Zumax Nigeria Ltd v First City Monument Bank Plc [2016] EWCA Civ 567

Case No A3/2014/2421[2016] EWCA Civ 567
IN THE COURT OF APPEAL (CIVIL DIVISION)
[2014] EWHC 2075 (Ch)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
MR CHARLES HOLLANDER QC
(sitting as a Deputy Judge of the High Court)
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 23/06/2016
Before
LORD JUSTICE KITCHINLORD JUSTICE CHRISTOPHER CLARKEMR JUSTICE COBB
Between
Zumax Nigeria LimitedClaimant/First City Monument Bank plcDefendant/Appellant
Fidelis Oditah QC and Phillip Aliker (instructed by Alan Taylor & Co) for AppellantFrancis Collaco Moraes (instructed by Mordi & Co) for RespondentHearing Hearing dates: 4/5 May 2016
Judgment

Introduction

[1]This is an appeal by the defendant, First City Monument Bank plc (“FCMB”), against the judgment of Mr Charles Hollander QC, sitting as a deputy judge of the Chancery Division, given on 1 July 2014 dismissing applications made by FCMB dated 6 December 2013, 11 December 2013 and 7 May 2014.

The parties and the claim

[2]The claimant, Zumax Nigeria Limited (“Zumax”), a company incorporated in Nigeria, was 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 Nigerian 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.[3]FCMB is a Nigerian registered bank and, as the deputy judge explained, it 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 Mr Edwin Chinye. He was also a director of Zumax.[4]At all times material 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.[5]Zumax asserts in these proceedings 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.[6]Zumax continues 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. It makes these claims against FCMB as the successor in title of IMB. It recognises that FCMB did not succeed to the liabilities of IMB Morgan but says that IMB Morgan was for this purpose the agent or nominee of IMB.

The proceedings and the applications

[7]On 10 April 2013 solicitors for Zumax wrote a letter of claim to FCMB detailing the matters to which I have referred and demanding payment of the Redsear proceeds together with interest. Some two months later, on 24 June 2013, solicitors in Nigeria for FCMB replied denying that the Redsear proceeds had ever been received by IMB and IMB Morgan and asserting that Zumax had admitted as much in the course of proceedings it had pursued in the Nigerian courts against Mr Chinye and Finbank under claim number FHC/L/CS/784/2009 (the “784/2009” claim).[8]Zumax considered that FCMB had failed to put forward a credible defence to its claim and accordingly, on 11 September 2013, it issued an application for permission to serve these proceedings on FCMB in Nigeria. The application was supported by a witness statement of Mr Nduka-Eze, a solicitor and director of Zumax, who explained that Zumax relied upon grounds (11), (15) and (16) of paragraph 3.1 of CPR Practice Direction 6B; that he believed that the claim had a reasonable prospect of success; and that this was the proper jurisdiction in which to bring the claim. On 19 September 2013 Master Nurse granted the permission sought.[9]On 8 October 2013 the proceedings were served upon FCMB in Nigeria. Service was acknowledged by FCMB on 30 October 2013. On 7 November 2013 FCMB sought from Zumax and was given a 28 day extension of time to prepare an application and evidence in support of a challenge to the jurisdiction. That extension expired on 5 December 2013.[10]Meanwhile, on 4 December 2013 FCMB’s then solicitors sought a further extension until 31 January 2014. They explained that they were reviewing seven different sets of proceedings in the Nigerian courts and that they needed more time in order properly to prepare their challenge. They invited a response by noon on 5 December 2013 and indicated that if the extension was not forthcoming they would make an application to the court.[11]On 6 December 2013 Zumax refused the extension sought. It did, however, extend time for FCMB to file a defence for 28 days from 13 November 2013, which extension therefore expired on 11 December 2013. In the meantime, FCMB’s solicitors had prepared an application to the court for an extension of time. It was purportedly dated 5 December 2013 but was in fact sent to the court by fax at 16:16 hours on Friday, 6 December 2013 and, given the time of receipt, was only issued by the court on Monday, 9 December 2013. That application was supported by brief evidence in paragraph 10 of the application notice given by Ms Ravat, one of the solicitors then acting for FCMB, in which she explained that they had received a substantial body of documentation in respect of the proceedings in Nigeria; that they required further information and instructions; and that representatives of FCMB were due in London in the week beginning 9 December 2013 for the purpose of providing the further information and the instructions they needed.[12]On 11 December 2013 FCMB made a substantive application to challenge the jurisdiction, which challenge was again supported by brief evidence in paragraph 10 of the application notice, on this occasion from Ms Nkontchou who was at that time a partner in the firm of solicitors then acting for FCMB. This evidence contained a reference to a seven page letter which accompanied the notice and which elaborated upon the matters referred to in it. In broad terms FCMB sought to have the order permitting service out of the 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 these proceedings 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 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.[13]On 16 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 20 December 2013, Zumax made an application for the disclosure of those records under the Bankers’ Books Evidence Act 1879.[14]FCMB’s application of the 11 December 2013 challenging the jurisdiction came before Master Teverson for directions on 16 January 2014. He extended FCMB’s time for filing evidence in support of the application until 6 February 2014; directed that any evidence in answer by Zumax should be filed by 6 March 2014; and directed that any evidence in reply by FCMB should be filed by 20 March 2014. He also directed that the application should be referred to a judge with a time estimate of one day.[15]On 4 February 2014 Master Teverson made an order upon Zumax’s application of 20 December 2013 requiring the disclosure to Zumax of such account statement entries in IMB and IMB Morgan’s US dollar correspondent accounts with Commerzbank as related to the transfer into those accounts of the Redsear proceeds. Disclosure of the documents, heavily redacted, duly took place and the documents revealed that, contrary to FCMB’s assertions, the Redsear proceeds had indeed been transferred into those accounts.[16]On 4 April 2014 FCMB made its own application for an order under the Bankers’ Books Evidence Act. The application was supported by a witness statement of Ms Nkontchou, who was by now employed by FCMB, dated that same day in which she explained that FCMB had first had sight of the documents disclosed by Commerzbank to Zumax when they were exhibited to and served with the fourth witness statement of Mr Nduka-Eze dated 4 March 2014. She continued that their heavy redaction meant that they only revealed details of the credits to the IMB and IMB Morgan US dollar correspondent accounts; and that FCMB therefore needed access to the unredacted account records in order to establish to whom the monies in those accounts had been transferred, and in particular whether those monies had been transferred to Zumax. She maintained that FCMB needed such an order because Commerzbank was not prepared to disclose these documents so far as they related to IMB Morgan. Then, at paragraph [15], she said this:
“The claimant makes very serious allegations of fraud against the Defendant. It is essential the Defendant is able to meet these allegations. The Defendant requires the information to assist it in narrowing the issues in contention and to ensure that all matters are before the Court. Furthermore, access to the documents should assist the Court to resolve this dispute justly and expeditiously.”
[17]On 7 May 2014 and 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 CPR rule 3.9. That application was supported by the fifth witness statement of Ms Nkontchou made on that same day.

The hearing before the deputy judge – an outline

[18]FCMB’s applications of 5 December 2013, 11 December 2013 and 7 May 2014 all came on for hearing before the deputy judge on 8 May 2014. FCMB did not pursue its application for disclosure under the Bankers’ Books Evidence Act.[19]The deputy judge was faced at the hearing with a host of arguments by FCMB as to why its applications should be allowed. In broad outline it contended that the court had the power retrospectively to grant it an extension of time for filing its application to challenge the jurisdiction and that this was an appropriate case in which to exercise that power; that leave to serve out should be set aside for the reasons summarised in its application of 11 December 2013 and accompanying letter, namely that 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 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.[20]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; that although the court had power to grant relief from sanctions and retrospectively to grant an extension of time for filing a challenge to the jurisdiction, no such relief should be granted in the circumstances of this case; that in any event, by seeking relief in the action by making its application for disclosure under the Bankers’ Books Evidence Act, FCMB had submitted to the jurisdiction; that the order for service out was justified and there had been no material non-disclosure; and that the appropriate forum for the resolution of the dispute was indeed England.[21]The deputy judge dismissed each of FCMB’s applications and held, in summary, that the delay by FCMB in making its applications of 5 and 11 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 case upon which it relied and for which permission to serve out 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

[22]Upon this appeal FCMB contends that the deputy judge: i) erred in principle in the way he approached the applications for an extension of time and 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 (the “115/2005” claim); 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 case upon which it relied and for which permission to serve out could properly be given.[23]I will deal with each of these contentions in turn. It is to be noted that FCMB has not pursued a challenge to the findings of the judge that there had been no material non-disclosure and that this was the forum in which the claim could most suitably be tried.

Ground 1 – extension of time

[24]The procedure for disputing the jurisdiction of the court is set out in CPR Part 11. This provides that a defendant who wishes to make an application for this purpose must first file an acknowledgement of service in accordance with Part 10 (rule 11(2)); and that the application must itself be made within 14 days after filing an acknowledgement of service and be supported by evidence (rule 11(4) and (9)). If the defendant files an acknowledgement of service but does not make an application within the period of 14 days, he is to be treated as having accepted that the court has jurisdiction to try the claim (rule 11(5)).[25]As Lord Collins explained in giving the judgment of the Judicial Committee of the Privy Council in Texan Management Ltd v Pacific Electric Wire and Cable Company Ltd [2009] UKPC 46 in considering the Eastern Caribbean equivalent of CPR Part 11, an application under CPR Part 11 disputing the court’s jurisdiction must be made promptly but, notwithstanding the deeming provision in CPR rule 11(5), the court has the power to grant an extension of time retrospectively in appropriate circumstances:
“73. The overall effect is this. A defendant served within the jurisdiction who has reasons for applying for a stay on forum conveniens grounds at that time should normally make the application under EC CPR r.9.7/English CPR Part 11. It is doubtful whether failure to make such an application in time means that the defendant has conclusively accepted that the court should exercise its jurisdiction, but that will not normally matter because the court has a power to extend the time for compliance with any rule, even if the application for extension of time is made after the time for compliance has passed: EC CPR r.26.1(2)(k). It has been held that even though English CPR r.11(5) (EC CPR r.9.7(5)) contains a provision deeming the defendant to have accepted the jurisdiction of the court, the court has power to extend the period in EC CPR r.9.7(3) retrospectively after the period for defence has expired: Sawyer v Atari Interactive Inc [2005] EWHC 2351 (Ch), [2006] ILPr 129, at [46] (a case of service outside the jurisdiction). 74. In addition, except where the consequence of failure to comply with a rule has been specified, where there has been an error of procedure or failure to comply with a rule, the failure does not invalidate any step in the proceedings, and the court may make an order to put matters right: EC CPR r.26.9. 75. Together these powers are sufficient to give effect to the overriding purpose of the jurisdiction to stay proceedings on forum non conveniens grounds, which is to ensure that the claim is tried in the forum which is more suitable “for the interests of the parties and for the ends of justice”: Sim v Robinow (1892) 19 R (Ct. of Sess) 665, 668, per Lord Kinnear. 76. Where the circumstances which give rise to an application for a stay arise after the service of proceedings and outside the time limits in EC CPR r.9.7 /English CPR Part 11, then the application may be made either under the inherent jurisdiction or under the court's powers of management in EC CPR r.26.2(q)/English CPR r.3.1(2)(f). 77.

(f) ”

[26]A little later, Lord Collins continued that an application for such an extension would not be an application for relief from sanctions:
“80. It is only necessary to deal with PEWC's point that the judge ought to have applied the check list for relief from sanctions in EC CPR r 26.8. No question of a sanction arises. Even if PEWC were right in saying that there was no proper application under r.9.7 and therefore Texan and Dragon were to be treated as having accepted that the court had jurisdiction to try the claim, that is not a sanction, since it applies to any defendant who files an acknowledgment of service and is not in a position to contest the jurisdiction.”
[27]Nevertheless, it has now been confirmed by the decision of this court in Salford Estates (No 2) Ltd v Altomart Ltd [2015] 1 WLR 1825 that an application for an extension of time for compliance with the rules falls to 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 a sanction for its default.[28]These principles were first described in Mitchell v News Group Newspapers Ltd (Practice Note) [2014] 1 WLR 795 and further guidance was given as to how they should be interpreted and applied in Denton v TH White Ltd [2014] 1 WLR 3926. There are three stages of the enquiry:(1) identifying and assessing the seriousness and significance of the default which engages rule 3.9;(2) identifying the cause of the default; and(3) evaluating all the circumstances of the case, including those specifically mentioned in rule 3.9, so as to enable the court to deal with the application justly.[29]At the first stage the focus is not on whether the breach was trivial but rather on whether it was serious or significant. If the court considers at this stage that the breach was not serious or significant, then relief from sanctions will usually be granted. The second stage is to consider why the default occurred. The third stage is of considerable importance for even if there has been a serious or significant default for which no good reason has been given, the application will not automatically fail. The factors mentioned in rule 3.9(a) are of particular but not overriding significance. The approach to be adopted at this stage was summarised in Denton at [35] to [36]:
“35. Thus, the court must, in considering all the circumstances of the case so as to enable it to deal with the application justly, give particular weight to these two important factors [identified rule 3.9(1)]. In doing so, it will take account of the seriousness and significance of the breach (which has been assessed at the first stage) and any explanation (which has been considered at the second stage). The more serious or significant the breach the less likely it is that relief will be granted unless there is a good reason for it. Where there is a good reason for a serious or significant breach, relief is likely to be granted. Where the breach is not serious or significant, relief is also likely to be granted. 36. But it is always necessary to have regard to all the circumstances of the case. The factors that are relevant will vary from case to case. As has been pointed out in some of the authorities that have followed the Mitchell case [2014] 1 WLR 795, the promptness of the application will be a relevant circumstance to be weighed in the balance along with all the circumstances. Likewise, other past or current breaches of the rules, practice directions and court orders by the parties may also be taken into account as a relevant circumstance.”
[30]The deputy judge addressed the application of an extension of time in his judgment from [36] to [47]. At the outset he recorded that his initial reaction, when told that Zumax was contending that FCMB should not be granted an extension of time when its application of 6 December 2013 had been made one day late, was that it would be disproportionate to refuse an extension. Nevertheless, that is what he proceeded to do.[31]The deputy judge reasoned as follows. He pointed out, entirely correctly, that the wording of CPR rule 11(5) reflects the importance given by the rules to this particular time limit. He noted too the fact that, by 5 December 2013, a 28 day extension of time had already been given. He then continued in these terms at [39]:
“… By 5 December, FCMB were obliged not only to make the application but also serve their evidence in support. It appears they were not in any position to do so. The application made on 6 December was only for a further extension of time and when the substantive application was ultimately made on the 11th no evidence was served, nor does it appear it was anywhere near ready.”
[32]The deputy judge considered next the explanation for the delay given in the fifth witness statement of Ms Nkontchou dated 7 May 2014, that is to say the day before the substantive hearing began. He was of the view that this did little to assist him as to why FCMB had not made its application in time, however. Moreover, it was, he thought, notable that although service had been effected on 8 October 2013, no request for a copy of the witness statement in support of the application had been made until 10 December 2013.[33]There followed this summary by the deputy

judge of the matters which were in his view material to the application:

“45. In relation to the application to extend time for making this jurisdiction application out of time in my view (i) the delay in making the application came after a lengthy agreed extension of time (iii) [sic] no explanation or evidence in support of the application for an extension of time was made until the last-minute application on 7 May under pressure from Zumax (iv) the explanation for the delay was, and remains, wholly inadequate (v) when the application was made on 6 December, it was initially only an application for a further extension of time made without evidence (vi) a substantive application was made on 11 December but in breach of the rules no evidence was served; although the master subsequently extended time for service of evidence, this indicates that the evidence in support of the application had not been prepared by 11 December (vii) the failure to seek a copy of the witness statement in support of the application until 10 December indicates the failure to carry out basic work to prepare the application; indeed, the fact that it was several days after the 28 day extension expired before even the most basic document, the witness statement in support of the application to serve out, was sought, speaks volumes about the work done by that stage (viii) I regard the delay as non trivial, the explanation for the delay late and entirely unsatisfactory.”
[34]The deputy judge considered that since, as Lord Collins had made clear in the Texan Management case, this was not an application for relief from sanctions, the Mitchell principles did not apply, but he observed that those principles were nonetheless relevant since they provided an indication of the present policy of the courts to the treatment of time limits. The deputy judge then expressed his conclusion in these terms:
“47. I recognise that Zumax have not put evidence of specific prejudice caused by the failure to make the application on time. But it cannot be a precondition of refusing an extension of time that prejudice is shown. I do not consider any good reason has been shown for the failure to make an application in time to justify an extension of time. I refuse to extend time under the 5 December application or to extend time retrospectively or (if applicable) grant relief against sanctions.”
[35]Upon this appeal counsel for FCMB submits that the deputy judge fell into material error in the following three respects. First, he was wrong to say that the application of 6 December 2013 was made without evidence for it was supported by the evidence in paragraph 10 of the application notice which I have summarised. Secondly, he was equally wrong to say that the application of 11 December 2013 was made without evidence for it was supported by the evidence in paragraph 10 of the application notice and by the seven page letter which explained in more detail the basis of FCMB’s challenge to the jurisdiction. Thirdly, in refusing to extend time, the deputy judge focused on what he considered to be the non-trivial nature of the failure and upon the absence of any good reason for it. He should instead have considered whether the breach was serious or significant. Furthermore and importantly, he did not consider whether, assuming there had been a serious or significant breach for which no good reason had been provided, relief should nevertheless be granted having regard to all the circumstances. In other words, says counsel for FCMB, he failed properly to apply the Mitchell guidelines as explained in Denton.[36]In my judgment each of these criticisms is valid. Contrary to the findings of the deputy judge, the applications of 5 and 11 December 2013 were supported by evidence. The deputy judge was entitled to consider the adequacy of that evidence but he was wrong to say that each of the applications was made without evidence. Secondly, I accept FCMB’s submission that the deputy judge had particular regard to whether or not the failure was or was not trivial and that he ought rather to have considered whether it was serious or significant. Thirdly, I also accept FCMB’s submission that the deputy judge failed properly to engage with the third stage of the enquiry and in that regard to evaluate all of the circumstances of the case, including those specifically mentioned in rule 3.9, so as to enable him to deal with the applications justly. I would, however, make clear that the second and third errors of the deputy judge are in my view readily understandable given that his decision preceded that in Denton.Nevertheless, the errors having been made, this court has no alternative but to consider the matter again for itself.[37]I begin by assessing the seriousness and significance of the default. The application for an extension of time was dated 5 December 2013 but, as I have explained, it was faxed to the court the next day, that is to say just one day outside the 28 day informal extension of time. Moreover, it was supported by brief evidence in which Ms Ravat explained that it was based in Nigeria where there had been seven different sets of court proceedings arising from the matters the subject of this claim. She continued that FCMB intended to bring an application challenging the jurisdiction but that there were many documents that needed to be reviewed for it to be able to do so. He also explained that they had received a substantial body of documentation but still required further information and instructions, and that for this purpose FCMB’s representatives were due to arrive in London from Nigeria in the week beginning 9 December 2013.[38]Second, the substantive application challenging the jurisdiction was made some five days later on 11 December 2013 and it was accompanied by the evidence and letter to which I have referred.[39]Third, I recognise that FCMB’s solicitors did not seek a copy of the witness statement filed in support of the application for permission to serve the proceedings upon it out of the jurisdiction until 10 December and that this indicates a failure to carry out some basic work to prepare the application. However, as I have said, the substantive application was in fact filed just one day later on 11 December 2013 and the evidence accompanying it did identify, at least in general terms, the matters upon which it relied. It is therefore evident that FCMB and its solicitors had carried out a good deal of basic work.[40]Fourth, at the hearing before Master Teverson on 16 January 2014, Zumax did not object to the Master’s directions for the sequential filing of evidence and, in particular, his direction that FCMB should serve any further evidence upon which it relied by 6 February 2014 and that Zumax should serve its evidence in response by 6 March 2014.[41]Fifth, the delay in making the applications of 5 and 11 December 2013, such as it was, had no material effect on the course of the proceedings. It has not been suggested that it has delayed the disposal of the application challenging the jurisdiction or that it has in any way interfered with the other business of the court.[42]Sixth, the transactions the subject of these proceedings took place some 12 to 14 years before the issue of these proceedings and at that time involved Zumax, IMB and IMB Morgan. IMB merged with Finbank in 2005 and Finbank merged with FCMB in 2012. In these circumstances the practical difficulties to which FCMB referred to in its evidence in support of the 6 December 2013 application are readily understandable.[43]In light of all of these circumstances I have come to the conclusion that the delays could not properly be regarded as serious or significant. As for the explanation for the delays, it is true that the full explanation was provided late and is not entirely satisfactory. I accept, in particular, that the delay in asking for the witness statement in support of the application for permission to serve these proceedings on FCMB out of the jurisdiction is revealing. However, turning to the third stage of the enquiry, that is to say the evaluation of all the circumstances of the case, including those specifically mentioned in rule 3.9, so as to enable the court to deal with the applications justly, the circumstances to which I have referred do in my view point strongly to the conclusion that justice demanded the grant to FCMB of an extension of time in which to serve its application challenging the jurisdiction at least until 11 December 2013. As Moore-Bick LJ emphasised in Salford Estates at [18], enforcing compliance with the rules is not an end in itself and it is not part of the function of the courts to impose sanctions for punitive purposes. In light of all of the foregoing I believe that FCMB should have been granted the short extension that it sought.

Ground 2 – submission to the jurisdiction

[44]As I have explained, on 4 April 2014 FCMB made its own application for an order under the Bankers’ Books Evidence Act and this application was supported by the fourth witness statement of Ms Nkontchou which contained the evidence I have set out at [16] above. As the deputy judge observed, there was no indication in the application or Ms Nkontchou’s evidence that the application was being made without prejudice to the FCMB’s pending challenge to the jurisdiction.[45]In SMAY Investments Ltd v Sachdev [2003] 1 WLR 1973 Patten J (as he then was) summarised the approach to be adopted in considering whether a party has submitted to the jurisdiction of the court after acknowledging service but before the time for challenging the jurisdiction has expired. He put it this way at [41]:
“It seems to me that when a defendant has complied with CPR Part 11 with a view to challenging the jurisdiction of the court, and the time for making his application under CPR r 11(4) has not yet expired, then any conduct on his part said to amount to a submission to jurisdiction, and therefore a waiver of that right of challenge, must be wholly unequivocal.”
[46]I respectfully agree and I believe that the same approach must be adopted in considering any conduct said to amount to a submission to the jurisdiction of the court after the application challenging the jurisdiction has been made and before that application is heard.[47]The deputy

judge applied these principles in summarising his conclusions at [52]:

“I recognise that at the time when this application was made, FCMB had already launched their application to challenge the jurisdiction of the court, and to that extent it differs from other cases where the alleged submission occurred before such an application had been made. But applying the test set out by Patten J, it seems to me impossible to treat this application, and the wording of the witness statement as anything other than an equivocal [sic] submission to the jurisdiction of the English court and the disinterested bystander would surely have taken the same view. It says that there are fraud issues before the court and states that the documents are required “to assist the court to resolve this dispute justly and expeditiously.”
That is inconsistent with the defendant’s position that the court had no jurisdiction to resolve the dispute at all. In my view this application, and the terms in which it is framed, are only consistent with an acceptance that the court is being asked to consider the merits of the dispute between the parties and involves a submission to the jurisdiction by FCMB.”[48]Counsel for FCMB submits and I agree that the deputy judge has here once again fallen into error. I have come to that conclusion for the following reasons. First, as the deputy judge recognised, this application was made at a time when there was an outstanding and unresolved application challenging the jurisdiction. Indeed, that application had been listed and duly came on for hearing on 8 May 2014, just over one month later.[49]Secondly, FCMB’s application of 11 December 2013 sought not only a declaration that the court did not have jurisdiction to hear the dispute but also, and without prejudice to that jurisdiction challenge, an order striking out the claim as disclosing no reasonable cause of action or as being an abuse of the process of the court.[50]Thirdly, the documents which FCMB sought would have been relevant to both of these applications for they would have allowed FCMB to ascertain what had happened to the Redsear proceeds and, in particular, whether they had been transferred to Zumax, and they would also have shed light on the merit of Zumax’s case that the claim fell within one or more of the classes of case in which permission to serve out may be given.[51]It seems to me that in the light of all of these matters it cannot be said that FCMB’s conduct in making the application and supporting it by the witness statement of Ms Nkontchou constituted an unequivocal submission to the jurisdiction. In my judgment FCMB’s conduct was not inconsistent with making and maintaining the challenge to the jurisdiction.

Ground 3 – impediments to the claim

[52]As I have mentioned, FCMB contends there are three fundamental impediments to this claim, namely: i) the proceedings between Zumax and Finbank (now FCMB) in Nigeria in claim 784/2009; ii) the terms of a settlement agreement and consent order in the proceedings between Zumax and IMB (now FCMB) in Nigeria in claim 115/2005; and iii) the terms of a debenture made by Zumax in favour of IMB (now FCMB) in 1998.[53]I shall deal with them in turn but must first set out a little more by way of background. In 1998 IMB agreed to extend to Zumax a loan facility of ₦200 million secured by the terms of a debenture made by deed and dated 17 December 1998. I must return to the terms and effect of this debenture a little later in this judgment.[54]Zumax anticipated that over time its trading profits would reduce its level of indebtedness to IMB but in 2002 it found that its indebtedness had increased substantially to around ₦400 million and would likely increase still further, so necessitating a renegotiation of its loan facility.[55]At about this time Zumax also became very suspicious of the manner in which Mr Chinye had dealt with the funds in Redsear’s US dollar account at the London branch of Chase. It therefore instructed its auditor, Edojariogba & Co, to carry out an audit of the account and found that over the period from January 1998 to 30 June 2002 a sum in excess of US$ 15.3 million had been paid into the account; that Mr Chinye, who was the sole signatory of the account, had authorised payments from the account amounting to over US$ 7.9 million and that there was a shortfall of nearly US$ 7.4 million for which Mr Chinye was unable to account. It is important to note that the audit did not purport to address the ultimate destination of the payments of over US$ 7.9 million which had been authorised by Mr Chinye.[56]IMB was aware of these matters and on 6 December 2002 it gave notice demanding repayment of its loan. The loan was not repaid within the stipulated time and on 18 December 2002 IMB appointed receivers under the terms of the debenture. It claimed that it was owed around ₦465 million. Shortly afterwards, Mr Chinye was removed as a director of Zumax.[57]In 2004 the directors of Zumax began negotiations with the receivers and IMB with a view to bringing the receivership to an end. Zumax maintains that during the course of these negotiations it sought from IMB and the receivers a full and proper statement of account. It continues that such a statement was never provided and that instead IMB represented to it that no more than ₦230 million had been recovered during the course of the receivership and that Zumax still owed it a sum of about ₦300 million. In January 2005 and while the settlement discussions were ongoing, IMB issued claim 115/2005 seeking an order requiring Zumax to pay to it a sum in excess of ₦ 309 million.[58]Zumax also maintains that, in reliance upon the representation which it says IMB made to it about the outstanding level of indebtedness, it agreed to pay to IMB over an 18 month period the sum of ₦150 million and that IMB agreed to bring the receivership to an end. These terms were embodied in a settlement agreement dated 23 May 2005 which provided for the payment by Zumax to IMB of the sum of ₦150 million which was said to represent the balance due and owing to IMB under the terms of the loan facility and, by clause 17:
“Upon the final effectiveness of this Terms of Settlement and the termination of the law suit as provided herein and the fulfilment of all the obligations stipulated therein, the parties shall and hereby do hereby fully release and discharge each other, their parent companies, affiliated companies and subsidiaries henceforth from any and all damages, suits, claims, debts, demands, assessment, obligations, liabilities, costs, expenses, rights or action [sic] and causes of actions of any kind or character whatsoever, accrued prior to the date of execution of these terms, whether known or unknown that now exist or at any time existed, except that this release does not apply to any term arising out of this Terms of Settlement [sic].”
[59]This settlement agreement was made the subject of a consent order in claim 115/2005 on 15 July 2005. In the meantime, on 27 April 2005, IMB executed a deed confirming the discharge of the receivers.[60]Zumax maintains that following the conclusion of the receivership it discovered that, contrary to the representation made to it by IMB in the course of the settlement negotiations, IMB had recovered from the receivers within the first nine months of the receivership a sum in excess of ₦600 million, and that over the whole course of the receivership IMB recovered nearly ₦250 million in excess of what it was owed.[61]In 2009 Zumax therefore began proceedings against Finbank (as successor to all the rights and liabilities of IMB) in Nigeria under claim number LD/1688/2009 (claim “1688/2009”) seeking, inter alia, an order that the consent order in claim 115/2005 be set aside for fraudulent misrepresentation and a declaration that it was entitled to recover from Finbank the sum of nearly ₦250 million together with interest.[62]In 2010 Finbank made an application to the High Court in Lagos in claim 1688/2009 for an order striking out the proceedings. The application came before Mrs Justice Nicol-Clay who dismissed it by order dated 24 June 2010. She recorded in her order that she had given careful consideration to the affidavit filed on behalf of Finbank in support of the application but that it was her view that there was evidence of fraudulent misrepresentation and concealment of facts by IMB which gave Zumax “grounds for setting aside the consent judgment”.[63]Meanwhile, in 2009 Zumax also began proceedings against Mr Chinye and Finbank in claim 784/2009 in which it asserted that Mr Chinye had, in breach of his fiduciary duty to Zumax, caused monies amounting to nearly US$ 7.4 million to be paid out of Redsear’s dollar account with Chase to persons and entities directed and controlled by him.[64]On 23 April 2013 Zumax’s solicitors wrote to FCMB in London the letter before claim to which I have referred earlier in this judgment asserting that a series of transfers of monies had been made from Redsear’s dollar account with Chase to the correspondent accounts of IMB and IMB Morgan with Commerzbank in London for the purpose of transferring them on to Zumax but that these monies had never been received.

Claim 784/2009

[65]FCMB contends that it is clear from the audit carried out by Edojariogba & Co and the allegations in claim 784/2009 that Zumax only complains that US$ 7.4 million dollars were unaccounted for and that that it has accepted that the balance of the Redsear proceeds, including the sums the subject of these proceedings, were duly accounted for. Accordingly, submits counsel for FCMB, this claim is hopeless and bound to fail.[66]The deputy judge was not persuaded by this submission and neither am I. The complaint the subject of claim 784/2009 is different from that the subject of the present proceedings. Claim 784/2009 is concerned with unauthorised transfers by Mr Chinye from Redsear’s US dollar account with Chase to the accounts of persons or entities with which he was connected or which he controlled. The present proceedings, on the other hand, are concerned with transfers of funds from Redsear’s US dollar account to the US dollar correspondent accounts of IMB and IMB Morgan with Commerzbank for the purpose of transferring those funds on to Zumax. Accordingly FCMB is right to say, as it now does, that the funds in issue in these proceedings are comprised within the US$ 7.9 million which were purportedly accounted for and that they were transferred from Redsear’s account to the correspondent accounts of IMB and IMB Morgan with Commerzbank. But it is wrong to say that this necessarily means that these funds were all received by Zumax as they should have been. Mr Nduka-Eze explains in his second and third witness statements, both dated 4 March 2014, that it can be seen from the statements of Zumax’s account with IMB that it received none of these funds. In these circumstances I am satisfied that Zumax has established a good arguable case on this issue and the judge was right so to hold.

Consent judgment in claim 115/2005

[67]FCMB contends that the settlement agreement and consent order in claim 115/2005 are a complete bar to the claim. The deputy

judge dealt with this argument at [65] to [66] in these terms:

“65. Again the ‘release and discharge’ depended on the fulfilment of all of the terms of the 2005 Settlement Agreement, which did not occur. A new action has been commenced concerned with setting aside the 2005 Settlement Agreement for misrepresentation. 66. None of these actions appear to relate to the specific payments the subject of this action and, so far as presently apparent, there seems to be no effective bar to these proceedings as a result of those actions.”
[68]Counsel for FCMB now argues that the deputy has plainly fallen into error because, given that the claims being asserted in these proceedings relate to transfers made to IMB between 2000 and 2002, it is obvious that they are caught by the terms of clause 17 of the settlement agreement, which merged into and was supplanted by the consent order. Further, he continues, this order creates a cause of action estoppel against Zumax in these proceedings to which the deputy judge should have given effect, and that he should therefore have acceded to FCMB’s applications.[69]I am unable to accept these submissions. It is well established that any foreign judgment is, if obtained by fraud, open to attack. Here there is evidence that IMB represented to Zumax that no more than ₦ 230 million had been recovered when in fact the receivers had recovered sums considerably in excess of Zumax’s alleged indebtedness. Zumax maintains that this representation was made dishonestly and that it entered into the settlement agreement and agreed to its embodiment in the consent order in reliance upon it. Furthermore, it continues, once it discovered the extent to which it had been misled, it made clear that it considered that the settlement agreement and the consent order were impeachable by reason of IMB’s fraud, and it refused to pay the ₦150 million. I am satisfied on the evidence that Zumax has a properly arguable case on this issue and I am confirmed in this view by the judgment and order of Mrs Justice Nicol-Clay to which I have referred.

The terms of the debenture

[70]FCMB contends that under the terms of the debenture made by deed and dated 17 December 1998, Zumax charged all of its assets, including its book debts, as security for all monies it owed to IMB; that the Redsear proceeds were the proceeds of its book debts; and that the debenture was effective to charge those proceeds and any cause of action in respect of them.[71]Further, continues FCMB, the debenture became enforceable upon demand by IMB or on the appointment of a receiver. Both events occurred in December 2002. At this point if and in so far as the charge was a floating charge, it crystallised and the deed became a completed equitable assignment to it of all of the assets charged and of Zumax’s rights in respect of them. In these circumstances, says FCMB, and given that IMB (and now FCMB) has enforced the debenture and remains out of pocket, Zumax has no title to the Redsear proceeds, it cannot give a valid discharge in respect of them, and its directors cannot bring proceedings to recover them without the consent of FCMB. This, as FCMB accepted at the hearing, was a new point which was not taken before the deputy judge. We gave FCMB permission to argue it on appeal on the basis and to the extent that it involved a pure question of law.[72]I am not persuaded that this point constitutes an impediment to this claim or that the issues it raises can be resolved at this stage of the proceedings. I have come to that conclusion for the following reasons. First, it is arguable that the charge was a floating charge for it purported to be a charge on a class of assets both present and future; the class of assets was one which would, in the ordinary course of business, be likely to change from time to time; and it was contemplated that Zumax would carry on its ordinary business in relation to those assets. As I have explained, the receivership came to an end in April 2005 by agreement and the management of the company was thereupon returned to its directors. It is in my judgment arguable that at this time IMB agreed to convert its charge back into a floating charge and in that way to restore to Zumax its ability to deal with its assets in the ordinary course of its business. Second and in any event, it is Zumax’s case, supported by evidence, that FCMB has recovered all of the monies to which it is entitled under the terms of the debenture and that in these circumstances FCMB is required by the terms of the debenture to discharge all of the assets of the business from the security. This too is in my judgment properly arguable.

Ground 4 – the gateways

[73]The application for permission to serve the claim out of the jurisdiction was based upon the following three grounds in CPR PD 6B paragraph 3.1, namely(a) the whole subject matter of the claim relates to property within the jurisdiction (3.1(11));(b) the claim is made for a remedy against FCMB as constructive trustee and liability arises out of acts committed in the jurisdiction (3.1(15)); and(c) the claim is made against FCMB for restitution and liability arises out of acts committed in the jurisdiction (3.1(16)).[74]The deputy judge held that each was made out to the degree of arguability required. FCMB contends that he erred in so doing for there is no arguable case that any of the three grounds is satisfied. I will deal with each of them in turn.[75]As for paragraph 3.1(11), counsel for FCMB submits that no part of these proceedings relates to any property located in England, let alone that such property constitutes the whole subject matter of the claim. There are, he says, no assets in England and it cannot be suggested that any part of the US$ 3.5 million the subject of the claim or the traceable proceeds of these monies are located in England.[76]I am unable to accept this submission. It is Zumax’s case that it was and remains the victim of a fraud. Mr Chinye authorised the transfer of the Redsear proceeds from Redsear’s dollar account at Chase in London to the US dollar correspondent accounts of IMB and IMB Morgan in London for onward transfer to Zumax. Despite FCMB’s protestations to the contrary, it is plainly arguable that IMB and IMB Morgan did receive these monies but as yet (and subject to a relatively small sum which Zumax has recovered pursuant to a judgment of Lawrence Collins J (as he then was) dated 30 November 2004 upon an interpleader application by Commerzbank in respect of competing claims in relation to certain monies at that time in the IMB Morgan dollar account), they have not been paid to Zumax and FCMB has been unable to provide any explanation of what became of them. In these circumstances it seems to me that Zumax is justified in saying that it is at least arguable that Mr Chinye acted fraudulently in transferring these monies from the Redsear account to the IMB and IMB Morgan correspondent accounts; and further, that it is also arguable that these monies were never remitted to Zumax as they should have been as a result of the fraud of IMB and IMB Morgan, acting through Mr Chinye. Moreover and in light of FCMB’s inability to say what has become of these monies, it is in my judgment arguable that they (or their traceable proceeds) remain in this jurisdiction. I am satisfied in light of all of the foregoing that the deputy judge was right to hold that Zumax has a good arguable case that the claim relates to property located in England.[77]Turning to paragraph 3.1(15), counsel for FCMB submits that Zumax has no possible case that IMB or IMB Morgan were constructive trustees of the Redsear proceeds. He contends first, these proceeds represented the proceeds of book and other debts charged and assigned to IMB under the all assets debenture and this provides a complete answer to the claim because FCMB cannot be a constructive trustee of its own monies; secondly, the instructions given by Redsear to IMB and IMB Morgan were ordinary payment instructions which failed to specify any purpose, still less a purpose sufficient to create a trust; and thirdly, any acts or omissions giving rise to the alleged liability occurred in Nigeria for that is where Zumax was entitled to receive its money.[78]I have addressed the debenture earlier in this judgment and for the reasons I have given I do not accept that it provides an unanswerable obstacle to this claim. Moreover, the Redsear proceeds were transferred at the direction of Mr Chinye who gave written instructions that the monies were to be remitted to Zumax. I am satisfied in all the circumstances of this case that Zumax has a good arguable case that these monies were transferred subject to the stipulation that they should be remitted to Zumax and not used for any other purpose; that IMB and IMB Morgan, through Mr Chinye, must have well understood that they were not free to dispose of the monies as they wished; and that in all the circumstances Zumax acquired a right, enforceable in equity, to prevent the monies being used for any other purpose. Further, I believe Zumax has a good arguable case that it retained the beneficial interest in these monies from the moment they were transferred to the correspondent bank accounts and that this interest constituted a proprietary security until the monies were applied for the specified purpose. If and in so far as the monies are no longer in the jurisdiction and have been applied for other purposes then it seems to me that Zumax has a good arguable case that FCMB is liable for a breach of trust and that this breach arises out of acts committed in this jurisdiction, namely the alleged misappropriation by IMB and IMB Morgan of the monies by wrongfully retaining them or transferring them to other accounts and applying them for other purposes.[79]Finally, I must deal with the claim against FCMB for restitution (3.1(16)). Counsel for FCMB submits that any liability for restitution does not depend upon any acts or omissions committed in the jurisdiction. He accepts that the alleged enrichment occurred in England but maintains that the fact that made it unjust was the alleged failure to deliver the monies in naira to Zumax in Nigeria. It is, he says, that alleged failure which rendered the enrichment unjust and completed the cause of action in restitution.[80]I disagree. It seems to me to me that Zumax has a good arguable case that the unjust enrichment has arisen from acts committed in this jurisdiction, namely the alleged misappropriation by IMB and IMB Morgan of the Redsear proceeds by wrongfully retaining them or transferring them to other accounts and applying them for their own purposes.[81]In my judgment the deputy judge was right to conclude that the gateway provisions were met and that the court had jurisdiction to hear Zumax’s claims.

Conclusion

[82]For the reasons I have given, I would dismiss this appeal.[83]I agree.[84]I also agree.

Cited in 9 later judgments