Koo Golden East Mongolia v Bank of Nova Scotia & Ors [2007] EWCA Civ 1443

Case No A2/2007/2806

[2007] EWCA Civ 1443

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT, CHANCERY DIVISION

(MR JUSTICE ROYCE)

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date Wednesday, 19 th December 2007

Before

SIR ANTHONY CLARKE MR

LADY JUSTICE SMITH DBE

LORD JUSTICE PUMFREY

Between

KOO GOLDEN EAST MONGOLIAAppellant

BANK OF NOVA SCOTIA AND OTHERSRespondent

(DAR Transcript of

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Mr A Fulton (instructed by Denton Wilde Sapte, London EC4M 7WS) appeared for Appellant.

Mr M Black QC, Mr A Miller (instructed by Squire, Sanders & Dempsey, London EC2N 1HQ) appeared for Respondent.

Judgment

Sir Anthony Clarke MR:

[1]This appeal arises out of a Norwich Pharmacal order made by Royce J on Monday 10 December in which he ordered the first and second defendants by 16:00 on 13 December to serve on the claimants a signed witness statement answering a number of specific questions. The judge refused permission to appeal but permission was subsequently granted on paper by Buxton LJ who also granted a stay of execution of the order pending determination of the appeal. Because the appeal was said to be urgent we heard the appeal on Monday, which was 17 December, and reserved judgment until today, 19 December.

[2]The order was made against the first and second defendants. Although it appears that the relief is really sought against the first defendant no distinction is drawn between the position of the first and second defendants in this appeal. It is convenient to refer only to the position of the first defendant (the bank). It is a Canadian bullion bank with a London branch. The third defendant is the Central Bank of Mongolia (MongolBank). The claimant’s principal dispute is with MongolBank but this appeal is only concerned with the claimant’s attempt to obtain information and documents from the bank. In order to focus on the issues in this appeal it is appropriate to say a word about the underlying dispute between the claimant and MongolBank and then the development of these proceedings and the role of the bank.

The Underlying Dispute

[3]The facts are set out in some detail in the claimant’s skeleton argument. Mr Fulton accepts on behalf of the bank that the facts are correct or at least arguably correct. It is necessary for present purposes only to refer to some of them. The claimant is a gold mining company based in Mongolia. Mr Sergey Paushok is the indirect majority shareholder in the claimant and its executive director. The claimant says that it is an established, large and successful company. Under Mongolian banking law the right to hold deposits of gold is limited to MongolBank and other banks authorised by MongolBank. In practice gold mining companies place their mined gold with MongolBank for safekeeping, usually releasing it for sale at a later date. On 19 July 2006 the claimant entered into a “safe custody/sale and purchase of precious metal agreement” (the agreement) with MongolBank.

[4]The terms of the agreement, which is governed by the law of Mongolia included the following: (a). The respondent agreed to deliver to MongolBank gold bullion bars (metal) for safe custody and subsequently to sell metal to MongolBank on certain terms (clause 1.1). (b). The sale and delivery period was subsequently extended to 25 December 2007 (clause1.2.1 ) as varied by supplementary agreement number one dated 5 October 2006. (c). The sale date would be any date designated by the claimant during the sale period (clause

1.2.2 ). (d). The amount of metal to be sold would be at least one million grams, ie one metric tonne (clause 1.2.4). (e). The price would be the metal price per ounce as set by MongolBank at 9.30am Ulan Bator Time on the date the claimant delivers a letter containing the request to sell the metal to MongolBank (the metal sale letter) (clause 1.2.5). (f). The claimant was obliged to deliver not less than one million grams of metal to MongolBank (clause

2.1.1 ). (g). The claimant was obliged to issue the metal sale letter within the period in clause 1.2.1, that is to say on or before 25 December 2007 (clause

2.1.2 ). (h). MongolBank was obliged to ensure acceptance of metal for safe custody in an amount of not less than one million grams (clause

2.2.1 ). (i). MongolBank was obliged to ensure the security of the metal delivered for safe custody from the moment of the acceptance of the metal into MongolBank’s depository until its sale by the claimant (clause

2.2.2 ). (j). MongolBank was obliged to issue a certificate confirming the amount of metal kept in safe custody on the claimant’s request within one business day of receipt of such request (clause

2.2.3 ). (k). MongolBank had the right to accept metal in an amount greater than provided under the agreement (clause 2.4). (l). During the metal sale period the claimant must sell to MongolBank metal in the amount set forth in clause 1.2.4, that is one million grams, and MongolBank must accept metal for safe custody and to purchase metal as the claimant requires in the metal sale letters (clause 3.1). (m). Risk in the metal will pass on delivery into the safe custody of MongolBank but ownership will only pass on the delivery of the metal sale letter designating the sale date and metal sale request and execution of the metal sale statement (clause 4.1). (n). MongolBank would pay 85% of the value of the metal deposited into safe custody on the date of delivery and that sum would be deducted from the actual purchase price. The balance would be payable to or by the claimant (clauses 5.5 to 5.8). (o). In cases not covered by the agreement liability would be determined in accordance with Mongolian law (clause 6.6). (p). All disputes and controversies not expressly addressed in the agreement were to be resolved by negotiation on the basis of Mongolian law (clause

9.1 ). (q). If the matters in dispute could not be resolved through negotiation the disputes were to be resolved in court – by which I understand was meant in a court in Mongolia – pursuant to the procedures established by Mongolian law (clause

9.2 ).

[5]It is the claimant’s case that the following terms were implied into the agreement under Mongolian Civil Law:(1) that the claimant retained the right to reclaim the deposited assets at any time under article 425 of the Mongolian Civil Law; and

(2) That the deposited assets may not be transferred to a third party without the authorisation of the claimant under article 422.3.2 of the Mongolian Civil Law.

[6]In addition, by article 103.1 of the Mongolian Civil Law the rights of an owner may only be curtailed or restricted in ways expressly provided for by specific legal provisions and there are no provisions of Mongolian law which would have the effect of depriving the respondent of title to the gold as a result of any transaction entered into by MongolBank with any third party. Article 106 of the Mongolian Civil Law provides that an owner may reclaim its property from those holding it illegally or without proper authorisation.

[7]Mr Fulton accepts on behalf of the bank that in these circumstances the claimant has an arguable case under the agreement and/or Mongolian law that:(1) it was not obliged to sell to MongolBank the whole amount deposited with MongolBank;

(2) it could withdraw either the whole amount deposited or the whole amount less one metric tonne;

(3) it could either retain such gold itself or transfer it to another authorised bank in Mongolia;

(4) it could then transfer gold out of Mongolia and sell it on the world market either before or after refining; and

(5) unless and until the claimant delivered a sale letter or letters to the MongolBank (a) the title the gold remained in the claimant; (b) MongolBank could not lawfully deliver the gold to a third party; and (c) MongolBank could not lawfully sell the gold to a third party or have it refined.

[8]The claimant accepts that it could not require redelivery of any of the gold without repaying the 85% of the value of the gold redelivered. Although Mr Fulton submits that the claimant has an arguable case along the lines I have just described he submits that the true position is much more likely to be as follows:(1) The claimant was bound to buy the whole of the amount of gold delivered at the price prevailing at the date of the relevant metal sale letter or letters.

(2) The claimant was bound to issue the letters on or before 25 December 2007 failing which the property in the gold would pass to MongolBank.

(3) In these circumstances the claimant had no right to possession of any of the gold once it was delivered to MongolBank.

(4) It follows that the claimant does not have an immediate right to possession of gold delivered to a refiner outside Mongolia.

(5) It was not a breach of duty to deliver the gold to such a refiner before property passed to MongolBank because risk had already passed and property was bound to pass on 25 December 2007 at the latest.

[9]It is accepted on all sides that the resolution of these questions depends upon Mongolian law and upon the application of Mongolian law to the terms of the agreement. It is not to my mind without significance that by clause 9 of the agreement the claimant and MongolBank had submitted their disputes to the courts in Mongolia for their resolution under Mongolian law.

[10]I return to the facts. Between 21 July 2006 and 19 January 2007 the claimant delivered a total of 3,299,184.13 grams of gold bars to MongolBank. There is some evidence that the chemically pure element of that gold was or was estimated to be 2,951,024.21 grams. On 12 March 2007 the claimant asked MongolBank to “confirm the amount of gold held in safe custody by MongolBank” in accordance with the agreement. MongolBank replied on 14 March saying that in accordance with the agreement MongolBank held 3,299,184.13 grams as of 13 March 2007. In the meantime in November 2006 the claimant was assessed by the Mongolian tax authorities for windfall profit tax and royalties on about one metric tonne of gold out of two metric tonnes delivered to MongolBank for safe custody. By that time no metal sale letter had been issued, as indeed is still the case. Mr Paushok wrote to MongolBank on 4 November 2006 asking for confirmation of the position. MongolBank replied on 8 November saying that no final settlement or payments had been made but that given the gold price fluctuations in the international market, “a certain portion” had been exported for refining.

[11]Somewhat later, on 24 August 2007, MongolBank issued a press statement, which seems to me to be of some importance in this appeal and which is in these terms:

“MongolBank gives the following explanations to media with respect to the statement made by KOO Golden East – Mongolia that 3 tons of gold held in custody in MongolBank have disappeared. “MongolBank, implementing the Law on Central Bank (MongolBank) and the Law on Precious Metals and Stones Fund and with the purposes of increasing the country’s currency reserves purchases from gold producing business entities and individuals unrefined gold at the market price, published as of a certain date. According to the standards, accepted in the international financial markets, refined gold is placed on the most favourable terms. As of today Mongolia’s hard currency reserves amount to US$1 million. “This gold, which according to the agreement made with KOO Golden East – Mongolia, will be definitely purchased by MongolBank, has been refined and placed abroad. “KOO Golden East – Mongolia distributed information that MongolBank breached the agreement and disposed of the gold kept in custody at its discretion. By doing this the Company is attempting to divert public attention from the tax payment issue. “MongolBank calls on the media expecting that truthful and verified information be published about the state institution.”

[12]I will return to the second paragraph in a moment but the statement expressly stated that the gold “has been refined and placed abroad”. It also reflects MongolBank’s case under the agreement, namely that the gold “will be definitely purchased by MongolBank”, presumably on or before 25 December 2007. The claimant responded by issuing a statement to the effect that MongolBank was in breach of the agreement. On 27 August the claimant asked MongolBank to make a statement under clause 2.2.3 of the agreement stating what amount of gold owned by the claimant and delivered to MongolBank for safe custody “is currently physically kept in Mongolia” pursuant to the agreement. MongolBank replied stating the weights I gave earlier, namely 3,299,184.13 and 2,951,024.21 grams. On 10 September MongolBank wrote to the claimant spelling out the amount of gold received and the prepayment of 85% and complaining that the claimants had not been willing to finalise a settlement. The letter concluded:

“By processing your gold in chemically pure gold MongolBank made the pre-payment on its price, and, in accordance with the law, placed refined gold on its foreign account. As requested by you in your letter No 3014/03 we confirmed the amounts of chemically pure and bullion gold by stating the same in response letter number No 5/1182 dated August 27 2007. “Please, send to us a formal letter on the sale of gold held by us in custody to terminate the agreement promptly.”

[13]No doubt in response to the last paragraph of that letter the claimant replied on 11 October. It set out the relevant figures and added:

“You are hereby requested to deliver the gold bars in question back to us. Please redeliver the gold bars according to the numbers ascribed to them in the deeds on the acceptance of gold into the custody of your bank’s depository between July 20, 2006 and January 19, 2007. In turn, our company is willing to repay 85% of the retainer received for the gold delivered into your custody.”

[14]As Smith LJ observed in the course of the argument that letter does not amount to a tender of repayment of the 85% but it does indicate a willingness to do so. I should add that in the meantime, according to his statement, Mr Paushok telephoned MongolBank on 20 or 21 September and was told by a former president of MongolBank that MongolBank had exported the gold and that it had been refined and placed with the bank in London. He was also told that some or all of the refined gold had been sold. As can be seen, the underlying dispute is between the claimant and MongolBank. It was information that the bank was in possession of the gold that prompted these proceedings.

Proceedings

[15]The claimant’s first step was to make an application without notice on 19 October to Saunders J for an order that the bank, the second defendant and MongolBank be restrained from moving or otherwise dealing with the gold. Saunders J declined to make the order on the ground that there was no good reason for the application to be made without notice. The application was subsequently made on notice to the bank but not, so far as I can see, to MongolBank. It came before Lloyd-Jones J on 25 October. He drew the claimant’s attention in particular to section 1(2) and section 14(4) of the State Immunity Act 1978 (the 1978 Act). He adjourned the hearing for a short time to enable the claimant to prepare submissions on the question whether an injunction should be granted against MongolBank as a central bank. After hearing those submissions he held that it should not. He held that the effect of section 14(4) was that a central bank has the same protection as a state under section 13(1) to (3) and that their effect is that no injunctive relief can be granted against a central bank. He accordingly declined to grant an injunction against MongolBank. MongolBank was not represented before him. He adjourned the applications against the bank. In doing so he expressed doubt about whether he could grant an injunction in the light of sections 13(2)(b), 13(4) and 14(4) of the 1978 act.

[16]He also expressed doubt as to whether the claimant could meet the undertaking in damages. He did however direct the bank through an appropriate officer to make a statement, to which it did not object. He directed the service of a claim form in seven days. On 31 October the claimant issued a claim form naming the bank the second defendants and MongolBank as defendants. The claim was expressed in these terms:

“The Claimant claims damages against the First, Second and Third Defendants by reason of tortious interference and conversion of unrefined gold, deposited by the Claimant with the Third Defendant in Mongolia between 20 July 2006 and 19 January 2007. The Claimant claims the Third Defendant: (a) removed the gold from Mongolia; (b) refined it; and (c) transferred it to England where the First and Second Defendants took possession of it and have retained custody of it, within their depository or within another depository on their behalf. At all times the Claimant has retained ownership and the right to possession of the gold. The First, Second and Third Defendants’ actions are inconsistent with the Claimant’s ownership and its right to possession of the gold and amount to a conversion of the gold for their own use. The Claimant claims: (a) an order for delivery up of the gold; (b) an account and an enquiry into the precise whereabouts of the gold and as to whether any part has been sold and if so to whom, for what sums and when; (c) damages and/or disgorgement of profits by way of restitution; (d) a declaration that the Claimant is the beneficial and legal owner of the gold; and (e) interest.”

[17]It can be seen that the claim is based on alleged possession of the gold by the bank and claims an order for delivery up of the gold, an account and damages and/or disgorgement of profits. It does not include a claim for Norwich Pharmacal relief. In the meantime Mr Simon Weeks who is a director of the bank made a statement pursuant to the order of Lloyd-Jones J. The statement included the assertion that in the period from July 2006 MongolBank had not deposited with the bank or the second defendant any gold ingot whether refined or unrefined. It also stated that MongolBank did not hold an allocated account with the bank but did hold an unallocated account to which I will return in a moment. The claimant’s solicitors complained this statement did not comply with the order.

[18]In a letter dated 1 November the bank’s solicitors confirmed that it had received no physical gold from MongolBank in the relevant period. By a letter dated 16 November the claimants again asked MongolBank for the whereabouts of the gold. It replied as follows on 19 November:

“With the purpose of increasing the state currency reserves MongolBank when purchasing from business entities purified gold produced by them would calculate its pure weight according to common practice of the international financial markets and would make settlements for the value of the gold based on the markets price of the gold as of a particular day. “Given that MongolBank has an obligation to refine the purified gold purchased into the state currency reserves and place the same in the international financial markets pursuant to the most favourable arrangements, MongolBank refined 3.1 tons of your gold, being in possession of MongolBank in accordance with the law. “With this please be informed that as of November 16, 2007 out of the total amount of gold delivered by your company under the agreement, 190.8 kg are kept in custody of MongolBank as 43 unrefined gold bullion bars, whereas 3.109 kg of 999.9 fineness are held in our metal account in London. “If your party wishes to rescind the agreement, we ask that a formal request be submitted in accordance with the law of Mongolia. We are prepared to resolve this issue expeditiously within the framework of Mongolian law.”

[19]It now seems reasonably clear that “our metal account in London” is a reference to MongolBank’s unallocated account with the bank. However the claimant wrote to MongolBank on 20 November asking who was holding the 3.109 kilograms of gold in London. MongolBank replied on 22 November as follows:

“In response to your letter ref 1440/05 dated November 20 2007. Pursuant to section 1.1 of the Agreement for Safe Custody, Purchase and Sale of Precious Metal, which reads that: ‘The Seller shall deliver into custody of and subsequently sell to the Bank … gold bars’, 3.109 kg of gold deposited by you were refined in accordance with international standards and are kept in custody with Bank of Nova Scotia/Scotiamocatta/London GB.”

[20]The claimant decided to restore the application which had been adjourned by Lloyd-Jones J. It did so because the contents of that letter appeared to be inconsistent with Mr Weeks’ statement that MongolBank had not deposited any gold at the bank. The claimant accordingly issued an application in which it sought injunctive relief against the bank and an affidavit in relation to the physical gold in its possession. The application did not include an application for Norwich Pharmacal relief of the kind ultimately ordered by Royce J.

[21]On 6 December Mr Weeks made a second witness statement. He exhibited a letter he had written to MongolBank asking for an explanation of the statement about the physical gold in the letter from MongolBank dated 22 November quoted above. His letter included this sentence:

“I would therefore be most grateful if you could help us bring this matter to a speedy conclusion and clearly demonstrate that BNS is no way involved in physical gold activity with the CB of Mongolia.”

[22]MongolBank replied on 5 December clearly stating that it had never delivered any physical gold to the bank. MongolBank did however decline to answer another question in Mr Weeks’ letter which asked what had happened to the physical gold where it was refined and who took the physical out turn in exchange for a “loco London credit” into MongolBank’s account with the bank. MongolBank declined to answer that question because:

“We believe based on the current situation that we are not obliged to release such information.”

[23]Mr Weeks however described in his second statement what was likely to have happened to the gold as follows, MongolBank probably placed the claimant’s gold over a period of time with a European refinery to be refined. The European refinery then placed the refined gold with a European, possibly English, bank. The European bank then arranged for a credit of the equivalent number of ounces to MongolBank’s unallocated account with the bank. The European bank would do this either on its own account if it were a clearing bank or via a clearing bank. Mr Weeks added that once the material is refined it may become co-mingled with other similar material and therefore it would be impossible specifically to identify the original material. Thus where a bank takes physical possession of refined out-turn the material may come from a variety of sources.

[24]Mr Fulton prepared a skeleton argument dated 7 December before the hearing before the judge which was limited to the injunctive relief claimed. He did not address a Norwich Pharmacal application because none had been made. However in the light of Mr Weeks’ second statement the claimant abandoned its claim for injunctive relief but now sought Norwich Pharmacal relief. In Mr Miller’s skeleton argument on behalf of the claimant which was also dated 7 December, which was a Friday, he said that in the light of Mr Weeks’ second statement the claimant must of course accept that the bank does not physically hold the gold. The claimant accordingly abandoned its claim for injunctive relief. Instead it sought wide ranging Norwich Pharmacal relief in order to try to discover who the refiner was, what had happened to the gold and what had happened to the proceeds of sale of the gold through the international banking system.

[25]In a nutshell the submission made to the judge as set out in paragraph 24 of Mr Miller’s skeleton argument was that the bank, possibly through no fault of its own, has been mixed up in the tortious act of MongolBank and possibly others involved in the conversion of the gold and has facilitated wrongdoing by allowing credits to be made on MongolBank’s account with the bank. The only case relied upon in the skeleton was Norwich Pharmacal Company v Commissioners of Customs and Excise

[1974] AC 133

. The judge essentially accepted Mr Miller’s submissions and made the order sought.

The Appeal

[26]It is plain that the argument before us which lasted a whole day was much more extensive than that before the judge. In particular the judge does not mention the possibility that an order should not be made on the ground of state immunity whereas it played a significant part in the argument before us. I have set out the background and the facts in some detail because in my opinion they are of some importance in the resolution of this appeal. The thrust of the case until 7 December had focused on the assertion that the bank was in physical possession of the gold and that the claimant wanted to preserve the gold in order to be able to pursue its claims against MongolBank. Mr Black QC, who, with Mr Miller, represents the claimant in this appeal, now puts the case on the basis that Norwich Pharmacal relief is necessary in order to pursue a claim for damages against the refiners of the gold on the basis that they are liable for conversion or some form of interference with goods. It is conceded by Mr Fulton that if MongolBank had no right to have the gold refined, on the basis that it did not own the gold, it is at least arguable that the claimant has a cause of action against the refiners. However for his part Mr Black correctly concedes that the claimant cannot be in a better position against the refiners or indeed any bank or entity further down the line than he would be against MongolBank. If MongolBank is in breach of duty owed to the claimant then the refiners may also be but, if the claimant does not have a valid claim against MongolBank it follows that it does not have a valid claim against the refiners. The claimant has all the information that it needs to pursue a claim against MongolBank, because it is conceded that MongolBank delivered the gold or most of it for refining outside Mongolia. Either MongolBank was entitled to do that or it was not. It does not need Norwich Pharmacal relief against the bank to pursue that claim.

[27]The claimant can pursue that claim by discussion with MongolBank or, if that should fail, by action in the courts of Mongolia as it agreed to do in the agreement. The claimant does not say that the courts of Mongolia are not competent to determine such a claim. Recognising this position, Mr Black expressly said that the claimant would not proceed with a claim against MongolBank in England. Thus the sole purpose of the Norwich Pharmacal relief is as a preliminary to a possible action against the refiners, wherever they might be possibly, or against an intermediate bank.

[28]The bank now resists the claim on three bases: one, that the conditions for Norwich Pharmacal relief were not satisfied; two, that the court cannot grant relief because of the state immunity of MongolBank; and three, that relief should be refused in the exercise of the court’s discretion. Mr Fulton submits that the judge erred in principle or was plainly wrong in granting the relief. I will consider each of those points in turn.

[1]Are the conditions satisfied?

[29]The facts asserted for this purpose are these: the gold was refined by a gold refiner outside Mongolia and according to Mr Weeks probably a European refiner. It is not clear where the refined gold has been held physically after refining or by whom. Nor is it clear whether the unrefined gold is, as it were, still identifiable in its refined form or whether it has been mixed with other gold so as to lose its identity. It seems to me to be quite likely that there has been mixture of the gold but this is really no more than speculation.

[30]It is common ground that MongolBank has an agreement with the bank substantially on the terms of the standard unallocated precious metals account agreement (the UPMAA). It has what is known as an unallocated account in which a certain quantity of gold is credited to MongolBank’s account. In the agreement unallocated account is defined as meaning:

“… in relation to a Precious Metal, the account(s) maintained by us in your name recording the amount of that Precious Metal which we have a contractual obligation to transfer to you (or, in the case of a negative balance, if so permitted by us, which you have a contractual obligation to transfer to us).”

[31]Clause 2.3 provides for reports to be made from time to time by the bank to MongolBank. The gold is denominated in an unallocated account in ounces. Clause 3 of UPMAA provides:

“DEPOSITS “Procedure: You may at any time notify us of your intention to deposit Precious Metal in an Unallocated Account. A deposit may be made (in the manner and accompanied by such documentation as we may require) by: (a) Procuring a book-entry transfer (i) to us by arranging that our account with a third party (as notified to us by you) in which we hold Precious Metal of the type which we have agreed to hold for you (and which has the same denomination as the Precious Metal to which your Unallocated Account relates) is credited with an amount of Precious Metal equal to the amount of Precious Metal to be recorded in your Unallocated Account; or (ii) to your Unallocated Account by arranging that a third party for whom we maintain an account holding Precious Metal of the type which we have agreed to hold for you (and which has the same denomination as the Precious Metal to which your Unallocated Account relates) instructs us to debit from its account with us an amount of Precious Metal and to credit such amount to your Unallocated Account; or (b) the delivery of Precious Metal to us at our nominated London vault premises detailed in the Schedule attached hereto, at your expense and risk. Any Precious Metal delivered to us (or to a third party holding to our order) must be in the form of bars which comply with the Rules (including the Rules relating to good delivery and fineness) or in such other form as may be agreed between us.”

[32]Mr Weeks says that in this case book entry transfers were made in accordance with clause 3.1(a)(ii). Clause 3.5 provides:

“Allocation: We may, if applicable, at our option convert your entitlement in respect of an Unallocated Account into rights in respect of Precious Metals in an Allocated Account, and vice-versa, on the terms set out in the Schedule attached hereto.”

[33]In the event, the evidence is that MongolBank does not have an allocated but only an unallocated account with the bank. The bank does not hold any gold for MongolBank and its obligations are purely contractual. The claimant wishes to know who the refiners were and who holds the gold. Mr Black recognises that the bank may not know who the refiners were but submits that it is likely to have information which will lead the claimant to the name of a gold clearing bank, of which I think there are five, which will have information which may lead to the whereabouts of the gold. It is, I think, likely that the bank does have such information which would take the claimant a step nearer the gold or the name of the refiner, even if the claimant may have to make further Norwich Pharmacal applications in the future.

[34]The classic statement of principle is that of Lord Reid in the Norwich Pharmacal case itself where he said at page 175 B to C:

“On the whole I think they [ie the authorities] favour the appellants, and I am particularly impressed by the views expressed by Lord Romilly MR and Lord Hatherley LC in Upmann v Elkan (1871) LR 12 Eq 140; 7 Ch.App. 130. They seem to me to point to a very reasonable principle that if through no fault of his own a person gets mixed up in the tortious acts of others so as to facilitate their wrong-doing he may incur no personal liability but he comes under a duty to assist the person who has been wronged by giving him full information and disclosing the identity of the wrongdoers. I do not think that it matters whether he became so mixed up by voluntary action on his part or because it was his duty to do what he did. It may be that if this causes him expense the person seeking the information ought to reimburse him. But justice requires that he should co-operate in righting the wrong if he unwittingly facilitated in its perpetration.”

[35]Mr Fulton submits that that is not this case because the bank was not, “mixed up with the tortious acts of others so as to facilitate their wrong-doing”. He submits that the bank was not mixed up with the refining process or with the subsequent movement of the refined gold, if there was any such movement. The judge rejected that submission on the basis that it is too narrow. So would I. I do not think that Lord Reid intended to put it so narrowly.

[36]Some of the other members of the house put it more broadly. For example, Lord Morris said at page 178H to 179A:

“It is not suggested that in ordinary circumstances a court would require someone to impart to another some information which he may happen to have and which the latter would wish to have for the purpose of bringing some proceedings. At the very least the person possessing the information would have to have become actually involved (or actively concerned) in some transactions or arrangements as a result of which he has acquired the information. In all ordinary circumstances there would then be some proceedings in the course of which the machinery of the court would enable all relevant and admissible evidence to be obtained.”

See also per Lord Cross at page 196 to 197.

[37]It seems to me that, whereas here the alleged tort involves dealing with the claimant’s property without its consent, Norwich Pharmacal relief should in principle be available against a person who holds an account which contains the proceeds of sale of the product, here the refined gold. Indeed that would, to my mind, be a classic case for such relief. In the present case the account does not hold the proceeds of sale but (it appears) the quantity of gold which, in one sense at least, represents the refined gold. I agree with the view expressed by Lightman J in Mitsui and Co Ltd v Nexen Petroleum UK Ltd

[2005] EWHC 625 (Ch)

[2005] 3 All ER 511

at [20] that Norwich Pharmacal relief is a flexible remedy. See also Ashworth Security Hospital v MGN Ltd

[2002] UKHL 29

[2002] 1 WLR 2033

per Lord Woolf CJ at [57].

[38]In these circumstances this is a case in which, in my opinion, Norwich Pharmacal relief is, in principle, available. However Lord Cross made it clear at page 199F to G that this is a discretionary remedy. He said:

“Then the court would have to decide whether in all the circumstances it was right to make an order. In so deciding it would no doubt consider such matters as the strength of the applicant’s case against the unknown alleged wrongdoer, the relation subsisting between the alleged wrongdoer and the respondent, whether the information could be obtained from another source, and whether the giving of the information would put the respondent to trouble which could not be compensated by the payment of all expenses by the applicant. The full costs of the respondent of the application and any expense incurred in providing the information would have to be borne by the applicant.”

I will return to the appropriate exercise of the discretion in a moment but for the reasons I have given I would not uphold the first ground of appeal.

[2]State Immunity 39. As I have already indicated, this aspect of the case did not play any significant part in the argument before the judge, perhaps because Mr Fulton had only a short time to prepare the argument. However, it was put at the forefront of his submissions in this appeal and it was not suggested that the point was not now open the bank. The 1978 Act provides so far as relevant: “1(1) A State is immune from the jurisdiction of the courts of the United Kingdom except as provided in the following provisions of this Part of this Act. (2) A court shall give effect to the immunity conferred by this section even though the State does not appear in the proceedings in question. 2(1) A State is not immune as respects proceedings in respect of which it has submitted to the jurisdiction of the courts of the United Kingdom. 3(1) A State is not immune as respects proceedings relating to –(a) a commercial transaction entered into by the State; or

(b) an obligation of the State which by virtue of a contract (whether a commercial transaction or not) falls to be performed wholly or partly in the United Kingdom … (3) In this section “commercial transaction” means – (a) any contract for the supply of goods or services; (b) any loan or other transaction for the provision of finance and any guarantee or indemnity in respect of any such transaction or of any other financial obligation; and

(c) any other transaction or activity (whether of a commercial, industrial, financial, professional or other similar character) into which a State enters or in which it engages otherwise than in the exercise of sovereign authority; but neither paragraph of subsection (1) above applies to a contract of employment between a State and an individual. 13 .… (2) Subject to subsections (3) and (4) below – (a) relief shall not be given against a State by way of injunction or order for specific performance or for the recovery of land or other property; and (b) the property of a State shall not be subject to any process for the enforcement of a judgment or arbitration award or, in an action in rem, for its arrest, detention or sale. 14 …. (2) A separate entity is immune from the jurisdiction of the courts of the United Kingdom if, and only if (a) the proceedings relate to anything done by it in the exercise of sovereign authority … (4) Property of a State’s central bank or other monetary authority shall not be regarded for the purposes of subsection (4) of section 13 above as in use or intended for use for commercial purposes; and where any such bank or authority is a separate entity subsections (1) to (3) of that section shall apply to it as if references to a State were references to the bank or authority.” 40. It is not in dispute that MongolBank is the central bank of Mongolia or that it is a state entity within the meaning of the 1978 Act. If these were proceedings against MongolBank, MongolBank would have state immunity if these were proceedings relating to a transaction or activity of a commercial, financial or other similar character into which MongolBank had entered in the exercise of sovereign authority. MongolBank entered into a contract with the bank which was of a commercial financial or similar character. If these proceedings were against the bank they would relate to such a transaction. It follows that the question is whether MongolBank entered into the contract in the exercise of sovereign authority. In my judgment it did. 41. This appears from the press statement dated 24 August which I quoted earlier. I repeat the second paragraph, which is in these terms: “MongolBank, implementing the Law on Central Bank (MongolBank) and the Law on Precious Metals and Stones Fund and with the purposes of increasing the country’s currency reserves purchases from gold producing business entities and individuals unrefined gold at the market price, published as of a certain date. According to the standards, accepted in the international financial markets, refined gold is placed on the most favourable terms. As of today Mongolia’s hard currency reserves amount to US$1 million.” 42. The same can be seen from the first paragraph of the letter dated 19 November from MongolBank to the claimant, which I quoted earlier. That evidence shows that the purpose of the transactions including the refining of the gold and the placing of a quantity of refined gold on the unallocated account at the bank was for the purposes of increasing Mongolia’s currency reserves. In my judgment that was an exercise of sovereign authority within the meaning of the 1978 Act. That conclusion seems to be entirely consistent with that of Aikens J in the slightly different context in AIG Capital Partners Inc v Kazakhstan

[2005] EWHC 2239 (Comm)

[2006] 1 WLR 1420

at paragraph 58. 43. As I understand it, Mr Black accepts the analysis so far. However, he submits that this is not now a claim against MongolBank. Indeed, he has indicated the claimant’s intention to abandon the claim in these proceedings against MongolBank. He submits that this is simply a claim by the claimant against a commercial entity, namely the bank, in order to discover either the physical whereabouts of the gold or the name of the refiners who arguably committed a tort actionable at the suit of the claimant. Mr Fulton responds that, while that may be so, the application is for an order for the disclosure of information that is confidential as between the bank and its client which is a central bank. He submits that in the circumstances the information is held in a real sense on behalf of MongolBank as the central bank of Mongolia and that to require the bank to disclose it would be for the claimant to obtain relief against the agent of a central bank in circumstances in which it could not obtain relief against the central bank itself. 44. He submits that the claimant should not be entitled to obtain relief against those who, for this purpose, were the agents of MongolBank, namely the bank. Mr Fulton relies upon Twycross v Dreyfus

(1877) 5 Ch D 605

where it was held that it was impermissible to obtain relief against the agents of a foreign state per Sir George Jessel MR at 618 and James LJ at page 618-9. James LJ said this: “I am of the same opinion. It appears to me that the Defendants are nothing but agents of the Peruvian Government, and that they fill no other character whatever. They may have, on the balance of account between them and the government, proceeds of guano, or other moneys, available for the payment of the bonds, but that is a matter between them and the Peruvian Government. You cannot sue the Peruvian Government, and it would be a monstrous usurpation of jurisdiction, in my opinion, to endeavour to sue a foreign government indirectly, by making its agents in this country Defendants, and then saying, ‘You have got the money of the government, and you ought to apply that.’ It really would be indirectly endeavouring to make the foreign government responsible to the jurisdiction of this Court.” 45. It appears that in that case the defendants may have been commercial agents for the Peruvian Government in a way that is not quite the case here. On the other hand the mere fact that the contractual relationship between the defendants and the government was a relationship between principals so that the defendants would have to account to the government for the guano or indeed for any monies held for the government did not destroy the immunity. The facts are thus not so dissimilar from those in the instant case. In a similar way, the bank was bound to account to MongolBank for the amount of gold shown on its unallocated account. In the recent case of Jones v The Ministry of the Interior of the Kingdom of Saudi Arabia

[2006] UKHL 26

;

[2007] 1 AC 270

, in a very different context, Lord Bingham said at [10] that: “The foreign state’s right to immunity cannot be circumvented by suing its servants or agents.” 46. Mr Black accepts the principle but submits that the bank is neither the servant nor the agent of MongolBank. That is true in a narrow sense but not as I see it in the wider sense that James LJ had in mind. Further, Mr Fulton relies upon Article 6(2)(b) of the 2004 United Nations Convention on Jurisdictional Immunities of States and their Property, which provides: “A proceeding before a court of a State shall be considered to have been instituted against another state if that other state … is not named as a party to the proceeding but the proceeding in effect seeks to affect the property, rights, interests or activities of that other State.” 47. Mr Fulton accepts that that Convention is not part of English municipal law but submits that it is valuable guidance on the extent of state immunity. The Convention was approached in a similar way by Aikens J in the AIG Capital Partners case at [80]. I would hold that on the facts of this case the bank was an agent of MongolBank for the purpose of the principle in Twycross v Dreyfus. In the light of section 1(2) of the 1978 Act, which provides that “A court shall give effect to the immunity conferred by this section even though the State does not appear in the proceedings in question.”, we must decline to make the order sought on the ground of state immunity. 48. I would only add that I was at one time concerned whether this conclusion would be inconsistent with the fact that, as is almost certain to be the case given the standard terms of the UPMAA, there is a waiver of immunity clause in the agreement between the bank and MongolBank. That is no doubt the position as between the bank and MongolBank but it is not the position as between the claimant and MongolBank. Lloyd-Jones LJ so held. In these circumstances I would allow the appeal on the ground of state immunity.

[3]Discretion 49. This is a discretionary remedy. If I were wrong on the state immunity point I would allow the appeal under this head for these short reasons:(1) A court should be very reluctant to make a Norwich Pharmacal order which involves a breach of confidence as between a bank and its customer.

(2) That is particularly so when the customer is a central bank.

(3) The principal dispute in this case is between the claimant and MongolBank. The claimant has agreed that that dispute should be resolved in the courts of Mongolia or hopefully by agreement. There is nothing to stop the dispute being so resolved either by a court in Mongolia or by agreement.

(4) If the claimant is entitled to succeed against MongolBank it will do so and there is no suggestion that that in that event that MongolBank will not discharge its obligations to the claimant. In short the claimant will be paid,

(5) The claimant cannot do better against the refiner or indeed any holder of the gold. Moreover it is pure speculation that the gold may still be in a state in which the claimant could say it has property.

(6) If the order is made, further applications are likely against others. I recognise that this will often be the case and will often not be an impediment to an order but here the possibility of future successful actions is very speculative. 50. In all these circumstances I have reached the conclusion that the judge should not have made the order in the exercise of his discretion. He did not take all these considerations into account. In particular he did not take into account the state immunity aspects of the case. I do not blame him in any way for that since the argument before us has been very much more extensive in all areas of the case. 51. I add three points by way of postscript: (1) I wonder whether the claimant would ever have embarked on a Norwich Pharmacal application if they had known from the outset that the bank was not in the possession of physical gold. (2) If any order had been appropriate it would have been much more limited than that made by the judge, perhaps limited to a question relating to the name of the refiners if known to the bank or, if not known, to what bank the credit came from. (3) Given the present position of the claimant it is not necessary to do more than mention in passing a letter which the court received from the Mongolian Ambassador dated 11 December asking that the matter be transferred to Mongolia. Since the claimant has indicated that it does not intend to proceed further against MongolBank in these courts the contents of that letter seem to me now to be irrelevant.

CONCLUSION

[52]For these reasons I would allow the appeal.

Lady Justice Smith DBE:

[53]I agree.

Lord Justice Pumfrey:

[54]I also agree.

Order

Appeal allowed