Vitol SA v Arcturus Merchant Trust Ltd

There are three applications before the court. The first is the application of the defendant, Arcturus Merchant Trust Limited, to set aside or to stay these proceedings. The second is the application of the claimant, Vitol SA, for an anti-suit injunction. The third is the claimant’s application for summary judgment.

The facts in brief are that the claimant is a well-known trading company. One of its businesses is selling petroleum products into West Africa. A large part of this trade is carried on by delivering products to its customers to tankers from what have been called ‘mother ships’ which are in fact large tankers themselves. These vessels carry the product from its country of origin and then stay for a short period of time at anchorage off-shore Cotonou in Benin to deliver the product to the claimant’s customers by ship-to-ship transfer there. This kind of delivery is called ‘DES’; delivery ex-ship.

The claimant, which is a Swiss company, is represented in Nigeria by a company called Mansel Commercial Services Limited. Mansel is a Nigerian company but it is wholly owned by the claimant and exists to provide the claimant with agency services there. It has an office in Lagos and employs among others Mr Ian Brown as head of its operations.

The defendant company is a Nigerian oil and gas trading company established in 1998. It is also a supplier of automative gas oil (AGO) in Nigeria. There are three officers of the company who are relevant to these proceedings. The first is Mr Adeniyi Adeoye who is the defendant’s CEO and who also owns most of the shares in the company. He is clearly a successful international businessman. The other two people I should mention are Mr Stilian Mitakev who was the defendant’s chief operating officer at least until September 2008. The third is Mr Sanya Akinyemi who was the defendant’s general manager with responsibility for shipping until January 2009.

Dealings between the parties began at July 2008 when Mr Mitakev was introduced to Mr Brown of Mansel by the defendant’s bankers, a Nigerian bank called Skye Bank. That meeting led to a contract which was made on the 23^rd of July 2008. The terms, which are the claimant’s standard terms for this type of contract, were confirmed by a contract note sent the following day.

Under this contract, the claimant supplied the defendant with 5,000 metric tonnes of gasoil in early August 2008. There is no dispute as to this contract. However it is to be noted that oil prices were particularly volatile at this time. The current dispute between the parties relates to a second agreement which is said to have been made on the 4^th of August 2008 and again confirmed on the claimant’s standard terms the following day, that is the 5^th of August 2008.

Before coming to the detail, I should state that it is common ground that an agreement was reached on the 4^th of August 2008 by the claimant represented by Mr Brown of Mansel and by Mr Mitakev. This agreement was for the sale of about 5500 metric tonnes of gasoil. That was 500 tonnes more than had been agreed a few weeks earlier in July. However, the defendant says that Mr Mitakev had neither actual nor ostensible authority to enter into this second agreement on its behalf. It is accepted by Mr Aliker, who has argued the case well for the defendant, that under normal circumstances Mr Mitakev as chief operating officer would at least have had ostensible authority to buy for the defendant whether he had actual authority or not.

However it is submitted that the claimant was on notice of his lack of authority. The question of notice has been the main issue between the parties. The claimant submits that Mr Mitakev was probably authorised in fact, alternatively that it had no notice to the contrary. On that basis, it submits that the court has jurisdiction under clause 20 of its standard terms that provides as follows,

The claimant further submits that on the basis of that clause, which is of course an exclusive jurisdiction clause. It is entitled to an anti-suit injunction restraining certain proceedings that the defendant has brought in Nigeria. Finally it submits that the defendant has no real prospect of successfully defending the claim and so seeks summary judgment. The defendant, on its behalf, maintains that this is not a case for an injunction, and further submits that factual disputes relating to the second contract show that the potential defence exists which should go forward to trial. In broad terms that is the ambit of the dispute between the parties.

In his first witness statement of the 2^nd of March 2009, Mr Adeoye explains that part of the defendant’s procedures are that there must be before every transaction a board resolution for the bank authorising the transaction and authorising him as CEO as the sole signatory of the contract. He produces such a resolution in relation to the first contract. He goes on to deal with the issue of notice to the claimant as follows. Given the importance of this, I should set out the relevant paragraph from his witness statement verbatim. It is paragraph 15 and it reads as follows,

This is the only evidence that the claimant was on notice of the alleged lack of authority on the part of Mr Mitakev, and it gives rise to the obvious question as to who on the part of the defendant made this representation. It is to be noted that the defendant was asked by the claimant’s solicitor’s letter of 4^th of March 2009 who it was that made this representation. This point has not been answered. That in itself might carry little weight but for the fact that there has been further evidence from the defendant including from Mr Adeoye which is dated the 9^th of March 2009 and in which this issue, which is obviously a central one, has not been addressed. Be that as it may, Mr Adeoye fairly accepts in his witness statement that when he did meet with Mr Brown of Mansel following the completion of the first contract, he did not at that time see the relevance of pointing out Mr Mitakev’s authority to bind the company. In his evidence, I should say that Mr Brown denies that any such representation was made.

As I have mentioned, the second contract was apparently entered into on 4^th of August and the contract note sent on 5^th of August 2008. Mr Brown’s evidence is to the effect that Mr Mitakev and Mr Akinyemi came to his office on 4^th August and an agreement was concluded then and there. Mr Adeoye says that he was not aware of, and had no knowledge of, any second contract being entered into. He says that there was no board resolution. He says that he was on a business trip to South Korea at the time returning to Nigeria on 9^th August 2008, and has produced copies of his passport. He says that he only discovered the existence of the alleged second contract when it was brought to his attention by the defendant’s bankers.

He draws attention to what appears to be an internal memo dated the 15^th August 2008. This is directed to ‘COO’, in other words the defendant’s chief operating officer, Mr Mitakev. In it, he asks,

Taking that document at its face value, it objects to the entering into of the contract on commercial grounds. It does not suggest that Mr Mitakev had no authority to enter into the contract, as one would have expected on the defendant’s case. According to Mr Adeoye, Mr Mitakev was last seen at his company’s offices on the 19^th September 2008. He says that he reported his actions to the police and also to the Economic and Financial Crimes Commission, which is an anti-corruption agency in Nigeria. He says that he thinks that Mr Mitakev was intent on defrauding the company of the sum of US$250,000 which had been paid by way of deposit for the first contract, and which the claimants rolled over in relation to the second. He also believes that companies like the claimant try to stifle indigenous shipping companies like his own by presenting bogus claims.

However there are further documents which are important in casting light on the matter. There is a letter of the 16^th September 2008 which purports to be from Mr Adeoye to Mr Brown. In it, it is stated,

The claimant submits (correctly in my view) that this letter is inconsistent with the case now put forward to the effect that Mr Mitakev had no authority to enter into the second contract on behalf of the defendant. In that regard, Mr Adeoye says in his witness statement that the letter was not written on his instructions, nor was it authorised by him. In support, Mr Akinyemi has said in a witness statement that it was in fact he who signed the letter on instructions from Mr Mitakev. He says that, ‘Whilst I had reservations, I did not want to be seen as disobeying a senior officer of the company.’ He does not explain why he should have in effect forged Mr Adeoye’s signature. Further doubt is placed on the defendant’s explanation by the fact that Mr Adeoye himself appears to have been in Lagos at this time. I shall come back to this letter later.

Following this letter, there was a meeting on 18^th September 2008 between Mr Adeoye and Mr Brown. Mr Adeoye says (again fairly) that he does recall confirming that Mr Mitakev was no longer with the company, but did not allude to the fact that he did not have the authority to bind the company. The following day Mr Brown wrote to the effect that so long as the deal was completed the claimant would agree to reduce all penalties on the contract to US$300,000.

There then follows a letter of the 24^th September 2008 which Mr Adeoye does accept that he signed. This informs the claimant of the defendant’s intention to change the laycan on the contract because:

The claimant asked for urgent confirmation that the contract would be performed on 26^th September 2008. On 6^th October 2008, in the absence of such confirmation, it treated the defendant’s conduct as a repudiatory breach of contract bringing the contract to an end.

On 29^th October 2008, the claim form in this action was issued for service in Nigeria pursuant to an order of Mrs Justice Gloster made on 28^th October 2008. The claim form and particulars of claim were served on 5^th November. Under the terms of Mrs Justice Gloster’s order, the defendant had until 22^nd November to acknowledge service. In fact, it acknowledged service on 20^th November 2008. When it acknowledged service, the defendant’s solicitors did not state that it intended to contest the jurisdiction of the English court. I will come back to that point shortly.

On 26^th November 2008, the defendant issued a writ of summons in the Federal High Court of Nigeria in Lagos. No permission was granted to serve that out of the jurisdiction on the claimant at its registered offices in Switzerland. The defendant’s claim in the Lagos proceedings is for (a) what is in effect a declaration that the second agreement is null and void, and (b) an order that Mansel and the claimant are jointly liable for the return to the defendant of the US$250,000 which, as I have said was paid by way of a security deposit.

To return to the English proceedings, on 20^th December 2008 the defendant filed a defence denying liability and stating that it wished to dispute the jurisdiction of the English court. On 23^rd December 2008, an application was issued accordingly. The claimant’s two applications were issued on 9^th February 2009.

The principles on which the court deals with this kind of case are well established. First, the claimant must show in respect of its claim that it has a ‘good arguable case’ that it falls within a relevant sub-paragraph of what is now Practice Direction B of CPR Part 6. In the present case, that is sub-paragraph 6(d), namely that the contract contains a term to the effect that the court shall have jurisdiction to determine any claim in respect of the contract. Second, the claimant must show that there is a serious issue to be tried in respect of the claim which it is seeking to make. This is not in dispute in the present case. Third, the claimant must persuade the court that England is clearly the appropriate forum for a trial action. The burden is on the claimant in all of these respects.

I should add that the claimant is a Swiss company, and that the requirement in article 17 of the Lugano Convention (which is the equivalent of article 23 of the Judgments Regulation) that it is ‘clearly and precisely demonstrated’ that the parties actually agreed to any clause conferring jurisdiction is met by the English law standard of a ‘good arguable case.’ Applying that standard, the claimant must show that it has a much better argument than the defendant that on the material available at present, the requirements of form in article 17 are met and that it can be established, clearly and precisely, that the clause conferring jurisdiction on the court was the subject of consensus between the parties: see Bols Distilleries v Superior Yacht Services [2007] 1 Lloyd’s Rep 683 at paragraph 28, applied in Deutsche Bank AG v APBW [2008] 2 Lloyd’s Rep 177.

Other than the points he makes on the evidence, Mr Aliker for the defendant submitted at the hearing that that jurisdiction clause came in standard documentation after the meeting on 4^th August, that is on 5^th August 2008,and so was not incorporated in the contract if there was one. Indeed he said that this was his main point. However I cannot accept this submission. It is plain in my view that, because of the course of dealing between the parties (and subject to the authority point) the contract entered into on 4^th August 2008 was on the claimant’s standard terms. As sent on 5^th August, these terms were in the same form as the terms sent in respect of the first contract on 24^th July 2008. In my judgment, they are binding in respect of both contracts.

The defendants had a further argument based on what were said to have been preconditions to the contract. This is developed in paragraph 13 of the witness statement made by the defendant’s solicitor Ms Owusu-Amponsah on 23^rd December 2008. She says that the defendant contends that in order for there to be a binding contract, it would have to complete the following steps which are set out in the attached contract: a) agree the price which was stated as dollars US$1175.00 per metric tonne, b) nominate the vessel to take delivery alongside the claimant’s vessels, c) pay a refundable security deposit of $250,000, and d) pay the contract price by fully secured, fully operative and workable irrevocable documentary letter of credit to be issued no later than 8^th August 2008.

But the alleged preconditions find no support in the terms of the contract as set out in the contract note. I agree with Mr Julian Kenny, counsel for the claimant, that there is no evidence to back this contention, which is really by way of legal submission, and which I do not accept in the absence of any evidence in support. Furthermore, by their nature at least some of these conditions are very unlikely to have been agreed by the claimant, since they would in effect have given the defendant a veto on whether there was ever a binding agreement at all.

There can in my view be no question that the claimant has satisfied the requirement of a good arguable case in respect of the existence of the contract and the inclusion of the exclusive jurisdiction clause within the contract. On the assumption (which in my view is a questionable one) that Mr Mitakev did not have actual authority to enter into the contract, there is clearly a good arguable case that he had ostensible authority. The only real question on this issue is whether the claimant can go further and satisfy the test for summary judgment, a question to which I shall come later.

The defendant submits that even if the claimant has shown to the required standard that there was an exclusive jurisdiction agreement between the parties, England is not the forum conveniens, and that the court shold stay the claim on that basis. I reject that submission. Where the parties have agreed an exclusive jurisdiction clause, that choice of forum overrides considerations of convenience at least insofar as the conveniences or inconveniences in question were foreseeable at the time when the contract was made: see the discussion of the authorities in Import Export Metro v Compania Sud Americana De Vapores S.A. [2003] 1 Lloyd’s Rep 405 at pages 410 and following.

In those circumstances the challenge to the court’s jurisdiction fails. I should add that the criminal investigation that is apparently ensuing in Nigeria does not in my view require that the exclusive jurisdiction clause be overwritten on grounds of comity.

That being my conclusion, I need not decide the further point raised by the claimant that by failing to tick the box on the acknowledgment of service to the effect that it did not intend to contest the court’s jurisdiction, the defendant has submitted to the jurisdiction. I am very unsympathetic to that argument. In all the circumstances I do not think that there was any unequivocal representation that objection was not going to be taken to the English court’s jurisdiction. On the contrary, the defendant made it quite clear that jurisdiction would be contested and the claimant can have been in no doubt in that regard.

I come now to the application for an anti-suit injunction. The principles are not in dispute. Where the applicant shows that he is a party to an exclusive jurisdiction clause the court will issue an anti-suit injunction to prevent a breach of the clause unless there are strong reasons for not doing so. In Donohue v Armco Inc [2002] 1 Lloyd’s Rep 425 at 422 to 433, Lord Bingham said as follows:

Other than the issue as regards the existence of the contract which I have dealt with already, Mr Aliker relies on a decree called the Nigerian Admiralty Jurisdiction Decree which gives the Nigerian courts (he submits) a mandatory jurisdiction in this kind of case. I think that Mr Kenny was right to object that foreign law is a question of fact, and has to be proved by evidence. The defendant provided no evidence to show the existence or applicability of the provisions relied upon. It may or may not be the case, as Mr Kenny submits, that the Admiralty Decree applies to admiralty matters, and as a contract for the sale of oil this contract is not an admiralty matter. I simply am not able to form a view as to whether that is correct or not. But in my judgment, even where a foreign law is shown to have the effect in a foreign territory of conferring exclusive jurisdiction on the courts of that territory, that is not a strong reason for the courts of this country to refuse an anti-suit injunction.

This is shown by OT Africa Line Ltd v Magic Sportswear Corpn [2005] 2 Lloyd’s Rep 170, in which proceedings had been begun in the Toronto courts. Section 46 of the Canadian Maritime Liability Act 2001 provided for proceedings in Canada. At paragraph 32, Lord Justice Longmore said as follows:

There is a final point made by the defendant, namely that the Lagos proceedings fall outside the terms of the exclusive jurisdiction clause. This is based on the fact that the second part of the claim relates to the security given of US$250,000. However the first part of the claim relates to the existence of the contract itself, and this is plainly a question that the parties have referred to the exclusive jurisdiction of the London court. In my view the claimant has made out the claim for an anti-suit injunction against the defendant.

I shall now consider the position of Mansel which is also a party to the Lagos proceedings. Mansel is a wholly owned subsidiary of the claimant. It acted at all times solely as the claimant’s agent. In Nigeria to all intents and purposes it stands in the shoes of the claimant. In my view, Horn Linie v Pan Americana [2006] 2 Lloyd’s Rep 44 is authority for the proposition that an exclusive jurisdiction clause can cover the claims made against an agent in such circumstances so as to bring such a claim properly within the ambit of the anti-suit injunction. In my view the claimant has made out a good case including both principal and agent in the terms of the injunction in the present case.

That brings me to the final question before me, which is whether the claimant should be entitled to summary judgment and if so for how much? The test is whether the defendant has no real prospect of successfully defending the claim. The defence (leaving aside questions as to damages) is as to authority, as I have already indicated. As I said, the defendant accepts, and I should say rightly accepts, that given Mr Mitakev’s position as its chief operating officer, and the fact that he alone concluded the first contract on behalf of the defendant, he did have ostensive authority to bind the defendant as to the second contract unless the claimant was on notice as to his alleged lack of authority.

I have already explained that the only evidence that the claimant was on notice is in paragraph 15 of Mr Adeoye’s witness statement. I have noted that this misses the vital information as to who from the defendant company made the alleged representation as to the alleged limits on Mr Mitakev’s borrowing. I have mentioned the request for this information, and the fact that it has not been supplied. As I have explained, all the other evidence points firmly in the opposite direction. I leave aside in this regard Mr Brown’s witness statement to the contrary, because that is one word against another. But I do accept Mr Kenny’s other submissions. The defendant’s case is inconsistent with the first contract which was entered into by Mr Mitakev and him alone. It is also inconsistent with the defendant’s subsequent contract which plainly proceeds on the basis that the second contract was binding as well. I cannot accept Mr Aliker’s submission that the claimant would perhaps have doubted Mr Mitakev’s authority because the deal was a bad one. The claimant has demonstrated that it was a deal at or about the market price when made. Much more likely, in my view, is that it was a deal that the defendant came to regret as the oil price collapsed shortly after it was entered into.

There is a further point that in my view removes any doubt, and which I have not yet mentioned. As I explained earlier, the terms of the letter of 16^th September 2008—if the letter is genuine—are inconsistent with the defendant’s case. At the least, if genuine it would show that the defendant has no defence to the claimant’s alternative contention that the contract has been ratified. The defendant as I have said contends that Mr Adeoye’s signature was added by way of forgery. This appears to me to be inherently improbable, and I shall not repeat what I said earlier in that regard. But it is a fact that in the Lagos proceedings the defendant has pleaded its case as follows. In paragraph 12, it has stated,

Mr Aliker submits that this was clearly a mistake, and the defendant is to seek leave to amend. But this confirms my view that the defendant has no real prospect of successfully defending this claim. In my opinion, the claimant is entitled to summary judgment. As to amount, there is no dispute as to the difference between the contract price and the market price. The number in that regard is about US$1.99million, and the claimant should have judgment for this sum. There is a further case for demurrage, which is not pursued at the summary judgment stage.

There is a yet further claim based on clause 12 of the claimant’s standard terms for carrying charges, that is to say liquidated damages in respect of the financing and administrative costs of keeping the cargo available for delivery during the period up to the termination by the claimant of the contract in October 2008. This at the rate of 50 cents a day per metric tonne, and amounts to about US$142,000. The clause is headed, ‘Delay Penalty Clause’ and on that basis the defendant suggested in argument that it might be a penalty. I do not think for a moment that this clause is a penalty. It has all the hallmarks of a genuine pre-estimate of damage. But I do agree with Mr Aliker that, on the evidence, the defendant is entitled to say that there is an issue as to the proper period in respect of which the carrying charges are payable. For that reason, I do not think that the claimant is entitled to summary judgment in respect of this sum. I shall now hear the parties as to any matters arising.