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12.07.2016
Zumax Nigeria Ltd v First City Monument Bank PLC Stephen Kola-Balogun
A Introduction
case which may be of considerable interest to the legal profession here in Nigeria is the recent judgement of the English Court of Appeal in ZUMAX NIGERIA LTD v FIRST CITY MONUMENT BANK PLC delivered on 23rd June 2016. The appeal not only clarifies certain significant procedural points taken in the High Court below but also contains a few helpful guidelines on the approach to be taken by our Courts when a case bears certain elements of fraud. The wider aspects as to what really constitutes fraud in Nigerian jurisprudence has become a perennial subject of debate and controversy in recent years and the decision of Mr. Charles Hollander QC (sitting as a Deputy Judge of the High Court in England) was by no means exempt from these disputations and his judgement seems to have even stretched this issue further on appeal. Needless to say First City Monument Bank Plc (FCMB) were dissatisfied with the judgement of Mr. Hollander QC and appealed to the Court of Appeal in England, questioning the dismissal of certain applications they made in the High Court on 6th December 2013, 11th December 2013 and 7th May 2014. The Court of Appeal’s eventual decision provides another useful reminder on how our Courts ought to tackle any perception of fraud. In the view of Lord Justice Kitchin at paragraph 69 of the Court of Appeal judgment, “any foreign judgment is, if obtained by fraud, open to attack………”, and this appears to have been the case in the suit as FCMB’s appeal was dismissed for fraudulent misrepresentation. The Issues in Zumax The Claimant/Respondent, Zumax Nigeria Limited (Zumax) (represented by Barrister Francis Collaco Moraes and instructed by the London based firm of Solicitors, Mordi & Co) is a company incorporated in Nigeria, and engaged in the business of providing engineering services in Nigeria, primarily to companies in the Shell and Chevron groups of companies. Zumax would invoice these clients for some of its fees in US dollars and the remainder in Naira. A nominee of Zumax, Redsear Limited (Redsear), a company incorporated in the Isle of Man, received the US dollar payments in a US dollar account at the London branch of Chase Manhattan International Limited (Chase), which subsequently became JP Morgan Bank. Zumax used these funds to purchase equipment and for other purposes connected with its business, and any surplus funds were remitted to Nigeria for use by it in its Nigerian operations. The Defendant/Appellant FCMB (represented by Fidelis Oditah QC, SAN and instructed by the London based firm of Solicitors, Alan Taylor & Co.) on the other hand is a registered Nigerian bank and, as the Deputy Judge in the High Court pointed out, is the product of a number of Nigerian bank mergers. By these mergers it assumed the liabilities and obligations of, among other banks, IMB International Bank Plc (IMB) and Finbank Plc (Finbank). IMB was Zumax’s main banker. IMB Morgan Plc (IMB Morgan) was a subsidiary of IMB. One of the directors of IMB was a certain Mr. Edwin Chinye. He was also a director of Zumax. At all material times to these proceedings IMB maintained in its own name a US dollar correspondent bank account at the London branch of Commerzbank AG (Commerzbank), as did IMB Morgan. Zumax asserts in this case that between May 2000 and April 2002 monies amounting to US$3,547,000 held in Redsear’s US dollar account at Chase in London were transferred upon the instruction of Mr. Chinye to the IMB and IMB Morgan Commerzbank correspondent accounts for the sole purpose of remitting them to Zumax. It also contends that IMB and IMB Morgan held these monies (the Redsear proceeds) on trust for Zumax. Zumax maintains that it never received the Redsear proceeds and that IMB and IMB Morgan, acting by Mr. Chinye, fraudulently and in breach of trust wrongfully retained them. The claims in this suit against FCMB are made because they are the successors in title of IMB. Zumax
recognises that FCMB did not succeed to the liabilities of IMB Morgan but asserts that IMB Morgan was for this purpose the agent or nominee of IMB. The proceedings and the applications in the High Court On 10th April 2013 solicitors for Zumax wrote a letter of claim to FCMB detailing the matters above and demanding payment of the Redsear proceeds together with interest. About two months later, solicitors in Nigeria for FCMB replied denying that the Redsear proceeds had ever been received by IMB and IMB Morgan and further asserted that Zumax had admitted as much in the proceedings it had pursued in our Courts here in Nigeria against Mr. Chinye and Finbank in suit number FHC/L/ CS/784/2009. Zumax considered that FCMB had failed to put forward a credible defence to its claim and accordingly, it issued an application for permission to serve these English proceedings on FCMB in Nigeria. FCMB were eventually served in Nigeria and they duly acknowledged service. On 7th November 2013, FCMB sought from Zumax and was given a 28 day extension of time by the High Court in England to prepare an application challenging its jurisdiction. That extension expired on 5th December 2013. Meanwhile, on 4th December 2013, FCMB’s solicitors sought a further extension until 31st January 2014. They explained that they were reviewing seven different sets of proceedings in our Courts here in Nigeria and that they needed more time in order to properly prepare their challenge. On 6th December 2013 Zumax refused the extension sought. It however extended time for FCMB to file a defence for 28 days from 13 November 2013. This extension expired on 11th December 2013. In the meantime, FCMB’s solicitors had prepared an application to the Court for an extension of time. It was purportedly dated 5th December 2013 but sent to the Court by fax late on Friday, 6th December 2013. On 11th December 2013 FCMB made a substantive application to challenge the jurisdiction of the Court. In broad terms FCMB sought to have the order permitting service out of jurisdiction set aside on the basis that Zumax had failed to make out a sufficiently arguable case on the merits, not least because the claims which are the subject of proceedings in the High Court in England had been compromised in the course of other proceedings in Nigeria; that the case did not fall within one or more of the classes of case for which permission to serve out of jurisdiction could properly be given; that the appropriate forum for the hearing of the dispute was Nigeria; and that the order should be set aside for material non-disclosure. On 16th December 2013 Zumax’s solicitors wrote to FCMB’s solicitors seeking disclosure and inspection of the records of the US dollar correspondent accounts held by IMB and IMB Morgan with Commerzbank in light of FCMB’s denial that the Redsear proceeds had ever been transferred to those accounts. That request was refused and so, on 20th December 2013, Zumax made an application for the disclosure of those records under the Bankers’ Books Evidence Act 1879 of England. On 4th February 2014 a Master of the High Court revealed that, contrary to FCMB’s assertions, the Redsear proceeds had indeed been transferred into those accounts. On 7th May 2014 in light of the position taken by Zumax to its failure to make its application challenging jurisdiction in time, FCMB made an application for relief from sanctions under the English Civil Procedure Rules. High Court Ruling FCMB’s application of 5th December 2013, 11th December 2013 and 7th May 2014 all came up for hearing before the Deputy Judge on 8th May 2014. The Deputy Judge was faced at the hearing with a host of arguments by FCMB as to why its applications should be allowed. It claimed Zumax had failed to make out a sufficiently arguable case on the merits for a variety of reasons; that the case did not fall within one or more of the classes of case for which permission to serve out of jurisdiction could properly be given; that the appropriate forum for the
The Rt Hon Lord Justice Kitchin
hearing of the dispute was Nigeria; and that the order should be set aside for material nondisclosure. Zumax responded that no application to challenge the jurisdiction had been made in time and therefore FCMB was deemed to have submitted to the jurisdiction of the English court. The Deputy Judge dismissed each of FCMB’s applications and held, in summary, that the delay by FCMB in making its applications of 5th and 11th December 2013 was not trivial and that no good reason for the delay had been shown; that FCMB’s application under the Bankers’ Books Evidence Act constituted an unequivocal and irrevocable submission to the jurisdiction of the English Court; that none of the actions between the parties in the Nigerian Courts concerned the Redsear proceeds or constituted a bar to the claim; that Zumax had shown a good arguable case; that its claim fell within each of the three classes of cases upon which it relied and for which permission to serve out of jurisdiction could properly be given; that there had been no material non-disclosure; and that this was the forum in which the claim could most suitably be tried. The Appeal Upon appeal FCMB contended that the Deputy Judge: i) erred in principle in the way he approached the applications for an extension of time for relief from sanctions, and that had he approached them correctly he would or ought to have granted the extension and relief sought; ii) was wrong to hold that FCMB’s application under the Bankers’ Books Evidence Act constituted an unequivocal and irrevocable submission to the jurisdiction of this court; iii) erred in that he failed to take proper account of (a) the parallel proceedings in Nigeria between the parties in which the same or substantially the same issues arise; (b) the terms of a consent order in proceedings in the Nigerian courts brought under claim number LD/115/2005 and (c) the effect of a charge of the Redsear proceeds to IMB, including the sums the subject of this claim, under the terms of a debenture made in 1998 and iv) was wrong to hold that Zumax had shown a good arguable case that its claim fell within each of the three classes of cases upon which it relied and for which permission to serve out of jurisdiction could properly be given. Ground 1 – extension of time The Appeal Court was of the view that an application for an extension of time for noncompliance with the rules should be decided in accordance with the same principles as an application for relief from sanctions, and that is so even if the rule in issue does not itself prescribe CONTINUED ON PAGE 7