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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2014] EWCA Civ 1295 (09 October 2014) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2014/1295.html Cite as: [2015] CP Rep 3, [2014] 2 CLC 569, [2015] 1 WLR 2309, [2015] WLR 2309, [2015] 1 All ER (Comm) 97, [2014] WLR(D) 417, [2014] EWCA Civ 1295

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION, COMMERCIAL COURT
Mr Justice Hamblen
[2012] EWHC 79 (Comm)

		Royal Courts of Justice Strand, London, WC2A 2LL
		9th October 2014

Lord Justice Tomlinson :

1. This is an appeal against an Order made by Hamblen J in the Commercial Court on 13 January 2012 requiring the Appellant to provide fortification of its cross-undertaking in damages. It raises for the first time at appellate level the question what is the appropriate test to apply when determining whether such fortification should be provided. The principal litigation in which this interlocutory order was made is at an end. The Appellant was largely successful in the litigation and will recover 90% of its reasonable costs of fortifying its cross-undertaking pursuant to an order made by the trial judge, Gloster LJ as she had by then become, on 17 July 2013. The appeal is thus very largely academic, although the Appellant contends that a decision in its favour would entitle it to invite Gloster LJ to revisit that order and also entitle it to pursue an application that certain other costs to which it is accepted it is entitled, including the costs of this appeal incurred in the period up to October 2013, should be assessed on the indemnity rather than on the standard basis. Since the court has already determined that the appeal must fail on the three grounds for which permission to appeal has been given, I do not need to dwell further on the possible costs consequences of a decision in the Appellant's favour. I merely assume that those possible consequences represent a sufficient interest in the Appellant to entitle it to pursue this appeal. These are my reasons for concluding that the appeal should be dismissed.
2. The Appellant ("EVP") is a British Virgin Islands company of which a Nigerian, Mr Obi, was at all material times the sole director and shareholder. It operated in an entrepreneurial capacity in relation to transaction and exploration opportunities within the global oil and gas industry, with special reference to Nigeria. Mr Obi had many years of experience acting for and advising the Federal Government of Nigeria, in particular in relation to, and in connection with, privatisation transactions.
3. The Respondent ("Malabu") is a Nigerian company. Its principal witness at trial was Chief Etete who was at all material times a consultant to the company. In April 1998, at a time when Chief Etete was the Minister of Petroleum Reserves in the Government of General Sani Abacha, the Respondent was awarded by the Federal Government a 100% ownership interest in an oil prospecting licence for Block 245, an oilfield located in the Eastern Niger Delta in the offshore territorial waters of Nigeria ("the OPL Assets").
4. In the underlying litigation EVP claimed that, pursuant to an oral variation of a written agreement concluded between EVP and Malabu in about January 2010, ("the EVP Exclusivity Agreement"), Malabu agreed to pay a minimum figure of US$200 million to EVP in respect of its fees for services provided in connection with the sale of the OPL Assets. In the alternative EVP claimed the like or some other sum by way of quantum meruit.
5. The transaction which EVP claimed gave rise to its right to commission was a settlement agreement, called a "Resolution Agreement", dated 29 April 2011 ("the First Resolution Agreement") and made between Malabu and the Federal Government of Nigeria. Under that agreement Malabu was due to be paid US$1,092,040,000 by the Federal Government of Nigeria in return for the surrender of the OPL Assets. Under a related agreement ("the Second Resolution Agreement") made between the Federal Government of Nigeria and affiliate companies of Shell and the Italian oil company ENI SpA it was agreed that the Federal Government of Nigeria would issue a fresh oil-prospecting licence in respect of Block 245 to the affiliate companies in return for a signature bonus payment of US$207,960,000 and the payment of a sum of the same value as that paid under the First Resolution Agreement.
6. Payments of at least US$1,092,040,000 were made by the Shell and ENI companies into an account held by the Federal Government of Nigeria with JP Morgan Chase Bank NA in London.
7. EVP claimed that it was wrongly excluded from the transaction between Malabu and the Federal Government of Nigeria, and the discussions and agreements leading up to it, having previously worked pursuant to the EVP Exclusivity Agreement to source potential purchasers of the OPL Assets, including the ENI interests. Malabu contended that EVP had done nothing to source either the ENI interests or any other potential purchaser and denied the claim in its entirety.
8. On 3 July 2011 EVP obtained, without notice, from Griffith Williams J, a Worldwide Freezing Order in respect of the assets of Malabu up to the value of US$215 million. There were (at least) three further hearings in July 2011 before David Steel J. The upshot of those hearings was that:-

i) The Freezing Order was continued subject to various modifications;

ii) An arrangement was sanctioned whereby the Federal Government of Nigeria could give a payment instruction to JP Morgan for US$215 million to be paid into court with the balance of US$801,450,000 being paid to Malabu;

iii) EVP was required to fortify its cross-undertaking in damages by means of a written guarantee in favour of Malabu in the sum of US$150,000, a level which reflected the fact that the sum of US$215 million had not yet been paid into court; and

iv) Malabu had liberty to apply for an increase in the amount by which EVP should fortify its cross-undertaking in the event that JP Morgan paid US$215 million into court on the instructions of the Federal Government of Nigeria.

9. By August 2011 US$215 million had been paid into court by JP Morgan out of the funds frozen by the Freezing Order.
10. Malabu's application for further fortification of the cross-undertaking came before Hamblen J at the first CMC in the action on 13 January 2012. The money in court attracted interest at the rate of 0.15% per annum. Malabu said that it was entitled to further fortification because of the losses being caused to it by being kept from the use of the substantial sum of money in court. It put its claim on the basis of the likely borrowing cost to it if it had borrowed the sum of US$215 million on the international market from a bank in the United States. It submitted that those costs could not be less than the US Prime Rate, then 3.25%. US Prime Rate was the rate at which lending would be provided to the most creditworthy companies.
11. Importantly, the evidence before the judge showed that:-

i) the cost of borrowing in Nigeria would have been higher than 3.25%; and

ii) the deposit interest rates which would have been available to Malabu had it deposited US$215 million in a Nigerian bank in Nigeria would have been considerably higher than 3.25%.

12. It was obvious that if EVP lost its claim for US$200 million and was called upon to pay pursuant to its cross-undertaking, the extent to which Malabu would be out of pocket was, theoretically, in the light of the principal sums involved, on any view considerable, running into millions of dollars. It did not appear to David Steel J that EVP was good for money of this order, and he gave a clear indication that it should produce its accounts in order to substantiate its financial position. No evidence or information substantiating EVP's financial position was produced before Hamblen J and there was before him simply no evidence whatever that EVP would be able to meet its cross-undertaking if called upon to do so.
13. It was contended by Malabu before Hamblen J that it had a good arguable case to be entitled to fortification pursuant to the principles set out by Mr Michael Briggs QC, as he then was, sitting as a Deputy Judge of the Chancery Division in Harley Street Capital v Tchigirinski [2005] EWHC 2471 (Ch). Mr Briggs identified three requirements which a defendant seeking fortification must in such circumstances satisfy. Those requirements are, first, that the court has made an intelligent estimate of the likely amount of loss which might result to a defendant by reason of the injunction; secondly, that the applicant for fortification has shown a sufficient level of risk of loss to require fortification; and, thirdly, that the contemplated loss would be caused by the grant of the injunction. Mr Briggs derived those requirements in turn from the judgments of Millett J and Mann J in Re: DPR Futures Limited [1989] 1 WLR 778 and Sinclair Investment Holdings v Cushnie [2004] EWHC 218 (Ch) respectively. He cited the following passage from Mann J's judgment:-

"24. I have already identified the evidence in this case which indicates that the cross-undertaking is of very uncertain value, but that does not automatically mean that fortification is required. In the light of the authorities just cited, it is both appropriate and necessary for me to consider the extent to which a risk of loss has been shown. In many cases the fact that there is a risk of loss will be obvious merely from the general situation, and while it may not be possible to put anything like a precise figure on the loss, the court, will if necessary, do what it can on the evidence before it to reach an appropriate figure. The courts are well accustomed to assessing the appropriate value to be given to things whose valuation is difficult. In some cases it will be possible to make a more precise or confident assessment than in others. The mere absence of particularised evidence does not mean that there is no evidence of a risk of loss. [Counsel] submitted that what he had to show was a risk of loss; any more refined questions of causation and likelihood would be appropriate for the enquiry (if any) should the cross-undertaking be called upon. I agree with that as a general approach. By and large it will be unnecessary and inappropriate for a court to go into a detailed and prolonged assessment of difficult questions on causation on applications for interim relief, not least because it might become entirely academic.

25. However, that leaves open the question of a threshold which has to be crossed by a Respondent in establishing that there is a sufficient risk of loss. If it is not sufficiently apparent that there is a sufficient risk of loss, then while that is no reason for not extracting a cross-undertaking, it would be a reason for not requiring fortification. It seems to me impossible to specify any formula for or definition of that level of risk. All that can be said is that the court must be satisfied that there is a sufficient level of risk to require fortification in all the circumstances. That will be a question of judgment in every case where it arises (though there will be large numbers in which it will not have to be the subject of any particularly anxious enquiry.)"

14. Expanding on the causation aspect, Mr Briggs said this:-

"20. I was referred to two authorities on this causation issue. In Air Express v Ansit [sic, in fact Ansett Transport Industries] [1981] 146 CLR 249, the High Court of Australia decided that a claimant for damages for loss under a cross-undertaking had to show that the making of the order was a cause without which the damage would not have been suffered. That was a case in which the rival competitor for having caused the relevant loss was, as here, the very existence of the proceedings in which the injunction was obtained. That test is, in effect, if I may be excused the Latin, a causa sine qua non test.

21. The same court also imposed a foreseeability test. In Tharros Shipping Co Ltd v Bias Shipping Limited [1994] 1 Lloyds LR 577, Waller J affirmed both those requirements as part of English law, and at page 581 continued as follows:

"[The court] retains a discretion not to enforce the undertaking if it considers that the conduct of the defendant in relation to the obtaining or continuing of the injunction or the enforcement of the undertaking makes it inequitable to do so, but if the undertaking is enforced the measure of the damages payable under it is not discretionary. It is assessed on an enquiry into damages at which principles to be applied are fixed and clear. The assessment is made upon the same basis as that upon which damages for breach of contract would be assessed if the undertaking had been a contract between the plaintiff and the defendant that the plaintiff would not prevent the defendant from doing that which he was restrained from doing by the terms of the injunction: see Smith v Day (1882) 21 ChD 421, per Brett LJ at p.427."

22. That analysis strongly suggests to me that it is loss caused by the preventative or, as the case may be, coercive effect of the injunction that is recoverable under the cross-undertaking."

15. Malabu submitted that:-

i) the US$215 million in court was money which belonged to it and it suffered a loss by being prevented by the injunction from exercising the rights of an owner over the money; and

ii) the loss should be assessed on a basis which reflected an interest rate which would be payable to borrow the money over the time it was the subject of the injunction.

16. EVP contended that no additional fortification should be ordered or, at the very least, no additional fortification should be ordered without there being disclosure by Malabu explaining what had been done with the US$800 million-odd which had been paid to it and, in addition, explaining why there had been difficulties in the banking arrangements to secure the payment of US$1 billion-odd due under the First Resolution Agreement. The evidence suggested that foreign banks had declined to participate in the originally proposed banking arrangements because of "compliance difficulties". EVP also contended:-

i) that it might be that the payment to Malabu was required to be paid on to a third party, then identified as a shadowy entity called Petrol Service Co Ltd, a company, as David Steel J observed, whose "name, existence and purpose remain[ed] as obscure at the end of th[e] hearing as it [had] at the beginning". EVP's point was that if, as seemed possible, Malabu was under an existing liability to pay the US$215 million to a third party upon receipt, then there would be no basis for its claim founded on the cost of borrowing, or indeed on deposit interest forgone.

ii) that since Malabu had the use, so it would appear, of US$800 million, there was no need for it to borrow a further US$215 million; and

iii) that there was no evidence that Malabu actually needed to or would borrow US$215 million to cover the position whilst the money had been paid into court.

17. Hamblen J applied the principles set out by Mr Briggs. Indeed, it does not appear to have been suggested to him that those principles were in any way inappropriate.
18. As to the first principle, Hamblen J said this:-

"20. Having regard to those three principles, I consider first the question of whether it is possible to make an intelligent estimate of the likely amount of the loss. In this case there is no particular difficulty about that. This is not a complex damages claim involving intricate issues of causation and remoteness. It is a straightforward claim by the defendant for the time value of money as a consequence of being kept from the use of the sum of US$215 million which has been paid into court. There may be issues as to what the appropriate rate of interest may be, but the court is well used to dealing with estimates and quantifications reflecting the loss of the use of money, which is the nature of the claim here."

19. Hamblen J then turned to what he described as probably the central issue, whether it had been shown that there was a sufficient level of risk of loss to require fortification. EVP did not appear to be good for the money. EVP faced difficulties in presenting its substantive claim for commission, but had satisfied David Steel J that it had a good arguable case, or at least a sufficiently good arguable case, which was all that was required to support an application for a Freezing Order up to the level of US$215 million. So, as Hamblen J concluded, at paragraph 22 of his judgment, "it has been shown to the satisfaction of the court that the claimant has a sufficiently good case for interim relief, but it is clearly on the evidence before the court a case where the defendant has a reasonable prospect of succeeding at the end of the day". If the claim did fail then prima facie EVP would have a liability on the cross-undertaking. Hamblen J continued, at paragraph 23 of his judgment:-

"As matters stand the full sum of US$1,000,092,000 was due to be paid to the defendant. As a result of the order of the court US$215 million was paid into court and only the balance paid to the defendant. On the face of it, had it not been for the court order, that further sum would have been paid to the defendant and it has prima facie therefore lost the use of that money and would be entitled to make a claim for compensation for the loss of the use of the money."

20. Dealing with the arguments which I have summarised at paragraph 16 above, Hamblen J concluded that whatever the position might be in relation to earlier banking instructions, US$215 million had now been paid into court and the basis of the claim was that the payment of the money into court rather than to Malabu resulted in a loss to Malabu. As to the other points:-

i) Even if it be the case that Malabu were under a liability to pass on the money to a third party, the prima facie effect of the Freezing Order would be that Malabu would be required to borrow that money elsewhere to satisfy the liability. "In my judgment the defendant has at least a good arguable case that even if there be some arrangement or obligation in relation to the onward transfer of the payment, the mere fact that the payment is one which was required to be made to it is sufficient to ground a prima facie claim for loss of use of the money". (Judgment paragraph 27).

ii) It was not correct to suggest that a rich claimant could not recover interest for loss of the use of his money;

iii) The normal measure of compensation for the loss of the use of money is simply an interest claim based on the usual cost of borrowing an equivalent sum, and there is no necessity to require or to provide specific evidence in relation to actual arrangements or to show that Malabu actually needed to or would borrow US$215 million to cover the position whilst these monies had been paid into court.

21. Turning to causation, the test was a causa sine qua non test. Where the claim is for loss resulting from not having received money which would otherwise have been paid to the party in question as a result of the money being paid into court, there was clear linkage between the payment into court and the loss claimed.
22. Hamblen J stressed that it is undesirable that the court should on an application of this nature be drawn into a mini-trial or satellite litigation. As he saw it:-

"The position is that the claimant has security for its claim on the basis of having shown the court that it has a good arguable case. If, as I find to be the position, the defendant can show that it too has a good arguable case that it will suffer an interest loss if it succeeds in this action and enforces the cross-undertaking, then it should equally be protected." (Judgment paragraph 31)

23. This was therefore a case in which in the exercise of his discretion Hamblen J concluded that fortification of the undertaking was required, as had been the clear view formed by David Steel J at the earlier hearings.
24. As to the amount of fortification, the appropriate rate for an international company operating in US dollars would be US Prime Rate, the rate at which lending would be provided to the most creditworthy companies. On the authorities, in the normal case the appropriate rate of interest is one which reflects borrowing costs. "When the currency of the loss and currency of damages is US dollars then the Commercial Court will consider the cost of borrowing US dollars" – per Aikens J in Mamidoil-Jetoil Greek Petroleum Company v Okta Crude Oil Refinery AD [2003] 1 Lloyd's Rep 1 at page 42. Malabu had not been shown to be an active trading company but (a) that was irrelevant in a commercial dispute between commercial parties and (b) on the evidence the claim formulated by reference to borrowing rates was conservative, as the deposit rates available to Malabu would be higher than the borrowing rate said to be the appropriate yardstick.
25. Thus it was that Hamblen J decided that fortification was appropriately assessed on the basis of US Prime Rate of 3.25% per annum. An adjustment was made to reflect the fact that the sum in court attracted interest at 0.15% to which Malabu was entitled, and the judge also ordered repayment of the initial fortification in the sum of US$150,000.
26. It is against that decision that EVP appeals. In view of our conclusion that the appeal must fail the subsequent history is largely irrelevant. However I must sketch it out briefly.
27. The application for permission to appeal made to Rix LJ on 19 June 2012 was supplemented with an application to adduce fresh evidence to the effect that Malabu could not properly be regarded, as described by its counsel to Hamblen J, as an international oil company but was rather a mere conduit or moneybox to facilitate the distribution of unlawful and corrupt payments. Rix LJ took the view that this evidence, the introduction of which was not opposed, ought in the first instance to be presented in the Commercial Court in support of an application pursuant to CPR 3.1(7) to set aside that part of Hamblen J's Order which required fortification of the cross-undertaking. CPR 3.1(7) provides:-

"A power of the court under these Rules to make an order includes a power to vary or revoke the order."

Accordingly, Rix LJ adjourned the application for permission to appeal pending that application.

28. That application came before Field J in July 2012. On 17 July 2012 he gave judgment dismissing it – [2012] EWHC 2215 Comm. I have already borrowed certain passages from that judgment, without attribution, in my recital above of the issues which arise on this appeal. Field J described the application before him and the new evidence in support thereof in this way:-

"14. EVP sought permission to appeal Hamblen J's decision on fortification to the Court of Appeal. Its permission application was refused by the Court of Appeal on the papers but was renewed orally before Rix LJ. In the course of the renewed application, EVP referred to newly-acquired evidence said to support the contention that Malabu was simply a channel for unlawful and corrupt payments. The Court of Appeal was also told that EVP wished to argue that Hamblen J had been misled as to the status of Malabu. Putting it shortly for the moment, the contention was that Malabu had been presented as an international trading company, when in fact it was but a domestic Nigerian company which had only carried on business in respect of the two Resolution Agreements and had done no further business and was not intending to do any further business.

15. The new evidence consisted of press articles published on the world wide web in respect of an interim report from the Nigerian Economic and Financial Crimes Commission ("EFCC") to the effect that, immediately following the transfer of the US$800 odd million to Malabu, the funds were dispersed as follows: (i) US$336 million, to the account of Rocky Top Resources Limited ("RTR") with the Abuja CBD branch of the Keystone Bank, out of which US$165 million was transferred to various individuals; (ii) US$64 million to an account allegedly belonging to Chief Dan Etete, "the blacklisted principal of Malabu, who is a convicted criminal"; (iii) US$157 million to A Group Construction Co Ltd, said to be co-owned by Mr Abubakar Aliyu; (iv) US$180 million to Mega Tech Engr Co Ltd; (v) US$34 million to Imperial Union Limited and (vi) US$30 million to Novel Property and Development Limited (also said to be co-owned by Abubakar Aliyu). RTR was said to be owned by Mr Abubakar Aliyu who is described by EFCC sources as "Mr Corruption" and a front for Government Officials."

29. Directing himself by reference to the decision of this court in Tibbles v SIG plc [2012] 1 WLR 2591, Field J asked himself whether there had been a material change of circumstances since the making of the original order or whether the court making the original order had been misled.
30. The allegations made in the articles had been denied by Malabu and in particular by the Attorney General of the Federal Government of Nigeria whose statement was in evidence before the court. That statement contained a detailed explanation of the Federal Government's role in bringing about the two Resolution Agreements said to have triggered EVP's claim to commission. The Attorney General said that the allegation of "round tripping" levelled against the Federal Government – the routing of funds paid by the Federal Government to officials via a corporate vehicle – was without basis and could not be substantiated, having regard to the role the Federal Government had played as a mere facilitator of an amicable settlement between two disputing parties over a longstanding dispute, with obvious economic implications for the country as a whole.
31. The evidence which Field J had to consider consisted of on-line news articles which had appeared on the worldwide web. Field J concluded that it was extremely difficult to assess the cogency and accuracy of the unsubstantiated allegations there made. The EFCC Report said to be the source of the articles was not before the court. Field J considered that in order to determine whether the allegations had sufficient cogency, weight and accuracy to justify revocation of the order, the court would, in effect, have to conduct a mini-trial with disclosure and, possibly, live evidence from witnesses including very possibly the authors of the articles. Such a procedure had not, understandably, been requested by Mr Anthony Trace QC who appeared for EVP and the judge concluded that the allegations made in the articles, denied as they were by Malabu and by the Attorney General of the Federal Government, did not constitute a fundamental change of circumstances of the sort contemplated in the Tibbles decision.
32. Field J did conclude that Hamblen J had been inadvertently misled as to the status of Malabu. It was not a company actively operating internationally. It was however a company that could, hypothetically, have borrowed US dollars internationally from international banks prepared to lend US dollars. However the mischaracterisation of Malabu was not such as should lead to the revocation of the fortification order. As the new evidence alleging involvement in corrupt dealings had been found insufficient to lead to revocation of the order, the misdescription of Malabu could not be deployed with a view to submitting that the judge was deflected from concluding that Malabu was not more than a non-trading vehicle used simply for the channelling of money. Field J concluded:-

"29. Fourthly, it is said that there is no evidence that the defendant actually needs to or will borrow US$215 million to cover the position whilst these moneys have been paid into court. However, in my judgment that is not a necessary requirement of a claim for interest. There may be cases in which it is necessary to go into the particular arrangements made by the particular claimant, but that is usually where the claimant is seeking to claim an enhanced level of compensation. The normal measure of compensation for the loss of the use of money is simply an interest claim based on the usual cost of borrowing an equivalent sum, and there is no necessity to require or provide specific evidence in relation to actual arrangements. In those circumstances I am satisfied that the defendant can show that there is a sufficient risk of loss to required fortification."

33. On 11 October 2012 Rix LJ gave EVP permission to appeal the Order of Hamblen J, limited to the following questions:-

1) Whether Hamblen J applied the correct legal test for deciding whether fortification should be ordered in respect of a cross-undertaking in damages;

2) If he did apply the correct legal test, whether EVP should have been ordered to provide fortification; and

3) If fortification should have been ordered, whether Hamblen J assessed the amount of fortification correctly, in doing so by reference to a borrowing rate of interest.

Initially, on the ex parte application, Rix LJ directed that the hearing of the appeal be expedited so as to be heard before the trial listed for 26 November 2012, however after receiving submissions from Malabu on 22 October he set aside the order for expedition. In so doing Rix LJ observed:-

"I have considered the submissions forwarded to me. It seems to me better that the parties should concentrate their efforts on the forthcoming trial. That is a fixture, and its outcome, subject of course to any appeal, will determine the course of these proceedings. In the meantime the fortification has been provided. If Energy succeeds at trial, the appeal question drops away, and, even if Malabu appeals, any application for further fortification will have to be addressed in those new circumstances, which are not the circumstances of today. Similarly, if Energy fails, the question will become the different question of whether it is liable on its cross-undertaking in damages for which the fortification is but security. In any event, a great deal more will have been learned about the transactions at the root of this dispute and about the parties and their part in them. If, as Energy submits, a partial success or failure or an appeal from the trial judgment raises anew the question of further fortification, this appeal can be advanced, with expedition if necessary, but also with greater insight."

34. The trial took place in November and December 2012 with judgment delivered on 17 July 2013 – [2013] EWHC 2118 (Comm). In that judgment Gloster LJ rejected EVP's claim for US$200 million on the basis of an oral agreement or oral variation to the contract between EVP and Malabu. However, EVP succeeded on its alternative case for a quantum meruit and was awarded US$110.5 million plus interest. Gloster LJ ordered that the remainder of the sums in court be paid to Malabu. She also ordered Malabu to pay 90% of EVP's costs of the action on the indemnity basis. It is accepted that the cost to EVP of providing fortification of its cross-undertaking is comprised within this order. The question raised by the appeal had, in the language used by Rix LJ, all but dropped away. However both parties sought permission to appeal against the substantive judgment. In October 2013 it was agreed that the appeal should be adjourned until those applications had been finally determined. It was agreed that Malabu would pay EVP's recoverable costs of the appeal on the standard basis if its application to appeal the substantive judgment was refused.
35. On 26 March 2014 both parties' applications for permission to appeal the substantive judgment were finally rejected by Longmore LJ. Malabu accepted that it no longer had any realistic prospect of enforcing the cross-undertaking in damages and confirmed that it had no intention of seeking to do so.
36. Since April 2014 the date fixed for the hearing of this appeal has been 16/17 July 2014. Very shortly before that date, on 11 July 2014, EVP issued an application seeking permission to adduce fresh evidence and for an adjournment of the appeal in order that the fresh evidence could first be deployed before the Commercial Court in another application under CPR 3.1(7) to set aside the Order of Hamblen J requiring fortification of the cross-undertaking.
37. In fact EVP had applied on 26 June 2014 to the Deputy Master of Civil Appeals seeking an adjournment of the hearing of its appeal. That application was refused on 4 July 2014. Beyond the fact that thereafter EVP indulged in yet further delay before issuing its application, which in point of form invited the court to reconsider the decision of the Deputy Master, this aspect adds nothing to the history.
38. EVP's application of 11 July 2014 was supported by a witness statement of Mr William Boddy, a solicitor in the firm representing EVP. The fresh evidence on which EVP sought to rely was evidence obtained from Malabu at or very shortly before trial demonstrating what in fact happened to the US$801,540,000 paid to Malabu on or about 23 August 2011. That evidence was disclosed on 2 and 10 December 2012. Mr Boddy described it at paragraph 21 of his witness statement in this way:-

"The bank statements show that sums totalling circa US$800 million were received into Malabu's bank accounts on 24 August 2011 and rapidly dissipated in a number of transactions between 26 August 2011 and 6 September 2011. The bank statements and paragraphs 4 to 7 of Mr Munamuna's evidence reveal that:

21.1 Of the US$400 million deposited in Malabu's account with Keystone Bank:

21.1.1 Circa US$336 million was transferred to Rocky Top Resources Ltd, a company owned by Chief Etete; and

21.1.2 US$60 million was transferred to "a bureau de change for foreign trading undertaken by Chief Etete".

21.2 Of the circa US$401 million paid into Malabu's First Bank account:

21.2.1 US$157 million was transferred to A Group Construction Co. Ltd;

21.2.2 US$180 million was transferred to Mega Tech Engr. Co. Ltd;

21.2.3 Circa US$34 million was transferred to Imperial Union Ltd; and

21.2.4 US$30 million was transferred to Novel Property and Development Ltd."

39. It was therefore the contention of EVP that this evidence, presented at trial, almost entirely corroborated the press reports upon which EVP already had permission to rely on the appeal, but which had failed to satisfy Field J that it was appropriate to set aside Hamblen J's order.
40. EVP recognised that its application was made both late and very shortly before the date listed for the hearing of its substantive appeal. It put forward two reasons for its delay:

i) The agreement that the hearing of the appeal should await the outcome of the parties' respective applications for permission to appeal the substantive judgment; and

ii) Funding difficulties. Mr Boddy explained that his firm holds part of the judgment sum awarded to EVP in a designated client account with EVP's instruction to hold those funds on account of future work. In May 2014 a payment instruction from McGuireWoods to its bank, the Royal Bank of Scotland, in respect of this account was not followed. RBS had not been able to tell either McGuire Woods or EVP why it felt unable to comply with the instruction. The issue was unresolved.

41. Both the application to adduce fresh evidence and the application to adjourn were in my view quite hopeless. The problem in May 2014 provides no excuse for the failure to make an application to the Commercial Court under CPR 3.1(7), if that was thought appropriate, when the new evidence first came to light, either in December 2012 after the conclusion of the trial, or at the latest in July 2013 after judgment had been delivered. Thereafter the outstanding applications for permission to appeal represented no impediment to the application to the Commercial Court under CPR 3.1(7). For good measure, it is not even demonstrated that EVP would have encountered difficulty in paying McGuireWoods in April 2014 had it instructed them then to proceed in the light of the refusal of both parties' applications for permission to appeal. In fact EVP was apparently able in April 2014 to fund two ill-conceived applications. One was an attempt made by McGuireWoods and Counsel to resist before Burton J Malabu's application for payment out of the sums due to it pursuant to the judgment. The other was a bizarre application made on its behalf by DLA Piper and Counsel for permission to serve a Claim Form on Malabu outside the jurisdiction alleging commission by Malabu of the tort of "malicious defence of civil proceedings". There is also no suggestion that EVP made any attempts to obtain alternative funding. In his judgment in Tibbles v SIG Plc above, at paragraph 42, Rix LJ, with whom Etherton and Lewison LJJ agreed, emphasised the need for promptness in an application under CPR 3.1(7). As Rix LJ there put it:-

"The court would be unlikely to be prepared to assist an applicant once much time had gone by. With the passing of time is likely to come prejudice for a respondent who is entitled to go forward in reliance on the order that the court has made. Promptness in application is inherent in many of the rules of court: for instance in applying for an appeal or in seeking relief against sanctions . . ."

I respectfully agree. There was simply no basis upon which it was appropriate to adjourn still further this almost wholly academic appeal. Equally, there was no basis upon which it was appropriate to permit the belated introduction of fresh evidence, which of itself would have necessitated an adjournment in order to permit Malabu the opportunity to seek to rebut it. It was for these reasons that, at the conclusion of Mr Pilbrow's application, I joined in dismissing both the application to adjourn the appeal and the application to adduce fresh evidence.

42. The appeal therefore proceeded upon the basis of the material which had been before Field J. As will become apparent, in my view a further application to the Commercial Court under CPR 3.1(7), in reliance on the fresh evidence which we have declined to admit on the appeal, which could in theory still be made, would enjoy no more prospect of success than did the application before Field J. For the like reason the fresh evidence would not have persuaded me that the appeal should be allowed. It neither shows nor begins to show that Malabu was "a corrupt moneybox".
43. A skeleton argument for the purposes of this appeal was prepared by Mr Anthony Trace and Mr Alexander Winter in March 2012. In that document it was contended that the authorities make clear that a party seeking fortification must establish, on the balance of probabilities, both that loss has been or will be caused by the injunction and the actual or likely extent of that loss. This approach involved a mis-reading of a passage in the judgment of Briggs J in Jirehouse Capital v Beller [2008] EWHC 725 (Ch) to which I shall refer later in this judgment.
44. In his argument before us Mr Pilbrow for EVP did not pursue this contention. He recognised that in the cases decided at first instance there had been enunciated no such requirement for the occurrence of loss to be proved on a balance of probabilities. Rather, he submitted, those judges had adopted an approach which is incorrect in principle. The error could be traced to the final sentence in paragraph 24 of Mann J's judgment in Sinclair Investment Holdings v Cushnie, relied on by Mr Briggs in Harley Street Capital v Tchigirinski, and which I have cited at paragraph 13 above, to the effect that it is in general unnecessary and inappropriate for a court on an application of this type to go into a detailed and prolonged assessment of difficult questions of causation. In Mr Pilbrow's submission it is appropriate that the linked questions of likely loss and causation be the subject of detailed assessment by the court on the basis that the applicant for fortification must make them out on the balance of probabilities. He recognised that the logic of that position is that a mini-trial may be necessary, whilst observing that in most cases it would not. In consequence, he submitted, Hamblen J had misdirected himself.
45. It is interesting to note that in none of the trilogy of cases to which I have so far referred, Sinclair, Harley Street and Jirehouse, in which Briggs LJ was involved as respectively counsel, deputy judge and judge, was fortification ordered.
46. In Sinclair, the defendant Cushnie's substantial property in the south of France was the subject of the Freezing Order. He complained that he could not use the equity in this property for the purposes of raising money to finance an investment project in consequence of which he would lose the return available from the project. Mann J found the evidence insufficient to demonstrate a sufficient level of risk of potential loss. An important failing was that Mr Cushnie had failed to show that he had no other free assets of sufficient value available to be used as security for this business opportunity.
47. In Harley Street Capital dealings in shares were restrained and it was alleged that in consequence they fell in value. The shares had indeed fallen in value, but Mr Briggs found the evidence of a significant and lasting fall, caused either by the proceedings, or, relevantly, by the making of the Freezing Order, very thin, in the light particularly of the price volatility of the shares in question and levels of trading over a wider period.
48. In Jirehouse Mr Beller alleged that the Freezing Order covering the matrimonial home deprived him of an opportunity to negotiate an advantageous rate of interest in relation to his mortgage liabilities. It was also said that a deposit account held by Mrs Beller had, on her bank being notified of the Order, been converted from an interest bearing to a non-interest bearing account. Critical to the decision was that whereas Mr Beller had initially assessed his likely loss as in the region of £150,000, by the time of the hearing this estimate had been reduced to £15,000. Briggs J observed that it was incumbent upon defendants before launching an application to assess coolly and objectively what the loss was likely to be. It could not be said that the Claimants would be unable to pay damages on this modest scale in the event that their claim failed.
49. We were shown two further cases at first instance, Bloomsbury International Limited v Holyoake [2010] EWHC 1150 (Ch), a decision of Floyd J, and Fortress Value Recovery Fund v Blue Skye Special Opportunities [2012] EWHC 1486 (Comm), a decision of Blair J. The latter was an application for increased fortification over and above €4 million already provided, which failed on the basis of insufficient evidence. However I have found helpful the decision of Floyd J. There Mr Holyoake's extensive asset portfolio was frozen. Floyd J first referred to some of the learning which I have already set out. At paragraph 18 of his judgment there appears the following:-

"In the case of a freezing order it may be necessary to distinguish between the harm caused by the existence of the litigation and the harm caused by the fact that the freezing order has been made. This consideration is important in the present case, because Mr Holyoake relies on a number of instances where his standing has been called into question by bankers and business associates since the grant of the order, and the question may arise as to whether this is damage which he would have suffered in any event. But it is very difficult on the limited evidence which is available to be sure whether or not it is the litigation or the order which is giving rise to the prospect of harm."

50. Of course, at the stage of enforcement of the cross-undertaking, the defendant must prove that the damage he has sustained was caused by the making of the order – see per Gibbs J in Air Express v Ansett, above, at page 313, rejecting a submission that it is enough that the making of the order should have been a cause of the damage. In that case the first instance judge, Aickin J, concluded that it was the litigation rather than the continuation of the injunction which brought about such damage as the defendant may have suffered. At the stage of considering whether fortification is required, however, it may, to paraphrase Gibbs J, be difficult "to disentangle any damage arising [or which may arise] from the [mere existence or continuation of] the litigation from that which was [or may be] caused by the making of the order."
51. Mr Holyoake's evidence in the case before Floyd J was treated as confidential in nature and was not set out in detail in the judgment. However it related to the reactions of banks and others with whom he had business dealings. Summarising that evidence, the judge observed, at paragraph 25:-

"It is not easy at this stage definitively to relate many of these instances to the preventive or coercive effects of the order. Nevertheless I think it is realistic to suppose that the existence of the freezing order could cause significant damage to Mr Holyoake. Firstly, it is clear from the evidence that Mr Holyoake has an extensive asset portfolio. It is almost inevitable that the existence of the freezing order will cause him loss. The assets discussed in the evidence are worth millions of pounds. It is entirely reasonable to suppose that damage will be incurred on a commensurate scale by Mr Holyoake if he is unable to deal freely and properly with his assets. Secondly, the freezing order is a very extensive one, and does not relate solely to one or two assets. As Mann J observed in Sinclair v Cushnie, it will be easier to foresee a risk of loss in such cases. Thirdly, it is no answer to say that Mr Holyoake will always be able to apply for permission to dispose of assets: the delay in obtaining that consent may well be damaging, or make it not worth selling the assets at all. Fourthly, I think that this is a case where, at least at this stage, it is not unrealistic to suppose that the order may have a significant, incrementally damaging effect on Mr Holyoake's standing. The examples given in his evidence may turn out to be cases where the order has had an impact on his ability to benefit from his ownership of assets and do business with others."

Floyd J concluded, at paragraph 30:-

"I should take the course in the present case which is least likely to lead to an injustice. I have no hesitation in saying that the cross undertaking should be fortified. To refuse to do so would potentially leave the defendants uncompensated for a very substantial claim, in circumstances where such an injustice would appear to be readily preventable. Equally I am satisfied that the undertaking should not be open ended. In my judgment the undertaking should be fortified in the sum of £4 million. This represents a realistic assessment of the order of damages that the defendants might suffer, although it is of course necessarily an unscientific one at this stage of the proceedings."

52. In my judgment the approach adopted by the judges of first instance in these cases has been entirely appropriate and in accordance with principle. I agree with Hamblen J's resort to symmetry – since the Claimant has obtained a Freezing Order preserving assets over which it may be able to enforce on the basis of having shown the court that it has a good arguable case, it is only appropriate that if the Defendant can show that it too has a good arguable case that it will suffer loss in consequence of the making of the Order, it should equally be protected. It may be said that what the Defendant in such circumstances obtains is security whereas the Claimant obtains something less, but in many cases, of which the present is probably one, a Freezing Order has the practical if not theoretical effect of giving security to the Claimant for its claim.
53. It is completely contrary to principle to require proof on the balance of probabilities on such an application and so to do would encourage wasteful satellite litigation. In my judgment Briggs J was correct in Jirehouse to summarise the principles as he did at paragraph 26:-

"Broadly speaking, they require an intelligent estimate to be made of the likely amount of any loss which may be suffered by the applicant for fortification (here the defendants) by reason of the making of an interim order. They require the court to ascertain whether there is a sufficient level of risk of loss to require fortification. They require that the loss has been or is likely to be caused by the granting of the injunction."

The three requirements are of course inextricably linked. The principles could equally be summarised, as Hamblen J did at paragraph 31 of his judgment, as a requirement that the applicant for fortification show a good arguable case for it. In this interlocutory context, showing a sufficient level of risk of loss to require fortification is synonymous with showing a good arguable case to that effect. In some cases the assessment of loss may at the interlocutory stage be difficult. It is in such cases that an intelligent estimate is required. An intelligent estimate will be informed and realistic although it may not be entirely scientific.

54. As to causation, it is sufficient for the court to be satisfied that the making of the order or injunction was a cause without which the relevant loss would not have been suffered, as Gibbs J put it in the High Court of Australia in Air Express v Ansett above, at page 313. That was said in the context of an application to enforce the undertaking. At the stage of considering whether fortification of the undertaking is required, the proposition could be restated as it is sufficient for the court to be satisfied that the making of the order is or was a cause without which the relevant loss would not be or would not have been suffered. That is the hurdle which the applicant must surmount. It is of course open to the Respondent to demonstrate that it has not been surmounted, as by demonstrating that there is no causal link between the granting of the injunction or order and the loss in question. If however, disproving the asserted causal link as to which a good arguable cause is shown requires the deployment of extensive contentious evidence and argument, that is not an exercise to be attempted at the interlocutory stage. That was the approach of Floyd J at paragraphs 18 and 25 of his judgment in Bloomsbury, set out at paragraph 48 above, and I agree with it.
55. I can deal more shortly with the second question on the appeal, whether Hamblen J, applying the principles which I have described, should have ordered fortification. On this aspect the appeal is in effect from the decision of Field J rather than of Hamblen J. Mr Pilbrow recognised that he had to do more than to show that the judge might have come to a different conclusion. However Mr Pilbrow's submission was that Malabu had adduced no positive evidence to the effect that it would in fact borrow funds, and that it stood or fell by its assertion that as a commercial party it was in principle entitled to be compensated for being kept out of its money. Mr Pilbrow reminded us that the application to Hamblen J was made six months after the injunction had been granted, and five months after the payment to Malabu of US$800 million, but still there was no evidence of actual loss suffered by Malabu. It was EVP's case before Hamblen J that Malabu was merely a vehicle through which assets were held on behalf of their true owners. Taking into account the absence of actual loss, Hamblen J could not in the circumstances have come to the conclusion that Malabu had a good arguable case to the effect that it was caused loss by the making and continuance of the order.
56. I reject this argument. For the reasons given by Field J, the fresh evidence before him did not sufficiently establish that Malabu was "a corrupt moneybox" being used simply for the unlawful laundering and channelling of corrupt payments. As I have already indicated, although it is unnecessary for my decision, the further evidence which we have refused to admit does not make good that allegation either.
57. I agree with Hamblen J and Field J that whether Malabu would need to or would borrow money to replace the US$215 million in court is irrelevant. If Malabu could show a good arguable case, as it did, that the money should have been paid to it and that the injunction would prevent Malabu using that money as it chose then, subject to the other necessary requirements, it was entitled to fortification of the undertaking. I agree that it is irrelevant that Malabu may have had a liability to pass on the money to a third party or third parties. As Hamblen J observed, the prima facie effect of the Freezing Order is that in order to meet that liability Malabu would be required to borrow. The normal level of compensation for the loss of use of money is simply, as Hamblen J said, an interest claim based on the usual cost of borrowing an equivalent sum.
58. I have already answered the third question, in that where commercial parties are involved it is the cost of borrowing which is usually relevant. Rix LJ acknowledged in giving permission to appeal that this is "the default rule in commercial affairs". However he gave permission to appeal because of the particular features of Malabu then known, i.e. that it was a non-trading company, apparently without a place of business, incorporated only for the purpose of holding and exploiting Licence OPL 245, with no continuing commercial purpose once that Licence had been surrendered. Mr Pilbrow in turn suggested that Malabu had no employees, and neither a place of business nor even an address, and that it would do nothing save pass on the money to those who sat behind it. I quite accept that there may be cases in which the default rule can be displaced, and in which the rate of return on funds deposited is the appropriate measure of compensation rather than a borrowing rate. However that question does not here arise because, as I have recorded at paragraph 11 above, the judge found on the evidence before him that the deposit rates which would have been available to Malabu had it deposited US$215 million in a Nigerian bank in Nigeria would have been considerably higher than 3.25%, the borrowing rate claimed.
59. It was for these reasons that at the conclusion of the hearing I joined in dismissing the appeal.
60. As I have set out at paragraph 34 above it is agreed that Malabu should pay, on the standard basis, EVP's costs of the appeal incurred until the agreement in October 2013 that the appeal be adjourned pending resolution of the applications for permission to appeal. I would direct EVP to pay, on the standard basis, Malabu's costs of the appeal incurred since October 2013, such costs to include the costs of the applications which we dismissed at the hearing. Bearing in mind that we have entertained the appeal, and that the point of principle argued had not hitherto been considered at appellate level, I do not regard it as appropriate to accede to Malabu's suggestion that costs be paid on an indemnity basis.

Lord Justice McFarlane :

61. I agree.

Sir David Keene :

62. I also agree.