Ardila Investments NV v ENRC NV & Anor

A security assignment does not become an absolute legal assignment merely because the deed uses that language. Its legal effect depends on the document read as a whole, including retained ownership, enforcement and repayment provisions.

A contractual exclusion of set-off is effective where the wording, read in context, clearly achieves that result. An anti-suit injunction may restrain foreign proceedings which unconscionably interfere with existing English proceedings. Security for costs may be refused where claim and counterclaim substantially overlap, but the court must assess whether the counterclaim has independent vitality.

Ardila claimed payment under a share purchase agreement relating to an iron ore project. ENRC disputed liability, counterclaimed for repayment of a US$65 million loan and sought relief concerning a foreign attachment order, security for costs and the pleadings. Zamin guaranteed Ardila’s obligations.

The court determined six interlocutory applications: joinder of RBC following an assignment by Ardila, strike-out of Ardila’s claim, summary judgment for repayment of the loan, an anti-suit injunction concerning proceedings in Curaçao, security for costs, and strike-out of parts of ENRC’s defence and counterclaim.

1. RBC was joined as a co-claimant under CPR Part 19.4 because its involvement would enable the court to resolve all matters in dispute.

2. The assignment was equitable rather than an absolute legal assignment under section 136(1) of the Law of Property Act 1925. Although clause 2.3 used the language of absolute assignment, the deed contemplated security by way of charge, retained Ardila’s legal and beneficial ownership and required Ardila to pursue its contractual rights. Ardila and RBC therefore had to be joined as co-claimants. ENRC’s strike-out application failed.

3. The US$65 million loan was repayable without set-off. The only relevant qualification was issuance of the Port Installation Licence by the specified date. That event had not occurred. Clauses 3.8 and 3.4(E) did not displace the repayment obligation. Summary judgment was therefore entered for ENRC and Zamin was jointly and severally liable. Interest was payable at 5 per cent from 1 July 2014. Payment was to be held by ENRC’s solicitors pending further order.

4. The Curaçao attachment was a vexatious interference with the due process and effectiveness of the English proceedings. The English court was the chosen forum for the dispute, and the foreign proceedings had been brought to prevent enforcement of a judgment which Ardila itself had invited the English court to make. Ardila was ordered to discontinue those proceedings.

5. Security for costs was ordered in the sum of £1 million. The claim and counterclaim substantially overlapped, engaging the Crabtree principle, but ENRC’s counterclaim had independent vitality. In the circumstances, and because only ENRC had sought security, an order was made in its favour.

6. ENRC’s allegations concerning the procurement of the Port Installation Licence were not so deficient that they should be struck out before trial. However, ENRC was required to restate its case concisely and with greater particularity.

First-instance decision. No appellate history was stated in the judgment.