Standard Bank Plc & Anor v Just Group LLC & Ors [2014] EWHC 2687 (Comm)

Case No 2013 Folio 965

[2014] EWHC 2687 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Venue Rolls Building, Fetter Lane, London, EC4A 1NL

Date 10/10/2014

Before

THE HON MR JUSTICE WALKER

Between

STANDARD BANK PLCClaimants

THE STANDARD BANK OF SOUTH AFRICA LIMITEDClaimant

JUST GROUP LLCDefendants

JUST OIL LLCDefendant

ERDTANA LLCDefendant

MERCANTILE HOUSE LLCDefendant

JUST AGRO LLCDefendant

MERCANTILE HOUSE COMPANY LIMITEDDefendant

ERDENET MINING CORPORATION LLC (ALSO KNOWN AS ERDENET COMPANY LLC)Defendant

JSC ULAANBAATAR RAILWAYSDefendant

MR BATKHUU SHARAVLAMDANDefendant

David Joseph QC and Edward Brown (instructed by Clifford Chance LLP) for Claimants

Daniel Toledano QC (instructed by Sidley Austin LLP) for Eighth Defendant

Hearing Hearing dates: 14 to 16 April 2014, 31 July 2014;

written submissions were received during the period 23 April to 17 June 2014.

Judgment

The Hon Mr Justice Walker:

A. Introduction 1 B. Background and Standard Bank’s claims 10 B1. Background and Standard Bank’s claims: general 10 B2. Background: the parties 11 B3. Background: events before 2007 16 B 3.1 Events before 2007: general 16 B3.2 The UBR supply contract 19 B3.3 The supplementary agreements 22 B3.4 The freight agreement 24 B4. An overview of Standard Bank Group’s involvement 28 B5. Initial involvement of Standard Bank Group 30 B5.1 The 2007 facilities agreement and the February 2007 assignment 30 B5.2 The February 2007 Just UBR notice 32 B5.3 The February 2007 UBR acknowledgement 36 B6. February 2007 to August 2009 40 B7. The EMC supply contract 43 B8. September to November 2009 44 B8.1 September and October 2009 44 B8.2 The 2009 facilities agreement and 2009 assignment agreement 45 B8.3 The 2009 Just UBR notice and the 2009 UBR acknowledgment 47 B8.4 Payments in November 2009 to the Standard Plc nostro account 48 B9. December 2009 to January 2011 50 B9.1 Payments, and an amendment to the 2009 facilities agreement 50 B9.2 The 2010 assignment agreement 51 B9.3 The 2010 Just UBR notice and the 2010 UBR acknowledgment 52 B10. February 2011 to December 2011 55 B10.1 The 2011 facilities agreement and the 2011 assignment agreement 55 B10.2 The 2011 Just UBR notice and the 2011 UBR acknowledgment 57 B10.3 Amendments to the 2011 facilities agreement 58 B10.4 Payments and the August 2011 debt instrument 59 B11. January to March 2012 63 B11.1 The 2012 facilities agreement 63 B11.2 The 2012 Just UBR notice and 2012 UBR acknowledgment 65 B11.3 Payments and deferred payments, January to March 2012 67 B12 April 2012 onwards 70 B12.1 More deferred payments 70 B12.2 “Savings Bank” payments 1 to 3: April to June 2012 71 B12.3 Debt instrument repayment 1: 27 June 2012 78 B12.4 Savings Bank payment 4: July 2012 79 B12.5 Savings Bank payments 5 and 6: August 2012 81 B12.6 Debt instrument repayment 2: 13 August 2012 84 B12.7 The period from September to December 2012 85 B12.8 Standard South Africa and the 2013 facilities agreement 86 B12.9 The pattern continues: January 2013 onwards 88 B13. Termination of the UBR supply contract 94 B14. Default under the amended 2012 facilities agreement 96 C. Serious issue to be tried 97 C1. Serious issue: overview and legal principles 97 C2. The expert evidence of Mongolian law 106 C3. Analysis of UBR’s “serious issue” challenge 114 D. Gateway 123 D1. Gateway: general 123 D2. Gateway (3): legal principles 130 D3. Route A to gateway (3) 134 D4. Route B to gateway (3) 148 D5. Gateway: Conclusions 156 E. Proper forum 162 E1. Proper forum: general 162 E2. The Mongolian exclusive jurisdiction clause 167 E3. England as the natural forum 198 E4. Forum and gateway (3) factors 201 E5. Criticisms of Mongolia 205 E6. Proper forum: conclusion 216 F. Standard Bank’s breach of duty to the court 219 G. Conclusion 232

[1]By an application dated 27 September 2013 (the “set aside application”) the eighth defendant (“UBR”) sought an order setting aside service of the claim form upon it. It also sought a declaration that the court has no jurisdiction to hear the claim against it. Oral submissions were advanced at a hearing before me on 14 to 16 April 2014, and were followed by written submissions during the period 23 April to 17 June 2014. On 31 July 2014 I granted the order and declaration sought by UBR, having provided the parties with part 1 of my draft reasons for that course. I now set out my full reasons.

[2]The first claimant (“Standard Plc”) is a bank incorporated in England and is part of the Standard Bank Group. It operates a branch in Hong Kong. The second claimant (“Standard South Africa”) is a bank incorporated in South Africa and is also part of the Standard Bank Group. In this judgment I describe events involving entities forming part of the Standard Bank Group over a period of seven years. For convenience I shall use the term “Standard Bank” to mean the entity or entities comprising the relevant part or parts of the Standard Bank Group in relation to the matter under discussion.

[3]At the hearing before me Mr David Joseph QC and Mr Edward Brown appeared on behalf of Standard Bank. Mr Daniel Toledano QC appeared on behalf of UBR. I am grateful to the legal teams on both sides for the clarity and care with which the arguments were presented.

[4]UBR maintains and operates the railway network in Mongolia, where it is incorporated. It is owned by, among others, the governments of Russia and Mongolia. It says that it has no business beyond Mongolia. Standard Bank did not dispute this at the hearing. In written submissions lodged after the hearing they made allegations that UBR operated in Russia and China, and purchased commodities internationally. However no evidence was relied upon to support these allegations.

[5]Standard Bank served these proceedings on UBR out of the jurisdiction pursuant to an order of Eder J dated 23 July 2013 (“the permission order”). In the usual way that order was made on consideration of an application notice (“the permission application”, which in this case sought permission to serve not merely UBR but also the ninth defendant), without a hearing and without notice. Included in the papers lodged in the present case by Clifford Chance LLP (“Clifford Chance”), who act as solicitors on behalf of Standard Bank, was a witness statement (“Yates 1”) made on 19 July 2013 by Mr CJ Yates, a solicitor employed by Clifford Chance. It recorded Mr Yates’s belief that Standard Bank had a good arguable case that, among other things, their claims against UBR fell within a particular jurisdictional gateway. The gateway in question was said to apply because the claim form would be served upon the first to seventh defendants, there was a real issue which it was reasonable for the court to try as between Standard Bank and those defendants, and UBR was a necessary or proper party to the claims made against those defendants. Earlier in his witness statement Mr Yates explained that Standard Bank would serve the proceedings upon the first to sixth defendants within the jurisdiction under CPR 6.11 at a place specified in the relevant contract, and upon the seventh defendant within the jurisdiction under CPR 6.9 at its place of business in London.

[6]Notable features of the present case are that:(1) Standard Bank’s main claims are against a Mongolian company (the first defendant) as borrower and its associated companies in Mongolia and Hong Kong (the second to sixth defendants) as guarantors following default by the first defendant in the repayment of substantial sums of money advanced by Standard Bank pursuant to a written agreement governed by English law;

(2) Standard Bank are entitled to bring the main claims in London and serve proceedings on the first to sixth defendants here in accordance with jurisdiction and service of suit clauses in the written agreement;

(3) as to those claims, the first to sixth defendants have been duly served by delivery of the claim form and accompanying documents to their appointed agent in London on 19 July 2013;

(4) none of the first to sixth defendants has disputed jurisdiction, nor has any of the first to sixth defendants disputed liability;

(5) subject to sub-paragraph (6) below, it is common ground that debts governed by Mongolian law and owed by UBR to the first defendant were validly assigned under Mongolian law to Standard Bank, that UBR received notice of that assignment, and that UBR nevertheless did not pay to Standard Bank substantial sums due under the assigned debts;

(6) however UBR asserts that despite receiving notice of the assignment it is not liable to Standard Bank as assignee because it has defences that (a) certain of the sums were paid to the first defendant by the seventh defendant pursuant to a pre-existing contract between UBR, the first defendant and the seventh defendant, (b) payment obligations for certain of the sums were satisfied by debt instruments as agreed with the first defendant, and (c) it paid, and was entitled to pay, the remainder of the sums in question at the direction of the first defendant;

(7) Standard Bank does not sue UBR as assignee;

(8) UBR asserts that the reason for not suing as assignee is because the assigned debts arise under a supply contract containing a clause conferring exclusive jurisdiction on the Mongolian court;

(9) Standard Bank claims against UBR under what it says, but UBR denies, was a collateral contractual undertaking by UBR in relation to which the defences identified at (6) above would not apply;

(10) it is common ground that whether there was any such collateral contractual undertaking, and if so its meaning and effect, is governed by Mongolian law;

(11) UBR asserts, but Standard Bank denies, that questions as to the existence, meaning and effect of the alleged undertaking fall within the clause in the supply contract conferring exclusive jurisdiction on the Mongolian court;

(12) Standard Bank considers that Mongolia is neither a natural nor an appropriate forum, among other reasons because of concerns about court proceedings in Mongolia;

(13) the claims advanced by Standard Bank against the seventh defendant are similar to those against UBR;

(14) Standard Bank assert that on 19 July 2013 they validly served the seventh defendant at its place of business in London, but the validity of such service is disputed by the seventh defendant, and Standard Bank do not rely on it for present purposes;

(15) the ninth defendant, who at all material times controlled the first to sixth defendants, has been served with the claim out of the jurisdiction, has not disputed jurisdiction, and has not disputed liability: on the contrary, prior to service of the claim form he admitted responsibility for defrauding Standard Bank;

(16) the ninth defendant has made no assertion that UBR was party to the fraud, and Standard Bank’s particulars of claim make no such assertion.

[7]I discuss the background and Standard Bank’s claims in more detail in section B below. It is common ground that the order sought by UBR must be granted unless Standard Bank can surmount each of three hurdles. Standard Bank must show, in broad terms, that:(1) their claim gives rise to a serious issue to be tried on the merits as between Standard Bank and UBR; and

(2) their claim falls within one of the gateways for the purposes of CPR 6.36 enabling the court to grant permission to serve out of the jurisdiction; and

(3) England and Wales is the proper place to bring the claim.

[8]I discuss these hurdles in sections C to E respectively. For the reasons given in those sections, I hold that:(1) on the material before me, Standard Bank’s claim against UBR is sufficiently strong to give rise to a serious issue to be tried on the merits;

(2) Standard Bank has not shown that its claim against UBR falls within a relevant gateway for the purposes of CPR 6.36;

(3) the consequence of my finding at (2) above is that UBR’s application succeeds and service on it must be set aside;

(4) I would in any event have held that England and Wales is not the proper place in which to bring the claim, and that UBR’s application succeeded for that reason.

[9]My overall conclusions are set out in section F, where I also deal with a contention by UBR that Standard Bank failed to make full and frank disclosure when seeking permission to serve out. B. Background and Standard Bank’s claims

B1. Background and Standard Bank’s claims: general

[10]In this section I begin by saying more about the parties to the proceedings. I then deal with events before Standard Bank came on the scene in 2007, after which I examine the documentary evidence about what took place when Standard Bank first became involved and how matters developed.

B2. Background: the parties

[11]The parties to the proceedings comprise Standard Bank as claimants and a total of nine defendants. I have dealt in section A above with Standard Bank and with UBR, which is the eighth defendant. In the present section I deal with the remaining defendants.

[12]The first defendant (“Just”) is a Mongolian company with interests across a range of sectors in Mongolia. For present purposes its relevant activities included the sale to Mongolian companies of petroleum products which it bought from countries outside Mongolia.

[13]I shall refer to the second, third, fourth, fifth and sixth defendants as “Just Oil”, “Erdtana”, “Mercantile LLC”, “Just Argo” and “Mercantile Ltd” respectively. Each is an associated company of Just. For reasons which will become apparent, it is convenient to refer to them collectively as “the 2012 guarantors”.

[14]The seventh defendant (“EMC”) is a Mongolian company jointly owned by the Mongolian and Russian governments. Its primary business is copper mining and export. At all material times it was a major customer of UBR.

[15]I shall refer to the ninth defendant as “Mr Batkhuu”. At material times he controlled Just and the 2012 guarantors. B3. Background: events before 2007 B 3.1 Events before 2007: general

B3. Background: events before 2007

[16]Prior to any involvement on the part of Standard Bank UBR had in place two separate, but linked, “rolling” arrangements for the supply of fuel for its trains and for the payment of freight by EMC. Both of these arrangements had their origin in written contracts made in 2006 in relation to 20,000 tons of fuel supplied in railway shipments over the spring and summer of that year. The arrangements were “rolling” in the sense that the written contracts contemplated that during their term more detailed arrangements would be made on a monthly basis, and in the sense that the original written contracts were treated as continuing in force after the 20,000 tons had been delivered.

[17]The first of these written contracts is described in detail in sections B3.2 and B3.3 below. It was a contract between UBR and Just for the supply of fuel for UBR’s railway operations. It provided for supplementary agreements to be made each month dealing with details of deliveries to be made that month.

[18]The second of these written contracts is described in detail in section B3.4 below. It was a tripartite contract between UBR, EMC and Just. It concerned freight services which UBR provided to EMC in support of EMC’s mining operations. The agreement was tripartite so as to enable UBR to give monthly instructions EMC to pay freight direct to Just, thereby satisfying some or all of what would otherwise be UBR’s current or future payment obligations to Just for fuel.

B3.2 The UBR supply contract

[19]On 14 March 2006 a written agreement (“the March 2006 UBR Just agreement”) was entered into in Ulaanbaatar between UBR as buyer and Just as supplier. It concerned the sale and purchase of 20,000 tons of “Summer” diesel products. This volume was to be delivered in quantities which were to be notified and agreed on a monthly basis. The 20,000 tons was duly supplied in the spring and summer of 2006. From (at the latest) autumn 2006 until April 2013 the parties treated the March 2006 UBR Just agreement, along with monthly supplementary agreements, as a rolling contract enabling a regular supply of fuel for UBR’s railway operations in Mongolia. At the hearing before me the parties used the expression “the UBR supply contract” to include the March 2006 UBR Just agreement. For ease of reference, however, in this judgment I shall use “the March 2006 UBR Just agreement” to refer to the original written agreement made in March 2006. References in this judgment to “the UBR supply contract” are to the rolling contract in place after delivery of the 20,000 tons contemplated by the March 2006 UBR Just agreement. References in this judgment to the UBR supply contract at any particular time are to that contract as it then existed in the light of the most recent monthly supplementary agreement.

[20]The March 2006 UBR Just agreement was written in Russian. It contained a Mongolian choice of law clause (clause 11.3). By clause 11.1 all disputes arising between the parties in the course of fulfilment of the March 2006 UBR Just agreement were, if no solution could be reached by negotiation, to be “reviewed by the district court where the defendant established his business activities.” It is common ground that, under Mongolian law, this:(1) forms part of the UBR supply contract; and

(2) constitutes an agreement that the applicable district court in Ulaanbaatar (which is where UBR’s business activities are established) has exclusive jurisdiction to determine all disputed claims against UBR arising in the course of fulfilment of the UBR supply contract.

[21]Under clause 2.1 Just was required to deliver the fuel (loaded on railway tanks) to UBR at Naushki railway station, on the Eastern Siberian railway, at the border point between Russia and Mongolia. Under clause 4 an initial payment for the first shipment of fuel was to be made in advance, and payment for subsequent shipments was to be within 14 calendar days of delivery.

B3.3 The supplementary agreements

[22]Clause 3.2 of the March 2006 UBR Just agreement required UBR, not later than the tenth day of each month in which delivery of product was expected, to send to Just a notice (“the buyer’s notice”) including “confirmation of the volume of products to be shipped, the delivery period and other information…”. By clause 3.3, not later than two working days from acceptance by Just of the buyer’s notice, the parties were to agree “in the form of additional agreements” the delivery schedule for the month with the volume of products to be delivered, cost of product and delivery timing. In this regard “Supplementary Agreement no.1” was attached to the March 2006 UBR Just agreement. It set out the quantity, specification, and total cost of goods to be supplied during the month of April 2006.

[23]Later supplementary agreements on occasion departed from the terms of the March 2006 UBR Just agreement in various respects. Among other departures there were changes to the terms of payment.

B3.4 The freight agreement

[24]On 12 May 2006 in Ulaanbaatar an agreement written in Russian was entered into between UBR, EMC and Just. I shall refer to it as “the May 2006 tripartite agreement”. Recitals to the May 2006 tripartite agreement recorded two intentions of the parties. The first was to optimise the performance of obligations under the March 2006 UBR Just agreement. The second was “to properly execute the obligations of [UBR] to provide rail transport services for goods of [EMC]”.

[25]By clause 1 of the May 2006 tripartite agreement UBR authorised EMC to make payments in favour of Just as payment for fuel supplied by Just to UBR under the UBR supply contract. Clauses 2 to 8 of the May 2006 tripartite agreement set out arrangements for this purpose:(1) Under clauses 2 to 5 towards the end of each month (referred to as “the current month”) UBR, after receipt from EMC of plans for the coming month (which I shall refer to as “the subject month”), would compute the freight charges and specify an amount (which I shall refer to as “the specified EMC/Just payment amount”) to be paid by EMC to Just. A notice from EMC of the completed payment and confirmation of receipt by Just would “be considered as the basis for the provision by [UBR] of freight services to [EMC]” during the subject month.

(2) By clause 6 Just agreed to accept payments made by EMC as payment of UBR’s obligations for fuel supplied by Just to UBR in accordance with the March 2006 UBR Just agreement. In the event that funds transferred by EMC were insufficient to pay amounts owing by UBR to Just for fuel supplied in the current month, Just was to send UBR a notice for payment of the remaining part of the debt. Payment of the outstanding balance was then to be made by UBR under the March 2006 UBR Just agreement.

(3) By clause 7 the parties agreed to reconcile settlements under the May 2006 tripartite agreement at least once a month.

(4) Clause 8 provided for each of EMC and Just respectively to pay commission charged by its bank and that bank’s correspondent banks.

[26]Clause 9 of the May 2006 tripartite agreement dealt with jurisdiction, and was in similar terms to clause 11.1 of the March 2006 UBR Just agreement. Clause 11 of the May 2006 tripartite agreement provided that “issues” not regulated by the May 2006 tripartite agreement were to be governed by the applicable laws of Mongolia.

[27]For the purposes of this judgment I proceed on the footing that from autumn 2006 until April 2013 the May 2006 tripartite agreement was treated as a rolling agreement applicable to the then current version of the UBR supply contract. At the hearing before me the parties used the expression “the freight agreement” to include the May 2006 tripartite agreement. For ease of reference, however, in this judgment I shall use “the May 2006 tripartite agreement” to refer to the original written agreement made in May 2006. References in this judgment to “the freight agreement” are to the rolling tripartite contract in place after delivery of the 20,000 tons contemplated by both the May 2006 tripartite agreement and the March 2006 UBR Just agreement. References in this judgment to the freight agreement at any particular time are to that tripartite contract as it then existed in the light of the most recent specified EMC/Just payment amount and the most recent monthly reconciliation.

B4. An overview of Standard Bank Group’s involvement

[28]From early 2007 until mid 2013 companies in the Standard Bank Group provided revolving trade finance facilities to Just. By mid 2013 there were three agreements which were in current use (“the Just Facilities”), to the value of $34m, $60m and $75m respectively. The present case concerns the Just Facility for $60m. It took the form of a series of agreements under which individual facilities were made available. These have throughout the period included both a letter of credit issuance facility (“Facility A”) in order to finance purchases from “approved suppliers” and an import loan facility (“Facility B”) in order to finance sales to “approved buyers”. The present case is mainly concerned with Facility B.

[29]Evidence on behalf of Standard Bank stressed the importance to Standard Bank Group of being satisfied that approved buyers would meet their payment obligations as they fell due, and that the money paid would be used to repay amounts advanced to Just. Below I summarise some of the documents that came into existence for this purpose. The written evidence also made reference to meetings at which representatives of both Standard Bank Group and UBR were present. Aspects of that evidence were disputed. I shall deal with them to the extent necessary in later sections of this judgment. B5. Initial involvement of Standard Bank Group B5.1 The 2007 facilities agreement and the February 2007 assignment

B5. Initial involvement of Standard Bank Group

[30]On 6 February 2007 a written agreement was entered into for a total credit line of $10m. It was written in English. The parties were Just and Just Oil as “co-borrowers”, companies associated with Just (each acting in the capacity of an “Original Guarantor”), and Standard Bank Asia Limited (“Standard Asia”). Standard Asia was described as acting in various capacities, including that of “Original Lender”, “Agent” and “Security Trustee”. I shall refer to this agreement as “the 2007 facilities agreement”. It was modified from time to time. I shall generally use the terms “facilities agreement” and “facilities agreements” to refer to the 2007 facilities agreement as modified at the relevant time or times.

[31]Before Just could make use of the 2007 facilities agreement it was required, among other things, to ensure that transaction security documents were executed. One such document was an assignment of the benefit of the UBR supply contract to Standard Asia. This was achieved by signature, also on 6 February 2007, of what was described as a “Pledge and Assignment Agreement”. I shall refer to it as the “February 2007 assignment agreement”. It too was modified from time to time. I shall generally use the terms “assignment agreement” and “assignment agreements” to refer to the February 2007 assignment agreement as modified at the relevant time or times.

B5.2 The February 2007 Just UBR notice

[32]Just was required to give notice to UBR of the February 2007 assignment agreement. Under the UBR supply contract payments by UBR to Just were made by bank transfer to Just’s account with Zoos Bank in Ulaanbaatar. The notice of assignment was to explain that, in consequence of the assignment, specified payment arrangements (“the 2007 assignee payment arrangements”) would apply. Under the 2007 assignee payment arrangements transfers were to be made to a US dollar account (“the Standard Asia nostro account”) held with Citibank N.A. in New York in the name of Standard Asia (described as “Beneficiary Bank”), accompanied by a statement that the payment was “IN FAVOUR OF JUST LLC ACCOUNT NO. 132075 AND/OR JUST OIL LLC ACCOUNT NO. 132076”. These latter accounts were held with Standard Asia in Hong Kong. I shall refer to them as “the Hong Kong collection accounts”.

[33]It is common ground that notice of the assignment was given by Just to UBR on 9 February 2007. I shall refer to it as “the February 2007 Just UBR notice”. The material prepared for the hearing did not include a copy of this document. Argument proceeded on the footing that it was duly provided in the form set out in Schedule 3 to the February 2007 assignment agreement. On this basis, the February 2007 Just UBR notice referred to the UBR supply contract as “the Supply Contract”, and was sent by Just on paper using its letterhead, with a copy to Standard Asia in its capacities as Agent and Security Trustee. On the same basis paragraphs 3, 4 and 6 of the notice included the following: 3 We hereby instruct you to pay all amounts due to us under the Supply Contract to: [details were set out of the 2007 assignee payment arrangements] … 4 Please note that, with effect from today and until the Agent has notified you in writing accordingly: (a) the Supply Contract and any addendum thereto may not be terminated, amended or varied except with the prior written consent of the Agent, PROVIDED THAT the Agent’s consent shall not be required for any amendment to the operational provisions of the Supply Contract so long as (i) there is no change in the scope of work, payment dates or completion dates, and (ii) we notify the Agent of any such amendment promptly after it is agreed … 6 This letter shall be governed by and construed in accordance with Mongolian law. [details were set out of the 2007 assignee payment arrangements] … (a) the Supply Contract and any addendum thereto may not be terminated, amended or varied except with the prior written consent of the Agent, PROVIDED THAT the Agent’s consent shall not be required for any amendment to the operational provisions of the Supply Contract so long as (i) there is no change in the scope of work, payment dates or completion dates, and (ii) we notify the Agent of any such amendment promptly after it is agreed

[34]From time to time further notices of assignment were given by Just to UBR, in each case setting out assignee payment arrangements. I shall generally use the terms “Just UBR notice” and “assignee payment arrangements” to refer to those which were current at relevant times.

[35]Just was also required by the February 2007 assignment agreement to procure the signature by UBR of what was described as a “Buyer Acknowledgment”, this being one of the transaction security documents (see section B5.1 above). A request in that regard was accordingly included in the February 2007 Just UBR notice.

B5.3 The February 2007 UBR acknowledgement

[36]It seems that there was no immediate response from UBR to the February 2007 Just UBR notice. On 14 February 2007 Mr Batkhuu on behalf of Just wrote to Mr Otgondemberel on behalf of UBR as follows: We request you to assist us by responding to our letter … sent to your organization on February 09, 2007. Your organization will not incur any financial risks or any additional obligations when you send a response to our letter. It is just a matter of transferring payment for the diesel fuel supplied by our company to your organization to City bank and not Zoos bank and complying with the request to notify the bank in a timely manner if any amendments are made to the contract.

[37]Two days later, on 16 February 2007, a letter was written to Standard Bank Asia Limited on the letterhead of UBR. It was written in Mongolian and was signed on behalf of UBR by Mr Otgondemberel. I shall refer to this letter as “the February 2007 UBR acknowledgement”. Further acknowledgements were given by UBR in response to later Just UBR notices. I shall generally use the term “UBR acknowledgement” to refer to such acknowledgement as was current at relevant times.

[38]The first paragraph of the February 2007 UBR acknowledgement acknowledged receipt of the February 2007 Just UBR notice. It adopted defined terms in that notice. Accordingly in the February 2007 UBR acknowledgement “Assignor” referred to Just, “Assignment” referred to the February 2007 assignment agreement, “Assigned Rights” referred to the benefit of the UBR supply contract as assigned by Just to Standard Asia, “Notice” referred to the February 2007 Just UBR notice, and “Supply Contract” referred to the UBR supply contract.

[39]The remainder of the February 2007 UBR acknowledgement contained substantial differences from the form set out in Schedule 3 to the February 2007 assignment agreement. It was in these terms: 2 Except as modified by paragraph 3(a) below, we consent to the terms of the Notice and the assignment for all purposes in relation to the Supply Contract and any addendum thereto. 3 We confirm that:(a) in respect of paragraph 4(a) of the Notice, we retain our right to terminate, amend or vary the Supply Contract and/or any addendum thereto without your prior written consent, but in the event we do so we shall notify you and in any event we shall remain obligated to make payment for all products delivered to us by the Assignor in accordance with the terms of the Notice and this Acknowledgment;

(b) we have not as at today’s date, received: (i) any other notice of any other assignment, charge or encumbrance in respect of the Assigned Rights; or (ii) any notice that any third party (other than you) has or will have any right or interest whatsoever in or has made or will be making any claim or demand or taking any action whatsoever in respect of the Assigned Rights, and we will notify you upon our receiving any such notice or otherwise becoming aware of such circumstances;

(c) we shall notify you of the exercise or purported exercise by the Assignor of any right that the Assignor may have to cancel, terminate, repudiate or surrender the Supply Contract and/or any addendum thereto, and the relevant issues shall only be agreed upon between us, you and the Assignor;

(d) we will unconditionally and irrevocably pay all proceeds payable by us under the Supply Contract and any addendum thereto to the following account established by the Security Trustee: [details were set out of the 2007 assignee payment arrangements] or to such other account or accounts as may from time to time be notified to us by you;

(e) we do not have, and will not make or exercise, any claims or demands, rights of counterclaim, lien, rights of set-off or any other equities against the Assignor of the Assigned Rights in relation to any payment by us to the Assignor under the Supply contract but without prejudice to our other rights under or in respect of the Supply Contract; and

(f) we have full authority to acknowledge the Notice and the Assignment in accordance with the terms of this letter. 4 This letter shall be governed by and construed in accordance with Mongolian law. (i) any other notice of any other assignment, charge or encumbrance in respect of the Assigned Rights; or (ii) any notice that any third party (other than you) has or will have any right or interest whatsoever in or has made or will be making any claim or demand or taking any action whatsoever in respect of the Assigned Rights, and we will notify you upon our receiving any such notice or otherwise becoming aware of such circumstances; [details were set out of the 2007 assignee payment arrangements] or to such other account or accounts as may from time to time be notified to us by you; with Mongolian law.

B6. February 2007 to August 2009

[40]During the period to the end of August 2009 five amendments were made to the 2007 facility agreement. None is said to be material for present purposes. Also during this period the February 2007 assignment agreement was superseded by a “Further Pledge and Assignment Agreement” executed on 22 August 2007 (“the August 2007 assignment agreement”). (It was subsequently amended on 7 August 2008, but nothing turns on this for present purposes.) The August 2007 assignment agreement took account of a restructuring under which Just changed its name from “Just LLC” to “Just Group LLC”. Contemporaneously with the August 2007 assignment agreement, by letter dated 22 August 2007 (“the August 2007 Just UBR notice”) Just gave UBR notice of the August 2007 assignment agreement. This in turn led to a letter from UBR (“the August 2007 UBR acknowledgment”) dated 23 August 2007 addressed to Standard Asia and signed by Mr Otgondemberel. Both letters took account of Just’s change of name, and each referred to the August 2007 assignment agreement rather than the February 2007 assignment agreement. With these exceptions, the terms of the August 2007 Just UBR notice and the August 2007 UBR acknowledgment do not appear to have differed in any material respect from those of the February 2007 Just UBR notice and February 2007 UBR acknowledgment respectively.

[41]A table of balances has been prepared which purports to give figures for (among other things) the value of diesel ordered and received by UBR each month, amounts paid by EMC on behalf of UBR under the freight agreement, and amounts paid by UBR along with details of the recipient bank account. For present purposes I treat what is said in the table as accurate. I stress that I do this for present purposes only. For this and other reasons the account given below must not be regarded as definitive.

[42]The table lists amounts of payments which were made by EMC on UBR’s behalf under the freight agreement, but does not identify the account or accounts to which those payments were made. As to those occasions on which Just is alleged to have accepted debt instruments in lieu of payment, the table lists for each addendum the amount of relevant debt instruments, along with the dates and amounts of payments made under those instruments, but does not identify the account or accounts to which those payments were made. As to the remaining sums payable, the table suggests that during the period April 2007 to August 2009 inclusive all relevant payments made by UBR itself were, with two exceptions, made to the Standard Asia nostro account. The two exceptions were:(1) in relation to order 35 for September 2007, a payment of $237,275.44 made by UBR on 13 September 2007 to an account with Zoos Bank;

(2) in relation to order 65 for July 2009, a payment of $2,333,070.16 made by UBR on 3 July 2009 to an account described as “Golomt”.

B7. The EMC supply contract

[43]A contract dated 27 September 2009 was made between Just and EMC under which Just agreed to supply certain diesel products to EMC (“the EMC Supply Contract”). By clause 4 payment was to be made by transfer to Just’s correspondent bank account, based upon invoices provided by Just. B8. September to November 2009 B8.1 September and October 2009

B8. September to November 2009

[44]In September and October 2009 all relevant payments by UBR are shown on the table of balances as having been made to the Standard Asia nostro account. A sixth amendment to the 2007 facilities agreement was made on 2 October 2009. It is not suggested that this has any relevance for present purposes.

B8.2 The 2009 facilities agreement and 2009 assignment agreement

[45]Standard Plc first became involved, and Standard Asia ceased to be involved, under changes to the agreements on 2 November 2009. By an “Amendment and Restatement Agreement” of that date the 2007 facilities agreement became an agreement for a $25 million revolving trade finance facility between Just (as Borrower), Mercantile LLC and Just Agro (as Additional Guarantors) and Standard Plc (as Lead Arranger, Original Lender, New Agent, New Security Trustee and Issuing Bank). I shall refer to this agreement as “the 2009 facilities agreement”.

[46]At the same time the August 2007 assignment agreement was altered by an “Amendment and Restatement Agreement”, entered into between Just (as Borrower) and Standard Plc (as Security Trustee). I shall refer to it in its altered form as “the 2009 assignment agreement”.

B8.3 The 2009 Just UBR notice and the 2009 UBR acknowledgment

[47]In relation to the UBR supply contract, Just was again required to give notice of assignment to UBR and to procure a signature by UBR of a “Buyer’s Acknowledgment”. In this regard notice of assignment (“the 2009 Just UBR notice”) was contained in a letter sent by Just to UBR dated 2 November 2009. UBR duly signed a letter dated 6 November 2009 (“the 2009 UBR acknowledgment”) addressed to Standard Plc.

B8.4 Payments in November 2009 to the Standard Plc nostro account

[48]In the documents dated 2 November 2009, and in the 2009 UBR acknowledgement, provision was no longer made for payment to the Standard Asia nostro account. In its place, replacement payment arrangements (“the 2009 assignee payment arrangements”) were set out. They provided for transfers to be made to a US dollar account (“the Standard Plc nostro account”) held in the United States of America with HSBC Bank USA N.A. in the name of Standard Plc (described as “Beneficiary Bank”). When such transfers were made, they were to be accompanied by a statement that the payment was “IN FAVOR OF JUST GROUP LLC ACCOUNT NO. 100130677”. This latter account was held with Standard Plc in London in the name of Just Group LLC. I shall refer to it as “the London collection account”.

[49]In accordance with these documents relevant payments made by UBR in November 2009 were made to the Standard Plc nostro account. B9. December 2009 to January 2011 B9.1 Payments, and an amendment to the 2009 facilities agreement

B9. December 2009 to January 2011

[50]During the period December 2009 to January 2011 inclusive all relevant payments by UBR were made to the Standard Plc nostro account. On 4 November 2010 relevant parties executed a written document concerning the facilities, described as a “Seventh Amendment”. Using my terminology, this was the first amendment to the 2009 facilities agreement.

B9.2 The 2010 assignment agreement

[51]The 2009 assignment agreement was altered by a “Second Amendment and Restatement Agreement” executed on 2 December 2010. I shall refer to it in its altered form as the “the 2010 assignment agreement”.

B9.3 The 2010 Just UBR notice and the 2010 UBR acknowledgment

[52]Just was required to give notice of the 2010 assignment agreement. There is no copy of it in the material provided to the court, but it seems clear that such a notice was indeed given. I shall refer to it as “the 2010 Just UBR notice”.

[53]Just was also required to procure a “Buyer’s Acknowledgment” from UBR in relation to the 2010 assignment agreement. This was duly achieved by the provision of a letter addressed to Standard Plc on the letterhead of UBR and dated 2 December 2010. On this occasion the letter was signed by Mr T Ochirkhuu, at that time a director of UBR. I shall refer to it as “the 2010 UBR acknowledgment”.

[54]Each of the 2010 Just UBR notice and the 2010 UBR acknowledgment referred to the 2010 assignment agreement rather than the 2009 assignment agreement. It was not suggested that they differed in any other material respect from the 2009 Just UBR notice and the 2009 UBR acknowledgment. B10. February 2011 to December 2011 B10.1 The 2011 facilities agreement and the 2011 assignment agreement

B10. February 2011 to December 2011

[55]The 2009 facilities agreement was further altered by an “amended and restated” agreement executed on 2 February 2011. I shall refer to it in its altered form as “the 2011 facilities agreement”.

[56]At the same time a “Third Amendment and Restatement Agreement” was entered into between Just (as Borrower) and Standard Plc (as Security Trustee). This agreement altered the 2010 assignment agreement. I shall refer to it in its altered form as “the 2011 assignment agreement”.

B10.2 The 2011 Just UBR notice and the 2011 UBR acknowledgment

[57]In accordance with requirements in the 2011 facilities agreement and the 2011 assignment agreement, Just gave UBR a further notice of assignment in relation to the UBR supply contract. I shall refer to this notice of assignment as “the 2011 Just UBR notice”. It was contained in a letter sent by Just to UBR dated 2 February 2011. Mr Ochirkhuu, by this time “General Director” of UBR, duly signed a letter on UBR note paper dated 2 February 2011 (“the 2011 UBR acknowledgment”). It referred to the 2011 assignment agreement and was addressed to Standard Plc. Both documents provided for payment of sums due by UBR under the UBR supply contract to be made in accordance with the 2009 assignee payment arrangements. In all other respects they were materially identical to the February 2007 Just UBR notice and the February 2007 UBR acknowledgment.

B10.3 Amendments to the 2011 facilities agreement

[58]Documents concerning the facilities and described as an “Eighth Amendment” and a “Ninth Amendment” were executed on 1 September 2011 and 2 December 2011 respectively. Using my terminology, they comprised a first and second set of amendments to the 2011 facilities agreement.

B10.4 Payments and the August 2011 debt instrument

[59]During the period February 2011 to July 2011 inclusive the table of balances indicates that all relevant payments by UBR were made to the Standard Plc nostro account. According to the table of balances at the end of July 2011 the amount owed by UBR under the UBR supply contract was $9,274,103.49.

[60]In August 2011 deliveries of fuel made pursuant to orders 94 and 95 had a total value of $8,999,416.99. The resulting total indebtedness of $18,273,520.48 was reduced by payments totalling $5,770,679.40 to the Standard Plc nostro account on 4 and 17 August 2011, a payment of $1,420,462 by EMC under the freight agreement, and a further payment of $39,367.59, for which no date or destination was given in the table of balances.

[61]As regards August 2011, the table of balances proceeds on the footing that there is then a reduction in the balance owing by UBR amounting to a further $8 million. This was said at the hearing to have been the result of what I shall call “the August 2011 debt instrument”. The amount of $8 million is shown in the table in a column headed “Received IOU”. The amount of $8 million is then also shown in two further columns as having been paid in a series of instalments during the period June to December 2012.

[62]On this footing the table of balances arrives at a sum of $3,009,186.07 owing by UBR at the end of August 2011. All other payments by UBR during the period to the end of December 2011 are shown as having been made to the Standard Plc nostro account. According to the table of balances at the end of December 2011, when account is taken of sums paid by EMC under the freight agreement, UBR had overpaid in an amount of $3,152,806.35. B11. January to March 2012 B11.1 The 2012 facilities agreement

B11. January to March 2012

[63]An “Amendment and Restatement Agreement” dated 16 January 2012 provided for the 2011 facilities agreement to be amended and restated so as to increase the credit line under the revolving trade finance facility from $25 million to $60 million. I shall refer to it as thus amended and restated as “the 2012 facilities agreement”. The “Transaction Security Documents” for the purposes of the 2012 facilities agreement were defined so as to include the 2011 assignment agreement and “each Buyer Acknowledgment”.

[64]The parties to the 2012 facilities agreement were described as comprising Just (as Borrower), Just Oil, Erdtana, Mercantile LLC, and Just Agro (as “Original Guarantors”), Mercantile Limited (as Additional Guarantor) and Standard Plc (as Lead Arranger, Original Lender, Agent, Security Trustee, and Issuing Bank).

B11.2 The 2012 Just UBR notice and 2012 UBR acknowledgment

[65]Although the term “Buyer Acknowledgment” was defined in the 2012 facilities agreement in a way which would include the 2011 UBR acknowledgment, it seems to have been thought necessary to have a new one. For this purpose, Just wrote a letter dated 16 January 2012 to UBR. I shall refer to this letter as “the Just UBR 2012 notice”. As appears to have been the case with previous notices, it made no express reference to any of the facilities agreements. The only agreement between Just and Standard Bank to which express reference was made was the 2011 assignment agreement. Paragraph 1 of the letter gave notice of that assignment. It appears that in that respect, and in all other respects, it was in precisely the same terms as the 2011 Just UBR notice.

[66]In response a letter was written by Mr Ochirkhuu on UBR headed paper dated 17 January 2012 and signed by Mr Ochirkhuu, again in his capacity as “General Director” of UBR. I shall refer to this letter as “the 2012 UBR acknowledgment”. Whereas the 2011 UBR acknowledgment had been addressed to Standard Plc, at an address which was “C/o” Standard Asia at a location in Hong Kong, the 2012 UBR acknowledgment did not identify an addressee. It set out a destination address which was “C/o Standard Bank Plc, Hong Kong Branch” at the same location as had previously been given for Standard Asia. It is not in dispute that the intended addressee was Standard Plc. In paragraph 1 the 2012 UBR acknowledgment referred to what it described as “the Notice” as having been dated 16 January 2012. In all other respects it was identical to the 2011 UBR acknowledgment.

B11.3 Payments and deferred payments, January to March 2012

[67]A letter dated 3 January 2012 was sent by Mr Batkhuu of Just to Mr Ochirkhuu of UBR. It concerned order 101 for the month of December 2011, invoicing UBR for diesel that had been ordered to the value of $9,172,966.40. The letter recorded that on 13 December 2011 Just had created a “line of credit” so that payment was not to be made until 2 March 2012. A subsequent letter dated 17 January 2012 stated that the current balance was $8,974,735.44, and requested that payment be made to Standard Plc by 2 March 2012.

[68]Similar letters were written in subsequent months concerning order 102 for the month of January 2012 (an invoiced amount of $7,747,584.00 and a current balance on 27 February 2012 of $7,606,310.03, to be paid to Standard Plc by 30 March 2012), for the month of February 2012 (an invoiced amount of $7,992,722.40 and a current balance on 15 March 2012 of $8,015,805.35, to be paid to Standard Plc by 27 April 2012), and for the month of March 2012 (an invoiced amount of $9,180,223.00, and a current balance on 16 April 2012 of $9,226,023.73, to be paid to Standard Plc by 31 May 2012).

[69]The table of balances records that all relevant payments made by UBR during the period January to March 2012 inclusive were made to the Standard Plc nostro account. B12 April 2012 onwards B12.1 More deferred payments

B12 April 2012 onwards

[70]The deferred payment arrangements described in section B11.3 above were repeated for the months of April to September 2012, November 2012 to January 2013, and March 2013. In each case payment for supplies during the month in question was deferred until a date towards the end of the second subsequent month.

B12.2 “Savings Bank” payments 1 to 3: April to June 2012

[71]The table of balances records a payment by UBR to the Standard Plc nostro account on 3 April 2012 in an amount of $2 million.

[72]A letter appears to have been written on 17 April 2012 by Mr Batkhuu on behalf of Just to Mr Ochirkhuu on behalf of UBR. It was headed, “Concerning payment execution”. The letter noted that Just’s supply of diesel had been financed by “Standard Bank’s loan requirements”. It stated that Just had been “requested to lower the loans” and had therefore made a temporary payment that day of $2 million. This payment was said to have been “completed for your interest”, and a request was made in that regard for payment by UBR to “our account at Khadgalamj Bank …”. The number in the account was then set out.

[73]The number of the account in question appears in the table of balances against the reference “Savings Bank”. It appears to be a reference to the account described in the letter of 17 April 2012. I shall refer to it as “the Savings Bank account”. “Savings Bank” is the English name given to Khadgalamj Bank, a Mongolian Bank which at relevant times was owned or controlled by Mr Batkhuu.

[74]A similar letter was written by Mr Batkhuu to Mr Ochirkhuu on 23 April 2012, referring to “an initial payment” that day by Just of $2.5 million. This was followed by a request that UBR transfer payment of $2.7 million to the Savings Bank account. It is not clear why the amount requested in this letter exceeds the amount of the “initial payment”.

[75]UBR appears to have made the payments to the Savings Bank account as requested by Just. What I shall refer to as “Savings Bank payment 1” appears on the table of balances as having been made on 18 April 2012 in an amount of $2 million. What I shall refer to as “Savings Bank payment 2” appears on the table of balances as having been made on 25 April 2012 in an amount of $2.7 million.

[76]A similar letter dated 25 June 2012 referred to payment, presumably that day, of an amount of $729,350.00 which UBR “was supposed to pay on June 26”. The letter requested transfer of that amount to the Savings Bank account. In this regard the table of balances shows what I shall call “Savings Bank payment 3” in the amount of $729,350.00 which is recorded as being made on 27 June 2012.

[77]In between Savings Bank payment 2 on 25 April 2012 and Savings Bank payment 3 on 27 June 2012, the table of balances records payments by UBR to the Standard Plc nostro account of $7,504,125.30 on 16 May 2012, $2.5 million on 8 June 2012, and $4 million on 22 June 2012.

B12.3 Debt instrument repayment 1: 27 June 2012

[78]The section of the table of balances dealing with the $8 million August 2011 debt instrument records that a partial repayment of $2 million was made on 27 June 2012.

B12.4 Savings Bank payment 4: July 2012

[79]A letter dated 19 July 2012 from Just to UBR asserted that Just had paid $6,503,206.54 to Standard Bank which UBR “owed to pay for the month of July”. A request was made for transfer of that amount to the Savings Bank account.

[80]The request appears to have been partially complied with on 23 July 2012: what I shall call “Savings Bank payment 4” is recorded on that date in the table of balances in an amount of $2,503,206.54. This would have left $4 million outstanding.

B12.5 Savings Bank payments 5 and 6: August 2012

[81]What I shall call “Savings Bank payment 5” appears on the table of balances to have been made on 6 August 2012 in an amount of $4,002,169.91. This appears to have resulted in a payment of $2,169.91 more than had been requested on 19 July.

[82]A letter dated 28 August 2012 from Just to UBR stated that on 27 August Just had paid $2 million to Standard Bank which “should have been paid” by UBR. The letter requested transfer of this sum to the Savings Bank account.

[83]What I shall describe as “Savings Bank payment 6” is recorded on the table of balances as having been made on 28 August 2012 in an amount of $1,988,101.89. This appears to have been $11,898.11 less than requested. If allowance is made for the overpayment of $2,169.91, then the shortfall would be reduced to $9,728.20.

B12.6 Debt instrument repayment 2: 13 August 2012

[84]The section of the table of balances dealing with the $8 million August 2011 debt instrument records that a further partial repayment of $2 million was made on 13 August 2012.

B12.7 The period from September to December 2012

[85]During the period September to December 2012 five further payments were made to the Savings Bank account (“Savings Bank payments 7 to 11”). The section of the table of balances dealing with the $8 million August 2011 debt instrument records three further partial repayments (“debt instrument repayments 3, 4 and 5”) made during this period. Debt instrument repayment 5 on 28 December 2011 was in an amount of $1,600,000.00, and completed the repayment of the $8 million.

B12.8 Standard South Africa and the 2013 facilities agreement

[86]An “Amendment Agreement” was executed on 16 January 2013 by the parties to the 2012 facilities agreement and Standard South Africa. The effect was to alter the 2012 facilities agreement. I shall refer to the altered agreement as “the amended 2012 facilities agreement”. Among other changes, Standard South Africa became the “New Lender” in relation to the $60 million credit line, and took over from Standard Plc as Lead Arranger and as Issuing Bank. Standard Plc continued in its role as Agent and in its role as Security Trustee.

[87]Amendments to the terms of the 2012 facilities agreement included the insertion of a new clause 24.26: UBR Arrangements Each Obligor shall keep the Agent informed in all respects in relation to any financial arrangement(s) in favour of Ulaanbaatar Railways JSC that it is proposing to be involved with (each a UBR Arrangement). Prior to entering into any UBR Arrangement during the Security Period, the relevant Obligor shall obtain the prior written consent of all the Lenders.” UBR Arrangements

B12.9 The pattern continues: January 2013 onwards

[88]A further payment to the Savings Bank account of $232,279.94 was made on 28 January 2013 (“Savings Bank payment 12”). Also in January 2013 three new debt instruments (“debt instruments 2, 3 and 4”) appear on the table of balances. The table suggests that debt instrument 2, in an amount of $1 million was repaid by instalments in February and March 2013, that debt instrument 3 in an amount of $2.5 million was repaid by instalments in March and April 2013, and that debt instrument 4 in an amount of $2.5 million was repaid by instalments in July 2013.

[89]In February 2013 two further payments (“Saving Bank payments 13 and 14”) were made to the Savings Bank account. These were for sums of $270,000 and $1,885,098.13 respectively.

[90]Also in January 2013 the table of balances records a further debt instrument (“debt instrument 5”) in an amount of $4 million. The columns “paid IOU” in this regard do not give dates of payment but simply state “shall be paid on 30.11.2013”.

[91]The table of balances records payments of $4,398,000 and $617,505.82 (“Savings Bank payments 15 and 16”) in March 2013. Also in March 2013 it records a further debt instrument (“debt instrument 6”) in an amount of $2.5 million. The table indicates that this amount was paid in a single lump sum on 11 June 2013.

[92]The remaining payments by UBR to the Savings Bank account are shown on the table of balances as having been made in April 2013. Savings Bank payment 17, in an amount of $4.5 million is recorded as being made on 9 April 2013. Savings Bank payment 18 in an amount of $1,004,000 is recorded as having been made on 17 April 2013 as is Savings Bank payment 19 in an amount of $1,710,227.16. The final payment, Savings Bank payment 20 in the amount of $4,070,500 is recorded as having been made on 23 April 2013.

[93]In addition the table of balances records a further debt instrument issued in April 2013. I shall refer to it as “debt instrument 7”. It was in an amount of $4 million. The table of balances records that it was paid as to an amount of $2 million on 22 May 2013, and as to the balance of $2 million on 28 May 2013.

B13. Termination of the UBR supply contract

[94]UBR states that from October 2012 onwards UBR’s board wanted to change UBR’s fuel supply arrangements, so that instead of purchasing fuel through Just UBR would deal directly with a fuel producer. On 28 January 2013 the board authorized the making of a contract for the supply of fuel with Rosneft Mongolia. An agreement with Rosneft Mongolia was subsequently concluded.

[95]The last supplementary agreement under the UBR supply contract is said to have been dated 22 April 2013. The table of balances records this as order 108 for an amount of $4,070,500, pursuant to which fuel to the value of $4,180,707.81 was delivered.

B14. Default under the amended 2012 facilities agreement

[96]Standard Bank say that on 29 April 2013 a sum of US$2,071,800.00 was due to be repaid by Just. A payment of US$624,540.72 was received, leaving an outstanding sum of US$1,447,259.28. Standard Bank treated this as an event of default under the amended 2012 facilities agreement, and on that basis by notice dated 18 July 2013 it accelerated repayment. Standard Bank served notices of demand upon each of the 2012 Guarantors, but no payment has resulted. It is said by Standard Bank that as at 18 July 2013 sums drawn down for the purposes of the UBR supply contract and not repaid amounted in total to US$33,088,690.26. C. Serious issue to be tried

C1. Serious issue: overview and legal principles

[97]Permission to serve a claim form out of the jurisdiction under CPR 6.36 will be set aside if, as regards that claim, the claimant cannot show that there is a serious issue to be tried. It is common ground that this test is equivalent to the test when, in response to an application by a defendant for summary judgment under CPR 24, a claimant contends that there is a real prospect of succeeding on the claim in issue.

[98]Aspects of that test were set out by Lewison J in EasyAir Ltd v Opal Telecom Ltd

[2009] EWHC 339 (Ch)

at [15]. Those which are key for present purposes are the first four:(i) The court must consider whether the claimant has a “realistic” as opposed to a “fanciful” prospect of success: Swain v Hillman

[2001] 2 All ER 91

;

(ii) A “realistic” claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel

[2003] EWCA Civ 472

at [8];

(iii) In reaching its conclusion the court must not conduct a “mini-trial”: Swain v Hillman;

(iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]; …

[99]The claim that I must consider is that pleaded against UBR in the particulars of claim. Before examining it I mention some terminology. The particulars of claim referred to the 2012 UBR acknowledgement as the “UBR Undertaking”, to the 2012 Just UBR notice as the “Just/UBR Notice of Assignment”, to the London collection account as the “Collection Account”, to the Standard Plc nostro account as the “Clearing Account”, to Standard Plc in its capacity as agent or security trustee as the “Agent” or the “Security Trustee” respectively and to Just as the “Borrower”. They also referred to an acknowledgement by EMC similar to the 2012 UBR acknowledgement as the “EMC Undertaking”.

[100]The claim against UBR was set out in the particulars of claim in this way: 24. The UBR Undertaking, in so far as material, included the following provisions:(a) Consent by UBR to the assignment in the terms of the Just/UBR Notice of Assignment (Clauses 2 and 3(a)), including that the Just Group could not change the payment instructions without the consent of the Agent (Just/UBR Notice of Assignment clause 3);

(b) An undertaking by UBR to the Agent/Security Trustee as follows: “we will unconditionally and irrevocably pay all proceeds payable by us under the Supply Contract” into the Collection Account via the Clearing Account “or to such other account or accounts as may from time to time be notified to us by you”, i.e. by the Agent (Clause 3(d));

(c) UBR's disavowal inter alia of any right of counterclaim or set off “in relation to any payment by us to [Just Group] under the Supply Contract” (Clause 3(e));

(d) An undertaking by UBR to the Agent/Security Trustee that it had “full authority to acknowledge the Notice and the Assignment [as defined in Clause 1] in accordance with the terms of this letter” (Clause 3(f)); and

(e) Mongolian governing law (Clause 4). … 25. As a matter of Mongolian law: (a) Both the EMC Undertaking and the UBR Undertaking constituted valid and enforceable self-standing contractual relations between the Agent/Security Trustee and EMC, on the one hand, and between the Agent/Security Trustee and UBR, on the other hand, pursuant to which EMC and UBR, respectively, undertook “unconditionally and irrevocably” to pay all sums due into the nominated bank account of the Agent/Security Trustee as aforesaid; (b) Any failure to pay such sums to the Agent/Security Trustee was and/or would be a breach of contract and/or give rise to indebtedness on the part of each of EMC and UBR in the amount of such failure; and (c) It would afford no defence for EMC or UBR (as the case may be) to show that it had (mistakenly or otherwise) paid any such sum to the Borrower or any other entity instead of paying such sum into the nominated bank account of the Agent as aforesaid: See Clause 3(e). … 48. Pursuant to the UBR Undertaking, as of 18 July 2013, receivables were owing from UBR to the Agent/Security Trustee in the amount of US$33,088,690.26. The amount of receivables due from UBR to the Agent/Security Trustee continues to increase, as set out in Schedule 7 attached hereto. 49. Wrongly and in breach of Clause 3(d) of the UBR Undertaking, UBR has failed to pay to the Agent/Security Trustee the said sum or any part of it. 50. By reason of the aforesaid breach or breaches by UBR, the Claimants have suffered loss and damage as aforesaid and are entitled to compensation in accordance with Mongolian law.

[101]The relief sought against UBR is set out under head (D) at the end of the particulars of claim. It includes: (D1) A declaration as to the validity and enforceability of the UBR Undertaking (D2) An order for payment and/or damages …

[102]Neither the claim form nor the particulars of claim refer to any assignment earlier than the 2011 assignment agreement. Similarly no mention is made of any UBR acknowledgements earlier than the 2012 UBR acknowledgement. In oral argument Standard Bank alleged that there had been breaches of earlier UBR acknowledgments, in the form of failures to pay receivables into the relevant nostro account. These breaches were said to have resulted from continuation from February 2007 onwards of the arrangements under the freight agreement, and from the substitution of the August 2011 debt instrument for payments which were then due. The discussion below reflects the way in which these matters were put in oral argument. It should not be inferred from this that I have formed any view as to whether the claim form or particulars of claim may need amending in relation to complaints about events prior to the 2012 UBR acknowledgement, nor that I have formed any view about whether permission to make such amendments would be granted.

[103]The crucial allegation that UBR has broken a legal obligation owed to Standard Bank is found in paragraph 49 of the particulars of claim. The obligation said to have been broken is an obligation to comply with what is described as “clause 3(d)” of the 2012 UBR acknowledgement. As to that, UBR’s response can be summarised in broad terms as involving two stages. The first stage notes that Standard Bank do not sue as assignee, and asserts that their motive for not doing so is to try to find a way of escaping from the Mongolian exclusive jurisdiction clause in the UBR supply contract. In this regard:(1) UBR accepts that if a claim were made against it by Standard Bank as assignee of Just under the UBR supply contract then a serious issue would arise as to whether UBR acted wrongfully by failing to pay the receivables in question to the bank. This issue would be governed by Mongolian law as stipulated in clause 11.3 of the UBR supply contract.

(2) UBR asserts that if the claim were made on that basis it would not be allowed to proceed here, for any such claim is undoubtedly subject to the provision in clause 11.1 of the UBR supply contract for exclusive Mongolian jurisdiction.

[104]The second stage of UBR’s response proceeds broadly as follows:(1) Standard Bank have made a choice to assert that the 2012 UBR acknowledgment constitutes a collateral contract.

(2) They have made this choice because, while accepting that the acknowledgement (by virtue of paragraph 4 of the acknowledgment) is governed by Mongolian law, they assert that the lack of any express provision in the acknowledgement as to jurisdiction frees them from the exclusive Mongolian jurisdiction clause in the UBR supply contract.

(3) Standard Bank would need at trial to show that under Mongolian law there is indeed a collateral contract, but the asserted collateral contract is artificially contrived and gives rise to no serious issue to be tried.

(4) Thus the present claim against UBR is a blatant device in an attempt to avoid the Mongolian exclusive jurisdiction clause, and the court should have no truck with it.

[105]The result is that UBR’s application involves evidence of Mongolian law on two different questions. The second of these is that if there is indeed a collateral contract then a consequential question of Mongolian law arises as to whether that contract frees Standard Bank from the exclusive Mongolian jurisdiction clause in the UBR supply contract. I deal with that consequential question in section E of this judgment. The first question is the question that I must consider in the present section of this judgment. It is whether the bank has a real prospect of showing, applying relevant principles of Mongolian law, that the 2012 UBR acknowledgment constituted a collateral contract between UBR and Standard Bank. For this purpose I turn to make some general observations about the expert evidence of Mongolian law.

C2. The expert evidence of Mongolian law

[106]In support of UBR’s application it relied upon a first witness statement of Ms Bataa Temuulen dated 27 September 2013 (“Temuulen 1”). Ms Temuulen is a professor and Doctor of Law, and holds the posts of Vice Dean of the National University of Mongolia, School of Law and Head of the Civil Law Department.

[107]The questions Ms Temuulen was asked to address included a question 2A as follows: 2A. Was the effect of paragraph 3(d) of the Acknowledgement to create self-standing contractual relations between [Standard Bank] and UBR? Please consider Article 43.2.2 of the Mongolian Civil Code.

[108]Ms Temuulen’s answer was in paragraph 8 of Temuulen 1. I set it out with sentence numbers added in square brackets for convenience: [8.1] For the given case, right to demand payment under the Supply agreement was assigned without any contradiction with the nature of the obligation, so it did not require consent or acknowledgement of UBR. [8.2] Per current Mongolian law, it was enough to notify UBR of such assignment to effect it. [8.3] Also neither Just nor Standard Bank was obliged to disclose any information regarding the Assignment Agreement, or its terms and conditions for such assignment to be effected. [8.4] Therefore, the letter from UBR of acknowledgement was not needed and not important to the assignment and shall not be regarded as factual document affecting any decision to be made. [8.5] Moreover, it will not create any obligation nor contractual relation between any parties. [8.6] As long as it plays no role in effecting the assignment in question, it is wrong to interpret this letter in line with Clause 43.2.2 of the Civil Code of Mongolia (BT1, p.1). [8.7] If Acknowledgement should be assumed as an offer to conclude a transaction, then it should offer new terms and conditions, which is not included in the Supply contract and Civil code of Mongolia. [8.8] But the Acknowledgment did not contain any new condition. [8.9] This could be further proved by the terms and conditions of the Supply agreement and Article 186.2 of the Civil code of Mongolia.

[109]In answer the bank served a report by Mr Tsogt Natsagdorj (“Mr Tsogt”) dated 29 November 2013 (“Tsogt 1”). Mr Tsogt is a citizen and resident of Mongolia and a lawyer admitted to practise law in Mongolia. In addition to private practice, he has also practised law and worked as a lawyer for the National Development Board at a time when it was part of the Ministry of Finance, and from 1999-2001 he was a Specialist of the Foreign Relations Division of the Ministry of Justice.

[110]In preparing Tsogt 1 Mr Tsogt reviewed, among other things, what had been said in Temuulen 1. Contrary to the view taken by Ms Temuulen, paragraph 18 of Tsogt 1 stated that in the 2012 UBR acknowledgment UBR had made an official offer to enter into an agreement and create legal relations with Standard Bank, which offer Standard Bank subsequently accepted by receipt and retention of the repayments by UBR of the receivables into the designated account. In this regard Mr Tsogt noted that article 199.3 of the Civil Code provided that parties can agree a contract for payment of money (i.e. a debt) by the receiving party accepting that payment.

[111]Mr Tsogt agreed with Ms Temuulen that the assignment of the UBR Supply Contract by Just to Standard Bank was legally binding under Mongolian law. However he disagreed with her conclusion that this meant that the 2012 UBR acknowledgement was not needed and could not be regarded as a contractual offer. His primary reasoning in that regard is in paragraphs 33 to 36 of Tsogt 1. I set out those paragraphs, with sentences numbered in square brackets for convenience:33. [33.1] Where there are additional proposals and/or promises beyond those contained in the assigned contract, the [2012 UBR Acknowledgement] can only be seen as an intention to create separate contractual rights and obligations (and therefore a deemed offer as I describe above) with a new counterparty, i.e. Standard Bank. [33.2] Upon the acceptance of such offer by the recipient/offeree ([Standard Bank]) a separate legally binding agreement is created under Mongolian law.

34. [34.1] The intentions of UBR expressly declared in clauses 3(d), 3(e) and 4 of the [2012 UBR Acknowledgement] (which include additional promises from UBR to [Standard Bank]) go beyond the pre-existing terms set of the assigned UBR Supply Contract. [34.2] They do not form part of the assignment itself, as a matter of Mongolian law analysis, and should therefore be seen as an offer to enter into a separate legally binding agreement with [Standard Bank].

35. [35.1] By the [2012 UBR Acknowledgement], UBR offered to unconditionally and irrevocably pay all receivables directly to [Standard Bank] without any offset from any proceeds payable or claims made … . [35.2] In my view, the intention expressed in the [2012 UBR Acknowledgement] duly satisfies the requirements stipulated in Article 195.1-2 of the Civil Code namely that it be an actual and sufficiently definite expression of the intention of UBR addressed to [Standard Bank] with an intention to create legal relationship with [Standard Bank].

36. [36.1] The requests made by [Standard Bank] to UBR to pay the Receivables and the recognition by [Standard Bank] of all remittances by UBR under the [2012 UBR Acknowledgement] should be treated as acceptance of such an offer by concrete action. [36.2] In other words, it should be interpreted as an acceptance by [Standard Bank] of the offer made by UBR in the [2012 UBR Acknowledgement] by [Standard Bank]’s concrete action as it was permitted under article 43.3 of the Civil Code.

[112]After reviewing Tsogt 1 Ms Temuulen prepared two further reports dated 29 January 2014 (“Temuulen 2”) and 4 April 2014 (“Temuulen 3”). I refer to these further reports below to the extent necessary for present purposes.

[113]Ms Temuulen and Mr Tsogt are both eminent Mongolian lawyers. The material before me does not entitle me to conclude, at the present stage, that one has significantly greater expertise than the other. In accordance with regular practice on an application of this kind, I am asked to proceed by reference to what is in their written reports, and there has been no application to cross-examine. The view that I have formed is that, for reasons given in section C3 below, Mr Tsogt has shown that the claim against UBR in these proceedings gives rise to a serious issue to be tried as a matter of Mongolian law. By contrast, it will be seen in section E2 below that in my view Ms Temuulen has much the better of the argument that the present proceedings have been brought in breach of the Mongolian exclusive jurisdiction clause in the UBR supply contract. I have reached these views on the basis of my assessment of the strength of the relevant reasoning of each expert in the light of materials cited to support that reasoning.

C3. Analysis of UBR’s “serious issue” challenge

[114]Mr Toledano noted that the sums alleged to be payable by UBR in the present claim under the alleged collateral contract were identical to those which would be alleged to be payable in a claim under the assignment. That being so, he strongly pressed a contention that there could be no collateral contract because nothing in the UBR acknowledgement went beyond UBR’s existing obligations under the UBR supply contract as assigned to Standard Bank. Accordingly a claim under the assignment and a claim under the UBR acknowledgment were simply, he maintained, “the same claim”. In this regard he referred to what was said by Ms Temuulen at [8.7] and [8.8] of Temuulen 1.

[115]Ms Temuulen supported her arguments in that regard at [8.9] by relying upon(a) the terms and conditions of the UBR supply contract, and

(b) Article 186.2 of the Civil Code of Mongolia. Article 186.2 states: Depending on the content and nature of the duty, either party can be given special duties in relation to the other party’s rights and obligations.

[116]At the conclusion of Mr Toledano’s opening submissions it seemed to me to be at least seriously arguable that paragraphs 3(d) and (e) of the UBR acknowledgement, as regards money payable by UBR under the 2011 assignment, identified matters that were not covered by the UBR supply contract. Accordingly in this regard I did not need to call upon Mr Joseph.

[117]In particular, as regards such money the UBR acknowledgement expressly referred in paragraphs 3(d) and (e) to payment of that money into the Standard Plc nostro account (unless notified to pay it into some other account) and to such payment being (as stated by Mr Tsogt at [35.1]) “without any offset from any proceeds payable or claims made”. The UBR supply contract does not expressly prohibit UBR, in respect of a claim made against it under the assigned rights, from setting off other claims it may have against Just. Nor does it expressly enable an assignee to insist that proceeds payable must unconditionally and irrevocably be paid into a specific account. Article 186.2 of the Civil Code on its face does not suggest that limitations on an ability to offset and on the precise method of payment, if absent from the UBR supply contract, would form part of UBR’s obligations to Standard Bank by virtue of the assignment. In Temuulen 2 Ms Temuulen noted at paragraph 22 that in order to know the amounts to be paid one had to refer to the UBR supply contract. She suggested at paragraph 27 that specification of the Standard Plc nostro account in the UBR acknowledgement was merely intended to give comfort that payments would be made as instructed in the 2012 UBR notice. She also suggested at paragraphs 28 to 30 that paragraph 3(e) was consistent with a concept akin to good faith under article 186.2. These points may well have force when the matter comes to be tried, but they are not obviously conclusive and thus do not detract from the conclusion that there is at least a serious argument that paragraph 3(d) and (e) referred to matters which were additional to what was required by virtue of the assignment.

[118]Mr Toledano relies on other matters in support of UBR’s contention that Standard Bank cannot show a serious issue to be tried. However these matters are, as it seems to me, even though to some extent supported by Ms Temuulen, insufficient to deprive Standard Bank’s collateral contract argument of a real prospect of success. In particular:(1) The use of the words “we confirm” at the start of paragraph 3 of the UBR acknowledgement, and the failure to refer in the UBR acknowledgement to UBR “undertaking” or “agreeing” anything, along with the reference to payments to the relevant nostro account being in favour of the Hong Kong or London collection accounts, are said to demonstrate that paragraph 3(d) was no more than a confirmation that payment obligations under the UBR supply contract were now owed to Standard Bank as assignee. However these matters, whether viewed on their own or cumulatively with other matters relied on, cannot be said at this stage to be so favourable to UBR under Mongolian law as to be inconsistent with paragraph 3(d) promising to Standard Bank that UBR would do the things set out in paragraph 3(d) in addition to fulfilling obligations owed to Standard Bank by reason of the assignment.

(2) Contentions are advanced as to why it is implausible that paragraph 3(d) was intended to create a “free-standing” obligation when the content of that supposed obligation is defined by reference to the UBR supply contract, and can only be gleaned by reading that agreement. It is added that wording elsewhere shows that the UBR acknowledgement “was not intended as a free-standing contract between Standard Bank and UBR”. However Standard Bank for present purposes does not have to show a “free-standing” contract in the sense of a contract which makes no reference to the UBR supply contract. A collateral contract can exist even though the content of obligations in the collateral contract can only be ascertained by reference to the main contract. (The question whether the collateral contract is “free-standing” calls for consideration at a later stage: see section E below.)

(3) It is said that if the UBR acknowledgement had been intended to give rise to a collateral contract paragraph 3(f) would not have said “we have full authority to acknowledge the Notice and the Assignment in accordance with the terms of this letter,” but would instead have said that UBR had authority to enter into the new collateral contract. As it seems to me, there is a serious argument that what Standard Bank was concerned to obtain was UBR’s signature to “the terms” of what was set out in the UBR acknowledgement, for which purpose it did not matter whether it was described as a collateral contract or as “this letter”.

(4) A similar point is made about the use of the term “acknowledgment”. Again as it seems to me there remains a serious argument that if the substantive wording of the UBR acknowledgment would suffice to give rise to a collateral contract then describing the document as an “acknowledgement” is not inconsistent with a collateral contract.

(5) Mr Batkhuu’s letter of 14 February 2007 is said to evidence a contemporary understanding that the February 2007 UBR acknowledgement would involve no additional obligation on the part of UBR. However while some of the things said in that letter would be consistent with such an understanding, other things said in that letter would arguably be inconsistent with such an understanding – in particular the reference to “complying with the request to notify the bank in a timely manner if any amendments are made to the contract”.

(6) Other points are made about the context, including the structure of the finance arrangements, to which UBR was not a party. A particular point is made that the assignments contained a definition of “Security Interest” which did not expressly refer to the UBR acknowledgements. Even assuming that Mongolian law would have regard to a point of this kind, the point itself seems to me to be a tenuous one in a context where the facilities agreements expressly include relevant acknowledgments in their definition of “Transaction Security Documents”. Neither this point nor other points about context, whether viewed on their own or cumulatively with other matters relied on, are at this stage so strong as to eliminate the force of Standard Bank’s arguments the other way. Generally, as it seems to me, there is a serious argument that the finance arrangements prompted a desire on Standard Bank’s part to be able to insist, by virtue of UBR’s signature to the UBR acknowledgement, that UBR would do things which the assignment alone would not or might not require UBR to do.

(7) Criticism is made of Mr Tsogt’s analysis under which the UBR acknowledgement is a contractual offer which Standard Bank accepted by conduct. It is said to be remarkable that a sophisticated operator such as Standard Bank left the final piece of the jigsaw to be completed by conduct, and that the obvious purpose of the UBR acknowledgement is to give comfort that the assignment had been validly effected. However to my mind there remains a serious argument that by identifying certain specific matters in the UBR acknowledgement, matters which cannot be conclusively shown at the present stage to be part of UBR’s obligations to Standard Bank by virtue of the assignment, UBR was doing more than merely give comfort as to the validity of the assignment.

(8) Mr Toledano also submits it to be “entirely obvious” that receipt and acceptance by Standard Bank of money to which it was entitled as assignee could not possibly imply an intention to accept an offer of a collateral contract. However Mr Tsogt at paragraph 18 of Tsogt 1 draws attention to article 199.3 of the Civil Code, which envisages that a contractual obligation can be accepted by making payment. If the UBR acknowledgement involved an offer to do more than required of it as a result of the assignment, I am not in a position at this stage to say that either under article 199.3 or generally it is impossible for Standard Bank to have accepted that offer in the way suggested by Mr Tsogt.

[119]Much is made by Mr Toledano of the “blatant device” analysis mentioned earlier. In support of that analysis he advances an additional argument that when matters came to a head Standard Bank initially reacted by relying upon the assignment, and only changed course to rely upon the UBR acknowledgement as a collateral contract when it was appreciated that a claim as assignee would inevitably be subject to the exclusive Mongolian jurisdiction clause. That argument may well be right, but it does not of itself mean that collateral contract arguments lack validity.

[120]Thus I cannot form the view at this stage that the reasons advanced by Mr Tsogt are so lacking in substance as to give no real prospect of establishing that Mongolian law enables the bank to advance the pleaded claim in reliance upon the UBR acknowledgement. Each acknowledgement may or may not have been a “device”. At this stage I cannot say that the “device” was plainly inadequate to create a collateral contract.

[121]In reaching this conclusion I have not needed to refer to other assertions by Mr Tsogt as to the effect of the provision in the UBR acknowledgement that it was to be governed by Mongolian law, and as to the willingness of Mongolian law to have regard to the subjective intentions of the parties. Nor is it necessary to refer to evidence lodged by Standard Bank as to what was said at meetings. As all these matters are in dispute I think it preferable to express no view upon them one way or the other.

[122]For these reasons, I conclude that Standard Bank have shown that the claim against UBR in these proceedings gives rise to a serious issue to be tried. D. Gateway

D1. Gateway: general

[123]I noted in section A above that Standard Bank must show, in broad terms, that their claim falls within one of the gateways for the purposes of CPR 6.36 enabling the court to grant permission to serve out of the jurisdiction. CPR 6.36 states that, with exceptions which are irrelevant for present purposes, a claimant may serve a claim form out of the jurisdiction with permission of the court if any of the grounds set out in paragraph 3.1 of Practice Direction 6B apply. These grounds are listed in paragraph 3.1 of the Practice Direction as individual paragraphs (1) to (20). For convenience I shall refer to each of the individual paragraphs as a “gateway”.

[124]Standard Bank rely upon one gateway only. However they say that they can bring themselves within the gateway by two different routes, either of which would suffice in order to demonstrate that they have the better of the argument that the gateway test is met.

[125]The gateway relied upon by Standard Bank is gateway (3). It applies where: A claim is made against a person (‘the defendant’) on whom the claim form has been or will be served (otherwise than in reliance on this paragraph) and –(a) there is between the claimant and the defendant a real issue which it is reasonable for the court to try; and

(b) the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim.

[126]The two different routes by which Standard Bank say that gateway (3) is met concern two different categories of defendant. First, in what I shall call “route A”, they note that the claim form has been served, without reliance upon gateway (3), upon the first to sixth defendants, making claims against them as the borrower and guarantors under the 2012 facilities agreement. They say that those claims give rise to real issues which is reasonable for the court to try, and that UBR is a necessary or proper party to those claims.

[127]Second, in what I shall call “route B”, they assert that similar considerations apply to their claim against Mr Batkhuu.

[128]Thus there are two different categories of “anchor” defendants. Under route A the anchor defendants are the first to sixth defendants, being Just and the 2012 guarantors. The claims against them arise in respect of Just’s failures to fulfil its obligations under the 2012 facilities agreement. Under route B, there is one anchor defendant only, Mr Batkhuu. The claims against him identify various ways in which he is said to have brought about breaches of contract by Just, by EMC and by UBR.

[129]In section D2 below I discuss the legal principles applicable to gateway (3). In section D3 I examine route A, and in section D4 below I examine route B. I set out in section D5 below my reasons for concluding that Standard Bank do not have the better of the argument that their claim against UBR falls within gateway (3).

D2. Gateway (3): legal principles

[130]In AK InvestmentsCJSC v Kyrgyz Mobil Tel Ltd [2011] UKPC7,

[2012] 1WLR 1804

the Privy Council was concerned with proceedings in the Isle of Man. In those proceedings a Kyrgyz company sought to enforce a Kyrgyz judgment against Manx companies. The Manx companies counterclaimed, and were granted permission to join 13 additional parties as defendants to the counterclaim and to serve them outside the jurisdiction. The gateway relied upon for this purpose was the Manx equivalent of gateway (3). The judgment of the Board was delivered by Lord Collins of Mapesbury JSC. He noted at paragraph 65 that until 1987 the relevant gateway was expressed in the same terms in the Isle of Man as it was in England. While gateway (3) now uses different terminology, the changes did not affect the questions of law discussed in the judgment.

[131]Section V of the judgment was concerned with legal principles. In paragraph 71 Lord Collins noted that a claimant must satisfy the court that there is a good arguable case that the claim falls within the gateway. He described “a good arguable case” in this context as connoting that one side has a much better argument than the other. In argument before me, Mr Toledano was content that I should adopt a test under which Standard Bank must show that it has “the better of the argument” in this regard.

[132]In paragraph 73 of the judgment Lord Collins referred to the relevant gateway as the “necessary or proper party head of jurisdiction”. In that regard he said this: 73 The necessary or proper party head of jurisdiction is anomalous, in that, by contrast with the other heads, it is not founded upon any territorial connection between the claim, the subject matter of the relevant action and the jurisdiction of the English courts: The Brabo

[1949] AC 326

, 338, per Lord Porter. Piggott, Foreign Judgments and Jurisdiction (3rd ed, 1910), pt III, p 238, said:

“This is perhaps the most important of the sub-rules, for it throws the net of jurisdiction over a wider area; and the principle of considering the nature of the cause of action which pervades the whole subject, appears here to be ignored.”

Consequently as Lloyd LJ said in The Goldean Mariner

[1990] 2 Lloyd's Rep 215

at 222:

“I agree … that caution must always be exercised in bringing foreign defendants within our jurisdiction under O.11 r.1(1)(c). It must never become the practice to bring foreign defendants here as a matter of course, on the ground that the only alternative requires more than one suit in more than one different jurisdiction.” “I agree … that caution must always be exercised in bringing foreign defendants within our jurisdiction under O.11 r.1(1)(c). It must never become the practice to bring foreign defendants here as a matter of course, on the ground that the only alternative requires more than one suit in more than one different jurisdiction.”

[133]A little later in his judgment Lord Collins turned to the wording which in England is found in sub-paragraph (b) of gateway (3):

“another person who is a necessary or proper party to that claim”

. In discussing what is meant by this wording Lord Collins used “D1” to refer to the anchor defendant and “D2” to refer to the defendant that is proposed to be served out of the jurisdiction. In that regard he said at paragraph 87:

“One investigation”/ “closely bound up” 87 Third, the question whether D2 is a proper party is answered by asking: “supposing both parties had been within the jurisdiction would they both have been proper parties to the action?”: Massey v Heynes & Co (1888) 21 QBD 330 at 338, per Lord Esher MR. D2 will be a proper party if the claims against D1 and D2 involve one investigation: Massey v Heynes & Co at 338, per Lindley LJ; applied in Petroleo Brasiliero SA v Mellitus Shipping Inc(The Baltic Flame) [2001] EWCA Civ 418, [2001] 1 Lloyd's Rep 203 , at [33] and in Carvill America Inc v Camperdown UK Ltd [2005] EWCA Civ 645, [2005] 2 Lloyd's Rep 457 , at [48], where Clarke LJ also used, or approved, in this connection the expressions “closely bound up” and “a common thread”: at [46], [49].”

D3. Route A to gateway (3)

[134]Under Route A the suggested anchor defendants are Just and the 2012 guarantors. UBR does not dispute that the claim form has been served on those defendants. Nor, for the purposes of satisfying gateway (3), is it disputed that there is a real issue which it is reasonable to try as against those defendants.

[135]What UBR submits is that it is not a ‘necessary or proper party’ to the claims against those defendants. Applying the tests identified at paragraph 87 of AK Investment UBR says that Standard Bank’s claims against those defendants are not ‘closely bound up’ with their claim against UBR, that the claims against those defendants and the claim against UBR do not form part of ‘one investigation’ and that there is no common thread. In particular, UBR relies upon differentiating factors as follows:(1) The claims are made under different agreements. Against UBR Standard Bank assert a collateral contract which builds upon their entitlements as assignee to receive payment for fuel supplied by Just under the UBR supply contract. By contrast, the claims against Just and the 2012 guarantors are made under the 2012 facilities agreement, to which UBR is not a party.

(2) The subject matters of the claims are different. The claims against Just and the 2012 guarantors concern the repayment of money lent by Standard Bank under finance arrangements. The claim against UBR is for payment for the supply of fuel.

(3) The claims give rise to different issues of law. The claim against UBR is likely to turn on issues of Mongolian law as to the construction of documents signed by UBR. In contrast, UBR’s skeleton argument says that the claims against Just and the 2012 guarantors are likely to turn on issues of English law as to the construction of the 2012 facilities agreement.

(4) The claims give rise to different issues of fact. That is so even if Standard Bank were right to say that under Mongolian law the 2012 UBR acknowledgment required UBR to pay the disputed amounts into the Standard Plc nostro account for onward transmission to the London collection account. One reason is that Standard Bank knew that on occasion Just made other arrangements with UBR, arrangements under which Just itself paid the sums in question to the Standard Plc nostro account, and it may arguably be inferred that Standard Bank were on notice that Just must have told UBR that it should not pay such sums to the Standard Plc nostro account. There may be other matters which point to Standard Bank having been content for Just to advise UBR that it was in order to do things inconsistent with what Standard Bank say Mongolian law required. Factual issues of that kind form no part of the claim by Standard Bank against Just and the 2012 guarantors. That claim asserts an event of default, with a consequent liability to pay a total sum in excess of $55,000,000. By contrast the claim against UBR is for ‘receivables’ in the form of money which was owed by UBR as the price for fuel which it purchased from Just.

(5) The claim form and particulars of claim do not allege that there was one overarching conspiracy. Instead they advance claims against UBR which are separate from their claims against Just and the 2012 guarantors.

[136]Standard Bank’s response involved a point which was obviously unsound. Mr Joseph stressed that UBR was an “approved buyer” designated as such by Standard Bank under Facility B. He added that fuel sold by Just to UBR would have been purchased by Just using letters of credit under Facility A, issued in favour of a seller who had designated as an “approved supplier” by Standard Bank under Facility A. He then went on to submit that in this way the approved fuel supplier was selling to approved buyers. In response to a question from me he said that the approved supplier was selling to UBR. The suggestion that there was a single transaction of this kind was rapidly corrected, and Mr Joseph accepted that UBR was an “approved buyer” under Facility B solely for the purposes of sales of fuel by Just to UBR.

[137]Once the obviously unsound point was disposed of, in broad terms Standard Banks’s response was as follows:(1) UBR is both a ‘necessary’ and ‘proper party’. It is a necessary party into the enquiry into Just’s discharge of its obligations under the 2012 facilities agreement and the 2011 assignment, and in particular its obligations as pledger of benefits under the UBR sale contract. It is a proper party because all claims concern repayment of the same monies originally advanced under the facility, because they relate to the same facility and its security arrangements, because there is a significant factual overlap arising from the fact that it is Mr Batkhuu who has effectively orchestrated or caused the non payment by other parties to Standard Bank, and because the claims will involve one investigation and are closely bound up with one another.

(2) It may be factually true that it is possible to have two investigations into the relevant factual matters. However, that is generally speaking undesirable. The relevant test does not require the court to determine whether the proceedings are viable in the absence of a particular party.

(3) The scope of the factual enquiry, in reality, is such that all claims are closely interlinked and bound up. The claims against Just and the 2012 guarantors are part of an overall trade finance transaction to allow for the provision of fuel products to UBR (and to EMC). While Standard Bank resiled from the suggestion that it financed a transaction between an approved supplier and UBR, nevertheless Mr Batkhuu and Just stood as brokers or middlemen in such a transaction. Accordingly, the factually enquiry in relation to the claims against Just and the 2012 guarantors would, it was submitted, overlap with those against UBR.

(4) There had been no suggestion that it was not proper to commence the action with a single claim form against all defendants. Under CPR 7.3 a claimant may use a single claim form to start all claims which can be conveniently disposed of in the same proceedings. Moreover, UBR would be an appropriate party for joinder under CPR 19.2. Under that rule a person can be added as a new party if it desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings, or if there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new parties so that the court can resolve that issue.

(5) Standard Bank say that what was arranged between Just and UBR, causing “receivables” not to be paid in the Standard Plc nostro account for onward transmission to the London collection account, was hidden from them. Those arrangements were highly unusual and went to the core of the claim against UBR. They were also why Just went into default under the facility, because there was not sufficient money in the London collection account to satisfy the claims for repayment which had become due.

(6) The scheme of the particulars of claim is that there is a single facility with associated transaction security documentation including the 2012 UBR acknowledgment. The particulars of claim identified one course of conduct which led to default both by Just and by UBR. A single factual matrix underlay the facilities agreement and the UBR acknowledgment.

(7) The quantum of the claims under the 2012 facilities agreement against Just and the 2012 guarantors on the one hand, and the claim against UBR for breach of the UBR acknowledgment on the other, went hand in hand. Recovery against UBR would reduce the amount recoverable from Just and the 2012 guarantors. By the same token, recovery against Just or any of the guarantors would reduce the amount recoverable from UBR.

[138]In my view by mid July 2013 it was clear that the claim against UBR was in a different category from the claim against Just and the guarantors, and that these two categories of claim involved investigations which in almost all respects were different. Four key features made this plain.

[139]First, the two categories of claim involved entirely different contractual allegations. This is plain from the particulars of claim. Standard Bank’s contention that UBR is a “necessary party” to their claim against Just and the 2012 guarantors is mystifying. That claim is for the repayment of advances, not for any failure to pledge. Standard Bank’s claim to contractual entitlements alleged against Just and the 2012 guarantors involves no question as to any entitlements as between Standard Bank and UBR. Similarly Standard Bank’s claim to contractual entitlements alleged against UBR involves no question as to any entitlement as between Standard Bank on the one hand and Just and the 2012 guarantors on the other.

[140]Second, Standard Bank has throughout acknowledged that questions as to what contracts had come into existence between Standard Bank and UBR, and whether any contractual obligation was broken by UBR, would be governed by Mongolian law. While I have held that the claim under the UBR acknowledgments surmounts the hurdle of a good arguable case (see section C above), the complexities of that claim made it highly likely that issues of Mongolian law would arise and would require expert evidence.

[141]Third, it must have been clear by July 2013 that UBR relied upon alleged agreements with Just under which certain “receivables” would not be paid by UBR into the Standard Plc nostro account for onward transmission to the London collection account. Mr Yates rightly acknowledged in Yates 1 that on occasions Just Group would itself remit funds to the Standard plc nostro account which, on Standard Bank’s case, ought to have been remitted by UBR. Mr Joseph explained that while Standard Bank knew that this had happened, they thought it was being done for a special reason, namely that there was a risk of late payment of receivables by UBR or EMC, and that accordingly Just had itself remitted funds in order to avoid defaulting under the facility. In my view enough was known by Standard Bank in July 2013 for them to appreciate that the claim against UBR would be likely to involve factual issues as to the extent of their awareness that things were occurring which on their case should not have been occurring. In the claim against UBR much might turn on what it was that Standard Bank knew about the reasons for those things occurring. The likely factual issues would be utterly irrelevant to the claims against Just and the 2012 guarantors for failure to repay advances.

[142]Fourth, it is difficult to see how the two categories of claim could have been thought to involve a substantial common element as to quantum. Nothing in the evidence before me suggests that there was any doubt as to what payments had in fact been made into the relevant collection accounts. Nor is there any reason to think that money went astray in the course of transfer from the relevant nostro account to the relevant collection account. There is no reason to doubt that Standard Bank were entitled to invoke the acceleration provisions. On its face the quantum of the claim against Just and the 2012 guarantors appears entirely straightforward: it is the total of sums advanced, with interest and charges, after giving credit for the total of sums repaid. There was nothing to suggest that, as regards money not paid into the collection account, any dealings involving UBR had any effect on the amount that was due by Just to Standard Bank. Of course if Standard Bank were to recover sums from UBR then they would have to give credit for those recoveries as regards the position between themselves, on the one hand, and Just and the 2012 guarantors on the other. That, however, would be a long way down the line, and would be unlikely to arise until after a judgment against UBR. As to the converse position, I do not understand how a change in the quantum of the amount owed by Just to Standard Bank has any effect on Standard Bank’s entitlement against UBR. Those entitlements are entitlements to “receivables” in the form of the price due for fuel supplied. There is nothing in the assignments or in the UBR acknowledgments to suggest that a reduction in the amount owing by Just to Standard Bank would reduce the amount of such receivables as Standard Bank were entitled to claim from UBR.

[143]It is noteworthy that the differences between these two categories of claims were not analysed in the evidence lodged by Standard Bank in support of the permission application. I recognise that the burden on Standard Bank is only to show that it has the better of the argument. I recognise also that in preparing the factual account given in section B above I have had the benefit of considerable work by the parties and their lawyers in the course of preparations for the hearing of the set aside application. Even so, in my view what was known in July 2013 by Standard Bank does not give them the better of the argument that when the permission order was granted the tests under CPR 7.3 and CPR 19.2 were met.

[144]It would not have been right under CPR 7.3 to say that the two categories of claim could be conveniently disposed of in the same proceedings. Nor, if UBR had not previously been a party, would it have been desirable for UBR to be added so that the court dealing with the claim against Just and the 2012 guarantors could resolve issues between Standard Bank and UBR. For the reasons given above there was no reason to suppose that there was any significant factual or legal overlap. Statements of case in the two categories would be dealing with very different things. Legal investigations in the claim against UBR would be likely to involve Mongolian law, and only Mongolian law, whereas those in the claim against Just and the 2012 guarantors were likely to be concerned only with English law. Nothing in the material put before me suggests that Standard Bank had reason to think that disclosure in the claim against Just and the 2012 guarantors would involve anything like the disclosure exercise which could reasonably be foreseen as part of an investigation into factual matters potentially relevant to the claim against UBR.

[145]Nothing in the material put before me suggests that Standard Bank had reason to think that witness evidence, whether expert or factual, in the claim against Just and the 2012 guarantors would involve anything like the expert and factual evidence which could reasonably be foreseen as requiring investigation and probable cross-examination at trial in the claim against UBR. In all probability any trial of the claim against Just and the 2012 guarantors would be straightforward, unlikely to require a significant amount of court time, and capable of being speedily brought to a successful conclusion. By contrast it could reasonably be foreseen that the claim against UBR would be complex, require considerable court time, and would inevitably take far longer to reach a conclusion.

[146]Far from being convenient, dealing with the two categories of claim together would be an inefficient use of court time and resources. From UBR’s point of view the combination of the claim against it with the claim against Just and the 2012 guarantors would be likely only to increase the costs of any eventual trial. It is difficult to see any sufficient compensating practical advantage to Standard Bank in having the two categories of claim joined in the same proceedings – other than the advantage of claiming that the joinder can be deployed in support of a submission that gateway (3) is met.

[147]All of this is simply another way of saying that the two categories of claim do not involve one investigation, are not closely bound up, and do not have a common thread. Mr Joseph at times elided the “necessary or proper” test with the question whether England was the proper forum. An example was a submission concerning the risk of having one transaction at one and the same time considered by two different courts. This risk, submitted Mr Joseph, weighed “very, very heavily in favour of [UBR] being a necessary or proper party”. When it was queried whether the two categories of claim did indeed involve “one transaction” Mr Joseph replied that for the purposes of gateway (3) they did not need to, citing what was said by Clarke LJ in Carvill America Inc v Camperdown UK Ltd

[2005] EWCA Civ 645

[2005] 2 Lloyd's Rep 457

at [49]. I deal in section E below, in the context of whether England is the proper forum, with the suggested risk of “the same transaction” being considered in two different courts. As to what was said by Clarke LJ in Carvill America, I stress that I do not suggest that the necessary or proper party test can only be met where the claims in question are part of one transaction. Nor do I suggest that a “proper party” has to be one which is needed so that the proceedings will be viable. The test is that described by Lord Collins in paragraph 87 of AK Investments. For the reasons given above, route A does not enable Standard Bank to say that it has the better of the argument that this test is met.

D4. Route B to gateway (3)

[148]Route B involves an assertion by Standard Bank that Mr Batkhuu can be regarded as an anchor defendant for the purposes of gateway (3). When seeking permission, however, no such assertion was made in Yates 1. After permission had been obtained, and after UBR had been served, it was said by Standard Bank that they could rely on Mr Batkhuu as an anchor defendant. UBR’s skeleton argument said that this was not accepted.

[149]Thus under route B the effective position is that Standard Bank say, “We did not seek permission to serve the claim out of the jurisdiction on UBR on the basis that Mr Batkhuu was an anchor defendant, but we could have done, and accordingly we ask the court to treat the matter as if we had done this.” For reasons given later in this section I am inclined to doubt whether it is right to say that Mr Batkhuu, given that reliance had been placed on gateway (3) when seeking permission to serve him, could have been an eligible anchor defendant. Even if he could have been, however, I agree with UBR that it is entitled to object. It seems to me that a request that I should permit Standard Bank to rely upon a new route to gateway (3) involves an exercise of discretion on my part.

[150]In exercising my discretion I begin with an analysis of the different claims made against Mr Batkhuu. First, he is said to have procured a breach of the 2012 facilities agreement by Just. I have explained in section D3 why the claims against Just for breach of that agreement do not provide a sufficient basis for saying that UBR is a necessary and proper party. That reasoning applies equally to a claim against Mr Batkhuu for procuring breaches of the agreement. Second, Standard Bank claims against Mr Batkhuu for procuring a breach of a collateral contract which they say was made with them by EMC. There is no suggestion that UBR is a necessary or proper party to that claim, and it accordingly falls away for present purposes. The remaining relevant claim against Mr Batkhuu is for unlawfully procuring breach by UBR of the obligations which Standard Bank say that UBR undertook by virtue of the 2012 UBR acknowledgment. A submission was made on behalf of UBR that this could not provide a basis for saying that it was a necessary or proper party, because there was no arguable case for a collateral contract. As Mr Joseph rightly observed that submission cannot survive where, as in the present case, I have concluded that there is an arguable case of collateral contract.

[151]However UBR’s objections did not stop there. What I must consider is whether it is right to allow Standard Bank to say that even though, on this hypothesis, the alleged breaches of contract by UBR give rise to no basis in themselves for the grant of permission, nonetheless the court should allow Standard Bank to say that the question whether UBR was in breach of contract should be tried here because it is bound up with the question whether Mr Batkhuu procured the breaches in question. Mr Toledano submitted that that would not be an appropriate use of gateway (3) on the facts of the present case. What it amounted to, he submitted, would be “the tail wagging the dog”. It would mean that the party alleged to be in breach of contract could be served out of the jurisdiction on the basis that the claim against it was connected with the claim against the alleged procurer, when the breaches of contract themselves provided no basis for service out of the jurisdiction. It seems to me that this point goes both to the exercise of my discretion and to the question whether UBR would be a “proper party” in this context.

[152]The response on behalf of Standard Bank was merely to stress that it was reasonable to proceed against Mr Batkhuu in this jurisdiction. I do not consider that that is a sufficient answer. I do not suggest that there is a general principle as to the relative importance of those who break a contract and those who procure a breach. Nor, as I explain in section E below, do I find the metaphor of “the tail wagging the dog” helpful. But in the circumstances of the present case there is a substantial point which underlies Mr Toledano’s use of the metaphor. By the time that the permission application was made Standard Bank had the benefit of a full admission by Mr Batkhuu that he was responsible for Just’s breaches of the facilities agreements. As against him, no practical advantage could be gained by embarking upon an elaborate enquiry as to whether UBR was in breach of contract, solely to enable Standard Bank to advance a claim against him that he had procured the relevant breaches of contract. Whatever damages could be recoverable in that regard would be subsumed within the damages recoverable under the obvious main claim against Mr Batkhuu, namely, the procuring of breaches by Just of the facilities agreement. The claim that is sought to be relied upon in order to assert that Mr Batkhuu is a suitable anchor defendant is a subsidiary claim with no practical utility. While I have no doubt that an investigation into whether Mr Batkhuu procured breaches of contract by UBR would involve much the same investigation as one into whether there actually were such breaches, in all the circumstances of the case I consider that it would be inappropriate to allow Standard Bank to advance the matter in that way now. Accordingly I decline as a matter of discretion to allow Standard Bank to rely upon route B to gateway (3). Alternatively I would hold that in these circumstances UBR would not be a “necessary or proper party” within the meaning of gateway (3).

[153]I noted earlier that I question whether Mr Batkhuu, having himself been served out of the jurisdiction in reliance on gateway (3), could indeed be an eligible anchor defendant when seeking to serve UBR under gateway (3). In order to be an anchor defendant, he must be a person on whom the claim form has been or will be served “otherwise than in reliance on this paragraph”- that is, otherwise than in reliance on gateway (3). However on the face of it he is not such a person, for Standard Bank sought permission to serve him, said that he would be served, and did indeed duly serve him, in reliance on gateway (3).

[154]It is right that other gateways were relied upon against Mr. Batkhuu:(1) Yates 1 asserted that certain of the claims fell within gateway (6). These were claims made against Mr Batkhuu for procuring a breach of the 2012 facilities agreement. Under gateway (6) the court may grant permission for service out of the jurisdiction where a claim is made in respect of contract and that contract is governed by English law or contains a term to the effect that the court shall have jurisdiction to determine any claim in respect of the contract. Yates 1 pointed out that the 2012 facilities agreement met both of these alternative bases for bringing these particular claims within gateway (6).

(2) In addition, Yates 1 relied upon gateway (9). That gateway enables the court to grant permission where a claim is made in tort and, among other things, damage was sustained within the jurisdiction. Yates 1 asserted that there had been such damage in the form of the absence of payments or credits into the London collection account.

[155]Even so, while these additional gateways were indeed relied upon, it remains the case that gateway (3) was also relied upon. It seems to me, particularly in the light of what was said by Lord Collins at paragraph 73 of the judgment in AK Investments, to be strongly arguable that the opening words of gateway (3) should be given their natural meaning: the gateway will only be available if no reliance has been placed on that gateway in order to serve the anchor defendant. I do not decide the point, however, as it was not the subject of argument at the hearing.

D5. Gateway: Conclusions

[156]Both at the time when the permission application was made and at the hearing before me, the only gateway relied upon by Standard Bank as enabling service on UBR was gateway (3). The only way in which gateway (3) was said by Standard Bank to arise at the time of the permission application was route A, a contention that Just and the 2012 guarantors were anchor defendants, and that UBR was a necessary and proper party to the claims against them. For the reasons given in section D3 above, I conclude that UBR, not Standard Bank, has the better of the argument in this regard. The two categories of claim are different, they involve different investigations, they are not bound up, there is no common thread, and it is neither convenient nor desirable to deal with them together. Accordingly I conclude that the way in which the matter was put at the time of the permission application does not provide a sound basis for saying that gateway (3) is satisfied.

[157]Standard Bank seek to save the position by asserting that even though it did not seek permission on the footing that Mr Batkhuu was an anchor defendant, it could have done. I doubt whether, on a proper understanding of gateway (3), that is the case. Even if it were, in the circumstances of the present case I would as a matter of discretion refuse to allow Standard Bank to depart from the basis adopted when seeking permission. A claim that Mr Batkhuu procured breaches of contract on the part of UBR adds nothing of any practical value to the admissions on the part of Mr Batkhuu which Standard Bank has already secured. Where, as here, the court is satisfied that the claim for breach of contract on the part of UBR is not properly joined with the proceedings against Just and the 2012 guarantors, I consider that in my discretion I should not allow Standard Bank now to say that one of its subsidiary claims it makes against Mr Batkhuu, a subsidiary claim which is of no practical value, provides a proper basis upon which to sue UBR here. Nor should I allow Standard Bank to say that this subsidiary claim makes UBR a proper party so that the claim against it should be joined with the claim against Mr Batkhuu. Alternatively, as it seems to me, the lack of any practical utility in the relevant claim against Mr Batkuu entitles me to hold that the “necessary or proper” test is not met.

[158]I add three further points. They do not form part of my reasoning on the gateway hurdle, but in my view they deserve mention.

[159]The first is that on their face the words “proper party” might not be thought apt to refer to a party, such as UBR, if it has the benefit of a contractual entitlement to insist that proceedings must not be brought against it here. This aspect of the matter is discussed in section E below.

[160]Second, Standard Bank cannot be heard to say that it is desirable for all their contentious dealings associated with Just to be part of the same proceedings. Yates 1 at paragraph 19 explained that Just and the respective guarantors are in default in respect of each of all three Just Facilities, and that Standard Bank had referred the disputes under the other two Just Facilities (i.e. those which by mid 2013 were for amounts up to $34m and $75m respectively) to arbitration with the London Centre for International Arbitration. No reason is given for separating Standard Bank’s claims in this way. Yates 1 says, no doubt rightly, that it is a matter of election on the part of Standard Bank. Clearly, however, Standard Bank considered that it was desirable to separate the claims.

[161]Third, in reaching my conclusion on gateway and on whether England is the proper forum, I have put on one side a concern on my part as to the commercial reasons which may underlie the decision to bring the present claim, both against UBR and against other defendants, by way of a court action in England. Mr Yates acknowledged at paragraph 62 of Yates 1 that he understood that enforcement of an English judgment might not be possible in Mongolia, and that Standard Bank did not know whether assets will be available to them outside of Mongolia in the event that they are successful in obtaining judgment in these proceedings. On 23 April 2014 Standard Bank lodged a supplemental note which, in effect, sought to give evidence as to why it was reasonable to bring court proceedings here. It was said, among other things, that Standard Bank would wish to rely upon enforcement mechanisms available in respect of an English judgment. In that regard, however, dealing with the two categories of claim (Just’s failure to repay advances, and UBR’s failure to make payments for fuel into the relevant nostro account) together seems to me likely to be counter-productive for Standard Bank themselves. If they wished to ensure speedy enforcement of an English judgment obtained after trial against Just and the 2012 guarantors, then far from advancing the two categories of claim together the logical course would have been at an early stage to seek a split trial so as to obtain such a judgment without delay. If it were necessary, the court would be entitled to ask Standard Bank whether an inference should be drawn that the failure to seek a split trial is motivated by tactical considerations as to how to resist the set aside application. E. Proper forum

E1. Proper forum: general

[162]In this section I deal with the third of the three hurdles identified in section A above as being hurdles which Standard Bank must surmount. It is that England and Wales is the proper place to bring the claim.

[163]My conclusions in section D above, however, have the consequence that this hurdle does not arise. I shall nevertheless deal with it in case my conclusions in section D above are wrong. For this purpose I shall assume that Standard Bank have met the gateway hurdle, either because UBR is a necessary or proper party to the claims by Standard Bank against Just and the 2012 guarantors or because Standard Bank are entitled to say that UBR is a necessary or proper party to their claim against Mr. Batkhuu.

[164]The third hurdle arises from CPR 6.37(3):

“The court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim.”

[165]It is common ground that, subject to one important exception, Standard Bank have the burden of showing that they have the better of the argument to the effect that England is the proper forum. The exception is this: to the extent that UBR asserts that England is not the proper forum because bringing the present claim against UBR in London involves a breach of the Mongolian exclusive jurisdiction clause in the UBR supply contract, UBR accepts that the burden shifts to UBR. I examine the arguments in relation to the Mongolian exclusive jurisdiction clause in section E2 below.

[166]In section E3 below I return to matters on which Standard Bank have the burden of showing that they have the better of the argument. The matters dealt with in section E3 are those which are commonly regarded as going to the question whether England is the “natural forum”. In that regard I put on one side factors which arise because Standard Bank, as must be assumed for present purposes, have met the test in gateway (3) and have thus shown that UBR is a necessary or proper party to claims against other defendants. Those factors are considered in section E4. I examine a final group of factors, those concerned with criticisms of Mongolia, in section E5. My conclusions on proper forum are set out in section E6.

E2. The Mongolian exclusive jurisdiction clause

[167]In English translation, clause 11.1 of the UBR supply contract states:

“11.1 All disputes and differences of opinion arising between the parties in the course of fulfilment of this contract shall be resolved by negotiations. If no solution can be reached via a negotiation, such disputes shall be reviewed by the district court where the defendant established his business activities.”

[168]The parties agree that the meaning and effect of clause 11.1 are governed by Mongolian law. They also agree that, as a matter of Mongolian law, if a dispute or difference of opinion falls within clause 11.1, then that clause has the effect that the district court of Ulaanbaatar has exclusive jurisdiction in relation to that dispute or difference of opinion.

[169]In this regard Ms Temuulen’s view is that claims by Standard Bank that UBR is in breach of the UBR acknowledgments fall within clause 11.1. The view of Mr. Tsogt is that they do not. In assessing the strength of their reasoning on relevant points I bear in mind that they are working in Mongolian and accordingly I allow for difficulties in translation. I also note that, after consideration of Tsogt 1, Ms Temuulen has prepared two further reports which have been put in evidence on behalf of UBR. By contrast, no further reports by Mr Tsogt have been put in evidence by Standard Bank.

[170]Standard Bank makes a number of criticisms of Ms Temuulen’s reasoning. It is convenient to take them in turn.

[171]First, Standard Bank say that Ms Temuulen is restricted by her conclusions that the UBR acknowledgment did not give rise to a collateral contract. As to that, it is right that Ms Temuulen’s conclusion as to the jurisdiction clause was founded, in part, on there being no collateral contract. Consideration of the strength of her reasoning in that regard would involve going over ground covered in section C above, albeit in order to consider the application of a different test. I do not propose to take such a course. I stress, however, that I have not concluded that Ms Temuulen’s reasoning on this aspect is wrong. All that I have concluded is that there is a serious issue to be tried.

[172]Putting Ms Temuulen’s reasoning on absence of collateral contract to one side, however, does not involve ignoring what she said about the jurisdiction clause. While she did not set out the precise wording of the clause, in Temuulen 1 she paraphrased it. In paragraph 9 she put it this way:

“… any claim made regarding the payment of fuel supply shall be subject to the jurisdiction clause set forth in Section 11.1 of the Fuel supply agreement.”

What she said in the first sentence of paragraph 10 was:

“… the claim pertaining to the Supply agreement shall be subject to jurisdiction clause under Section 11.1 of the Fuel supply agreement”

. Later in that paragraph she continued: If we have to assume [i.e. if Standard Bank were to be entitled to say] that any claim regarding to the Fuel supply agreement shall not be the subject to the jurisdiction under the section 11.1 then the clause should have been amended by the UBR, Just and Standard Bank in the same form of original agreement between the parties. However, … [the absence of such an amendment] brought me to the conclusion that any dispute or claim pertaining to the Fuel supply agreement shall be subject to jurisdiction set forth by the Section 11.1 of the Fuel supply agreement.

[173]It is apparent from these passages in Temuulen 1 that Ms Temuulen considered clause 11.1 to have a wide scope, applying to “any dispute or claim pertaining to the Fuel supply agreement”.

[174]What happened in Temuulen 2 was that this aspect of the matter was the subject of question 5:

“Q5 – Are the additional obligations created by the UBR Undertaking, if any, subject to and/or within the scope of the Mongolian jurisdiction clause contained in clause 11.1 of the UBR Supply Contract, even though Standard Bank was not a party to the UBR Supply Contract?”

[175]This question was confused, and was likely to be confusing. It referred to ‘additional obligations created by the UBR undertaking, if any’, when what it needed to do was to ask Ms Temuulen whether as a matter of Mongolian law the words ‘All disputes and differences of opinion arising between the parties in the course of fulfilment of this contract’ in clause 11.1 had the effect that the parties agreed that the relevant Mongolian district court had exclusive jurisdiction to decide(a) whether the UBR acknowledgment gave rise to a collateral contract, and

(b) on the assumption that it did, and on the assumption that the collateral contract created obligations on UBR additional to those arising under the UBR supply contract and the assignment, whether UBR was in breach of those additional obligations.

[176]In these circumstances it is understandable that Temuulen 2 did not clearly and distinctly deal with the relevant questions. It nevertheless seems to me that Ms Temuulen took her analysis a stage further in paragraphs 40 to 42 of Temuulen 2, where she said:40. … However, if Standard Bank sues UBR in relation to a payment due under the UBR Supply Contract, it can only do so in its capacity as assignee. As a result, the absence of a jurisdiction clause in the acknowledgement of assignment has no significance.

41. At paragraph 62 of his report, Mr Tsogt says that I “appear to be asserting [at paragraph 10 of my report] that the only way for the parties to take the additional obligations in the UBR Undertaking outside [the Mongolian jurisdiction clause contained in clause 11.1 of the UBR Supply Contract] would be via a tripartite amendment to the UBR Supply Contract and/or the 2011 Assignment.” In fact, what I stated at paragraph 10 of my first statement was that the only way for a claim regarding the UBR Supply Contract to be brought outside the Mongolian jurisdiction clause would be to amend the UBR Supply Contract. As Mr Tsogt recognises, I did not address the possibility of a claim based on additional obligations under the acknowledgement of assignment because there are no such obligations.

42. If the Acknowledgement was a self-standing contract containing additional obligations, the appropriate jurisdiction for claims based on those obligations would be decided according to Mongolian law as paragraph 4 provides that it shall be governed by Mongolian law. Mr Tsogt refers to Article 13.3 of the Civil Procedure Code. However, that article only states that in the absence of an arbitration agreement, a court will have jurisdiction. Article 189.2.1 of the Civil Procedure Code states that a Mongolian court will have jurisdiction when litigation pertaining to international private law involves a defendant domiciled in Mongolia or with a business activity in Mongolia. In light of this, Mr Tsogt is wrong to say at paragraph 65 of his report that the choice of governing law has no legal effect on the questions of jurisdiction.

[177]Paragraph 42, to my mind, is the key to understanding paragraphs 40 and 41:(1) In paragraph 42 Ms Temuulen examines the position if the UBR acknowledgment were “a self-standing contract containing additional obligations”. Mr Joseph notes that in this paragraph Ms Temuulen has not said that clause 11.1 is applicable. Here it seems to me that Ms Temuulen is referring to what I described in Section C above as a “free-standing” contract, in the sense of a contract which makes no reference to the UBR supply contract. In those circumstances clause 11.1 would not bite and jurisdiction will be determined by ordinary principles of Mongolian law.

(2) By contrast in paragraph 40 Ms Temuulen makes a different point. It is concerned with the position where Standard Bank sue UBR “in relation to” a payment due under the UBR supply contract. That, says Ms Temuulen, it can only do “in its capacity as assignee”. Ms Temuulen goes on to say that the result is that “the absence of a jurisdiction clause in the acknowledgement … has no significance.” It seems to me that Ms Temuulen is proceeding on the basis that a claim “in relation to” a receivable will involve Standard Bank asserting its capacity as assignee and thus will fall within the jurisdiction clause.

(3) In paragraph 41 Ms Temuulen acknowledges an omission in Temuulen 1: she did not there address the possibility of a claim based on additional obligations under the acknowledgement. It does not seem to me, however, that in paragraph 41 Ms Temuulen is saying that the point she has just made in paragraph 40 proceeds on the basis of a similar omission.

[178]Standard Bank then turn to Temuulen 3. Ms Temuulen begins a new analysis in paragraphs 34 and 35:34. … I will assume for the purposes of this question that it is possible for SB [without doing so in its capacity as assignee] to bring a claim on the basis that UBR had breached obligations owed under the “UBR Undertaking”. For a court or tribunal to consider whether it had jurisdiction to hear such a claim as a matter of Mongolian law, it would have to examine the obligations SB was seeking to enforce and in order to do so it would have to consider the UBR Supply Contract.

35. Any obligations that existed under the “UBR Undertaking” could not be considered in isolation from UBR’s obligations under UBR Supply Contract. There could not, for example, be a valid claim under the “UBR Undertaking” if there were no payments due under the UBR Supply Contract for supplies of oil. Since any obligation to pay for oil received under the UBR Supply Contract clearly falls within the scope of the jurisdiction clause in that contract, it follows that the jurisdiction clause must also cover any claim brought to enforce a corresponding obligation under the “UBR Undertaking”.

[179]Standard Bank criticise paragraph 35 as involving a conclusion that has been reached without citation of any relevant principles or authority. It seems to me, however, that the key point in paragraph 35 is the conclusion that if any obligations existed under the UBR acknowledgment, they could not be considered in isolation from UBR’s obligations under the UBR supply contract.

[180]It does not seem to me that it was necessary at this stage to cite any principles or authority. The essential element in Ms Temuulen’s reasoning was explained in paragraph 36 of Temuulen 3: 36. This reflects the fact that it is not possible in practice to view the “UBR Undertaking” as a “self-standing” contract, which was the point that I considered in paragraph 42 of my second statement. This is because the “UBR Undertaking” is not separate from the UBR Supply Contract even if it is viewed as a direct contract between SB and UBR (which is not an analysis that I accept).

[181]Paragraph 36 of Temuulen 3 is the subject of Standard Bank’s next criticism. They say that what Ms Temuulen has done is merely to revert “to her previous position” that the UBR acknowledgment is an assignment of rights under the UBR supply contract. In my view this criticism is unfounded. In section C3 above I made the point that in order to show a good arguable case Standard Bank did not have to show a ‘free-standing’ contract in the sense of a contract which makes no reference to the UBR supply contract, and added that a collateral contract can exist even though the content of obligation in the collateral contract can only be ascertained by reference to the main contract. It seems to me that Ms Temuulen’s approach in paragraphs 35 and 36 of Temuulen 3 is one which, in essence, accepts those points for the purposes of argument. Having done so, Ms Temuulen goes on to say that, because the content of obligations in the collateral contract can only be ascertained by reference to the main contract, clause 11.1 of the main contract will apply to disputes in which it is said UBR was in breach of the collateral contract.

[182]Next, it is said by Standard Bank that Temuulen 3 cannot be saying these things, because to do so would be inconsistent with paragraph 42 of Temuulen 2. On my understanding of that paragraph, however, there is no inconsistency: paragraph 42 of Temuulen 2 is concerned with the position if the UBR acknowledgment were a ‘self-standing contract’, whereas the crucial point being made in Temuulen 3 is that even if the UBR acknowledgment is a direct contract between Standard Bank and UBR, it is not ‘self-standing’.

[183]Subject to a suggestion from Mr Joseph dealt with below, the two remaining criticisms are that Ms Temuulen does not refer to the possibility that UBR may have complied with the UBR supply contract so that Standard Bank’s only claim is for breach of the UBR acknowledgement, and that Ms Temuulen makes no attempt to address the applicability of clause 11.1 to Standard Bank’s claim to declaratory relief as to the status of the UBR acknowledgment. As to both these matters, it is true that Ms Temuulen does not specifically refer to them. However for the reasons given earlier, in each of Temuulen 1, Temuulen 2, and Temuulen 3, Ms Temuulen was making a point that any dispute or claim “pertaining” to the UBR supply contract was subject to exclusive Mongolian jurisdiction as set out in clause 11.1 in that contract.

[184]It is, as it seems to me, a fair inference that what Ms Temuulen has in mind when making these points is the expression “arising between the parties in the course of fulfilment of this contract”. She treats issues between Standard Bank and UBR as “disputes and differences arising between the parties” and it is common ground that she is right to do so. She treats issues concerning the UBR acknowledgment as “disputes and difference of opinion arising…in the course of fulfilment of” the UBR supply contract. As a matter of the factual history, it is plainly the case that the UBR acknowledgment has come about in the course of fulfilling the UBR supply contract. It does not matter, as it seems to me, for the purposes of Ms Temuulen’s analysis whether the ‘dispute or difference of opinion’ is as to whether Standard Bank is entitled to a declaration as to the validity and enforceability of the UBR acknowledgment, or whether Standard Bank’s claim is for an order for payment and/or damages pursuant to claims under the UBR acknowledgment. Nor would it matter if Standard Bank were to make a concession (which I note they have not thus far made) that UBR has a complete defence to any claim under the UBR supply contract.

[185]Standard Bank then turn to the rival contentions of Mr. Tsogt. He expresses the view that the UBR acknowledgment creates a ‘self-standing’ bilateral contract between UBR and Standard Bank. In my view it is important to note the context in which Mr. Tsogt expresses that view in paragraphs 32 to 34 of Tsogt 1. The relevant question he is asked is whether the UBR acknowledgment creates ‘a self-standing bilateral contract between UBR and Standard Bank that is legally distinct from the assigned rights under the UBR supply contract?’ It does not seem to me that when replying ‘yes’ to this question Mr. Tsogt is treating the expression ‘self-standing’ as meaning anything other than ‘legally distinct’.

[186]Mr Tsogt specifically addresses clause 11.1 in paragraphs 51 to 66 of Tsogt 1. Here he replies to question 5 which asks him to consider whether additional obligations created by the UBR acknowledgement are “subject to and/or within the scope of” that clause. For this purpose question 5 refers to clause 11.1 as “the MJC”. At an early stage Mr Tsogt says that he agrees with Ms Temuulen “that the MJC is valid and enforceable in respect of obligations in that contract…”. In this passage, which I set out in full below, Mr Tsogt overlooks the passages in Temuulen 1, cited above, where what she says about clause 11.1 is not confined to “obligations in” the UBR supply contract, but instead refers to “any dispute or claim pertaining to” that contract.

[187]Moreover, it seems to me that from the outset of his analysis there is an important omission by Mr Tsogt. Paragraphs 53 and 54 of Tsogt 1 state:53. The MJC states: “…disputes shall be reviewed by the district court where the defendant established its business activities.”

54. I note that Ms Temuulen addresses the validity of the MJC. I agree that the MJC is valid and enforceable in respect of obligations in that contract and give my opinion on this basis.

[188]I observed earlier that Mr Tsogt overlooks the way in which Ms Temuulen describes the effect of clause 11.1. Paragraph 53 suggests that he has, in addition, overlooked the relevant words in that clause. The crucial words state that clause 11.1 is concerned with disputes and differences of opinion arising between the parties “in the course of fulfilment of this contract”. Those words are simply omitted by Mr Tsogt in paragraph 53 of Tsogt 1, where he may be presumed to be setting out what he regards as the relevant words in clause 11.1. Nowhere in his report does he recognise that these words form part of the clause considered by Ms Temuulen. This omission in my view seriously undermines the subsequent reasoning of Mr Tsogt.

[189]The key passages of Tsogt 1 in this regard are at paragraphs 55, 59 and 61. At paragraph 55 Mr Tsogt says this: 55. As established under Article 123.6 of the Civil Code, an assignee is entitled to exercise all its rights and remedies under an assigned contract, including the right to sue in the agreed jurisdiction. Additional rights will not be caught by the jurisdiction of the assigned contract, unless expressly stated and agreed. In my view the additional obligations created by the UBR Undertaking will not automatically fall within the scope of the jurisdiction clause in the UBR Supply Contract. This was not expressly stated or agreed.

[190]As to paragraph 55 Mr. Tsogt is merely making the point that the UBR acknowledgment did not expressly state or agree that disputes arising under it would fall with clause 11.1. In that regard he is undoubtedly correct. He is not, however, as it seems to me stating that clause 11.1 was not wide enough to include such disputes. He expressly deals with the latter question in paragraph 59: 59. However, as stated, in my opinion the additional obligations created by the UBR Undertaking are not subject to or otherwise within the scope of the MJC. This is because the content of the UBR Undertaking does not solely relate to obligations under the UBR Supply Contract but also relates to the Facility and the 2011 Assignment. This is expressly made clear by UBR in paragraph 1 of the UBR Undertaking, where it refers to the 2011 Assignment.

[191]Here he sets out the reason why he considers that “the additional obligations created by the [UBR acknowledgment] are not subject to or otherwise within the scope of” clause 11.1. The reason that he gives is that the content of the UBR acknowledgment “does not solely relate to obligations under the UBR supply contract but also relates to the Facility and the 2011 Assignment”, which have jurisdiction provisions different from those in the UBR supply contract. It thus appears to be suggested that because the UBR acknowledgement makes reference to the facilities agreement and the assignment, issues between Standard Bank and UBR about the effect of the UBR acknowledgment cannot fall within the Mongolian exclusive jurisdiction clause in the UBR supply contract.

[192]I find that reasoning difficult to understand. It is true that the facilities agreement and the assignment have jurisdiction provisions differing from that in clause 11.1 of the UBR supply contract. However they are agreements between Standard Bank and Just, not agreements between UBR and Standard Bank. In any event the fact that the UBR acknowledgement makes reference to them is not inconsistent with it being subject to the Mongolian exclusive jurisdiction clause in the UBR supply contract.

[193]Mr Tsogt completes his own analysis in paragraph 61 of Tsogt 1: 61. Under Mongolian law, the contracting parties (UBR and SB) were free to agree the terms and conditions of their additional obligations including choice of law/jurisdiction. By agreeing Mongolian law but not specifying jurisdiction, I conclude the parties’ intention was not to incorporate the jurisdiction clause from the UBR Supply Contract to cover the additional obligations in the Undertaking.

[194]The point made by Mr. Tsogt is that in the UBR acknowledgment the parties expressly agreed Mongolian law but made no provision about jurisdiction. Mr. Tsogt concludes from this that their intention was not to incorporate the jurisdiction clause from the UBR supply contract. However, clause 11.3, dealing with Mongolian law, did not use words that on their natural meaning would ordinarily be understood as extending to a later arrangement made in the course of fulfilment of the UBR supply contract, and thus as extending to the UBR acknowledgment. By contrast, clause 11.1 did use such words – although, as noted above, Mr Tsogt appears to have overlooked them. Moreover, Mr. Tsogt does not consider the alternative that the parties were content to leave the relevant court or tribunal to decide whether clause 11.1 extended to any such dispute as arose between them.

[195]In argument Mr. Joseph added his own suggestion that Ms Temuulen’s approach involved “a non-literal approach” that, he submitted, would be contrary to article 198.1 of the Mongolian civil code. This states: 198.1 While interpreting a contract, literal meaning of its words shall be considered.

[196]I did not find this suggestion persuasive. Quite apart from Mr. Joseph not being a Mongolian lawyer, it does not seem to me that Ms Temuulen’s interpretation is “non-literal”, and even if it were, paragraph 37 of Tsogt 1 made the point that Mongolian law does not limit the analysis to the four corners of the contract. In that paragraph Mr. Tsogt cited article 41 of the civil code, which he translated as stating: [41.1] The direct meaning of words shall be taken into consideration in order to make an interpretation into the content of intentions of parties. [41.2] If the content of intentions of parties is ambiguous (from the direct meaning of the words used in an agreement or offer), the content of intentions of parties shall be interpreted by analyzing needs, requirements, words, actions and inactions of intentions’ expressers as well as the other circumstances and conditions.

[197]The result is that on this question Ms Temuulen’s evidence appears to me to be cogent and that of Mr. Tsogt does not. In those circumstances I conclude that, on the material before me, Ms Temuulen is plainly right when she states that Standard Bank’s claim against UBR falls within the Mongolian exclusive jurisdiction clause.

E3. England as the natural forum

[198]Mr Joseph advanced a contention that there were strong factors which weighed in favour of England as the natural forum. In large part the suggested “strong factors” arose because Standard Bank must be assumed for present purposes to have met the test in gateway (3), and thus to have shown that UBR was a necessary or proper party. For convenience I refer to factors which arose in this way as “gateway (3) factors”.

[199]I deal with gateway (3) factors in section E4 below. If they are put on one side, it seems to me that the contention that England is the natural forum for Standard Bank’s claim against UBR would not get off the ground. The only links with England are that Standard Plc is based here, and that the London collection account is here. The result is that there may be some documentation here of relevance to the issues, but to my mind that will be dwarfed by the considerable amount of documentation in Mongolia. The claim against UBR concerns likely factual issues about what UBR did in Mongolia, and likely factual issues as to what Standard Bank knew about what happened in Mongolia. It concerns questions of Mongolian law and will require expert evidence of Mongolian law. UBR’s witnesses are Mongolian and are based in Mongolia, and for the most part would have to give evidence in England through a translator. If the claim against UBR is considered on its own, then the factors normally regarded as relevant to identification of the natural forum point overwhelmingly to Mongolia.

[200]In addition to factors normally relied upon as relevant to whether England is the natural forum, Mr Joseph cited cases where the parties entered into a suite of contractual documents. He submitted that in those cases the courts presumed that the parties, acting commercially, intended that the jurisdiction clauses in the agreements at the commercial centre of the transaction would apply. He then suggested that in the present case, “the Facility claims, which provide for English law and jurisdiction, are the centre of gravity of the dispute”. Mr Joseph did not, however, submit that UBR has made a submission to English court jurisdiction. That being so, it seems to me that the cases he cited do not bear upon the points at issue in the present case.

E4. Forum and gateway (3) factors

[201]Mr Joseph advanced general propositions that gateway (3) factors are of such importance that they demonstrate that England is the natural forum. In oral argument he relied upon observations found in three paragraphs of the judgment of Leggatt J in VTB Bank v Parline

[2013] EWHC 3538 (Comm)

. The first of these was as follows: The claimant’s submission - which I accept and I do not understand, when it is correctly formulated - to be disputed, is that, in answering the third question, the fact that the second defendant is a necessary or proper party is a relevant and indeed weighty factor to take into account, albeit that it is not conclusive and does not in any way exclude consideration of other factors. The reason why it is a weighty factor is, in essence, that it is generally desirable that claims arising out of the same facts and requiring a single factual investigation should be decided in one proceeding in the same place. The reasons which make that so are, first, the desirability of avoiding duplication and waste of time and costs and, second, the undesirability of inconsistent judgments. Those are the policy considerations which underlie the jurisdiction of the court over a defendant who is a necessary or proper party to those proceedings, and those same policy factors are clearly important factors to take into account in deciding which is the most appropriate and convenient forum for the trial.

[202]The policy factors identified in this passage were clearly important policy factors in the specific circumstances of VTB Bank v Parline. Applying AK Investments, however, I do not think that there can be a general presumption that they warrant the conclusion that England is the most appropriate and convenient forum for the trial: see the citation by Lord Collins in paragraph 73 of what was said by Lloyd LJ in The Goldean Mariner. Nor does the judgment in VTB Bank v Parline suggest this. Moreover, even assuming that the “necessary or proper test” has been satisfied, the extent of duplication, and concomitant waste of time and costs, may vary from case to case, with greater or lesser importance in consequence. The same is true as regards the significance of such danger as may exist of inconsistent judgments.

[203]As regards route A to gateway (3), I assume for present purposes that (contrary to my conclusion in section D3 above) the claim against UBR and that against Just and the 2012 guarantors involve the same investigation. Even so, it is plainly the case that the vast majority of the necessary investigative work will involve looking into matters which may affect the claim against UBR and which are utterly irrelevant to the claim against Just and the 2012 guarantors. Thus policy factors concerning duplication and waste of resources would not make England the appropriate forum. As regards inconsistent judgments, the judgment of a Mongolian court on whether UBR was in breach of contract is unlikely to have any bearing upon, or to be inconsistent with, the English court’s judgment in the claim against Just and the 2012 guarantors. When these conclusions are combined with my conclusions in section E3 above, even if the Mongolian exclusive jurisdiction clause did not apply, my overall conclusion (subject only to consideration of factors discussed in section E5 below) would be that England is not the most appropriate and convenient forum for the trial.

[204]As to route B, I assume for present purposes that (contrary to my conclusion in section D4 above) the mere fact that the particulars of claim assert procurement by Mr Batkhuu of breaches of the UBR acknowledgement entitles Standard Bank to rely on gateway (3). Even so, it remains the case, for the reasons given in section D4 above, that it is unnecessary in the English proceedings against Mr Batkhuu to inquire into whether he procured breaches of contract by UBR. Conducting such an inquiry would be an obvious waste of time to the detriment of other court users. I would expect the English court, applying the overriding objective, to refuse to allow the time of the court to be taken up with such an investigation. In the absence of such an investigation by the English court the position as regards whether England will be the appropriate forum will be identical to that under route A. Again, in my view, when these conclusions are combined with my conclusions in section E3 above, my overall conclusion (subject only to section E5 below) would be that England is not the most appropriate and convenient forum for the trial.

[205]Standard Bank relied on paragraphs 10 and 16 of Leggatt J’s judgment: 10. There is no reason why the claimant should be expected or required to relinquish that right [the right to sue defendants based in England] in order to avoid duplication of proceedings. Rather, it seems to me that the existence of that right and the fact that it is being exercised is the starting point and the background against which I ought to consider the question of whether England is also the appropriate forum for the claim against the second defendant. … 16. Furthermore, the question is not, as I said earlier: is Russia or England the more appropriate place for the claim against the second defendant being tried, other things being equal? The real question is whether it is more appropriate to have that claim tried in Russia in addition to the claim against the other defendants in England raising all the same factual and legal issues. It seems to me that the answer to that question is clearly no.

[206]The points made in these paragraphs are fact-specific. In the present case I take account of Standard Bank’s ability to serve Just and the 2012 guarantors here, and I take account of the fact that they sought and gained permission to serve Mr Batkhuu here. It remains the case however, that the present circumstances differ from what is contemplated in paragraph 16 of Leggatt J’s judgment. As explained above, the two claims do not come close to raising “all the same factual and legal issues”.

[207]In a second supplemental note emailed on 10 June 2014 Standard Bank drew attention to a recent judgment of Males J in Standard Bank Plc v EFAD Real Estate Company

[2014] EWHC 1834 (Comm)

. It was said that in that action the anchor defendant (D1) had not acknowledged service of the claim form, with the result that the scope of any trial against the anchor defendant was unclear. Standard Bank noted that at paragraphs 58 and 59 of his judgment Males J considered this factor to be “irrelevant”. As UBR pointed out on 11 June 2014, however, the facts of that case were different in at least 3 major respects from those in the present case. For present purposes these differences are such that I do not gain assistance from the observations made in paragraphs 58 and 59. I deal in section G below with a different aspect of what was said by Males J in paragraph 59.

[208]There is an additional point to mention. It was not argued, and I have not relied upon in reaching my conclusions above. The additional point is that to my mind Mr Joseph’s submissions under this head ran counter, not only to what was said by Lord Collins in AK Investments, but also to observations by Christopher Clarke J in JSC BTA Bank v Granton Trade

[2011] 2 All ER 542

. At paragraph 28 of his judgment in that case Christopher Clarke J discussed the court’s approach to the requirement that England be the proper forum. In that regard he was concerned with a gateway (3) case, and was pressed with an observation by Blackburne J in Pacific International Sports Clubs Ltd v Soccer Marketing International Ltd

[2009] EWHC 1839 (Ch)

at 111 that the interests of justice would not be served by “allowing the tail to wag the dog”. In paragraph 28 Christopher Clarke J said this: 28. … A decision that permission should be granted to serve the protagonist out of the jurisdiction because the minor player is domiciled within the jurisdiction would indeed allow the tail to wag the dog. But if the anchor defendant is the protagonist a decision to allow a minor player to be served outside the jurisdiction may be entirely appropriate. That would be, to continue the metaphor, to allow the dog to wag the tail. Just as it may make little sense to have the venue determined by where the claim against the most insignificant player will be heard, so it may make little sense to have the venue where the most significant will be sued passed over in favour of another jurisdiction to whose jurisdiction a lesser player is subject. I do not mean thereby to suggest that whether or not jurisdiction should be exercised against a foreign defendant is necessarily determined by whether the anchor defendant, or the defendant sought to be joined, fits into some particular descriptive category ("major/minor"; "principal/secondary"); only that a decision as to appropriate forum must necessarily take account of the relative importance in the case of different defendants and particularly those against whom proceedings in England are practically bound to continue.

[209]Christopher Clarke J in the last sentence quoted above was at pains to stress that categorisation of defendants would not necessarily determine whether or not jurisdiction should be exercised. Nor did he say that the relative importance of different defendants would necessarily determine whether or not jurisdiction should be exercised. It is always for the court to assess the importance of particular factors in the circumstances of the case. The notion of “the tail wagging the dog” is a striking metaphor often used by advocates. It has been adopted by judges at the highest level in the United States of America: see Priester, “The Canine Metaphor and the Future of Sentencing Reform: Dogs, Tails, and the Constitutional Law of Wagging” (2007) SMU Law Review61 (1). In the present case, however, I do not think it is particularly helpful to try to characterise any particular individual or factor as being the tail or the dog. As noted in section D4 above, the real point underneath the metaphor adopted by Mr Toledano concerns the lack of any practical value, as regards the claim against Mr Batkhuu, of an inquiry into whether he induced breaches of contract by UBR.

E5. Criticisms of Mongolia

[210]Standard Bank expressed concerns about the procedure that would be adopted by the Mongolian court if that court were to determine their claims against UBR, and about what they described as the “viability of court proceedings in Mongolia.”

[211]As to procedure, Standard Bank noted that their claim exceeded $33million in value, and would not be allocated to a specialist commercial court. There would be no automatic right of disclosure, trial would occur within sixty days without advance notice of witness evidence, and judgment would be given orally at the conclusion of the hearing or within seven days.

[212]Standard Bank added that in Mongolia “the claim would simply be examined under the UBR supply contract”, referring to “the manner in which the problem is addressed by [Ms] Temuulen.” For reasons given in section C, however, I conclude that under Mongolian law there is a real prospect that Standard Bank’s claim under the UBR acknowledgement will succeed. Indeed, it is only upon the basis that there is such a real prospect that any consideration needs to be given to the question of which court would be the proper forum. As to whether Standard Bank will indeed succeed in showing that it has a claim under the UBR acknowledgement, that is a matter of Mongolian law which is entirely apt to be determined by the Mongolian court.

[213]Questions of disclosure are properly a matter for that court to consider. In the light of the work that has been done already on the present case, a trial occurring within sixty days and without advance notice of witness evidence does not appear to me to involve a serious risk of injustice to Standard Bank. I note in that regard that until relatively recently trials in England took place without advance notice of witness evidence. I simply do not understand why the giving of judgment orally at the conclusion of the hearing, or within seven days, can conceivably be considered to involve any injustice.

[214]The concerns about the “viability of court proceedings in Mongolia” are said to arise for three reasons. The first is that UBR is “an emanation of the Mongolian state which operates a strategic railway infrastructure”. The second concerns a visit by “senior police inspectors of the Economic Crime Division” to the Ulaanbaatar office of Standard Bank’s Mongolian counsel on 15 August 2013. Items that they removed from the premises included copies of privileged legal advice prepared for Standard Bank. These documents then came into the possession of EMC, and EMC has refused to explain how that came about. The third matter is that there is a background of “well publicised and internationally acknowledged concerns over judicial independence in Mongolia.”

[215]It is well established that any contention in this court to the effect that there will be a real risk of injustice in a foreign court must be supported by cogent evidence. As is pointed out by UBR, the present case cannot be compared with those rare cases where the court has been persuaded that there is such a risk of injustice. What happened in relation to privileged material seized on 13 August 2013 appears to be no more than an isolated incident. UBR has put forward uncontradicted evidence that it is separate from, and has its own differences with, the Mongolian state. Ms Temuulen has described recent reforms in Mongolia in Temuulen 3, and her evidence in that regard has not been challenged. I do not regard the material relied upon by Standard Bank as capable of constituting cogent evidence of the kind that would be required to show a risk of injustice.

E6. Proper forum: conclusion

[216]Thus far I have examined four different groups of factors: the Mongolian exclusive jurisdiction clause in section E2, factors commonly regarded as relevant to identification of the natural forum in section E3, the gateway (3) factors in section E4, and criticisms of Mongolia in section E5. My conclusion in relation to each of them is favourable to UBR.

[217]At the hearing the two sides advanced contrasting cases as to how the court should go about balancing the various factors. I propose to deal with only one of the disputes which arose in that regard. I approach the question whether England is the proper forum by applying the principles identified by the House of Lords in Spiliada Maritime Corporation Appellants v Cansulex Ltd [1987] A.C. 460 at 481. As regards comments in that case that service out of the jurisdiction is “exorbitant” and “extraordinary” Mr Joseph noted that Lord Sumption JSC in Abela v Baadarani [2013] 1 W.L.R. 2043 at [53] said that it should no longer be necessary to resort to muscular presumptions against service out which are implicit in adjectives like ‘exorbitant’. Lord Sumption, however, was not in that case dealing with the “necessary or proper party” gateway, nor was he addressing the particular features identified by Lord Collins when describing that gateway as anomalous. My understanding of the Supreme Court decision in Abela is that it is not intended to cast doubt on what was said by Lord Collins in AK Investments. It will be apparent from earlier sections of this judgment that I have proceeded on the basis of that understanding. That is not to say, however, that my decision would be any different if I were to have put out of consideration the anomalous features of gateway (3) and ignored the warnings given in so many cases in that regard. The present case is one where in any event the factors pointing to Mongolia as the proper forum are overwhelming.

[218]My findings in the present case have the consequence that, if they are right, arguments as to how the court should structure its approach to the “proper forum” hurdle cannot conceivably affect the outcome. It does not seem to me desirable in the circumstances of the present case to go beyond the observations I have made in the preceding paragraph. I consider that if other rival contentions are to be resolved, it is preferable that they be resolved in a case where they will affect the overall conclusion. F. Standard Bank’s breach of duty to the court

[219]This aspect of the case concerns what has been described as a “golden rule”: those who seek relief from the court without notice to the other side must disclose to the court all matters relevant to the exercise of the court’s discretion. The rule was discussed by the Court of Appeal in Knauf UK Gmbh v British Gypsum Ltd

[2001] EWCA Civ 1570

at [62]-[71]. The Court of Appeal identified additional essential principles in paragraph [65]. For convenience I summarise them as involving four propositions, and I add a fifth proposition derived from paragraphs [70] and [71]:(1) Failure to observe the rule entitles the court to discharge the order obtained even if the circumstances would otherwise justify the grant of the relief which had been obtained without notice;

(2) A due sense of proportion must be maintained between, on the one hand, marking the court’s displeasure at the non-disclosure and, on the other hand, doing justice between the litigants;

(3) For these purposes the degree of any culpability on the part of the applicant or of any prejudice on the part of the respondent are relevant to the court’s discretion when deciding what should be done in the light of the non-disclosure;

(4) A balance must be maintained so that the without notice applicant’s “heavy duty of candour and care” is not undermined, without giving respondents who lack any substantial merits an easy escape route from their difficulties;

(5) Where a without notice order is designed to affect and does affect the jurisdiction or potential jurisdiction of the English court in respect of foreign parties, it is absolutely necessary to bring to the court’s attention the possible existence of a possible jurisdiction clause in favour of a foreign jurisdiction. Nothing else would vindicate the “heavy duty of candour and care”. It is for the court, not for the parties, to decide whether the possible existence of such a clause should affect the court’s decision, for otherwise the court is effectively taking that decision blindfolded.

[220]UBR’s evidence in support of the set aside application noted in this regard that Yates 1 had not clearly drawn the court’s attention to the jurisdiction agreement at clause 11.1 of the UBR supply contract. In their skeleton argument for the hearing before me Standard Bank acknowledged in this respect that “the potential argument now relied upon by UBR should have been drawn to the court’s attention.”

[221]Having acknowledged that Standard Bank had not done what it should have done, Standard Bank’s skeleton argument went on to say that the proper context for this issue included that “the clause does not bite on the actual claim.” It will be apparent from section E2 of this judgment that in my view this assertion was overconfident. But even if I had held that UBR were not entitled to rely upon the Mongolian exclusive jurisdiction clause, mere confidence on the part of Standard Bank in such an outcome would not provide an exculpatory “context” for non-disclosure of the existence of a potentially important issue. On the contrary, it suggests that what is no better than a nonchalant approach has been taken to a very serious matter.

[222]In those circumstances it is hardly surprising that Mr Toledano described what was said in Standard Bank’s skeleton argument as “a rather grudging apology”. He added that Standard Bank had wholly failed to explain their conduct in this regard.

[223]The opportunity arose in oral submissions for Standard Bank to seek to remedy the deficiencies in what was said in the skeleton argument. What happened, however, was that Mr Joseph began by saying this: We did not mean for there to me a mealy mouthed apology. We obviously apologise if in any way we inadvertently misled the court but we don’t accept we did, but we obviously unreservedly do apologise.

[224]It seemed to me that this was, at best, a qualified apology. When I asked whether it was unqualified, Mr Joseph replied that he did not believe there had been a failure to give the full disclosure that the court would expect. He then explained that the reason for qualifying the apology was that Yates 1 had properly reflected the position which was advanced by UBR. It had set out what UBR had said in correspondence, which had not included any reliance upon the Mongolian exclusive jurisdiction clause. This, to my mind, was an unsound point. One would only expect UBR to have relied in correspondence on the Mongolian exclusive jurisdiction clause if UBR had been told that Standard Bank intended to bring proceedings somewhere other than in Mongolia. After checking the position, Mr Joseph acknowledged that Standard Bank had not told UBR that it intended to sue UBR in London, and that it was perfectly valid to say that in those circumstances one would not have expected a point to be taken by UBR relying upon the exclusive jurisdiction clause.

[225]So far as the correspondence between Standard Bank and UBR was concerned, Mr Joseph summarised it in this way: The point they [UBR] are advancing is not: we do have relations with you but under the supply agreement. They say: we have no civil law relations with you at all, even under the supply agreement.

[226]At best, it can be said on Standard Bank’s behalf that UBR had not drawn their attention to the Mongolian exclusive jurisdiction clause. But it was not UBR’s task to do this. It was Standard Bank’s task to consider what objections might be advanced by UBR to the proposal that the court give permission for proceedings against UBR to be brought in London. Standard Bank could hardly think that UBR had made whatever points needed to be made in correspondence, when there had been no suggestion in correspondence that Standard Bank intended to bring proceedings in London.

[227]The next point taken by Mr Joseph was to repeat the assertion in the skeleton argument that a relevant factor was that the Mongolian exclusive jurisdiction clause did not bite. I have already explained why that is no answer: it ignores what I have described as proposition (5) in my summary of the principles described in Knauf.

[228]Mr Joseph then relied upon what had been said by Lightman J in Albon v Naza Motor Trading Sdn Bhd

[2007] EWHC 9 (Ch)

;

[2007] 1WLR 2489

. At paragraph 17 Lightman J said: The court exercises what has been variously referred to as “disciplinary control” and a “regulatory power” in respect of non-disclosure… for this purpose the court is concerned whether it is satisfied that the claim falls within the letter and spirit of the gateway relied on and that there is a serious issue to be tried, but it is not further concerned with the merits of the case and who is likely to succeed in the action. Where there have been deficiencies in the evidence, the form of application or presentation on the application for permission, the court is not for that reason obliged to discharge the order granting permission. A wrongful non-disclosure (at any rate if not deliberate), though a serious matter, will not automatically require the court to set aside the order granting permission if such a sanction is disproportionate or would be contrary to the overriding objective of dealing with the case justly: a costs or some other sanction may alone be appropriate. …

[229]I accept that wrongful non-disclosure, if not deliberate, does not automatically require the court to set aside the order granting permission. I must apply the overriding objective, and, as emphasised in Knauf, strike a balance which ensures that the case is dealt with justly. The difficulty for Standard Bank in the present case is that it has not lodged any evidence to explain how the non-disclosure in the present case came about. Before deciding whether to make the permission application, there was a need to investigate whether clause 11.1 might arguably be an exclusive jurisdiction clause applicable to a claim under the UBR acknowledgement. The need for this would have been apparent to any careful lawyer examining the key agreements. I infer from the evidence that Standard Bank took a deliberate decision that the evidence in support of the permission application should not draw attention to the jurisdiction clause in the UBR supply contract and the fact that under Mongolian law it constituted an exclusive jurisdiction clause. It is vital that the judge who is asked to deal with these matters on paper is not left in ignorance of a key point of this kind. This was a very serious breach of the golden rule. In the circumstances, it seems to me that justice requires that I should deprive Standard Bank of the benefit which it obtained in this way.

[230]I add that it has not been said that there was a failure by Standard Bank to consider the question whether UBR might wish to rely upon the jurisdiction clause. Nor has it been said that Standard Bank did consider this but upon doing so there was a failure to appreciate that there might be an arguable basis for relying upon the jurisdiction clause. Nor has it been said that there was a failure to appreciate that Standard Bank had to apply its own mind to this question, and not merely assume that any point arising in this regard would have been raised by UBR in correspondence. If there had been a recognition of the need to take proper care on such an important matter, and proper care had indeed been taken, then it is difficult to see how any such failures could have occurred. I have no reason to think that there were any such failures. However I observe that if there were any such failures it seems to me that in the circumstances of the present case they, too, would have involved such a serious breach of the golden rule as to require that I should deprive Standard Bank of the benefit which it obtained in this way.

[231]For all these reasons, even if my decision on other matters had been in Standard Bank’s favour, I would have allowed the set aside application on this ground alone. G. Conclusion

[232]For the reasons given above, while Standard Bank have shown that their pleaded claim against UBR raises a serious issue to be tried, that claim is not within gateway (3). It follows that I must grant UBR’s set aside application. Moreover, even if the pleaded claim had fallen within gateway (3), UBR’s set aside application would have succeeded in any event because the grant of permission was contrary to the exclusive jurisdiction clause in the UBR supply contract, because even if that had not been the case England would not have been the proper forum, and because even if England were the proper forum Standard Bank’s failure to disclose the potential argument in relation to the exclusive jurisdiction clause was so serious as to require that Standard Bank be deprived of the benefit it had obtained by this non disclosure.

[233]I have addressed in section E4 above, in relation to a potential aspect of the case concerning uncertainty as to whether the claim against an anchor defendant will proceed, the second supplemental note emailed by Standard Bank on 10 June 2014. This was the note which drew attention to paragraphs 58 and 59 in the judgment of Males J in Standard Bank Plc v EFAD Real Estate Company. The noteadded that in those paragraphs Males J had proceeded on the basis of a proposition that the issue of appropriate forum falls to be decided at the time when the claimant sought permission to serve the claim form out of the jurisdiction. It was not suggested in the second supplemental note that this proposition affected any other aspects of the present case, and there has been no suggestion that on any such aspects the matters argued before me involved a material change in circumstances since the permission application was made or since permission was granted. I have already held in section E4 that the factual differences are so great that the decision of Males J does not assist me on the aspect raised in the second supplemental note. In earlier passages in this judgment I have made reference to the position at the time the permission application was made and at the time when it was granted. I should not be taken, however, to have decided any issue as to the relevant time by reference to which particular matters may fall to be considered. No such issue was argued before me.

Cited in 1 later judgment

CH Offshore Ltd v PDV Marina SA & Ors 2015