Kensington International Limited v Republic of Congo Dr Ikechukwu Nwobodo [2006] EWHC 1848 (Comm)

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
[2006] EWHC 1848 (Comm)Case No Case No: 2002/1088,1281,1282 and 1357Venue Royal Courts of Justice, Strand, London, WC2A 2LL
Between
Kensington International LimitedClaimantRepublic of Congo Dr Ikechukwu NwobodoDefendant
Before
Mr Justice MorisonMr Ewan McQuater QC and Mr William Edwards (instructed by Deehert LLP) for theClaimantMr Philip Rainey (instructed by Charles Russell) for the RespondentHearing dates: 13 July 2006
[1]The Hon. Mr Justice Morison : This is an application for permission to cross-examine a person named Dr Nwobodo on his affidavit sworn pursuant to a search order made by Gloster J on 24 March 2006, which was executed on 27 March 2006. The claimant is also seeking clarification of their rights to use the documents obtained as a result of the execution of the search. This judgment deals only with the first matter. Background[2]The background to this case is, simply, that Kensington bought, at a substantial discount, the debts owed by the Republic of Congo to various banks. Congo have indicated that they are unwilling to pay those debts. Summary Judgment for the Claimants against Congo for approximately US$100 million was entered on various dates in 2002 and 2003. Since that time the claimants have been chasing assets which they say belong to Congo. Those assets are, to a large extent, Congo's oil. In order to evade its creditors, with the assistance of lawyers and oil companies, Congo's oil is traded in a way which is least likely, in Congo's view, to be attached. To this end false documents are created [that is, documents which are simply there to create an image and which have been forged, in the sense that they have been backdated for some purpose or another]. There is, therefore, something of a ritual dance where Congo pretend that companies other than themselves own the oil or other assets, as the case might be, and protracted proceedings then ensue. There is a pattern of deceit and concealment perpetrated in these actions: a feature of them is dishonest oral evidence, a failure to disclose relevant material and the use of forged documents: see the judgments of Cooke J. and Morison J. in Walker International Holdings v Congo [2005] EWHC 2813 (Comm) , delivered on 6 December 2005.[3]The subject-matter in the present case before Cooke J. was a cargo of oil. Cook J. concluded that "the structure of companies and sales was therefore put in place and employed by the Congo .. with the object of evading enforcement of existing liabilities of the Congo by hiding its assets from view." The structure he was referring to was complex. It involved the State Oil Company [SNPC] its wholly owned subsidiary, Cotrade which allegedly sold the cargo to an entity called 40GC which in turn sold it on to Sphynx Bermuda which in turn is said to have sold it on to Glencore [which was not alleged to be involved in improper dealing] which then on- sold the cargo to BP. The question before the Judge was, effectively, whether the payment for the cargo was going directly to Congo or SNPC its alter ego. He concluded that it was.[4]In order for these complicated arrangements to be set up and operated it was necessary for a number of people to be involved in creating paper transactions and appearing to act independently of the State. One of the persons in that story was Dr Nwobodo. For example, he signed a contract document with Glencore on behalf of Sphynx Bermuda. The Judge considered that Dr Nwobodo had adopted a cavalier attitude to the truth; although he was primarily engaged as a consultant to SNPC regarding the marketing of their oil, and not so much with the complicated contractual structures he was "more involved than appeared in the witness statements" and "more alive to Mr Gokana's activities and their rationale than he appeared to be". Mr Gokana was heavily involved in the structures and controlling the whole of Congo's oil operations. He failed to return to this country to complete his evidence and was primarily responsible for seeking "to evade the effect of the court's orders by assigning the proceeds of sale of the cargo with a backdated assignment and later switching another existing oil sale contract from Sphynx Bermuda to AOGC and then lied to the Court about both." The Judge concluded that Mr Gokana and Dr Nwobodo between them ran Sphynx's business especially in 2005. The court rejected Dr Nwobodo's evidence that his negotiations with Mr Gokana on behalf of Sphynx Bermuda and AOGC, respectively were at arm's length:
"no such negotiations occurred between him and Mr Gokana."
In relation to the later transactions, that is those taking place after the one cargo in issue,

the Judge said this:

"When it emerged in Dr Nwobodo 's evidence that he, SNPCS consultant, had sold all the 2005 cargoes in the name of Sphynx Bermuda or AOGC, and had drawn up the contracts himself; it became obvious that AOGC and Sphynx Bermuda were being used by Mr Gokana as a façade where the underlying reality was a supply of oil by SNPC/Cotrade to end purchasers with payments made, by one means or another to SNPC. Where pre-financing or pre-payment arrangements were made, the oil supplied was already charged with the debt incurred in respect of the advance, but in the rare case where this was not done, the payment was truly destined for SNPC/Cotrade and not for any of the companies which ostensibly were presented as intermediate sellers."
He concluded that:
"the contract document dated 10 March 2005 between AOGC and Sphynx Bermuda, on whose behalf Dr Nwobodo signed, was not signed until 20 April and that this was effected in the context of the forged assignment referred to later in this judgment, as part of a conspiracy to establish that AOGC was entitled to the sale proceeds from Glencore. This appeared not only from Dr Nwobodo's evidence under cross-examination but also from the date when that contract first surfaced in the form of a fax of that date."
[5]The Judge found that a document in French entitled "Accord de Garantie was executed by Dr Nwobodo for Sphynx Bermuda and by Mr Malonga for AOGC, which was conveniently dated 30 March 2005 [this court had made its Interim Third Party Debt Order on 10 April 2005]. ... It purported to be an irrevocable assignment to AOGC of Sphynx Bernmuda's right to payment from Glencore. Both the AOGC/Sphynx contract and the Accord de Garantie were backdated from an execution date after 20 April and I find that the latter was intended to defeat any rights Kensington might have. "[6]It follows, therefore, on the Judge's findings, that Dr Nwobodo participated in a forgery with the intention of misleading this court and with a view to his principals obtaining a pecuniary advantage thereby. He also put forward dishonest evidence about the matter. The Application[7]Whilst Kensington has managed to recover part of the monies owing to it, a substantial amount remains due and owing under the Judgments. On 24 March 2006, Kensington successfully applied to Gloster J. on a without notice basis for a search order against Dr Nwobodo and using the material derived from that search, Kensington sought and obtained from Gloster J. an Interim Third Party Debt Order against a cargo of gas being purchased by an entity called Tacoma Trading Limited. At an inter partes hearing on 31 Match 2006, Gloster J. continued the order she had made without notice and extended the Interim Third Party Debt Order to cover a cargo of oil due to be lifted on 1 1-1 3 April 2006.[8]On 3 April 2006 Kensington applied to a court in Geneva for an interim attachment order against Vitol SA of debts due from them to Congo on the grounds that Vitol had set up an off-shore company incorporated in Mauritius Global Oil Trader Mauritius [GOTM] which it was using to buy oil from Congo. Such an order was made.[9]On 5 April 2006 Gloster J. made ex parte orders against two Vitol companies located in this jurisdiction preventing ..them from making any payments to Congo [or any company identified in a schedule] and to prevent them from transferring or assigning debts, or entering into pre-payment or pre-financing transactions. At an inter parties hearing the Judge concluded that on the basis of the claimant's evidence Vitol SA and other companies within the Vitol Group "have a long history of dealing with the Congo and with its various emanations, and that it has played a role and a significant role in the dishonest judgment-proofing scheme considered by Cooke J, ..." The Judge continued: The evidence of the claimants does show a strong arguable case. I refer in particular to the emails between Dr Nwobodo and Mr Chautard and Mr Lambrosa. These do, in my judgment show, at least prima facie, that the Vitol Group have participated actively in assisting the Congo to ensure that it remains judgment-proof In particular, Mr Chautard sent or referred to Cooke J's judgment in an email of 5 December 2005. He sent the judgment to Dr Nwobodo on that date saying:
"Not sure you'll enjoy reading this"
. Other emails also refer to legal problems being experienced by the Congo, and when, in early 2006, the Congo introduced a new company, namely Phenicia International SA, to carry out its oil sales to the Vitol Group, this was discussed with, and agreed to by the Vitol Group. It agreed to deal with Phenicia without question and promptly changed its own practice by creating a new vehicle through which to buy the Congo's oil, Global Oil Trader Mauritius ("GOTMJ>. This appears to be a new vehicle of the Vitol Group which is incorporated in Mauritius. In one particular email of 21 February 2006, Mr Chautard asks for:
'The exact details of the company selling the March 29-30 N'kossa to Global Oil Trader Mauritius [GOTM], as it is already very late for me and Othmar to enter the deal details in our internal deal churning factory here '
. The inference can be drawn from that email that the various companies are simply used, both at the Congo end, and at the Vitol end, as vehicles for the purpose of structuring the deals for the purchases of oil. I am satisfied, at least on a prima facie basis, that the claimant has a reasonably strong case for asserting that, in so structuring the oil sales with the use of new companies to replace earlier entities, Mr Chautard and his colleague Mr Lambrosa, and thus the Vitol UK Companies and the Vitol Group, must have appreciated that the purpose of using these vehicles was in order to prevent detection by the Congo's judgment creditors of the oil sales. I take as my starting point the fact that Vitol SA is already prevented by the interim attachment order of the Geneva court from making any payment in respect of this cargo. If the view of Kensington's Swiss lawyer is correct, the order also prevents Vitol SA effecting any payment owed to the Congo by entities regarded as Vitol SA 's nominees or as 'equivalent to ' Vitol SA. Therefore, as a result of that interim attachment order, Vitol SA, and its nominees are not entitled to make pre-payment in respect of this cargo as things stand at present, subject, of course, to any further order of the Geneva court. Second, the evidence in relation to the incorporation and use of GOTM as a vehicle to enable the Congo and Vitol, notwithstanding the findings of Cooke J: to continue to proceed with the Congo 's oil sales, strongly suggests that GOTM has been deliberately utilised by Vitol SA as a façade to conceal any connection between Vitol and the cargoes for the deliberate and express purpose of assisting Congo to evade enforcement of Kensington's judgment. That being so, I take the view that if this were to be a matter to be determined in accordance with English law (which it is not), the English court would be likely to adopt the stance indicated by Kensington's Swiss lawyer in its letter to Vitol SA of 4 April, namely that GOTM would be regarded as being equivalent to, and/or a nominee of Vitol SA, and that in these circumstances the corporate veil would he pierced and any purported separate corporate identity of GOTM disregarded. That being so, and approaching the matter on the basis that Swiss law (to the extent that I have evidence before me) appears to be the same us English law, the position is that Vitol SA and its nominees are already effectively prevented by the interim attachment order porn making this pre-payment of US$ 50 million. It is against that critical fact that I have to consider the exercise of my discretion. I can infer from the evidence of Mr Fox, seeking the release of Vitol Services and Vitol Broking from the injunction, that, if the UK Vitol Companies are released, monies will indeed be paid on GOTM's behalf to the Congo. Thus, there is clearly a risk that, notwithstanding the interim attachment order in Switzerland, unless this court injuncts Vitol Services and Vitol Broking, those monies will be pre-paid. The demand for pre-payment of the US$50million was made after the search order had been enforced against Dr Nwobodo, one of the people who has been involved in acting on behalf of the Congo in relation to these and other shipments. The inference, Mr McQuater said, is that the request for pre-payment was yet another example of the Congo attempting to make itself judgment-proof by insisting on pre-payments in order to prevent effective attachment proceedings in the relevant jurisdiction, here Switzerland. Accordingly, in my judgment, it is appropriate that, subject to an appropriate fortification of Kensington S cross-undertakings in damages, and an extension of the ambit of that undertaking so as to include others in the definition of beneficiary of that cross-undertaking, I should maintain the injunctions against the UK Vitol Companies in order to prevent payment by them, or assistance of payment by them, in relation to this particular cargo. I should say that my decision to do so is without prejudice to any further arguments that Mr Gruder may raise on the effective hearing, or the continued hearing, of this application to discharge the injunctions in relation to other cargoes identified in the order or other cargoes or transaction referred to in the order, even though not specifically identified. This decision relates merely to this particular pre-payment based on the evidence currently before me. Although there is evidence that the effect of the order will place the contracting party, GOTM, into default, if the analysis that GOTM is to be equated with Vitol SA is correct, then it is the attachment order which the Geneva court has considered appropriate to issue that is responsible for that state of affairs. My order is, in effect, merely providing assistance to the interim attachment order that has already been made by the Geneva court. "[10]When the search order was effected an image was taken of Dr Nwobodo's lap top computer. Various emails have been discovered which show that he is still actively involved in selling Congo's oil. Kensington say that Congo have started a new company to carry out its oil sales to Vitol and Vitol's alter ego. The new Congo entity is called Phenicia International SA and Dr Nwobodo makes the oil sales on its behalf. They say that Phenicia is plainly a replacement for AOGC: one of the emails refers to Phenicia "marketing crude oil in place of AOGC". The emails recovered from Dr Nwobodo show that he was closely involved in the sales of oil to Vitol after Cooke J's judgment. He also has links with trading with other entities also designed to evade enforcement. On his own case he resides in the UK and his sole income is derived from his consultancy role with the Congo. He may hold the key to the location of Congo's oil revenues. The Parties' arguments[11]For the Claimant, it was submitted that(1) The court has power to order Dr Nwobodo to attend for cross-examination both on the affidavit he filed in response to the search order and more generally as to Congo's assets.(2) As to the affidavit, CPR 32.7 provides that "(1) where at a hearing other than the trial, evidence is given in writing, any party may apply to the court for permission to cross-examine the person giving the evidence." This power is widely drawn and is the basis on which the court permits a defendant to be cross-examined about his assets in the context of a freezing injunction. The courts have accepted the right to ask for cross-examination in the context of the Anton Piller jurisdiction: CBS United Kingdom Ltd v Perry [I9851 FSR 421. The basis upon which the search order was made was that it was in aid of execution of a Judgment and under Norwich Pharmacal principles. No suggestion is made that the order was other than regular. The affidavit filed is inadequate in a number of respects.(3) CPR 71 provides a power to compel a judgment debtor to attend for oral examination on oath. In the case of "a company or other corporation" an order may be made against "an officer of that body". Congo is not a body corporate or a company; but nor was the International Tin Council (see Maclaine Watson & Co Ltd v International Tin Council (No 2) [I9881 3 WLR 1 190. When the ITC failed to satisfy an arbitral award made against it, the judgment creditor sought to discover where its assets could be found. An application to the Court was made under RSC 0.48 [the predecessor to CPR 711; under section 37(1) of the Supreme Court Act, 198 1 and under the Court's inherent jurisdiction. Milled J. refused the application under 0.48 but granted it under section 37. The Court of Appeal upheld his decision, assuming that the Judge's decision under the Rules was correct. The order was made against a "proper officer" of the ITC. Being a non- corporate entity there were no officers in the technical sense or the sense in which that word is used in the case of corporations. However, there was no reason why a "consultant" engaged by the State in organising much of its oil sales could not properly be described as someone against whom such an order might be made.[12]For Dr Nwobodo, it was submitted that:(1) The Court should bear in mind that Dr Nwobodo is not a party to this or any other claim brought by Kensington; he is not an employee of Congo or any façade company.(2) A search order made in this case is a hybrid granted under a number of overlapping jurisdictions, including the court's inherent jurisdiction in aid of execution, the inherent Norwich Pharmacal jurisdiction, section 7 of the Civil Procedure Act 1997 and sections 34 and 37 of the Supreme Court Act 1981.(3) Under the terms of Gloster J's Order, questioning of him in his flat was permitted. "It is out of that interrogation that Kensington's application flows."(4) As a matter of principle, any order for cross examination in a situation like this would be exceptional: Yukong Lines v Rendsburg Investment Corporation (unreported, 17 October 1996 (Court of Appeal)), and CBS UK v Perry [I9881 FSR 42 1:per Falconer J. "Some inconsistencies may we22 become apparent between what is said when they [respondents] are taken by surprise when confronted with the order and what is said on affidavit, but it would be in my view quite wrong if it became the norm for an Anton Piller Order to be followed by applications for cross-examination."(5) The court must always consider the purpose of the application for cross examination. The court must at least be satisfied that "there was a reasonable likelihood that the person sought to be cross examined had information which should have been disclosed pursuant to the order for disclosure and which would lead to the fulfilment of the purpose of such an orde:
" CBS UK v Perry Thus, for example, if the purpose of the order was to trace assets it would be wrong to permit cross-examination which was designed to show that there had been a contempt of court: Phillips v Symes [2003] EWCA Civ 1769 . (6) The purpose of the search order was to aid enforcement against cargoes that were being shipped or were about to be shipped. Accordingly, it is unclear how the cross-examination would now advance that purpose. "
Unless it is likely that Dr Nwobodo possesses information which is very likely to be very useful indeed, it will not be just and convenient to make the order." (7) The desire for background evidence is "constructed" and it suggests that the purpose of the cross-examination is not to aid execution but rather it is: (i) to establish breaches of the disclosure order (ii) to, punish Dr Nwobodo (iii) to provide a peg for the application for more general cross examination. (8) It is accepted that a cross examination as to assets is permissible if it is just and convenient that such an order should be made. However, in applying the test of whether it would be "just and convenient" to make the order "the court will have regard to the fact that it is a very considerable imposition to subject a defendant to cross-examination and consider carefully whether there are not alternative means of achieving the same end that are less burdensome ... I would .... emphasise that .... an order for cross examination is an exceptional measure." Per Phillips LJ in Yukong Lines v Rendsburg, unreported, 17 October 19961 (Court of Appeal.) The Court of Appeal were critical of the court taking what might be called a blended approach, combining the general discretion to order cross-examination as to assets generally, in support of the enforcement of a judgment, and the discretion to order disclosure to test the adequacy of an affidavit provided in response to an order to make disclosure. (9) There are no strong grounds for believing that Dr Nmobodo would have useful '(current) information to give. His role was not central. Cooke J. never found that Dr Nwobodo had knowledge of the assets, the structures put in place, or how the money moved. Thus, on this issue there was no finding that Dr Nwobodo played a significant role. (10) Only assets which could be pursued through the English Courts could properly be the subject of an order for cross-examination. Jurisdiction in aid of execution abroad does exist but has not been invoked. The information which Kensington seeks from this witness could be obtained by other means, such as an application for disclosure orders against Vitol, in Geneva; disclosure orders against Tacoma and Trafigura in this jurisdiction; there is a pending tort claim in the USA and proceedings for conspiracy against Vitol in this jurisdiction have been threatened. (11) In assessing the usefulness of cross examination it should be borne in mind that Dr Nwobodo would have the right to refuse to answer questions on the basis of his privilege against self-incrimination.[13]At the hearing I indicated that I would grant the order asked for and this Judgment sets out my reasons for doing so.[14]In the first place, it seems to me that on the evidence there is good reason to believe that Dr Nwobodo has been intimately involved in the trading of Congo's oil and in the plan to defeat execution by creating bogus companies and switching cargoes in order to defeat execution of the judgment. He was responsible for trading Congo's oil at least until the end of March 2006 and was continuing his participation in switching cargoes in order to defeat execution. From the documents obtained in the search, it appears that he was involved in the creation of an entity called Phenicia which appeared to replace AOGC in the chain of contracting parties in order to create the appearance that there was a trade other than by Congo itself. The counterparty to the deal was an entity called GOTM which appears to have been created by Vitol, a well known oil trader, so as to distance Vitol from the cargo and thus prevent attachment of it.[15]Dr Nwobodo is currently engaged as a consultant to Congo. The evidence shows that, amongst Congo's personnel, he has unique knowledge of the market and an inference can be drawn that his services are likely to be regarded as indispensable. Accordingly, there is reason to believe that he may currently be engaged in one role or another in Congo's present trades. This suggests to me that it would be most helpful to Kensington in their desire to enforce its judgments if he were to attend for cross- examination. Despite the findings of Cooke J. to which I have referred, other passages in that judgment indicate that Dr Nwobodo's evidence was not completely rejected as dishonest; indeed, there are passages which suggest that he volunteered valuable information. An order for cross-examination is likely to bear fruit if Dr Nwobodo has relevant information.[16]I have to say that his affidavit filed in response to the order made by Gloster J. is woefully inadequate. He simply asserts that what he told the investigators on the day of the search was correct. He has not, as I see it, made any real attempt to comply with the order and what he has said is crying out for 'further information' to be obtained through the process of cross-examination[17]It seems to me that there is power to make such an order section 37 of the Supreme Court Act and under the Norwich Pharmacal jurisdiction. On any view, the Norwich Pharmacal jurisdiction is apt to cover situations post judgment. Also, on any view, Dr Nwobodo has become mixed up, at the very least, in dishonest attempts to defeat execution of the judgments against Congo. But in exercising my discretion I bear in mind, in particular the following:(1) An order to attend for cross-examination is likely to be burdensome to the person concerned and a court will not make such an order lightly. The circumstances here, however, seem to me to justify imposing that burden on Dr Nwobodo.(2) I would not make such an order if I did not consider that it would provide any material benefit to Kensington in their quest to execute a lawful judgment. I am satisfied, for the reasons advanced by Mr McQuater QC on Kensington's behalf and the reasons given above that the purpose of the cross-examination is not, 3s was suggested, to punish Dr Nwobodo for what he has done to defeat legitimate attempts at attachment, nor to lay the ground for a contempt of court application or criminal prosecution. The purpose is to enable them to inquire into his knowledge of Congo's modus operandi and the relationships between companies and individuals so as to give them the best chance of attaching other assets. It is truly being sought in aid of execution.(3) The fact that Kensington make their application to cross-examine Dr Nwobodo on his affidavit and, more generally, in aid of execution, is not of itself a good reason for refusing the order. It would have been open to Kensington to issue two separate applications and the court would have had to examine each with care. Assuming that cross-examination was considered just and appropriate in relation to each application, I do not consider that there would be any good reason in law why both such applications should not be granted. Here, there is but one application although it is being sought for two different purposes. In my view it would be just, appropriate and proportionate to make what might be called a 'blended' order, on the facts of this case. During the cross-examination it can be made clear to what the questions are directed. Dr Nwobodo is entitled to be represented at the cross-examination and his interests against self-incrimination can be properly protected.(4) I reject the suggestion made in argument that there are other means by which Kensington's aspirations could be met. Whilst I am sure it will press for whatever disclosure orders it is entitled to in proceedings in other jurisdictions, Dr Nwobodo is resident in this country; he has substantial family ties here. He knows about Congo's oil trades and has given evidence on behalf of Congo in litigation in this court. He is an obvious target for the present application. doubt if there is a better avenue for obtaining further information than from him.(5) There is no question of State Immunity; he is amenable to the jurisdiction of the court and can be asked questions which relate to Congo's assets both here and abroad,[18]Despite the fact that Dr Nwobodo is not a defendant and it will be inconvenient for him to be compelled to return to court to answer further questions, I make the order as asked because in my view he has allowed himself to become mixed up in attempts by Congo dishonestly to evade paying its judgment creditor and I believe he has useful information to give under cross-examination.

Cited in 1 later judgment