Zumax Nigeria Ltd v First City Monument Bank Plc

A court may debarr a claimant from continuing proceedings for failing to pay an order requiring repayment of an overturned judgment sum. The application engages the court’s inherent jurisdiction and requires consideration of all relevant circumstances, including enforcement alternatives, access to justice and whether the claim would be stifled.

The merits are ordinarily irrelevant unless the claimant would obtain summary judgment and that conclusion can be reached quickly. A company alleging impecuniosity must provide full, frank and cogent evidence of its own resources and the availability of funding from shareholders or associated third parties. The court may draw adverse inferences from evidential gaps. A sanction should not require payment of a sum in respect of which the defendant has no arguable defence.

The claimant brought proceedings alleging that the defendant bank held transferred funds on trust. Barling J granted summary judgment concerning nine transfers. The Court of Appeal reversed that decision, holding that the relationship was one of debtor and creditor, not trustee and beneficiary, and ordered repayment of the judgment sum and payment of costs: [2019] EWCA Civ 294.

The claimant paid only £100,000. The bank applied for an unless order debarring continuation of the claim unless the outstanding sums were paid, and for an order preventing further proceedings based on the same facts or causes of action. The court considered the effect of the proposed sanction, the claimant’s alternative claims, its alleged impecuniosity, possible third-party funding, and the existence of a separate Nigerian judgment in the claimant’s favour.

1. Applicable principles. The court followed the principles stated in Michael Wilson & Partners v Sinclair and held that the same approach applies to repayment of an overturned judgment sum. The discretion derives from the court’s inherent jurisdiction. Relevant matters include the purpose of interlocutory costs orders, Article 6 ECHR, alternative enforcement methods and the need for an unless order rather than immediate debarring where appropriate.
2. The underlying merits were normally irrelevant. Under Global Torch v Apex Global Management, they could be considered only if the claimant could establish entitlement to summary judgment quickly. The claimant failed to establish that the bank was subject to a wide fiduciary duty to account from receipt of the transfers. A receiving bank may be an agent in the limited sense that payment discharges the payer’s debt, without thereby becoming a fiduciary. The ordinary banker-customer relationship permitted the bank to receive the funds as its own property: Foley v Hill. The distinction between ordinary account information and fiduciary accounting was explained by reference to Paragon Finance v DB Thakerar.
3. The bank had no arguable defence to the principal and interest calculation of £603,022 relating to the tenth transfer, and that sum could not properly be required as a condition of continuing the proceedings. The position concerning the other transfers remained realistically arguable.
4. Under Goldtrail Travel Ltd v Onur Air, the claimant bore the burden of proving on the balance of probabilities that the sanction would stifle its claim. As a company, it had to address not only its own resources but also funds potentially available from shareholders, owners and associated funders. The claimant’s evidence contained substantial gaps concerning its current accounts, trading income, legal funding, assets and the resources and willingness of Cosmopolitan and Kasa. Adverse inferences were justified.
5. The bank’s past conduct and the separate Nigerian judgment did not make enforcement oppressive or unfair. The Court of Appeal’s repayment order was unconditional and independent. The sanctions application was therefore granted in respect of the sums owing under that order, excluding £603,022. The requested order barring continuation of the separate proceedings was refused because the court had not been addressed on the relevant abuse authorities, although the claimant was not to be understood as entitled to continue them without complying with the repayment order.

• Court of Appeal. The appeal from Barling J’s summary judgment was allowed. The court held that the bank was not trustee of the transferred sums and ordered repayment and costs: [2019] EWCA Civ 294.
• High Court (Chancery Division). The present court granted the bank’s sanctions application in part, subject to the exception concerning £603,022.