judge to see his witnesses and hear their evidence. In relation to the claim that the unofficial foreign exchange market on which Mr Naresh Asnani dealt is unlawful, he submits that a judge in Nigeria will be more familiar both with local conditions and the principles of Nigerian law to be applied. He points out that if the claimants are concerned to obtain judgment against Mr Naresh Asnani if he is convicted then, subject to their appeal, they will get it in Switzerland or if the appeal fails the obvious place to sue him is the country of his residence namely Nigeria. He suggests that in view of Mr Vaswani’s admissions there is little likelihood of inconsistent findings if the proceedings against him are heard in Nigeria.

In relation to the forensic conditions in Nigeria counsel for Mr Vaswani points out that delay must be truly excessive to warrant the rejection of the natural forum. For that proposition he relies on Ceskoslovenska Obchodni Bank v Nomura Int PLC (Mr Jonathan Sumption QC sitting as a deputy judge of the Commercial Court, unreported, 12th December 2002) and Smay Investments Ltd v Yogenda Sachdev (Patten J, unreported, 14th March 2003). In relation to what is sometimes called the Cambridgeshire factor (see The Spiliada [1987] AC 485E to H), namely the presence in London of a team of lawyers and other professionals acting for the claimants, he points out that they have professional assistance in Nigeria in the person of Mr Ogundipe. Finally in relation to the evidence of Mr Ogundipe as to the conduct of hearings in Lagos which I have quoted he submitted that it was reminiscent of proceedings in the County Court in England and for that reason could not amount to a denial of justice.

Counsel for the claimants contends that the appropriate forum is England and Mr Vaswani has failed to show, clearly and distinctly or at all, that the appropriate forum is Nigeria. He points out that given the international dimensions of the underlying facts there is no natural forum. He submits that the only issue of Nigerian law is a straightforward point on the construction of the Nigerian legislation. He maintains that the number of witnesses whose evidence Mr Vaswani could not procure to be given in England is limited and for them the video-link to which I have referred would be adequate. He points to the common issues of fact which may arise and suggests that the sort of hearing in Nigeria to which Mr Ogundipe refers would be most unsuitable.

I prefer the submissions of counsel for the claimants. First, there is no “natural forum” in the sense in which those words are used in this connection. The case concerns the misapplication of money from the Cayman Islands Branch, in fact located in New York, of a Bank incorporated in Brazil. The money was transmitted by electronic means to accounts in Switzerland ($126m), England ($40m), Hong Kong ($6m) and USA ($17m). From those accounts the money has been distributed to other accounts in those four countries, Brazil and Nigeria. Of the Substantive Defendants, as defined, six of the ten have addresses in England and this court has jurisdiction over all of them.

Second, the conduct of Mr Naresh Asnani is central to all the claims. It is an essential element in the conspiracy claim. It is an essential element in the knowing receipt claims and the indispensable background to a consideration of the defences of bona fide purchaser for value without notice advanced by Mr Vaswani as well as by Mr Kirpalani and Mr and Mrs Dalamal too. Not only would it be highly inconvenient and productive of delays and increased costs to split off the claims against those defendants, Mr Vaswani to Nigeria, Mr Kirpalani, as he claims, to Switzerland and retain that against Mr and Mrs Dalamal in England but it would lead to a considerable risk that conflicting findings might be made in each of those jurisdictions. Accordingly it is in the interests of all parties that all these claims be pursued in one action.

Third, the Cambridgeshire factor plainly favours the retention of all claims in England from the point of view of the claimants. I do not regard the services of Mr Ogundipe in Nigeria as comparable to those provided to the claimants in London.

Fourth, I consider that the need for Mr Vaswani to call witnesses whose evidence cannot in practice be procured in England has been exaggerated. Mr Vaswani will be the principal witness in his own defence. No doubt he will wish also to call evidence from his own employees. It is not suggested that in practice their evidence cannot be made available in England. It is suggested that he will need to call further evidence from third parties as to the working of the unofficial foreign exchange market in Nigeria and Mr Vaswani’s commercial reputation there. I have difficulty in understanding how the latter point will be relevant. It is no part of the claimants’ case that Mr Vaswani had any particular reputation and his defence will succeed or fail in the light of the facts of the case irrespective of his reputation good or bad. But in so far as Mr Vaswani wishes and is permitted to call evidence as to his reputation it will be peripheral to the main issues. Similarly I accept that some evidence on the workings of the unofficial foreign exchange markets in Nigeria may be required as a background for the consideration of the conduct of Mr Vaswani and the question whether transactions in that market were legal. But that evidence would, I think, be either essential to the claim against all the Substantive and Conspiracy Defendants or it would be peripheral to the main issues. Either way it would not justify a separate trial against Mr Vaswani in Nigeria.

Fifth, insofar as Mr Vaswani wishes to adduce the evidence of third parties who are not prepared to give evidence here the evidence does not establish that the suggested video-link is so unreliable or unsatisfactory as to be unviable for the purpose of transmitting to a judge in England peripheral evidence of that nature. Nor is there any reason to anticipate any constitutional or diplomatic objection to the establishment of a video-link. And if it is then such evidence can be obtained on commission.

Sixth, the issue of Nigerian law appears to me to be a simple point of statutory construction of a statute of a common law country which applies to that issue similar principles to those applied in this Court. In this connection counsel for Mr Vaswani submitted that the court here would be at a substantial disadvantage because it would be unable to call for assistance from the Attorney-General of Nigeria or the Minister of Finance. I do not understand, and counsel for Mr Vaswani was unable to explain, for what legitimate purpose such assistance might be required. Certainly there is no expert evidence to warrant the submission.

Seventh, the procedure of the High Court in Lagos as described in the unchallenged evidence of Mr Ogundipe which I have quoted in paragraph 52 above would be unsuited to a trial of the claim against Mr Vaswani. It is no answer to say, as counsel for Mr Vaswani did, that the description fits that of hearings in County Courts in England and Wales for no one would suggest that the claim against Mr Vaswani should be tried in the County Court.

For all these reasons Mr Vaswani has not satisfied me that the action or the claim against him is clearly and distinctly more appropriately tried in Nigeria than in England. Accordingly I dismiss paragraph 4 of the application notice also.

For the reasons I have given I do not consider that