Sawiris & Ors v Marwan [2010] EWHC 89 (Comm)

[2010] EWHC 89 (Comm)Case No 2007 Folio 1402
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 28/01/2010
Before
MR. JUSTICE TEARE
Between
Naguib Sawiris (2) Cylo Investment Limited (3) Melody Group Limited (4) Gemini Technologies Limited Issue Claimants- and -Gamal Marwan Issue Defendant
James Turner (instructed by Skadden, Arps, Slate, Meagher & Flom (UK)) for Issue ClaimantsJames Willan (instructed by Trowers & Hamlins) for Issue DefendantHearing Hearing dates: 16-18 December 2009
Judgment

Mr. Justice Teare:

[1]This has been an unusual trial. The principal issues in this action were resolved by a Consent Order made by Aikens J. (as he then was) on 26 June 2008. Ancillary issues arising out of related litigation in Egypt and the Lebanon were reserved for later determination as were issues of interest and costs. Those issues have now been tried, with each party calling oral evidence. The resolution of these ancillary issues requires the court to have some understanding of the events which gave rise to the principal issues between the parties, what those principal issues were and how were they resolved in June 2008. It is therefore most unfortunate that the parties were not able to agree these ancillary issues at the same time as resolving the principal issues since the cost of resolving the ancillary issues in court has no doubt been considerable.[2]The First “Issue Claimant”, Mr. Sawiris, is a successful Egyptian businessman. The Second “Issue Claimant”, Cylo Investments Limited, is a company controlled by him. The “Issue Defendant”, Mr. Marwan, is also a successful Egyptian businessman. He commenced these proceedings as claimant against Mr. Sawiris and Cylo (and others) as defendants.[3]On 5 May 2005 Cylo and Mr. Marwan made an agreement described as a Memorandum of Understanding (“MOU”). The MOU recited that the parties shared a common view on the potential for the media and entertainment industry in Egypt and wished to create an integrated media company. Each party was to transfer certain assets to an offshore entity.[4]Clause 1 of the MOU provided that the MOU was contingent on financial and legal due diligence on the asset contribution of the parties. Clause 2 provided that Cylo was to cause the offshore entity (“the BVI”) to be created as a holding company. Cylo was also to appoint the Chairman and CFO of the BVI. Mr. Marwan was to be the CEO of the BVI. Clause 6(a) listed the assets to be contributed by Mr. Marwan. Clause 6(b) and (c) listed the assets and cash to be contributed by Cylo. Clause 7 provided that the anticipated shareholding of the BVI would be 50.1% held by Cylo and 49.9% held by Mr. Marwan. Clause 8 provided for certain adjustments to those shareholdings after presentation of the 2005 audited accounts of two companies which were to be contributed by Mr. Marwan to the BVI. If there was a shortfall from the expected profit there would be a proportionate increase in the shareholding of Cylo at the expense of Mr. Marwan. If there was an increase in the expected profit then there would be a proportionate increase in Mr.Marwan’s shareholding at the expense of Cylo. In the latter event Cylo was obliged to increase its cash contribution in order to maintain the previously agreed relative shareholdings. In the former event Mr. Marwan had a right to make a payment in cash which had the effect of maintaining the previously agreed relative shareholdings.[5]Clauses 10 and 11 provided as follows:
“10. As a pre-condition to signing this MOU, the Second Party [Mr. Marwan] shall cause an irrevocable, legal transfer of full rights of the newly signed films contracts to be transferred in full operational and economic interest to the First Party [Cylo]. In addition, [Mr. Marwan] shall submit to the First Party a personal check in favour of the First Party for the amount of $1,358,000 due on December 31, 2005 drawn on an Egyptian Bank. 11. Immediately upon completion of Clause 10 above, [Cylo] shall transfer in cash the amount of $1,358,000 to [Mr. Marwan] the amount of $1,358,000 to [Cylo]. [Mr. Marwan] will then cause the transfer of the films contracts to a newly formed company which shall be contributed to the BVI as part of [Cylo’s] asset contribution as specified in Clause 6b above. Upon satisfactorily transferring the films contracts to the new company and upon full execution of the BVI and the final share holding determination, [Cylo] shall return to [Mr. Marwan] both the legal transfer of rights of the films contracts and the personal check.”
[6]These clauses are not clearly expressed but in essence their effect was that Cylo was to provide Mr. Marwan with $1,385,000 in respect of certain film contracts and Mr. Marwan would in turn contribute the film contracts to the BVI but such contribution would, as between Cylo and Mr. Marwan, be regarded as a contribution by Cylo. The film contracts were listed in clause 6(b) as one of the assets to be provided by Cylo.[7]Clause 14 provided as follows:
“(a) The Parties have entered into this agreement in good faith and intend to manage and market the entity/entities in a transparent, professional, ethical and moral way to preserve the brand and image of each Party’s current assets and the assets of the BVI. (b) In the case of non-conclusion by any of the parties to the transactions contemplated under this MOU, [Cylo] shall terminate the Undisclosed Assignment Agreement dated on or around the date of this MOU together and return the personal check which [Mr. Marwan] has issued to guarantee the payment amounting to $1,358,000 made by [Cylo] pursuant to clause 11 hereof and, simultaneously, [Mr. Marwan] shall settle in full the payment amounting to $1,358,000 made by [Cylo] pursuant to clause 11 hereof by a date no later than September 20, 2005.”
[8]Clause 15 provided for English law and the exclusive jurisdiction of the English Court.[9]On signing the MOU US$1,358,000 was transferred by Cylo to Mr. Marwan. Mr. Marwan provided a personal cheque for US$1,358,000. Further sums were provided by Cylo or entities controlled by Mr. Sawiris between 1 June 2005 and 6 March 2006. Further cheques equal to such sums were, I think, provided by Mr. Marwan.[10]On 15 October 2005 Cylo procured the incorporation of the Third Issue Claimant, Melody Group Limited (“MGL”), as the holding company for the joint venture.[11]By November 2006, for reasons which fortunately do not require to be investigated, the relationship between Mr. Sawiris and Mr. Marwan had deteriorated.[12]By letter dated 21 November 2006 Trowers & Hamlins, acting on behalf of Mr. Marwan, wrote to Cylo stating that the MOU was of no effect on the grounds that there had been no satisfactory due diligence. Alternatively, if it was of effect, there had been a repudiatory breach which Mr. Marwan had accepted as terminating the MOU. In the further alternative, one week’s notice of termination of the MOU was given. By letter dated 23 November 2006 Cylo replied, refusing to accept the contents of the letter dated 21 November 2006 and requiring Mr. Marwan to honour his obligations under the MOU. By letter dated 30 November 2006 to Cylo, Trowers & Hamlins reiterated Mr. Marwan’s position and requested a statement of Cylo’s understanding of how much had been lent to Mr. Marwan in order to establish “a meaningful starting point for discussion as to how to unravel affairs to date”. By a further letter dated 12 December 2006 to Cylo Trowers & Hamlins attached “a statement of expenses incurred by Melody companies or our client” and noted that they were still awaiting a statement from Cylo of monies provided by Cylo. The letter ended with the following proposal:
“Our client has asked us to propose that upon agreement of these two statements and subsequent calculation of the net amount outstanding to your account, our client shall either repay such monies plus interest or provide Cylo, or its nominee, with an interest in Melody Aflam in the amount of such monies provided that a new agreement is entered into confirming, in particular, that in relation to such participation in Melody Aflam, Melody Entertainment shall continue to control the board of directors and to nominate the chairman and managing director(s) and other managers of such company.”
[13]There was no response to that proposal. But in March 2007 MGL brought proceedings in the Lebanon against Mr. Marwan seeking to enforce the MOU. Cylo presented cheques issued by Mr. Marwan for payment. In the late Spring of 2007 proceedings were brought in Egypt against Mr. Marwan by Cylo seeking to enforce payment of the cheques provided by Mr. Marwan.[14]On 1 October 2007 Mr. Marwan issued proceedings in this court against Mr. Sawiris, Cylo and MGL. He sought the following relief: i) A declaration that the MOU had ceased to have effect or had been terminated. ii) A declaration that Mr. Marwan and the companies controlled by him had no obligations or liabilities under the MOU. iii) A declaration that the Defendants were not the owners of Melody Entertainment Limited or any other company owned by Mr. Marwan. iv) A declaration that Mr. Sawiris acted unlawfully in causing or procuring MGL to bring proceedings in the Lebanon against Mr. Marwan. v) The taking of such accounts as may be necessary to reverse any steps taken on behalf of Mr. Marwan, Mr. Sawiris and Cylo to implement their joint venture. vi) Damages for breach of contract. vii) Interest and costs.[15]On 18 January 2008 a defence and counterclaim were served to that claim. Mr. Sawiris said that Mr. Marwan had repudiated the MOU which repudiation had been accepted by Mr. Sawiris as terminating the MOU. Damages for that repudiation were claimed in the sum of the monies paid to Mr. Marwan and the assets transferred to MGL “if, which is denied, the Defendants are not entitled to repayment of the monies advanced in debt and/or restitution of the value of the Transferred Assets”. In the alternative, “regardless of whether the Claimant or any of the Defendants have breached the terms of the MOU”, Mr. Sawiris claimed repayment of the monies advanced and a sum representing the value of the transferred assets.[16]On 10 March 2008 Mr. Marwan, pursuant to an order of the Egyptian court, paid Mr. Sawiris (or Cylo) the sum of $3,185,500 and was given a 36 month suspended prison sentence. On the same day MGL undertook to apply to stay the proceedings in Lebanon.[17]On 7 April 2008 a Case Management Conference took place before Aikens J. After a discussion between the Judge and counsel the CMC was adjourned to enable the parties to agree the terms of a declaration that the MOU was at an end and, if there were any outstanding issues, to prepare a list of those issues. A consent order was not agreed until 26 June 2009. That order declared that the MOU was at an end and that Mr. Marwan was to pay certain sums into court which represented the total amount transferred to him or his companies by Mr. Sawiris or his companies, credit having been given for a sum advanced by Mr. Marwan to Mr. Sawiris and for the repayments made pursuant to the Egyptian proceedings. Four issues were not resolved. They were: i) Whether the credit given for sums paid pursuant to the Egyptian proceedings should be net of Mr. Sawiris’ costs incurred in those proceedings and whether the costs incurred by Mr. Marwan in defending the proceedings in the Lebanon should be taken into account. ii) Whether Mr. Marwan should pay interest on the sums advanced in respect of the period between 12 December 2006 and the date of repayment. iii) Whether Mr. Marwan should pay interest at a rate exceeding LIBOR plus 1% and/or on a compound basis. iv) Costs.[18]These four issues were the subject of the present trial between 16 and 18 December 2009. Mr. Sawiris did not give oral evidence or provide a statement in writing. In his stead evidence was given by Mr. Abdou, a director of Cylo. He gave his evidence clearly and candidly, particularly with regard to the pressure that Mr. Sawiris sought to place on Mr. Marwan to perform the terms of the MOU. Mr. Marwan also gave evidence. His evidence as to his, or his family’s or his companies’ ability to repay sums advanced by Mr. Sawiris did not always sit happily with his contemporaneous correspondence. Either he was being less than candid in that correspondence or in his oral evidence.

Issue 1: The Egyptian and Lebanese proceedings

[19]The Egyptian proceedings: This issue contains a claim by Mr. Sawiris and a claim by Mr. Marwan in relation to the Egyptian proceedings. I shall deal with each in turn.[20]Mr. Sawiris claims that in calculating the credit to be given for the sums repaid by Mr. Marwan pursuant to the Egyptian proceedings a deduction should be made in respect of the costs incurred by Mr. Sawiris in bringing those proceedings. The Egyptian lawyers acting for Mr. Sawiris have stated that the fees invoiced to him and Cylo “in pursuing the Egyptian criminal proceedings filed by Mr. Naguib Sawiris and Cylo Investment Limited against Mr. Gamal Marwan” up to 16 December 2008 were US$57,501. They stated that a further sum of US$13,800 would be invoiced before 30 December 2008.[21]In Mr. Sawiris’ Particulars of Claim these sums are claimed as damages for breach of contract. Two breaches are alleged. The first is a breach of “the term as to repayment.” In paragraph 1 of the Particulars of Claim it had been alleged that by the MOU it was agreed that in the event that the transactions contemplated by the MOU were not concluded Mr. Marwan would refund the advance. That allegation was admitted. It was further alleged that the same applied to further advances made by Mr. Sawiris to Mr. Marwan. As to that allegation it was admitted that clause 14(b) of the MOU was applicable to those further advances. Since that is the only clause in the MOU dealing with repayment of advances by Mr. Sawiris I understand Mr. Marwan to have admitted that the further advances made by Mr. Sawiris were also to refunded in the event that the transactions contemplated by the MOU were not concluded. The second alleged breach was of “the term as to the presentation of the security cheques to honour the same upon presentation”. That was alleged to be an express, alternatively, an implied term. Mr. Marwan denied that there was any such express or implied term. Clause 14(b) provided that if the transactions were not concluded (as is now common ground) Mr. Sawiris would return the cheque and Mr. Marwan would simultaneously return the advance.[22]Counsel for Mr. Sawiris, in his Skeleton Argument, deals with this issue very shortly. He makes two points. Firstly, Mr. Marwan “cannot be heard to object to a netting off of [Mr. Sawiris’] costs of [the Egyptian proceedings] against their recovery.” Secondly, as to Mr. Marwan’s construction of clause 14(b) he says that it “requires a literal reading of the clause which defies business common sense: security which cannot be realised is no security at all, yet that is precisely what his submission entails.”[23]Counsel for Mr. Marwan, in his Skeleton Argument, deals with this issue at greater length. Firstly, it is said that Mr. Sawiris was not entitled to present the cheques for payment because the MOU had either not come to an end (the first cheque was presented in October 2006) or Mr. Sawiris was contending that it had not come to an end and was pressing for performance of the MOU (the later cheques were presented in March 2007). Secondly, in the event that the transactions contemplated by the MOU were not completed, clause 14(b) of the MOU provided for Mr. Sawiris to return the cheque and simultaneously Mr. Marwan would repay the advance. Mr. Sawiris acted in breach of clause 14(b) because he did not return the cheque.[24]The MOU does not in terms state in what circumstances Mr. Sawiris was entitled to present the cheque for payment. Clause 14(b) deals expressly with the non-completion of the transactions contemplated by the MOU. It obliged Mr. Sawiris in that event to return the cheque to Mr. Marwan who, simultaneously, was obliged to settle in full the payment. In my judgment the effect of clause 14(b) (which it is accepted applied to all the cheques, not just the one for $1,358,000) was that Mr. Sawiris was not entitled, in the event of the non-completion of the transactions contemplated by the MOU, to present the cheques for payment before he had tendered the return of the cheque to Mr. Marwan and requested the simultaneous repayment of the advance. If Mr. Marwan then failed to repay the advance simultaneously Mr. Sawiris could present the cheque for payment. That is either the true construction of the express terms of clause 14(b), which clause expressly refers to the cheque being issued “to guarantee payment of $1,358,000”, or is a term which is necessary to imply in the MOU to make it work. This construction of the MOU and clause 14(b) does not defy business common sense. It recognises that the cheque is security and provides for it to be realised after Mr. Marwan had been requested to repay the advance (in exchange for the cheque) and had failed to do so.[25]Mr. Sawiris did not tender the return of any of the cheques to Mr. Marwan or request the simultaneous repayment of the advances covered by the cheques. Mr. Abdou accepted this in cross-examination. Indeed, he said that the cheques were presented for payment as a means of putting pressure on Mr. Marwan to perform the other terms of the MOU. Far from accepting that the MOU was at an end, in which case Mr. Sawiris could tender the return of the cheques and request repayment of the advances, Mr. Sawiris wanted the MOU to be performed. In that event he would not be entitled to repayment of the advances. Presenting a cheque drawn on an Egyptian bank for payment has the potential to put pressure on the person who drew the cheque because non-payment is a criminal offence in Egypt.[26]I have therefore concluded that Mr. Sawiris, by presenting the cheques for payment before tendering their return to Mr. Marwan in exchange for repayment of the advances, acted in breach of clause 14(b). Moreover, the cost of bringing criminal proceedings in Egypt was not incurred in order to recover the advances made to Mr. Marwan (which would be repayable in the event that the transactions contemplated by the MOU were not completed) but to put pressure on Mr. Marwan to complete those transactions. In these circumstances I do not consider that is appropriate to reduce the credit due to Mr. Marwan in respect of the amount of the advances repaid pursuant to the Egyptian proceedings by the costs incurred by Mr. Sawiris in bringing proceedings in Egypt.[27]Although the list of issues reserved for decision in the order of Aikens J. did not include a claim for damages by Mr. Marwan in respect of the costs of defending the Egyptian proceedings such a claim was made in Mr. Marwan’s Points of Defence, was the subject of a reply in the Points of Reply and was dealt with in Mr. Sarwiris’ counsel’s skeleton argument without objection. I therefore consider that I can properly and fairly decide that claim. The costs have been certified by Mr. Marwan’s Egyptian lawyers in the sum of $120,000 plus an estimated amount of $20,000-30,000 in respect of his appeal.[28]The claim is put on the basis that the presentation of the cheques for payment was a breach of the MOU and therefore that the costs of defending the criminal proceedings are recoverable as damages for that breach. The claim is defended on the basis that the sums claimed were unquestionably due, that it was therefore unreasonable to defend the proceedings and that the costs were incurred by Mr. Marwan’s unreasonable conduct in defending the proceedings and not by any breach of clause 14(b).[29]The presentation of the cheques was a breach of the MOU for the reasons I have given. It was said that the costs of defending those proceedings are recoverable as damages for that breach because those proceedings would not have “come into being” but for the breach. No submissions were made as to whether, as a matter of Egyptian law, that breach, or the facts giving rise to that breach, amounted to a defence in Egyptian law to the claim brought against Mr. Marwan on the cheque. I infer from the decision of the Egyptian court that there was no defence. If there was no defence it is at least possible that that the costs of defending the Egyptian proceedings were unreasonably incurred notwithstanding that Mr. Sawiris’ presentation of the cheque for payment, in breach of the MOU, was a necessary foundation for the criminal proceedings.[30]The burden of proving causation lies on Mr. Marwan. The burden of proving that he could have avoided loss by taking reasonable steps to mitigate his loss lies on Mr. Sawiris. It was argued by counsel on behalf of Mr. Sawiris that Mr. Marwan’s “obvious and sensible course in Egypt was to pay and then seek such relief as he might have been entitled to elsewhere.” It was argued by counsel on behalf of Mr. Marwan that Mr. Sawiris could not establish that Mr. Marwan had brought these costs on himself by unreasonably defending the Egyptian proceedings. It was observed that no expert evidence had been called to show that the defence was hopeless.[31]I consider that Mr. Sawiris’ breach of contract was a substantial cause of Mr. Marwan incurring costs in defending the criminal proceedings brought by Mr. Sawiris in Egypt. The cheques were presented to bring pressure on him to perform the MOU. That pressure was real because dishonour of a cheque in Egypt is a criminal offence which could lead (and has led in this case) to a prison sentence. Mr. Marwan sought to resist that pressure by defending those proceedings and thereby incurring legal costs.[32]It is likely that Mr. Marwan sought to defend himself against the criminal proceedings on the basis that the cheque was presented in breach of a collateral agreement, the MOU, pursuant to which the cheque had been issued. As to that it was argued by counsel on behalf of Mr. Sawiris before me that “any lawyer would have told him that cheques are independent contracts and what’s going on elsewhere won’t affect the position.”[33]However, whilst the position in English law (and I infer in Egyptian law, in the absence of evidence to the contrary) is that cheques are autonomous legal instruments it does not necessarily follow, though it might follow, that the position under the MOU, and in particular clause 14(b), with regard to the presentation of the cheque was irrelevant to the question of criminal liability or the appropriate sentence. In the absence of expert evidence as to Egyptian criminal law I am not able to find on the balance of probabilities that Mr. Marwan’s defence of the criminal proceedings was hopeless and therefore unreasonable.[34]It therefore follows, in my judgment, that Mr. Marwan is in principle entitled to an award of damages in respect of the costs of defending himself against the Egyptian criminal proceedings. Making a finding as to the quantum of those costs is however difficult. In Mr. Marwan’s pleading dated 8 August 2008 they are claimed in the sum of US$100,000. In Mr. Marwan’s statement dated 31 July 2009 he states that he has incurred costs in the region of $350,000 in dealing with the Egyptian criminal proceedings. His Egyptian lawyers have certified in a document dated 14 December 2009 that the costs were $120,000 and that a further $20,000-30,000 will cover the costs of an appeal. The amount certified by the lawyers must be preferred to the much larger sum claimed in Mr. Marwan’s statement. The amount claimed in the pleading dated 8 August 2008 was a little less at $100,000. The verdict in the criminal proceedings appears to have been given in March 2008 and, according to Mr. Marwan’s evidence in re-examination, an appeal was lodged in April 2008. Thus the pleaded figure of $100,000 is likely to include such of the appeal costs as were incurred by August 2008. The increase to $120,000 in the lawyers’ certificate may be explained by appeal costs incurred since August 2008. Whilst I am sceptical of the “round” nature of these figures they were not specifically challenged by counsel for Mr. Sawiris. Mr. Sawiris’s own costs were $57,501. It is to be expected that Mr. Marwan’s costs of defending himself against serious criminal proceedings would be more than those of Mr. Sawiris who brought a simple claim on a dishonoured cheque. In that context $100,000, the pleaded figure, does not appear to be out of place for the costs of the first instance proceedings and such of the appeal costs as had been incurred by August 2008. However, in the absence of any evidence to the effect that an appeal has any prospect of success I do not consider that Mr. Marwan can claim the costs of his appeal as damages caused by Mr. Sawiris’ breach of the MOU. The costs of defending at first instance are likely to have been significantly in excess of $57,501 but somewhat less than $100,000. Doing the best I can on the limited evidence before me I find those costs in the sum of $85,000.[35]The Lebanese proceedings: In March 2007 MGL brought proceedings against Mr. Marwan in the Lebanon to enforce the terms of the MOU, specifically to compel Mr. Marwan to transfer Melody Entertainment Limited to MGL. Mr. Marwan claims the costs of defending these Lebanese proceedings as damages for the tort of conspiring to cause financial loss to Mr. Marwan by bringing proceedings against him in the Lebanon. These costs were claimed in the sum of $35,000. However, in his witness statement he said the costs were in the region of $90,000 based upon a letter dated 17 March 2009 from his Lebanese lawyers.[36]The only issue argued before me was whether Mr. Sawiris had the necessary malicious intent to cause loss to Mr. Marwan.[37]On behalf of Mr. Marwan it was submitted that the proceedings were brought with that intent. Several matters were relied upon. The proceedings could sensibly have been brought in London by Mr. Sawiris pursuant to the terms of the MOU. It was plain from the presentation of the cheques in Egypt that Mr. Sawiris was intent on doing all that he could, whether legitimate or not, to put pressure on Mr. Marwan to implement the MOU. In similar vein, he instructed other companies controlled by him not to pay their debts to Mr. Marwan even though there was no contractual basis to withhold payment. Further, Mr. Sawiris chose not to come to this court to give evidence in support of his defence to the charge that the proceedings were brought with the malicious intent of causing him harm. Mr. Abdou, who did give evidence, did not have much involvement with the Lebanese proceedings although he was aware of them. An inference could be drawn from Mr. Sawiris’ failure to give evidence that he had no answer to the charge.[38]On behalf of Mr. Sawiris it was said that it had to be shown that the predominant purpose of the Lebanese proceedings was to cause harm to Mr. Marwan. This could not be shown because it was plain that his intent throughout, at any rate until 2008 when he accepted that the MOU was at an end, was to enforce the MOU. Although it is now accepted that the MOU was at an end since November 2006 that was not accepted until 2008. Until then he was pursuing what he thought was the legitimate objective of enforcing the terms of the MOU and that was the intent behind the Lebanese proceedings (which began in March 2007 and which Mr. Sawiris undertook to apply to stay in March 2008).[39]I accept that what must be shown is that Mr. Sawiris, acting in combination with others, when commencing and pursuing the Lebanese proceedings did so with the predominant intention of injuring Mr. Marwan; see Clerk and Lindsell on Torts 19th. ed. para.25-117. I also accept that such intention, or malice, must be specific with regard to the conduct in question, namely, the commencement of proceedings in the Lebanon.[40]Mr. Marwan’s case is supported by Mr. Sawiris’ own pleading. Mr. Sawiris pleads in his defence to the main action that in October and November 2006 Mr. Marwan repudiated the MOU which he accepted as terminating the MOU by presenting for payment a series of cheques. Those cheques were presented for payment in March 2007. Thus on his own case Mr. Sawiris had elected to terminate the MOU in March 2007. Yet at the same time proceedings were commenced in the Lebanon to seek enforcement of the MOU. Since the MOU was now at an end the only intention in bringing such proceedings must have been to cause harm to Mr. Marwan by causing him needlessly to incur legal costs in defending those proceedings. Mr. Sawiris cannot have commenced those proceedings with the intention of enforcing the transfer of shares as provided for in the MOU because he had brought the MOU to an end. There was no evidence from Mr. Sawiris to put against this case because he chose not to give evidence either orally or in writing.[41]However, it was clear from Mr. Abdou’s evidence that Mr. Sawiris’ intention throughout 2006 and 2007 was to put such pressure on Mr. Marwan that he would transfer the shares as provided in the MOU. Thus he freely accepted that the purpose of presenting the cheques for payment was to put pressure on Mr. Marwan to transfer the shares. Mr. Sawiris did not want his advances repaid. He wanted the shares transferred. This was also why Mr. Sawiris ordered other companies under his control not to pay debts due to Mr. Marwan. It was plain from Mr. Abdou’s evidence that Mr. Sawiris was prepared to use whatever leverage he had to put pressure on Mr. Marwan to transfer the shares. This naked aggression had the distinct ring of truth and indeed was not challenged by counsel for Mr. Marwan.[42]Thus, although Mr. Sawiris had pleaded that he had accepted Mr. Marwan’s repudiation as terminating the MOU when he presented the cheques for payment in March 2007, I am unable to accept that that pleading reflected the truth. His conduct showed that he regarded the MOU as extant, not terminated. It is true that with regard to certain of his actions Mr. Sawiris was intent on causing harm, or threatening to cause harm, to Mr. Marwan. That is why he instructed companies within his control not to pay debts due to Mr. Marwan. That is also why he commenced criminal proceedings against him in Egypt. But such actions were designed to put such pressure on Mr. Marwan that he would transfer the shares. However, the proceedings in the Lebanon were the legal vehicle which would bring about this transfer. The intention behind the proceedings was not to cause harm to Mr. Marwan by causing him to incur legal fees. It was to bring about the transfer of the shares as provided for by the MOU.[43]I am mindful that Mr. Sawiris has chosen not to give any evidence himself as to his intention when commencing proceedings in the Lebanon. But I am unable to draw the inference I am asked to draw. The inference is simply inconsistent with the evidence which was extracted from Mr. Abdou in cross-examination and which I accept.[44]For these reasons I must reject Mr. Marwan’s claim for the costs of the Lebanese proceedings.

Issues 2 and 3: Interest as from 12 December 2006

[45]These two issues concern the date from which interest was due, the rate at which interest was due and whether it should be simple or compound interest. Mr. Marwan has agreed to pay and has paid simple interest on the sums advanced until 11 December 2006 at a rate of LIBOR +1. However, Mr. Sawiris claims compound interest until the date on which the sums were received at a rate of 15.5% (which reflects the costs of borrowing Egyptian pounds). That amounts to a sum of $2,723,309.07 and Euros 23,698.55. Alternatively, Mr. Sawiris claims compound interest until the date on which the sums were received at a rate of LIBOR+3% (which reflects the cost to Mr. Marwan of borrowing US$). That amounts to a sum of $1,199,158.98 and Euros 7,929.33. In the further alternative Mr. Sawiris claims simple interest until the date on which the sums were received at a rate of 15.5%. That amounts to a sum of $160,370.07 and Euros 4,450.73.

Compound interest

[46]It is convenient to deal first with the claim to compound interest. This claim is now only advanced on the basis of an implied term of the MOU or of the advances made that interest would be payable at a commercial lending rate from the time of the advance until the date of repayment, such interest to be compounded at monthly rests. (Counsel for Mr. Sawiris did not pursue the claim for compound interest as damages for breach.) It is said that such an implied term is so obvious as to go without saying and/or is necessary in order to give business efficacy to the MOU or the advances made.[47]The reasons why it was submitted that such a term should be implied can be summarised as follows. The object of clause 14(b) of the MOU, in the event that the transactions contemplated by the MOU were not completed, was to place the parties back in the position they would have been in if the MOU had not been entered into. If the MOU had not been entered into then Mr. Marwan would have had to have borrowed Egyptian pounds and that would have been at the rate of 15.5% compound interest, alternatively US dollars at LIBOR plus 3% compound interest. It would be inimical to the scheme of the MOU for Mr. Marwan to have the benefit of free finance.[48]The difficulty with this submission is that to the extent that clause 14(b) seeks to place the parties back in the position they would have been in if the MOU had not been entered into it does so without making provision for any payment of interest. Thus the clause does not seek to place the parties completely back in the position they would have been in had the MOU not been entered into. Mr. Sawiris would be left without compensation for not having had the use of US$1,358,000 and Mr. Marwan would not be obliged to pay to Mr. Sawiris a sum of money equal to the interest he would have had to pay in order to borrow US$1,358,000 from others. Thus it would not be inimical to the scheme of the MOU for Mr. Marwan to have the benefit of free finance.[49]Clause 14(b) deals in terms only with the transactions not being completed by September 2005 whereas it was not until November/December 2006 that the MOU came to an end without the transactions being completed. However, both parties relied upon its provisions in support of their respective arguments. Since it deals with the event of the transactions not being completed it must be some indication of the parties’ intentions in that event.[50]The basis upon which the law implies terms in a contract has now been re-stated by Lord Hoffman in the Privy Council in AG of Belize v Belize Telecom [2009] 1 WLR 1988. The question for the court is whether the suggested implied term would spell out in express terms what the instrument, read against the relevant background, would reasonably be understood to mean.[51]This restatement of the basis upon which terms should be implied has been followed by the Court of Appeal in Mediterranean Salvage and Towage Limited v Seamar Trading & Commerce Inc. [2009] EWCA 531. There was some debate between counsel as to the extent to which the Court of Appeal loyally followed, or not, as the case may be the guidance of Lord Hoffman but that dispute does not affect the issue in the present case.[52]Lord Hoffman said, at paragraph 17:
“The question of implication arises when the instrument does not expressly provide for what is to happen when some event occurs. The most usual inference in such a case is that nothing it to happen. If the parties had intended something to happen, the instrument would have said so. Otherwise, the express provisions of the instrument are to continue undisturbed. If the event has caused loss to one or other of the parties, the loss lies where it falls.”
[53]If the parties in the present case had intended that interest would be payable by Mr. Marwan in the event that the transactions contemplated by the MOU had not been completed they could easily have inserted a provision to that effect. They did not do so. That is not a conclusive factor but it is a cogent indication of the parties’ intentions in the event that the contemplated transactions were not completed. It must have been obvious to the parties that if Mr. Sawiris provided funds for the use of Mr. Marwan and the transactions did not go ahead Mr. Marwan would have had the use of those funds and Mr. Sawiris would not have had such use. Yet no provision for the payment of interest was made. In circumstances where clause 14(b) deals with that which Mr. Marwan must pay back in the event that the transactions are not completed by September 2005 and does not require Mr. Marwan to pay interest there is no basis upon which it can fairly be said either that an obligation to pay interest is the only meaning consistent with the provisions of the MOU or that that is the meaning which the MOU would convey to a reasonable person with the relevant background knowledge. On the contrary it is consistent with clause 14(b) of the MOU that Mr. Marwan was not to have to pay interest on the money which had been paid to him in the event that the transactions contemplated by the MOU were not completed. That is the meaning which the MOU would convey to a reasonable person with the relevant background knowledge.

Simple interest pursuant to section 35A of the Supreme Court Act 1981

[54]Counsel for Mr. Sawiris accepted that he could borrow money at the rate of LIBOR plus 1 and that that should be the rate awarded under section 35A.[55]The major dispute is whether the court should order interest to be paid from 12 December 2006. The minor dispute is whether interest should cease running on the date of the consent order made by Aikens J. or whether it should run until the date on which the sums ordered to be paid were actually received by Mr. Sawiris.[56]I can deal with the minor dispute first. Section 35A states that interest under section 35A may be awarded “for all or any part of the period between the date when the cause of action arose and ………the date of the judgment.” Thus interest, if it is awarded, should run until the date of the consent order which is the date of judgment.[57]It was submitted on behalf of Mr. Sawiris that the court should order interest from 12 December 2006 because it was common ground that repayment should have been made about then when the MOU ceased to be binding and that Mr. Sawiris had been kept out of his money since then.[58]The award of any interest from 12 December 2006 was opposed. Essentially the grounds for this unusual stance were that Mr. Sawiris had kept himself out of his money by seeking performance of the MOU rather than repayment of the money advanced by him.[59]Interest is awarded pursuant to section 35A as compensation to the successful claimant for having been kept out of his money. The award is discretionary. The authorities make clear that a relevant factor in the exercise of such discretion is whether the successful claimant has sought payment of the money in question promptly. Where he has chosen not to pursue a claim for his own reasons and has made that known to the defendant so that his own failure to prosecute his claim is the predominant cause of his being kept out of his money a court may decide not to award interest; see Kuwait Airways and others v Kuwait Insurance Company and others, a decision of Langley J dated 19 April 2000 at p.23 and Derby Resources AG v Blue Corinth Marine Co.Ltd. (The “Athenian Harmony”) [1998] 2 Lloyd’s rep. 425 at p.427. Similarly, in Benedetti and others v Sawiris and others [2009] EWHC 1806 (Ch) Patten LJ refused to award interest where the delay in receiving the money awarded by the judgment was entirely of the claimant’s own making.[60]In the present case it is clear that Mr. Sawiris wished to have the transactions contemplated by the MOU completed, rather than his advances repaid, and that those remained his wishes until some time after the commencement of the proceedings in this court by Mr. Marwan. He did not accept (until very late in the day) that the MOU was at an end. Mr. Abdou accepted that Mr. Sawiris was still pressing for the MOU to be performed in October 2006 and continued to do so notwithstanding the letters from Mr. Marwan’s solicitors in November and December 2006 which said that the MOU was at an end and proposed repayment of what was due after the taking of accounts. Indeed in March 2007 Mr. Marwan’s cheques were presented for payment as a form of pressure on Mr. Marwan to perform the MOU rather than to get Mr. Sawiris’ money back. He accepted that the presentation of such cheques was an implied threat to have Mr. Marwan jailed if the cheques were not honoured. Thereafter the Lebanese proceedings were brought with the approval of Mr. Sawiris with the aim of procuring the completion of the transactions contemplated by the MOU. They were not directed to the recovery of Mr. Sawiris’ money. Later, when negotiations were opened as to “unwinding” the MOU, Mr. Sawiris required not only the return of his money but 30% compound interest as an “equity return”. If that was not paid Mr. Sawiris wanted the transactions contemplated by the MOU performed. Mr. Abdou described the latter as “the primary goal”. Mr. Sawiris’ efforts to pressurise Mr. Marwan into performing the MOU included instructing companies controlled by Mr. Sawiris not to pay debts owed to Mr. Marwan’s companies.[61]On the basis of Mr. Abdou’s evidence it was submitted that the court should not award any interest from 12 December 2006 because Mr. Sawiris’ own conduct was the reason he was kept out of his money thereafter. He had chosen to seek completion of the transactions contemplated by the MOU rather than repayment of the sums advanced by him.[62]On behalf of Mr. Sawiris it was submitted that there was good reason to award interest, namely, that Mr. Sawiris was entitled to repayment of the sums in question from November/December 2006, that if Mr. Sawiris had asked for the sums to be paid Mr. Marwan would been unwilling or unable to pay it and that it would be “grotesque” if Mr. Marwan were allowed the free use of Mr. Sawiris’ money.[63]I shall first deal with the submission that Mr. Marwan was either unwilling or unable to pay the sum in question. There is clear evidence that he was willing in principle to pay such sum as was found to be due after the taking of an account, namely, the letter dated 12 December 2006 to which I have referred earlier. Notwithstanding the other matters to which counsel made reference, including the later offer to pay by instalments and the delay in completing the negotiations commenced after the CMC, I am satisfied that Mr. Marwan was willing to repay such sums as he was obliged to repay. As to inability to pay the position is not so clear. On the one hand correspondence from Mr. Marwan to Mr. Sawiris gave the impression that Mr. Marwan was very much in need of the funds to be provided by Mr. Sawiris. On the other hand Mr. Marwan, or the companies controlled by him, secured loan facilities and he did in fact repay the sums in question to Mr. Sawiris. He himself gave evidence that he would have been able to repay the sums in question if asked to do so either from his own resources, the earnings of his companies, loans obtained by his companies or from the resources of his family. I was not persuaded by Mr. Marwan’s evidence that he would have been able to call upon the resources of his family. Such resources were not mentioned in the contemporaneous correspondence and the details of his family resources were not in evidence. But it seems likely that if he had been called on to pay the sums in question in December 2006 or thereafter he would have obtained loan facilities from financial institutions in order to make the necessary payments as he in fact did.[64]I do not consider it “grotesque” for Mr. Marwan not to have to pay interest from December 2006, notwithstanding that it will mean that he will have had the free use of money from that date. Mr. Marwan had stated his willingness to pay such sum as was agreed to be due following a taking of accounts but Mr. Sawiris had no interest in such sum being paid and did not seek repayment of such sums. Indeed, he actively sought to put pressure on Mr. Marwan by such means as were available to him to complete the transactions contemplated by the MOU rather than to pay such sum as was due following the taking of accounts. The cause of his being out of his money from December 2006 was his own decision not to accept (as he has since accepted) that the MOU was at an end. The delay in receiving the sums now agreed to be due to Mr. Sawiris is entirely of his own making. It simply does not lie in his mouth to complain that he has been kept out of his money from December 2006 when he sought to persuade Mr. Marwan not to pay but to complete the transactions contemplated by the MOU.[65]However, the position began to alter after the proceedings in this court were begun in October 2007. Mr. Marwan sought a number of declarations to the effect that he was not obliged to transfer shares or film contracts as contemplated by the MOU and that the MOU had ceased to have effect. In addition he sought a declaration that in procuring the Lebanese proceedings Mr. Sawiris was acting unlawfully. Other relief was sought including the taking of accounts and a direction for the repayment of all loans made by Mr. Sawiris to Mr. Marwan and vice versa. Finally, damages for breach of contract were sought.[66]Counsel for Mr. Sawiris emphasised that Mr. Marwan sought a declaration that he was “under no liability to Cylo, MGL, Gemini or Mr. Sawiris in respect of the MOU or the joint venture”. However, I do not consider that this can fairly be read as referring to monetary liability because the relief sought included an order for the taking of accounts and repayment of loans.[67]Counsel for Mr. Sawiris also relied upon paragraph 14 of the Reply and Defence to Counterclaim in which Mr. Marwan denies that Mr. Sawiris was entitled to the repayment of the sums advanced by him. It was said that this demonstrated that Mr. Marwan was not willing to repay the sums that had been advanced to him. The denial is open to that interpretation but I am not persuaded that that is the correct interpretation in the light of the pleadings as a whole. It had always been Mr. Marwan’s position since November/December 2006 that he should repay whatever was shown to be due after the taking of accounts. That was repeated in the Particulars of Claim. The basis of Mr. Sawiris’ claim had not been clearly set out and a later passage appeared to deny that there should be an account. In those circumstances the denial should, I think, be read as a denial that Mr. Sawiris was entitled to repayment of the sums advanced without account being taken of sums paid by Mr. Marwan. A denial of a liability to repay such sum as was shown to be due after an account had been taken would simply make no sense having regard to Mr. Marwan’s conduct before action was commenced and to the contents of the Particulars of Claim.[68]Mr. Sawiris accepted in his Defence served in January 2008 that the MOU was at an end and sought by counterclaim damages for breach of contract and/or duty, repayment of the sums advanced and a sum representing the value to Mr. Marwan of albums, artists and other assets transferred by him. Thus by January 2008 it was common ground that the MOU was at an end but there was a dispute as to why.[69]By the time of the CMC on 7 April 2008 the dispute narrowed further and it became clear that there was really only an accounting to be done between the parties to decide what sum should be repaid.[70]It then took the parties until late June to agree on the accounting position, leaving over for determination those few issues on which they could not agree.[71]It is arguable that Mr. Sawiris’ position fundamentally changed when he served his defence in January 2008 accepting that the MOU was at an end. It could therefore be said that thereafter the predominant cause of his being out of his money was not his own conduct. However, Mr. Sawiris maintained at that stage that Mr. Marwan should account in respect of the value of artists, albums and other assets transferred by him. There was also a claim for damages. It was thus not entirely clear that all that had to be unwound or accounted for was the sums paid by the two parties. Mr. Sawiris’ stance in respect of the “transferred assets” and his damages claim was not abandoned until the CMC in April 2008.[72]I consider that account should be taken of Mr. Sawiris’ altered position. It cannot be said that from 7 April 2008, the date of the CMC, Mr. Sawiris’ conduct was the predominant cause of his being kept out of his money. He had by this time accepted that which he had been asked to accept in December 2006. Had he done so then it would not doubt have taken time to agree the accounts and it is likely that Mr. Marwan would have agreed to pay interest for that period. I shall therefore allow interest at the rate of LIBOR plus 1% from 7 April 2008 until 26 June 2008.

Issue 4: The costs of the action

[73]The costs of the action were reserved by Aikens J.[74]Before the proceedings were commenced in October 2007 there was a serious dispute between the parties as to whether the MOU was at an end. Indeed, the proceedings have been described as “reactive” to the Lebanese proceedings in which Mr. Sawiris sought to enforce the MOU. But when the defence was served in January 2008 it was common ground (though it had not been before) that the MOU was at an end. There was still a dispute as to why it was at an end.[75]As a result of the order of Aikens J. made on 26 June 2008 Mr. Marwan obtained a declaration that the MOU was at an end, that the joint venture had ceased and that Mr. Marwan had no obligation to transfer shares (save those in the joint venture vehicle). In addition, he agreed to pay into court a sum of almost US$2m. comprising the principal sum owing and interest thereon until 12 December 2006.[76]In effect Mr. Marwan secured all he had sought in the action save an order that Mr. Sawiris had acted unlawfully in procuring the Lebanese proceedings and damages for breach for contract.[77]Mr. Sawiris, who had sought by counterclaim damages for breach of contract and/or duty, repayment of the sums advanced and a sum representing the value to Mr. Marwan of albums, artists and other assets transferred by him, obtained only the repayment of the sums advanced but in a lesser sum than that counterclaimed.[78]In these circumstances there is a cogent argument that Mr. Marwan should have at any rate some part of his costs up until the date of the CMC when Mr. Sawiris accepted that the position was as had been put to him in December 2006. However, he cannot claim the costs associated with his case as to why the MOU was at an end because that issue has not been resolved. Nor should he have the costs associated with his damages claim. Although Mr. Sawiris secured judgment for a large sum to be paid to him, he cannot fairly claim the costs of recovering judgment for that large sum because there was no dispute in principle about that. It was the merely the quantum that had to be worked out or agreed.[79]Had Mr. Sawiris accepted what had been put to him in December 2006 each side would have borne its own costs of working out what had to be repaid by Mr. Marwan.[80]In the result I consider that a fair order as to costs is that Mr. Marwan should have 50% of his costs up to and including the date of the CMC. Thereafter, each side should bear its own costs. Conclusions: Egyptian proceedings

Conclusions:

[81](i) It is not appropriate to reduce the credit due to Mr. Marwan in respect of the amount of the advances repaid pursuant to the Egyptian proceedings by the amount of costs incurred by Mr. Sawiris in bringing proceedings in Egypt.(ii) Mr. Marwan is entitled to an award of damages in respect of the costs of defending himself against the Egyptian criminal proceedings in the sum of $85,000.

Lebanese proceedings

[82]I reject Mr. Marwan’s claim for the costs of the Lebanese proceedings.

Interest

[83]Pursuant to section 35A of the Supreme Court Act 1981 Mr. Sawiris is awarded simple interest on the principal sum ordered to be paid by Aikens J. at the rate of LIBOR plus 1% from 7 April 2008 until 26 June 2008. I request the parties to calculate that interest so that it may be put in an agreed order.

Costs of the main action

[84]Mr. Marwan should have 50% of his costs up to and including 7 April 2008. Thereafter, each side should bear its own costs.

Cited in 3 later judgments