UK: Application For Summary Judgment Granted After Nine-Day Hearing

Zumax Nigeria Limited v. First City Monument Bank Plc [2017] EWHC 2804 (Ch)

At first glance, it may seem something of a contradiction to hold a summary judgment hearing over nine days. In this case the court held that it would have been wrong to shy away from looking carefully into whether there was merit to the defences and other complaints raised by the defendant bank. The court decided that, save in relation to one issue, none of the defences had a real prospect of being established and a trial over many months and at substantial cost would have been wholly unwarranted.

The relevant background to this claim, brought by Zumax Nigeria Limited (Zumax) against First City Monument Bank Plc (FCMB), the successor in title to Zumax's main banker, IMB International Bank Plc (IMB), is: (i) in 2002, IMB had appointed receivers to Zumax over a dispute concerning a debenture, which was settled in 2005 and formalised in a consent order; and (ii) Zumax had brought Nigerian proceedings in 2009 against IMB's former managing director, who had also been a director of Zumax at the relevant time and who the parties agreed was a fraudster.

Zumax's claim against FCMB was that 10 money transfers, totalling approximately US$3.7 million, had been made from an account in the name of an Isle of Man-registered nominee entity to accounts at a third party bank that were in the name of IMB or entities under its control, but that those moneys were fraudulently diverted or retained by IMB.

In its defence, FCMB stated that (i) it had repaid the moneys by way of bankers' drafts; (ii) the claim was covered by the 2005 consent order; (iii) the claim had been assigned to IMB and charged to it under the terms of the debenture; (iv) the claim was time-barred; and (v) the claim was an abuse of process in that it should have been raised in the Nigerian proceedings. FCMB also brought a counterclaim for damages on the basis that Zumax had assisted the former director to breach his fiduciary duties to IMB by concealing the conflict of interest arising as a result of his dual role as managing director of IMB and director of Zumax.

The court held that FCMB's argument that the moneys had been repaid by bankers' drafts had no substance whatsoever. The limitation defence failed on the basis that the instructions for the transfers and the surrounding circumstances clearly gave rise to an express trust in Zumax's favour, therefore section 21(1) of the Limitation Act 1980 applied. On the debenture argument, the Judge found that Zumax owed nothing to IMB at the time the receivership began in 2002, and that the appointment of receivers had been unjustified. There was in fact a credit due to Zumax from IMB at the date of the appointment, so there could be no valid assignment by Zumax of the funds that were the subject of the instant claim.

The court held that the consent order and settlement agreement were both unenforceable, because two fraudulent misrepresentations made by IMB underlay Zumax's entry into the agreement: it had been misinformed about the true extent of its indebtedness and about the moneys that had been recovered in the receivership. The court accepted that it was unusual for a finding of fraud to be made in the context of a summary judgment application but the Judge stated that, in his view, the finding was fully justified in the circumstances of this case.

The defence as to abuse of process was not arguable as the Nigerian proceedings had concerned an entirely different dispute over different moneys and neither FCMB or IMB had been a substantive party to those proceedings (the judge accepted that FCMB had been joined as a procedural formality to assist with enforcement against Mr Chinye, the managing director of IMB, who had also been appointed as a director of Zumax). The court also held that FCMB's counterclaim could not possibly succeed as it was plain that it had at all times been aware of, and had even approved, Mr Chinye's dual role.

Zumax was entitled to summary judgment in respect of the counterclaim and all but one of the 10 transfers (there was a lack of clarity on the documents over the position in respect of the third transfer that was claimed for).

The hearing required detailed analysis of the documents and written evidence, following which the court was able to conclude that the defences had no real prospect of succeeding and that there was no other compelling reason that the matter should proceed to trial.

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