Tidewater Marine International Inc v Phoenixtide Offshore Nigeria Ltd & Ors

On 31 March 2015 a worldwide freezing order was made by Eder J to restrain the Respondents from dealing with their assets until further order. It contained the usual provision permitting payment of a reasonable sum on legal advice and representation:

“This Order does not prohibit either the Second or the Third Respondent from each spending £500 a week towards her/his ordinary living expenses, and it does not prohibit any of the Respondents from spending a reasonable sum on legal advice and representation. But before spending any money the Respondent must tell the Applicant’s legal representatives where the money is to come from.”

It contained also permission for the Applicant (“Tidewater”) to seek an order of a similar nature in Switzerland in order to freeze an account held in Geneva either with Bank Leumi or with Bank Julius Baer. In fact there appear to have been two accounts held with Bank Julius Baer, one in the name of the Second Respondent and the other in the name of the Third Respondent. Tidewater obtained an attachment order from the Swiss court, but it appears that it froze only the Second and not the Third Respondent’s account there.

So far the Respondents’ (by which from now on I mean the Second and Third Respondents) legal fees in this action have been met, with the agreement of Tidewater, from the Third Respondent’s account with Bank Julius Baer, but the funds in that account are now exhausted. By an application which I heard on 4 September 2015 the Second and Third Respondents seek an order which will enable them to use the funds in the Second Respondent’s account for the purpose of funding their defence to this action and discharging an order for costs of £60,000 already made in favour of the Applicant. At this stage the Respondents ask to withdraw £145,000 to pay their solicitors and £60,000 to pay the costs which the Second Respondent is obliged to pay to Tidewater, a total of £205,000. Because the Swiss attachment order contains no exception for legal expenses, the mechanism by which this would have to be achieved would be a joint request by the parties to the President of the Tribunal of First Instance in Geneva for a variation of the Swiss order to enable the funds in the account to be used in this way.

The Respondents say that there are no other sources of available funds from which their legal expenses can be met and that if the order is not made their solicitors (who are currently owed some £95,000 in addition to the £294,000 which they have already been paid from the Third Respondent’s account) will have to cease to act, leaving them unrepresented and unable to defend themselves in this complex litigation.

Tidewater is prepared to join in making such a request to the President of the Tribunal of First Instance if this court determines that the Respondents’ legal expenses of this action should be funded from the Second Respondent’s Bank Julius Baer account, but objects in the strongest terms to any such determination. It does so essentially on two grounds. The first is that the Respondents have not shown to the necessary standard that there are no other sources of available funds. The second is that, even if there are no other sources of funds, to make the order sought by the Respondents would be unfair (or as Mr David Allen QC put it, grotesque) having regard to the overall justice of the case, in circumstances where the Respondents are in continuing contempt of a mandatory order of this court and the Third Respondent is a fugitive from justice.

Following the conclusion of the hearing I informed the parties that the Respondents’ application would be dismissed and that my reasons would follow. These are my reasons for that decision.

Tidewater is a Cayman Islands company carrying on business as a manager and operator of vessels engaged in the offshore oil and gas industry. In October 2005 it entered into two agreements with the First Respondent (“PhoenixTide”), a Nigerian company. The agreements related to vessels to be bareboat chartered to PhoenixTide by affiliates of Tidewater and, in turn, time chartered by PhoenixTide to oil companies or their service providers operating in Nigerian waters. Both agreements contained exclusive jurisdiction clauses providing for English law and jurisdiction. The background to these agreements was the Nigerian Coastal & Inland Shipping (Cabotage) Act 2003, which resulted in preference being given to local Nigerian businesses in relation to shipping and chartering support services to the Nigerian offshore sector. The Second Respondent (who has been referred to in these proceedings as “the Otunba”, this being, as I was told, a tribal title in Nigeria) was the Chairman of PhoenixTide and her son the Third Respondent (referred to in the proceedings as “Toks”) was the managing director.

It was Tidewater’s case that pursuant to the agreements between the parties PhoenixTide was obliged to direct the oil majors or their affiliates who were the time charterers of the vessels to pay hire to Tidewater and that, in the case of substantial sums payable by several Total companies, PhoenixTide wrongfully failed and refused to do so. In action 2013 Folio 290 Tidewater sought declarations as to its right to receive hire and other sums payable by Total together with an order that PhoenixTide by its managing director (i.e. Toks) send a letter to the applicable Total companies instructing and authorising them to pay these sums to identified Tidewater bank accounts. It is unnecessary for the purpose of this judgment to explain in further detail the basis of that claim. It is fully set out in the judgment of Burton J [2013] EWHC 2960 (Comm) delivered on 1 October 2013 dismissing PhoenixTide’s challenge to the exercise of jurisdiction by this court in that action.

Following the dismissal by Burton J of its challenge to the jurisdiction, PhoenixTide decided not to file a fresh acknowledgement of service. On 22 November 2013 Tidewater issued an application for a mandatory order that PhoenixTide sign, through its managing director or other authorised representative, a letter to Total directing it to pay the sums in question over to Tidewater. On 5 December 2013, at a hearing of which PhoenixTide had been given proper notice but which it chose not to attend, Burton J made that order. It was endorsed with a penal notice warning both the Otunba and Toks that they might be held to be in contempt of court if PhoenixTide did not obey the order and provided as follows:

“2.

The Defendant must send, by each of the methods stipulated in paragraph 3 below, by no later than 1800 hrs (West Africa Time) on Monday, 16 December 2013, to [Total] a letter in the form set out in Schedule 2 of this Order, signed by the Managing Director or other duly authorised representative of the Defendant and copied to the Claimant, instructing and authorising them to make payment forthwith of the undisputed hire and other sums payable in respect of the [named vessels].”

The order was served on PhoenixTide on the same day it was made. The Otunba and Toks accept that they personally saw it, but they say that they only did so on some unspecified date in January 2014. PhoenixTide did not comply with the order, either by 16 December 2013 as the order itself required, or in January 2014 when (if their evidence is true) the Otunba and Toks saw the order, or at all.

On 14 February 2014 Tidewater issued an application for a default judgment in the light of PhoenixTide’s failure to file a fresh acknowledgment of service. On 7 March 2014 Burton J made an order entering judgment against PhoenixTide. His order included a declaration that the right to payment under each of the Total time charters was held by PhoenixTide on trust for Tidewater as the equitable owner of the rights and that as between Tidewater and PhoenixTide it was Tidewater that was entitled to receive all payments made by the charterers pursuant to the time charters. It declared also that:

“The Defendant was under obligations as trustee and as a matter of contract to procure that the Claimant received the time charter remuneration, in particular but without limitation by instructing and authorising the charterers to make payment to the Claimant of all remuneration due under the Time Charters”

and that PhoenixTide had wrongfully breached those obligations.

In addition to the declarations, PhoenixTide was ordered to pay damages in the total sums of US $5,398,436 and Nigerian Naira 1,797,403,582, together equivalent to about US $15 million.

PhoenixTide did not pay the damages awarded. Instead it has done everything within its power, so far successfully, to frustrate Tidewater’s attempts to obtain recognition and enforcement of the judgment in Nigeria.

On 23 June 2014 Burton J gave permission to Tidewater to serve an application to commit all three Respondents for contempt of court. That application, together with notice of a hearing for 3 October 2014, was duly served on 24 June 2014. Burton J was persuaded to adjourn the application, but the adjournment was followed by proceedings issued by PhoenixTide in Nigeria seeking an anti-suit injunction against the continuation of proceedings here including the contempt proceedings. That was met by an anti-anti-suit order made by Burton J. The Respondents’ application for permission to appeal from that order was refused by Tomlinson LJ as wholly without merit. It appears, however, that PhoenixTide nevertheless continued with the Nigerian proceedings, although ultimately these were dismissed.

Eventually the contempt application came on before Burton J on 9 February 2015. Despite a direction that they should attend the contempt hearing, neither the Otunba nor Toks was present. One working day before the hearing their then solicitor served an affidavit to explain their absence. He said that the Otunba was seriously ill, that she was being cared for at a hospital in Lagos, and that Toks “cares for her round-the-clock and as a result … is unable to leave her to attend court”.

The Respondents were represented at the hearing by leading counsel who argued, among other things, that a finding of contempt and the imposition of sanctions was no longer possible as a result of the default judgment by which Tidewater had obtained declarations together with an award of damages. Burton J rejected that argument at [29] of his judgment [2015] EWHC 417 (QB):

“29.

Mr Slade further says that the imposition of the default judgment, which has effectively ended the proceedings, which was granted as I described in my earlier judgment, on 7 March 2014, has overtaken the need to enforce my Order and thus rendered it unnecessary. He may put it even higher, in terms of some kind of merger. I am not satisfied as to that at all. The Order that was made was not until trial or further order. It has not been set aside. It has not been discharged. It has not run out of time. It was an order that a letter be sent, admittedly giving a date for expected compliance, but the Order expected continued compliance if the letter was not served by 16 December, and it remained in place. As for the default judgment, what there now is is a declaration that the Claimant is beneficially and legally entitled to the monies presently held by Total, and any method of obtaining those monies will only be part and parcel of an enforcement of that declaration.”

Burton J found all three Respondents to be in contempt of court. He found that the failure to comply with the order was deliberate and that even when the contempt application had been served, everything which the Respondents had done had been directed to avoiding the consequences of their non-compliance with the order rather than complying with it. He said:

“36.

The last point that is raised is that in some way the Defendant or Respondents apologise. It is not clear what this means, because it would have been, and still is, so easy for them to have purged the contempt by signing the letter, even now. As I have indicated, the default judgment has led to recognition by the English Court that the Claimant is entitled to the monies held by Total. There has been no attempt to set aside that judgment, no attempt to seek an extension of time for an acknowledgement of service in order to seek to do so. The position is that the Defendant and Respondents have simply just refused to recognise the jurisdiction of this court, as they did when they sought unsuccessfully to challenge it, and the Order made by this Court. In those circumstances I am satisfied that they are and remain in contempt.”

This was a decision, therefore, that notwithstanding the default judgment, the Respondents were and remained in contempt of the order requiring them to sign a letter instructing Total to release the monies to Tidewater. There has been no appeal from Burton J’s decision.

Burton J sentenced Toks to four months imprisonment and the Otunba to one month. PhoenixTide was fined.

Although evidence had been provided to the effect that the Otunba was seriously ill and was in Lagos being cared for by Toks around the clock, it transpired that she was in fact in England and had been since before the committal hearing, although Toks was not. Further hearings followed in which Tidewater sought an order for surrender of the Otunba’s passport, while the Otunba contended that as she had now resigned her directorship of PhoenixTide, there was no longer any point in her complying with the injunction to sign the letter because she now lacked the relevant capacity to give such instructions, an argument which (not surprisingly) Burton J described as unattractive. (Subsequently Toks also resigned as managing director, no doubt in order to avail himself of a similar argument).

It was also said on the Otunba’s behalf that she was wheelchair bound and only left her London house (held by a trust fund) to attend medical appointments. That was not true either. In fact as was revealed by covert surveillance which Tidewater had arranged, she had been shopping in London without the need of a wheelchair. She did eventually attend court in a wheelchair on 16 March 2015 to apply for her prison sentence to be discharged or suspended. The covert surveillance revealed that the wheelchair had been delivered to her for the first time the night before. Her application was refused and she was sent to HMP Holloway and ordered to pay costs of £60,000. Toks remained in Nigeria as a fugitive from justice and has not served his sentence. Evidently he preferred that his ill and elderly mother should go to prison rather than that Tidewater should obtain the monies to which this court has held that it is entitled.

Tidewater now seeks a personal remedy against the Respondents. It puts its claim against them in four ways. The first is that they deliberately and dishonestly assisted breaches of trust and fiduciary duty by PhoenixTide in refusing to enable payment by Total to Tidewater of the sums due under the time charters. The second is a claim in conspiracy to injure Tidewater by unlawful means, the means in question consisting of a failure in contempt of court to issue the required letter. The third is a claim for the tort of intentionally causing loss by unlawful means, the means again consisting of the contempt of court. Finally, Tidewater contends that committing a contempt of court and thereby causing financial loss is independently actionable as a tort.

Initially Tidewater sought to bring these claims as part of action 2013 Folio 290. However, the Respondents’ new solicitors (Mishcon de Reya, who came on the record on 11 May 2015) maintained that as Tidewater had already obtained judgment in default against PhoenixTide in that action, the only remaining jurisdiction of the court in relation to it was for the purpose of enforcement of the judgment. In any event, Tidewater also commenced a new action, 2015 Folio 595. The 2013 action has been stayed. The new action was served on the Otunba at her London residence with her solicitors’ agreement (she was then in hospital in London) and was served on Toks pursuant to an order for alternative service made by Burton J on 20 May 2015.

The Respondents deny liability for the claims brought against them by Tidewater and (according to their solicitor’s witness statement) will contend that compliance with the order to sign a letter instructing Total to make payment to Tidewater would have been a breach of an order of the Nigerian court. They have issued an application to challenge the exercise of jurisdiction over them by this court on the ground that Nigeria is clearly and distinctly a more appropriate forum for the claim. In summary they contend that each of the claims advanced against them is a claim in tort or delict within the meaning of the Rome II Regulation (Regulation 864/2007/EC); that in contrast with the position of PhoenixTide those claims are not subject to any exclusive jurisdiction clause; that the law applicable to the claims pursuant to Article 4 of the Regulation is Nigerian law because the damage to Tidewater occurred predominantly in Nigeria and (if necessary) the claims have a manifestly closer connection with Nigeria than with England; that this factor of Nigerian governing law is itself a strong ground for holding Nigeria to be a more appropriate forum; and that in any event other connecting factors considered overall point more strongly to Nigeria than to England.

It remains to be determined what law is applicable to the claims against the Respondents, whether this court should exercise jurisdiction over those claims, and whether in accordance with whatever is the applicable law the Respondents are under a personal liability to Tidewater. All of those issues are for another day. It is, however, entirely clear that the issues arising in the 2015 proceedings only arise at all because of the Respondents’ breach of the mandatory order for signature of the letter instructing Total to pay the charter monies to Tidewater. If the Respondents had provided that letter, as they were ordered to do, these proceedings would never have been necessary. It is equally clear, and has been determined by the judgment of Burton J, that so far as this court is concerned this conduct of the Respondents was wrongful and constituted a contempt of court which has been proved to the criminal standard of proof. Indeed their conduct represents, and has continued to represent, a refusal to recognise the jurisdiction of this court and to comply with its orders when they choose not to do so.

Meanwhile on 31 March 2015 Eder J made the worldwide freezing order which has given rise to the present application. As well as the provision for payment of legal expenses, it contained the usual asset disclosure orders requiring information to be provided by each Respondent (in this case as to all assets exceeding £5,000 in value), to be followed by a confirming affidavit. Unusually, however, it also contained in paragraphs 9(3) and 9(4) orders for the Otunba to attend for cross-examination as to her assets and those of PhoenixTide and to surrender all current and valid passports in her name.

The process of asset disclosure by the Otunba was rendered more complex, and took longer than it would otherwise have done, because of her medical condition. Despite the lies which were told about her condition at an earlier stage, it appears that she is seriously ill, has suffered from recurrent cancer for some years, has required frequent medical treatment, and was admitted to hospital in London in May 2015. Indeed medical evidence was provided to Tidewater’s solicitors at that time to the effect that she was not likely to live for more than a few weeks, as a result of which Tidewater agreed to the discharge of paragraphs 9(3) and 9(4) of the freezing order so that she could return to Nigeria to be with her family. Moreover, the Respondents’ solicitor (Mr Hugo Plowman of Mishcon de Reya) has described the difficulties of taking instructions from the Otunba as a result of her poor health, limited eyesight and general weakness, as a result of which documents have had to be read out to her, primarily over the phone while she is on her back in bed. I accept that these are genuine difficulties, and that the Otunba’s condition is serious, but I am nevertheless concerned that there is still a degree of dishonest exaggeration in the Otunba’s own evidence about her health. In an affidavit provided on the day before hearing of this application, she gave the impression that she was unable to walk for periods longer than about 20 minutes per day, and that she was otherwise spending all of her time lying down. That is difficult to reconcile with Tidewater’s evidence in response, which I see no good reason to doubt, that the Otunba and Toks attended a meeting with the Nigerian Federal Inland Revenue Service in Lagos approximately two weeks before the hearing.

Toks provided his asset disclosure by letter on 1 May 2015 and followed this with an affidavit provided on 18 May 2015. The principal assets disclosed consisted of a bank account with Bank Julius Baer in Geneva with a credit balance of US $439,000 (after transfer to Mishcon de Reya of US $235,000), and various Nigerian bank accounts with Naira credit balances. Various other assets were said to be worth less than the figure of £5,000 specified in the freezing order. Toks said that he owned no real estate, the house in Lagos which he occupied being owned by a trust (the Ayora Educational Trust) established by the Otunba for her children and their heirs which also paid his children’s school fees, while the house in London at which he and the Otunba stayed was owned by another trust (the Phillimore Trust) also established by the Otunba of which he was a beneficiary. Similarly he said that he did not own the expensive cars which he drove, which were owned by an investment company of which he was a 20% shareholder.

The Otunba provided her asset disclosure by letter on 26 May 2015. She provided further information on 18 June and an affidavit dated 14 July 2015. The principal assets disclosed consisted of an account with Bank Julius Baer in Geneva with a net asset value of some US $3.9 million which was used for investments in bonds and similar investments as well as to hold cash; bank accounts with Nat West (a credit balance of about £14,300 at the date of the order, from which living expenses of £500 per week were taken) and Barclays (about £5,000); various Nigerian bank accounts; some shareholdings in Nigerian companies; a property in Virginia in the United States; and a vehicle worth about US $30,000. She disclosed also that she was a named beneficiary of the Phillimore Trust referred to above, although this was intended to provide for her children after her death. This trust was said to own two principal assets, the property in London used by the Respondents which was valued at £925,000 in 2012 and an investment portfolio with a value of about £640,000.

In her affidavit the Otunba referred to a loan of some US $3 million made to her by Bank Julius Baer. She said that the loan monies had been spent, partly on general living, travelling and medical expenses, but mainly “on the charitable and philanthropic ventures of the Ayora Foundation, in particular donations to several churches”. The Ayora Foundation is a charitable foundation established by the Otunba in Nigeria. More recently, following questions by Tidewater’s solicitors, the Otunba has acknowledged in her affidavit provided immediately before the hearing that this information was wrong. She says now that the loan monies were not used in this way at all, but were used to provide leverage to her capital contribution to the investment portfolio which forms part of the Bank Julius Baer account. The loan monies were used to acquire additional investments in the portfolio and have therefore been reinvested within the account.

The Otunba explained also in this latest affidavit that the commissions due to PhoenixTide from the business conducted with Tidewater between 2006 and 2012 (which Tidewater says amounted to some US $10.3 million) were paid into her personal Bank Julius Baer account. She said that about 30% of that sum, about US $3.09 million, had been distributed to her children, that the balance on the account in April 2013 had been about U$4.4 million, and that the rest, about US $2.81 million, would have been spent, including expenditure of about US $650,000 on her daughter’s wedding. However, no bank statements were provided to verify these figures.

These are the circumstances in which this application is made. On behalf of the Respondents Mr Sa’ad Hossain QC submitted in summary that it is a long-standing principle that a litigant should be entitled to use his or her own assets to defend a claim; that the Otunba’s account with Bank Julius Baer is the only source of funds available to the Respondents to pay for legal representation to defend this claim; that if the Respondents are not allowed to use these funds, their solicitors will have to come off the record and they will be unrepresented, which would be a wholly unjust outcome as well as inconvenient for the court which would be left to deal with complex issues of jurisdiction and merits without the benefit of legal representation of behalf of the Respondents; and that the Respondents should therefore be allowed to use these funds in order to avoid the freezing order becoming a tool of oppression in the hands of Tidewater. Although the present application is for permission to use the sum of £205,000, it is apparent from the Respondents’ evidence that this will be insufficient even to fund the Respondents’ jurisdiction challenge, that if the present application is successful further requests for permission to use the Bank Julius Baer funds will follow in short order, and that at the present rate of expenditure, and if the jurisdiction challenge fails, the funds in the account are likely to be very substantially depleted by the time this litigation comes to trial.

Although there was only a limited area of dispute, it is convenient to summarise the legal principles applicable to an application of this nature.

The standard freezing order provides that a Respondent is entitled to spend a reasonable sum on legal advice and representation without obtaining the Applicant’s permission, but the requirement to tell the Applicant’s legal representatives where the money is to come from gives the Applicant an opportunity, if it objects, to bring the matter before the court. Once it does so, the principles summarised below apply. (This is not a case where a proprietary claim over the Respondents’ assets is asserted). In the present case the effect of the Swiss attachment order is that the funds in the Otunba’s Bank Julius Baer account cannot be used by the Respondents without a variation of that order, which will only be made if Tidewater either volunteers its agreement or is directed by this court to join in an application for such a variation to be made. It was not suggested, however, that this feature of the present case makes any difference to the principles to be applied to this application.

The starting point is that a freezing order has been made against the defendant. Otherwise the question of use of frozen funds to pay legal expenses could not arise. This means that the court has already concluded that, even before the claimant’s claim has been established, justice requires that the defendant’s freedom to dispose of its own assets as it sees fit should be restrained. However, a freezing order is not intended to provide a claimant with security for its claim but only to prevent the dissipation of assets outside of the ordinary course of business in a way which would render any future judgment unenforceable. While the disposal of assets outside of the ordinary course of business is prohibited as being contrary to the interests of justice, payments in the ordinary course of business are permitted even if the consequence will be that the defendant’s assets are completely depleted before the claimant is able to obtain its judgment. This has been clear since the decision of Robert Goff J in The Angel Bell [1981] 1 QB 65 in the early days of what were then called Mareva injunctions. Moreover, so long as the payment is made in good faith, the court does not enquire as to whether it is made in order to discharge a legal obligation or whether it represents good or bad business on the defendant’s part.

A further principle is that a defendant is entitled to defend itself and, if necessary, to spend the frozen funds, which are after all its own money, on legal advice and representation in order to do so. This is recognised by the standard wording of the usual freezing order, although the defendant’s right to spend its own money on legal advice and representation is limited to expenditure of “a reasonable sum”. (Despite the substantial figures for legal expenditure in this case, it was not submitted on this application that the sums which the Respondents propose to expend were unreasonable). It was held by Sir Thomas Bingham MR in Sundt Wrigley Co Ltd v Wrigley (unreported, 23 June 1995) to be “the ordinary rule” in a non-proprietary case. He put it this way:

“In the Mareva case, since the money is the defendant’s subject to his demonstrating that he has no other assets with which to fund the litigation, the ordinary rule is that he should have resort to the frozen funds in order to finance his defence.”

Two points should be noticed here. The first is that even where the defendant has no other assets, its right to use the frozen funds is only “the ordinary rule”. It is therefore capable of being outweighed in an appropriate case by other considerations. Ultimately it is the interests of justice which must be decisive. The second point represents an important qualification on the defendant’s right to choose how it spends its own money. That qualification is necessary in order to strike a fair balance between the parties. It is that in order to be permitted to use the frozen funds, the defendant must demonstrate “that he has no other assets with which to fund the litigation”. This places an onus on the defendant to demonstrate that there are no other assets available, not frozen by the order, which he could use to pay for legal advice and representation in defence of the claim.

This second point has been adopted in many later cases, for example Halifax Plc v Chandler [2001] EWCA Civ 1750 where Clarke LJ said at [17]:

“… in the Mareva case, in order to be allowed to spend frozen monies, the defendant must show that he has no other assets which he can use.”

He added at [27] that:

“… it is incumbent on a defendant, like any applicant, to put the facts fully and fairly before the court.”

The burden on the defendant to put the facts before the court has been emphasised in further cases. It was described as “the burden of persuasion” by Sir Anthony Clarke MR in Serious Fraud Office v X [2005] EWCA Civ 1564 at [35] and [43], a case concerned with a restraint order made under section 77(1) of the Criminal Justice Act 1988 to which the same principles were held to apply. It is necessary that the defendant should have this burden in part because it is the defendant, not the claimant (at any rate in the usual case), who knows the facts, but also because the court has already concluded that there is a risk of disposal of assets outside the ordinary course of business or it would not have granted the injunction in the first place. Judges are entitled in an appropriate case to have a “very healthy scepticism” about unsupported assertions made by a defendant about the absence of assets, as Sir John Donaldson MR noted in Campbell Mussels v Thompson (1985) 135 NLJ 1012.

At [43] of his judgment in Serious Fraud Office v X, Sir Anthony Clarke MR identified the issue in these terms:

“43.

… The question for the judge was whether X discharged the burden of proof or, as I would prefer to put it, the burden of persuasion. That depends upon an analysis of the facts. As I see it, on an application to vary a restraint order in a case of this kind, where the order relates to all the defendant’s assets, the position in principle is that it is for the defendants to satisfy the court that it would be just to permit him to use funds which are identified as being caught by the order. If the court concludes that there is every prospect of the defendant being able to call on assets which are not specifically identified in the order, or assets which others will provide for him, I do not think that the court is bound to vary the order in the terms sought.”

Thus it is relevant to consider not only the defendant’s own assets, but whether there are others who may be willing to assist the defendant to obtain legal advice and representation. In this respect the position is similar to that which obtains when the court is considering an argument that security for costs should not be ordered on the ground that it would stifle the claim (cf. Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534, where Peter Gibson LJ referred to consideration of whether a claimant “can raise the money needed from its directors, shareholders or other backers or interested investors”, pointing out that “as this is likely to be peculiarly within the knowledge of the plaintiff company, it is for the plaintiff to satisfy the court that it would be prevented by an order for security from continuing the litigation”).

Clarke LJ went on in Serious Fraud Office v X, at [46] and [47], to approve statements of principle contained in the 5^th Edition (2004) of Gee on Commercial Injunctions. These were as follows:

“20.054

… Therefore, the principle is that a defendant can use his own money which is frozen under a Mareva injunction to fund the defence provided that it is apparent that there are no other funds or source of payment which should as a matter of objective fairness be used to pay for the defence rather than the frozen funds. This may require the defendant to adduce ‘credible evidence’ about his other assets before the court can be satisfied that it is just that he should be able to use the particular frozen assets.

…

20.056

The same principle of objective fairness applies when an injunction is granted worldwide and the question arises whether the defendant should be at liberty to pay an expense using his English assets or assets safely frozen outside the jurisdiction by a local court, or whether he should be left to make the payment from assets which are not effectively frozen or may not be available for execution or satisfaction of the judgment.”

It is inherent in this approach that, because the court is dealing with risks and prospects rather than certainties, and is doing so at an interlocutory stage, there is a real risk that the court, even doing the best it can on the material available, may reach what is in fact a wrong conclusion. It may conclude that a defendant has failed to adduce credible evidence that it has no other available assets and has therefore failed to discharge the burden of persuasion even if, in fact, the defendant has no other assets. It may conclude that there is a reasonable prospect that a defendant’s friends or associates will rally to his support, but that prospect may not materialise. In such circumstances the court will refuse to allow the frozen funds to be used, even if that means that in fact the defendant is left unable to pay for legal representation to defend the claim. However, this is no different from any other situation in which there is a risk that the court may make a mistaken interlocutory assessment, for example when it concludes that an order for security for costs will not stifle a claim. It should not deter the court from making the best assessment it can on the material available and imposing on the defendant the burden of persuasion for the valid reasons identified above.

Immediately before the passage quoted above and approved in Serious Fraud Office v X, paragraph 20.054 of Gee puts the matter in this way:

“In exercising the discretion whether or not to grant an application to vary an injunction the court acts in accordance with what is ‘just and convenient’. This is the test laid down in s.37(1) of the Supreme Court Act 1981. On an application for a variation, the claimant has already established a real risk of dissipation and a good arguable case. The principles which apply in considering whether to grant a variation are the same as those which apply when considering whether or not to grant Mareva relief. …

The correct test is to consider objectively the overall justice of allowing the payment to be made including the likely consequences of permitting it on the prospects of a future judgment being left unsatisfied, and bearing in mind that the assets belong to the defendant and that the injunction is not intended to provide the claimant with security for his claim or to create an untouchable pot which will be available to satisfy an eventual judgment.”

I accept this as an accurate summary. Its value, in my judgment, is the emphasis which it rightly gives to the need for an assessment of “the overall justice” of the case. The principle that a defendant bears the burden of persuading the court that there are no other assets available to fund the litigation is one aspect of that assessment, but not the only aspect. In most cases the absence of other assets will be decisive. Justice will require that such assets as there are should be available to fund the defendant’s defence. But in what is likely to be an exceptional case, this is capable of being outweighed by other considerations.

In the present case Tidewater relies upon what it says is the injustice of allowing Respondents who have flouted orders of the court when it suits them to do so and who remain in contempt of court to invoke the court’s discretion, as a matter of justice and convenience, to permit a variation of the injunction. Mr Hossain for the Respondents submitted that this is an irrelevant consideration and that the present application should be confined to an examination of whether the Respondents have access to funds which are not effectively frozen by the order. I do not agree. In my judgment the overall justice of the case needs to be considered, and that is capable of extending to the wider considerations relied on by Tidewater.

In accordance with these principles I turn to consider whether the Respondents have discharged the burden of showing that they have no funds available to pay for legal advice and representation other than the funds in the Otunba’s Bank Julius Baer account. They do of course have funds held in Nigerian bank accounts as well as other assets in Nigeria, but they have provided evidence that Nigerian foreign exchange permission would not be available to pay for ongoing litigation expenses, although apparently it would be permitted for payment of a judgment debt. This seems surprising, but it is evidence which Tidewater has not challenged. I proceed, therefore, on the basis that their Nigerian assets are not available to the Respondents to pay for legal advice and representation in this action. However, as Mr Allen pointed out, there appears to be no reason on the Respondents’ own evidence why their Nigerian funds should not be used to pay the costs of £60,000 which they have been ordered to pay, which are in effect a judgment debt.

I have summarised above the Respondents’ evidence as to the assets which they hold. There is no positive evidence of any other source of funds available to them outside Nigeria. If the burden lay on Tidewater to prove positively the existence of some other source of funds, it would be unable to do so. However, as already explained, that is not an unusual situation and the burden of persuasion lies on the Respondents. In my judgment they have failed to discharge that burden. I reach this conclusion for the following reasons.

First, as shown above there is no doubt that the Respondents have been prepared to give false evidence in the past in order to frustrate Tidewater in its attempts to obtain the payments to which it has been held by this court to be entitled. The false claim as to the Otunba being seriously ill in Lagos and cared for round-the-clock by Toks is an example, as was the claim on another occasion that she was wheelchair bound. That does not necessarily mean that their evidence now is untrue, but it does entitle me to view with scepticism their unsupported assertions.

Second, their assertions as to their lack of available assets outside Nigeria are indeed unsupported. While I do not overlook the difficulty which a party may face in attempting to prove a negative, it is striking that the Respondents have produced very few documents to demonstrate their financial position. I accept that they were not required to do so by the terms of the freezing order. However, in seeking a variation of the order the burden of persuasion is upon them and if that burden is to be discharged, credible evidence is likely to be needed. An obvious example of such evidence in the present case would have been statements from the Bank Julius Baer account which would show the sources of payments into and destinations of payments from that account. These could easily have been provided if the Respondents had wished to do so, just as they did produce some documents from the bank summarising the Otunba’s current holdings. I do not accept that problems with the Otunba’s health would have made the provision of such documents impracticable. There must be accountants and other employees who would have been able to gather the necessary documents to provide to the Respondents’ solicitors.

Third, although I reach no final conclusion, it seems to me that the claim (made on oath) that the loan monies of about US $3 million had been spent mainly on charitable and philanthropic ventures is much more likely to have been a deliberate falsehood by the Otunba than an innocent mistake as is now suggested. Her explanation is that as a 10% (and later 20%) shareholder in PhoenixTide, the Ayora Foundation was entitled to a share of the commissions received from business with Tidewater, and that she accounted for this share of commissions by making donations on behalf of the Foundation from funds held by her in Nigerian Naira in Nigeria. She has chosen not to produce the accounting documents which, if this explanation is correct, must exist to demonstrate the Foundation’s entitlement and the funds which it has received in this way. In any event, even if the explanation is correct, it does not explain why the claim that the loan monies had been expended in charitable donations rather than invested in the account was made in the first place.

Fourth, the Otunba’s explanation as to the way in which the US $10.3 million of commissions paid by Tidewater to PhoenixTide between 2006 and 2012 have been utilised is vague in the extreme, although the provision of bank statements would have made the position clear. It means that she has failed, other than by the most general of unsupported assertions, to account for the receipt and disposal of substantial sums. I am left with the strong impression, however, that the lifestyle which the Otunba and her family appear to enjoy and the extent of charitable and philanthropic donations which she claims to have made indicate a considerably greater degree of remaining personal wealth than she has been prepared to admit.

Fifth, very little information and almost no documents have been provided relating to the various trusts established by the Otunba and the assets which these hold. Again, very general assertions have been made with no supporting evidence.

Sixth, the evidence of Toks is also very vague and, in some respects, seems hard to reconcile with the practicality of modern life. For example, he says that he holds only one credit card but has never used it.

Seventh, although the Otunba and Toks as her eldest son must be well connected and highly respected members of their tribe, and perhaps also of wider society in Nigeria, they have made no attempt to show that family, friends or business associates would be unable and unwilling to assist them in obtaining legal representation for the defence of this claim.

In accordance with the principles set out above, my conclusion that the Respondents have failed to discharge the burden of persuasion which they bear is sufficient for this application to fail.

However, I go on to consider the overall justice of the case on the assumption that, contrary to this conclusion, the Respondents have no available assets with which to pay for legal advice and representation other than the Otunba’s Bank Julius Baer account. In that event, if they are not permitted to draw on this account to fund their legal costs, their solicitors will come off the record and they will be left unrepresented. Moreover, the Otunba is likely to be unable in view of her poor health to play any active part in representing herself. Toks, who was the managing director of PhoenixTide, is (I assume) an intelligent and articulate businessman who would be as well able as any litigant in person to represent his and his mother’s interests, although he has no legal qualification which would undoubtedly be a disadvantage. He would also labour under the handicap that as a fugitive from English justice he might choose not to attend hearings in this court lest he be required to serve the outstanding sentence of four months imprisonment for contempt, but that (it seems to me) is a matter for him. Nevertheless the fact that the Respondents would be left unrepresented is an important factor in favour of allowing them to use the funds in the Bank Julius Baer account.

Ordinarily, as already noted, the fact that a defendant would be left without legal representation if not allowed to draw on frozen funds which are the only funds available with which to fund the defence of the claim would be decisive in favour of allowing such funds to be used. However, this is in several respects an exceptional case. It is exceptional not only because the Respondents are and remain in contempt of court, but also because it is only because of that contempt that this action is necessary. If the Respondents had done what they were ordered to do, Tidewater would have received the monies to which it is entitled, there would have been no need for any personal claims against the Respondents, and none of the legal costs of this action would have been incurred by either party. Even now, despite their resignations as directors of PhoenixTide, I am not at all persuaded that the Respondents would be unable to procure the release of the monies payable by Total to Tidewater if they chose to do so.

Accordingly these are Respondents who have deliberately flouted orders of this court and continue to do so and who have been prepared to mislead the court when it suits them, but who now come seeking an exercise of the court’s discretion in their favour as a matter of the overall interests of justice. It is particularly ironic, to say the least, that the order which they seek is an order that Tidewater should do the very thing which the Respondents themselves have refused to do, namely to procure the release of funds. They have in my judgment been unable to explain satisfactorily why justice requires that Tidewater should procure the release to the Respondents of funds attached by the Swiss order, but not that the Respondents themselves should comply with this court’s order to procure the release of funds to Tidewater. In these circumstances I accept the submission of Mr Allen that to order Tidewater to join in an application to the Swiss court to procure the release of funds to the Respondents would indeed be grotesquely unfair when this matter is considered overall. It would inevitably mean the very substantial depletion of what may well be the only funds available to Tidewater in the event that it is able to make good its claims in this action. Tidewater would rightly be left with a sense of grievance that there is one rule in this court for it and another for the Respondents.

Accordingly I would have dismissed this application even if the Respondents had adduced credible evidence that the Otunba’s Bank Julius Baer account represents the only source of funds with which to defend this action. That, in my judgment, is what the overall interests of justice would have required. Even if this means that the Respondents will be unrepresented in this action, that is a consequence of their own deliberate conduct.