Mr Justice Cooke :
- The Claimant/Judgment Creditor (Kensington) obtained four judgments against the Republic of the Congo (the Congo) between 20 December 2002 and 28 January 2003 in relation to sums due under various loan and credit agreements. At the contractual rate set out in those loan agreements the effect of the judgments was that, as at 12 August 2005 the total amount of principal and interest due and owing from the Congo to Kensington (an assignee of the loan agreements) was $121,365,437.70. Interest continues to accrue at a daily rate of $22,008.23. The judgments remain unsatisfied in their entirety.
- On 10th April 2005 Kensington obtained interim Third Party Debt Orders in each of the four actions in which judgment had been obtained in this Court, together with supporting injunctions relating to the monies due in respect of two consignments of Congolese oil (the cargo), which were shipped on the Nordic Hawk and were bought by an English company, the first Third Party (Glencore). There followed a series of interlocutory applications pursuant to which Kensington obtained urgent injunctive relief in the form of disclosure orders directed to Glencore and various companies in both England and Bermuda and subsequently the British Virgin Islands (BVI), all relating to the sale of the cargo and payment of the proceeds and the companies concerned in it.
- In consequence of the various orders made and the disclosure given, the second, third and fourth third parties (Sphynx UK, Sphynx Bermuda and AOGC), but not the fifth Third Party (Cotrade) which did not participate in these proceedings despite being joined, maintain that there is a chain of contracts relating to the sale of the cargo:
i) Cotrade, which is a wholly owned subsidiary of Société Nationale des Pétroles du Congo (SNPC), the Congo State owned Oil Company, concluded a contract with AOGC for the sale of cargo on an fob basis. The written contract produced is dated 20 March 2005 and, on its face, was signed for Cotrade in Brazzaville in the Congo by Denis Christel Sassou Nguesso (Mr Christel), the son of the Congolese President, and was signed by Mr Malonga for AOGC.
ii) AOGC in turn sold to Sphynx Bermuda under the terms of a contract in writing dated 10 March 2005. On its face this contract was signed in Brazzaville by Mr Malonga for AOGC and Dr Nwobodo for Sphynx Bermuda, both of whom said in their statements that it was actually signed sometime after 16 March 2005.
iii) There is a contract document under which Sphynx Bermuda contracted with Glencore on the general terms and conditions of SNPC which is undated. It was signed by Dr Nwobodo for Sphynx Bermuda and Mr Gibson on behalf of Glencore. It too was said to have been signed some time after 16 March 2005.
iv) Glencore in turn on-sold the cargo to BP on the terms of a contract which, it is not disputed, was a typical arm's length commercial transaction between entities involved in the conventional trading of oil.
- The evidence which I heard was to the effect that the dates of the signed contracts were irrelevant and that these documents merely recorded in writing deals which had been concluded at an earlier stage. From Glencore's internal documents and an email from Glencore to Sphynx Bermuda, it appears that the agreement reached between Mr Wakefield for Glencore and Dr Nwobodo for Sphynx Bermuda and the on-sale between Glencore and BP were made on 23 February 2005. Dr Nwobodo then confirmed the sale, on Sphynx Bermuda's behalf, in an email dated 2 March 2005.
- It is the purchase price payable by Glencore (approximately $39 million) which is the sum that Kensington wishes to intercept in order to enforce its judgments against the Congo. The issue which falls to be determined is whether the debt due from Glencore which Kensington is seeking to attach is in reality owed to the Congo or should be treated as owed to the Congo for the purpose of CPR 72 and enforcement of judgments by Third Party Debt Orders.
- In short, Kensington maintains that Sphynx Bermuda is a mere device or façade concealing the true facts which are that:-
i) The receipt of monies by Sphynx Bermuda in respect of the cargo would in reality be receipt by the Congo, the judgment debtor and;
ii) The monies apparently due from Glencore to Sphynx Bermuda are in reality due to and (if paid) will be paid to the Congo.
- In consequence it is said that the Court should "pierce the corporate veil" of Sphynx Bermuda and treat Glencore's debt to Sphynx Bermuda as a debt which is in reality due to the Congo. If and insofar as it is necessary, Kensington also says that AOGC and Cotrade were used for the purpose of hiding the fact that the debt due from Glencore was in reality a debt due to the Congo and that SNPC and Cotrade are in any event part of the Congolese State.
- It is the case of the Sphynx companies and AOGC that they are private oil trading vehicles of Mr Denis Gokana (Mr Gokana), who is and was at the time of this transaction the President and Director General (DG) of SNPC and a Special Adviser to the President of the Congo, President Sassou Nguesso.
- Glencore's position on the issue is neutral, being willing to pay the money as the Court directs. It is concerned to get a good discharge of its debt by making payment to the appropriate recipient. By virtue of orders made in this action, which debar the raising of such an issue, it is now clear that Glencore cannot be at risk of having to pay twice. Counsel for Glencore appeared at the beginning of the trial out of courtesy to the Court, expressing the intention to absent himself for the rest of the trial and only to make submissions in the event that I might consider making findings which might sully Glencore's reputation. In the event he did make written submissions. Until shortly before the trial, it seemed that Glencore would appear at the trial and would call its witnesses to give evidence but it decided not to do so and the other parties relied upon the statements which had been put in by those witnesses. At the outset it was made clear by Counsel for Kensington that for the purposes of this trial it was not being said that Glencore was privy to a conspiracy to defraud creditors of the Congo but it was being said that Glencore treated payments to Sphynx Bermuda as equivalent to payment to SNPC and the Congo.
- In this connection it is worth pointing out that there have been prior decisions which equate SNPC with the Congo albeit that such decisions are not binding on these parties. In a judgment of the Commercial Court, Tomlinson J on 16 April 2003 found that SNPC was simply part of the Congolese State and had no existence separate from it. Kensington and the Congo were parties to those proceedings. Similarly, the Court of Appeal of Paris has twice reached the view that SNPC is an alter ego of the Congo on 23 January 2003 and 3 July 2003 in the context of enforcing judgments given against the Congo, against assets belonging to SNPC.
The Witnesses and the Documents
- Kensington adduced evidence in the form of hearsay statements from Glencore personnel, an individual who had been a director of Sphynx Bermuda and from lawyers and others instructed by them who had sought to discover the identity of those who lay behind the seller of the cargo to Glencore. The evidence of those instructed establishes that the disclosure orders obtained from the courts were complied with tardily and incompletely by the Third Parties, save for Glencore. This was due, according to Mr Gokana to the differences between the practice in civil law jurisdictions and common law jurisdictions and the need for the advice of Mr Junod, the Swiss lawyer consulted by Mr Gokana. The tardiness, defaults and shortfalls in compliance with disclosure obligations are apparent from any study of the history of the matter and, throughout the course of the trial, further documents were regularly promised, but few arrived.
- Orders were made by this Court on 29 April against the Sphynx companies and on 26 May against all the third parties, including AOGC, which only decided to participate in these proceedings in September, by which time it had been conceded that the contracts between it and Sphynx Bermuda were "paper transactions" only. AOGC provided a list of documents on 21 September, a few untranslated documents on the eve of the trial and a few more during the trial. A bundle of documents was said to have been dispatched by courier on the Friday before the trial, a transit which normally takes 4 days maximum. I ordered further disclosure during the trial, to be given by 1 November. The order encompassed all relevant documents, but in particular those supposedly sent by courier and those promised alternatively by fax, as well as those referred to in evidence, which Mr Gokana (on his evidence, the 90% shareholder of AOGC and the owner of the Sphynx companies) undertook to produce. These documents were listed in a letter from Dechert LLP dated 27 October and included bank statements, oil trading and prepayment agreements, transactional documents and annual returns. None of those documents arrived before Monday 7 November, the date when Mr Gokana was due to return to complete his evidence and to face cross-examination in relation to them. None arrived before the close of the trial. The conclusion to be reached is that no package was ever sent and that AOGC had and has no intention of making proper disclosure of its documents. The missing material is significant in the context of these proceedings, as appears later in this judgment, particularly with regard to the position of AOGC and its financial affairs.
- The disclosure given by the Sphynx companies likewise appears to be limited but it is hard to gauge the extent of the inadequacy and the extent to which documents never existed because of the way in which Mr Gokana carried on business, using these companies' names.
- Kensington relied on the evidence of a Congolese lawyer, Maitre Brudey in relation to searches he had caused to be carried out in the Congo as to the status of AOGC. He appeared at trial and was cross-examined.
- The Third Parties who appeared (not Cotrade) adduced evidence in the form of hearsay statements from individuals who had been directors of Sphynx Bermuda, its parent company and the parent company of Sphynx UK and from others as to the identity and nature of those entities, from Mr David Fransen of Vitol (whose hearsay evidence the Claimant also adduced) and from Mr Louboula, AOGC's notary in the Congo.
- In addition they called three witnesses, for whom statements had been served, namely Mr Gokana, Dr Nwobodo and Mr Malonga who became the Managing Director of AOGC in January 2005.
- I did not find Mr Gokana or Mr Malonga to be satisfactory witnesses. Their statements contained falsehoods, only some of which were admitted (by Mr Malonga). The lack of documentation produced by the third parties inhibited the testing of some of their evidence, but reflected upon its credibility. Mr Gokana was cross-examined for four days and, because of his alleged unavailability the following week, other witnesses were interposed and a short adjournment allowed in order that he could return on the Monday of the ensuing week, by which time it was anticipated that further disclosure would have been given. As already set out, the disclosure was not given. Moreover Mr Gokana did not return and instructed those representing the third parties to apply for an adjournment without evidence or any indication of when he would be available to return or when disclosure of the requisite documents would be given. I was left in no doubt as to the desire to avoid further cross- examination and the making of proper disclosure.
- It is plain, in my judgment, that following the imposition of the Interim Third Party Debt Orders and freezing injunctions, by this and foreign courts, Mr Gokana, with Mr Malonga's assistance, sought to evade the effect of the courts' orders by assigning the proceeds of sale of the cargo with a backdated assignment and later switching another existing oil sale contract from Sphynx Bermuda to AOGC and then lied to the Court about both. Moreover, money was removed from Sphynx Bermuda when it was appreciated that Kensington was hot on the trail of discovering where assets were, with a view to rendering any judgment or freezing order against it fruitless. I am satisfied too that a payment which Mr Gokana said was made to Cotrade by AOGC was not in fact made at all.
- The leading light in the activity of the Sphynx companies and AOGC was undoubtedly Mr Gokana and Mr Malonga did no more than what he was told, but he was prepared to lie in his witness statement in relation to the activities of AOGC and about the date when the assignment was executed, whilst making limited admissions in oral evidence.
- For these and other reasons which appear later in this judgment I was unable to accept their evidence unless it accorded with the evidence of others or such documents as were available or with inherent commercial probabilities, given their apparent motivation to frustrate the enforcement of any judgment against the Congo or any attachment of oil or its proceeds.
- Dr Nwobodo, who hailed from Nigeria, frankly admitted mistakes in his statement, both in evidence in chief and under cross-examination. He said that his solicitors wrote his statement after interviewing him and that, despite being told that he should go through it and correct it, he "figured that the way that they had written it would be the way that would serve them", that he did not know he would be standing in court to defend it and that he "was not particular about what was written, I said whatever they wanted was fine with me". This cavalier attitude did not reflect well on him, but, like Mr Malonga, he did speak more frankly when in the witness box. He did not understand French and was engaged as consultant to SNPC in connection primarily with the marketing of oil, and not with the structure in which that took place. Nonetheless, as he drafted contracts which he negotiated, and was, as it transpired, much more involved than appeared in the witness statements, in my judgment he was more alive to Mr Gokana's activities and their rationale than he appeared to be. There were some areas where his evidence did not fit the overall picture or was so improbable, vague, confused or inconsistent with what he had said previously that I could not accept it as accurate.
- The documentary position was altogether unsatisfactory. I am satisfied that the Third Parties other than Glencore have deliberately sought to conceal documents and that the failures on their part to comply with Court orders are not just the product of a difference in outlook between African entities subject to civil law jurisdictions and the requirements of common law courts. No documents were disclosed for AOGC's bank accounts where nearly all the money went for the sales of oil in which it and the Sphynx companies were involved. In relation to the 45 contracts prior to April 2005 which ostensibly existed between the third parties, 14 signed contract documents were produced. In relation to the 22 contracts between SNPC or Cotrade and AOGC or Sphynx Bermuda, at the top end of the chain of sales, only 3 signed contract documents were produced, with 7 unsigned contract documents. No documents were disclosed in the shape of faxes, emails or notes which showed any negotiation of such contracts at all. Demands for inspection of originals of some of the documents which do exist have not been met. Because of the attitude taken to disclosure, it is hard to know whether, in respect of any given contract, there is a failure to make proper disclosure, whether documents do exist and whether those disclosed are authentic.
- Notwithstanding the view that I take of these witnesses, the inadequacy of disclosure, the attempts to circumvent the orders of competent courts and the lack of candour on the part of the Third Parties (other than Glencore) and their witnesses, I bear in mind that in an action of this nature, the burden of proof not only rests upon Kensington, but that the standard of "balance of probabilities" is applied with greater rigour where there are allegations of dishonesty and fraud.
- Kensington was straightforward in saying that this action was a fraud case which concerned a scheme by which the Congo dishonestly sought to defraud its creditors by selling the cargo (and other cargoes) through Cotrade, AOGC and Sphynx Bermuda in a deliberate and dishonest attempt to conceal the true facts of a sale and receipt of proceeds by the Congo, in the hope of preventing the Congo's creditors from attaching the oil or proceeds of sale.
- Kensington maintained that all the typical badges of fraud were present including:-
i) Lies and other false and misleading testimony.
ii) Wholesale and deliberate failures to make proper disclosure.
iii) Secrecy and concealment when not apparently necessary.
iv) Over-elaboration of transactions, with no commercial need or justification.
v) Deliberate and dishonest fabrication of documents.
vi) Deliberate attempts to circumvent and undermine orders of the court.
vii) Failing to call relevant witnesses.
viii) Failure of a witness to reappear to complete evidence when under cross-examination and under pressure to produce proper disclosure.
- As appears from this judgment, for the most part, Kensington made those points good.
The Major characters and entities involved:
Mr Gokana and his connections with SNPC, AOGC, Sphynx Bermuda and Sphynx UK
- Mr Gokana was educated in the Congo and moved to France for his university education where he studied engineering. He has a doctorate in nuclear physics which was published in 1986, following which he worked for the Atomic Energy Commission. After working at ELF on robotised platforms for the extraction of oil and living in Pau, Paris and Fos he went back to the Congo in 1997 to install and commission a platform designed for offshore drilling in the Congo.
- At that time, the civil war had just ended and President Sassou Nguesso had come to power and wished to reorganise the oil production in the Congo. In February 1998 Mr Gokana was offered the job of assisting and reorganising the petroleum industry in the Congo by the Director of Cabinet, Mr Bitsindou, but because he was still employed by ELF, he accepted this task on a consultancy basis. He was asked to review the commercial agreements between the Congo and oil companies, principally ELF and AGIP and the pre-financing arrangements which effectively meant that ELF was acting as banker to the Congo. The oil production of the Congo is of critical importance to its economy, accounting for over 67 % of its GDP, 78 % of its government budget and 95% of its export revenue. It appears that this revenue goes into the Congo's treasury for use in the country as a whole.
- Mr Gokana was an attaché (a form of adviser to the State) whilst working on this project for reorganising the petroleum industry in the Congo. He was part of a team which included Mr Itoua (who was one step up in the hierarchy of advisers, being a Special Adviser at that time - a Conseiller Special), Dr Nwobodo (a man with considerable experience of the oil business from Nigeria) and Mr Ndeko, who is now the DG for oil at the Ministry of Oil (an appointment he took up in February 2005, at about the same time that he was appointed by Mr Gokana to the board of AOGC).
- The decision was taken to reorganise the system because, at that time the Congo did not have an oil trading company at all. Djeno and Nkossa Oil are only produced in the Congo and have unusual characteristics. The Congo's oil was being sold then by ELF and AGIP into a small market because of its characteristics. A decision was taken to reorganise the system so that the State had greater control over its oil, over oil sales and revenue, as compared with the prior system, under which, according to Dr Nwobodo, the oil concessionaires' activities, royalties and taxes paid were rarely checked. The recommendation was to set up a new company which would be a holding company and, for the most part, a management company with specialised subsidiaries. This recommendation was followed which led to the formation of SNPC in the Congo and various subsidiaries thereafter.
- SNPC was to have a commercial branch which was to operate in London with Mr Gokana at the helm. Hence SNPC UK was formed as an English registered company. Dr Nwobodo, who was also an attaché in 1998, after extensive experience in the oil market, including many years of oil trading when employed by the Nigerian National Petroleum Company (NNPC), was also to come to London to advise and help Mr Gokana who had then no experience of oil trading at all. Mr Gokana started by training for some 3 months at Glencore, in order to learn about trading before commencing to deal at SNPC UK in, it appears, 1999. SNPC UK started to sell the Congo's oil directly to customers in the market, with Dr Nwobodo directing Mr Gokana and Mr Gokana taking the ultimate decisions on his recommendation, until he had built up some knowledge and experience in the field. For tax reasons SNPC did not want SNPC UK to be structured as a trading company. It was a service company for SNPC and it acted as an agent for sales for the account of SNPC whilst monitoring oil markets. It did not contract in its own name because that would trigger tax liability and for the same reason, according to Mr Gokana, the income never went through London. He stated that the reasons for the set up were wholly fiscal.
- Mr Gokana was a director of SNPC UK from the outset until he resigned at the end of March 2001, working with Dr Nwobodo and Simon Chaffey who was in charge of operations in an equipped office in London. SNPC UK's customers, according to Mr Gokana, included Glencore, Trafigura, Quantic, Arcadia (a subsidiary of Mitsui), Taurus and Addax. Dr Nwobodo remained at SNPC UK until its demise towards the end of 2003 and was a director still when it was put into creditors' liquidation in mid 2004. He had a range of oil trading contacts, including most if not all of SNPC's customers. He was, and remains, a consultant to SNPC, being paid on a quarterly basis throughout the period from 1998 onwards. He was paid a salary also whilst a director of SNPC UK.
- Mr Gokana prepared the first model contract for the sale of SNPC's oil on the basis of a draft used at Glencore, whilst the terms and conditions which were utilised were based on ELF's model, with some modifications as required by SNPC's lawyers in the Congo. Pre-financing arrangements were utilised, the broad effect of which was that purchasers lent money to SNPC either directly or through a financing company before any delivery of cargo purchased. The price of the cargo was then set off against the loan by way of repayment together with interest charged at a significant rate. Thus the prepayment would be for a proportion of the purchase price only, in order to allow for repayment of the sum advanced with interest and expenses out of the total product value.
- In his statement, Mr Gokana said he left SNPC in April 2001 because he had a personal problem with Mr Itoua whom he found tyrannical and totalitarian. Mr Itoua was the President and DG of SNPC and Mr Gokana also stated that he felt he was not being paid enough and that he wanted to start a business on his own. His statement refers to a letter of resignation sent to SNPC in August or September 2000 which Mr Itoua refused to accept. He states that he went to Brazzaville in October 2000 to see if he could find a solution with Mr Itoua but he then appreciated that he did not want to be a subordinate of Mr Itoua, having been senior to him at ELF. While seniority was not the problem, he could not accept the way in which Mr Itoua behaved towards him. Thus at the start of 2001 he wrote another letter giving 3 months notice of resignation. In his statement at paragraph 30 he stated :
"Since I was the only person at SNPC UK who had the knowledge and ability to provide sufficient information for the marketing of oil, Mr Itoua and I agreed that this service would be subcontracted to my new company for which SNPC would pay a fee".
- The new company in question, according to Mr Gokana, was ITMS. This was formed in about February or March 2001 in France to trade crude and petroleum products, based on the relationships which Mr Gokana had built up when he was in London. Furthermore it was to provide market intelligence to SNPC, for which the latter would pay. Offices were equipped in Paris for the company which was bought "off the shelf", with Mr Gokana paying the establishment expenses.
- Although market information was provided to SNPC, ITMS was never paid for it, on Mr Gokana's evidence. According to his statement, Mr Gokana found that costs in Paris were very high and things did not work out well because ITMS never did make any trading contracts. He went to Equatorial Guinea to offer his services to the government which promised to work with him but nothing ever resulted. At paragraph 34 of his statement he says that:
"I decided that the only thing to do was to try and find ways to get round Mr Itoua. I decided to present my competence personally in Brazzaville in front of Ministers and also in Gabon and Angola. And I also decided to move my business back to London because costs were lower, but also to set up a trading operation offshore."
- In his statement he stated that the idea was to have a small group of oil companies with a central company based in the Congo. One of the companies based offshore would be involved in oil trading and in consequence Sphynx Bermuda and Sphynx UK were incorporated on 15 February 2002 and 7 February 2002 respectively. Simon Chaffey had left SNPC UK by this time and was brought in by him to assist in Sphynx UK's offices in Bruton Street. His job was to run the London office which was purely administrative. Mr Gokana intended to and did run the trading business from abroad, treating Sphynx Bermuda as his company without any reference to the professional directors who were engaged to act as such for Sphynx Bermuda or to the friends he had appointed as directors of Sphynx UK. Business did not commence however until the end of 2002 or the beginning of 2003.
- In cross-examination, Mr Gokana said he was approached in December 2002 to assist in relation to a dispute between the Congo and Total which had been running for some time and which had come to a head following an unsatisfactory renegotiation with Total in 2001, for which Mr Itoua was responsible. He became a Special Adviser (Conseiller Spécial) to the President in relation to oil in December 2002, whilst being part of the larger cabinet of advisers to the President, which included Mr Itoua as an adviser. As one of only three special advisers to the President, he was now at the top of the hierarchy of advisers. He was thereafter supplied with a diplomatic passport in February 2003. He worked in relation to the Total dispute from there on, whilst operating Sphynx Bermuda, for whom he had negotiated the first contract in December 2002, although the lifting took place in January 2003, as a direct lifting from SNPC. However long the Total issue took to resolve, Mr Gokana has remained the President's Special Adviser on oil from December 2002 to date. Having resolved the issue, he found himself in "a very favoured position". Although he denied that he was involved in any advice to the President before December 2002 I find that he was in fact giving such advice from at least April 2002 onwards, since a number of press reports refer to him as being the President's "semi-official oil adviser" or "oil adviser" at about that time.
- Mr Gokana, on his evidence, set up AOGC as an SAU in the Congo on 7 January 2003 as the centrepiece of his vision of a group of companies, intending to make AOGC as active as possible.
- Between January 2003 and March 2005, Mr Gokana traded the Congo's oil through AOGC and Sphynx Bermuda to the limited market of buyers of Congo oil products. SNPC UK was still in existence when Sphynx UK and Sphynx Bermuda were first set up, with Dr Nwobodo continuing as a director. Mr Gokana testified that he used to deal with Mr Christel when buying for Sphynx Bermuda from SNPC through SNPC UK or, later, Cotrade. Dr Nwobodo also gave evidence of one occasion when he negotiated such a sale to Mr Gokana, either in 2003 or 2004.
- Mr Gokana could not recall precisely when SNPC UK came to an end which is odd, since this was the company with which he says he dealt in order to obtain Congolese oil. Sphynx Bermuda's first contract was with SNPC and was, he says, negotiated through SNPC UK in December 2002. He said that he approached SNPC UK with a proposal that he should buy a cargo from it and sell it on and that, since this worked well, the process was repeated. Thereafter AOGC was the immediate purchaser which passed the cargo on to Sphynx Bermuda, which then sold the oil in the market. Mr Gokana said that he dealt with Mr Christel, who on the demise of SNPC UK appears to have gone back to the Congo and, in due course, became President and DG of Cotrade, which, on the available documents, first became involved in the chain of sales in December 2004. According to SNPC UK's own liquidation documents, it ceased activity in November 2003, so for a period of over a year, Mr Gokana was, on his evidence negotiating with Mr Christel who was then acting for SNPC directly, rather than operating through SNPC UK, or Cotrade.
- Mr Gokana was appointed DG of SNPC on about 14 January 2005 when Mr Itoua became Minister for Energy. An agreement dated 24 January 2005 between Cotrade and SNPC was produced during the trial as part of a restructuring of SNPC whilst AOGC was reorganised in February 2005, as set out later in this judgment. Mr Gokana remains a Special Adviser to the President on oil, as one of only three Special Advisers, the others being concerned with different subject matters.
- For the purpose of this action the represented Third Parties were prepared to treat SNPC as having shipped the cargo as agent for the Congo, but since it is necessary to explore the status of Cotrade, it seemed to me to be inevitable that I should determine the nature and status of SNPC also.
- SNPC is an industrial and commercial public corporation placed under the supervision of the Minister of Oil and subject to the control of the Public Accounts Court. It was incorporated by law 1/98 of 23 April 1998 and operates pursuant to that law and law no 13-81 of 14 March 1981 regulating State owned entities, as well as its Articles of Association which were approved in December 1998 by the Council of Ministers. Although registered at the Brazzaville Companies and Credit and Personal Property Register (RCCM) in compliance with the OHADA Treaty for harmonisation of business law in French speaking African States, it operates outside the legislation provided for in that Treaty.
- Article 4 of law 1-98 sets out the purposes of SNPC as follows:-
i) "to engage on behalf of the Congo directly, through subsidiaries or in connection with foreign partners, in all operations of production, treatment, transformation, value adding and transportation of liquid or gaseous oil, in Congo or abroad;
ii) to undertake or participate in all industrial, commercial, technical operations, whether on goods or real estate or related directly or indirectly to the above described operations;
iii) to undertake on behalf of the Congo all operations of investments or management and audit in the gas and oil sector;
iv) to trade in the extracted products originating from the oil fields or the industrial facilities of treatment or transformation;
v) to participate, pursuant to the oil agreements, in the fixing of oil prices;
vi) to hold and manage, on behalf of the Congo, all the assets, rights, direct and indirect, whatever their nature, held originally by Congo, directly or through Hydro-Congo [SNPC's predecessor] in all activities related to research, exploitation, treatment and transformation of oil and secondary or connected products;
vii) to represent the interests of the Congo in all contractual relations with third parties in connection with exploitation of liquid or gaseous oil, secondary or connected, including in connection with the control and verification mechanisms belonging to the State;
viii) to give opinions on the government policy regarding liquid or gaseous oil."
- Article 2 of SNPC's byelaws (Articles of Association), entitled "the byelaws of the National Company of Congo Oil" ("the byelaws") are to similar effect. The byelaws are established by a decree issued during a session of the Council of Ministers (Article 6).
- The "Convention concerning the detention and management by SNPC of the rights, assets and participations of the State in the domain of petroleum," which was made between the Congo (represented by the then current Minister for Oil and Minister of Finances) and SNPC (represented by Mr Itoua, the then President) likewise sets out similar objectives and at article 2 provides that SNPC is to carry out the policy and strategic orientations defined by the government in the domain of petroleum whilst the terms of that convention and the byelaws provide that, in carrying out its functions, SNPC is under the control and supervision of the Congo:-
i) Article 7 of the Convention provides that: "SNPC shall carry out the missions which will have been entrusted to it according to the Law, the Decree and the present Convention under the control of the Ministry for Petroleum Affairs, who will assume a role of technical supervision, and of the Ministry of the Economy, Finance and the Budget, who will assume a mission of economic and financial control, every such time as required by the texts applicable to the SNPC, as well as by the rules of Public Accounts. The technical supervision by the Ministry for Petroleum Affairs will concern notably the application of the policy and orientations defined by the Government in the domain of petroleum, whilst that of the Ministry of the Economy, of Finance and of the Budget will concern the regularity of financial management by … SNPC as required by the texts applicable to it and by the policies of the Government".
ii) SNPC's website refers to the fact that its pre-financing transactions are approved as necessary by a Government representative, specifically the Finance Minister
iii) Under Article 35 of the byelaws, SNPC is specifically subject to the control of the State, as well as the supervisory authority and other controls whilst Article 37 provides that it is subject to the financial and economic control by the State.
- According to its byelaws, the Board of Directors is made up of seven members with voting powers. Four of those members represent Ministers. The first, the President and DG who was Mr Itoua but is now Mr Gokana himself, represents the President of the Republic and is Chairman of the Board, whilst others represent the Minister of Oil, the Minister of Finances and Budget, and the Minister of Foreign Affairs and Cooperation.
- The byelaws further provide:-
i) "SNPC is governed by a Board of Directors and a general management. The Board of Directors is composed of various members who are Government officials and who are appointed by a Council of Ministers decree (article 8). The Chairman of the Board (who is also the Director General of SNPC) is the member who represents the President of the Republic.
ii) Pursuant to Article 16 of the byelaws, the Board can delegate all or part of its powers to the Chairman.
iii) SNPC is supervised by the Ministry of Petroleum and can only be dissolved by the Council of Ministers (on the proposal of the Board of Directors).
iv) The registered office of SNPC can only be transferred to any other location within the Republic on a resolution by the Board of Directors followed by a decree issue by the Council of Ministers (article 3).
v) Resolutions approving the financial statements of SNPC and about (inter alia) its general orientation, budgets and balance sheets, economic policy and agreements relating to the exploitation of oil, all require the approval of the Council of Ministers.
vi) The capital of SNPC is composed of all the assets rights and mining permits, held originally by the State, directly or through Hydro-Congo in all activities related to research, exploitation, treatment and transformation of oil and secondary or connected products. Article 5 of the byelaws provides that the initial registered capital of 900 millions CFA francs can be increased by State allowances, in cash or in kind or by any other legal or regulatory mean (sic) pursuant to the provisions of the byelaws.
vii) Resources of SNPC come from (inter alia) State subsidies."
- Article 17 of the byelaws sets out the extensive responsibilities of the President and DG. Amongst other tasks he is to supervise all SNPC activities, to be the principal controller of its budget and to be responsible for performing the resolutions of the board and taking all initiatives required for that purpose, if within his power. The Article contains a list of responsibilities of one kind or another and it is worth noting that all the contracts in the bundle of documents for the trial which were signed for SNPC were all signed by the President and DG.
- It is clear that SNPC is controlled by the Congo and acts on its behalf in exploiting its oil. It is required by its byelaws to implement the policies of the Congo and Mr Gokana regards his role as being to further the aims set out in the byelaws. Although Mr Gokana professed ignorance of the policy, the Caisse Congolese d'Amortissement, a department of the Ministry of Finance stated as recently as 19 May 2005 that it is out of the question to make any payment to Kensington or any other creditors who have purchased loans to the Congo until various negotiations for relief from general indebtedness of the Congo have been concluded. Further, by a letter 3 March 2005, Mr Adada, the Minister of Foreign Affairs wrote to a Texas court stating that the Congo would not implement the order made by that court under which the court provided that the Congo should turn over royalty payments owed to it by oil company concessionaires to satisfy judgments given against it.
- The decision of the Court of Appeal in Trendtex Trading Corporation v Central Bank of Nigeria  1 QB 529 is the prime authority in relation to the principles which apply when determining whether any given entity is or is not part of the State. At page 560 Lord Denning MR stated that it was necessary to look to all the evidence to see whether the organisation in question was under government control and exercised governmental functions in order to determine whether it was part of the State. Shaw LJ stated, at page 573, that whether a particular organisation is to be accorded the status of a department of government or not must depend upon its constitution, its powers and duties and its activities. In that decision, the court was concerned with ascertaining whether or not the Central Bank of Nigeria was entitled to immunity from suit, a matter now governed by statute with particular provisions where commercial activities are undertaken by a State or a part of it. The Third Parties say that the issue which arises in the present case, which is whether a particular body should be held liable for the debt of the State is a different question from that which was explored in Trendtex for the purpose of determining whether or not a body was entitled to immunity from suit.
- Whilst the questions are different, it appears to me that the answers will turn on the self same factors. In Trendtex, Shaw LJ said that there could be no intermediate hybrid status occupied by the bank where it was regarded as a government department for certain purposes and as an ordinary commercial or financial institution for different purposes. It had to be one or the other. Since a state can be involved in commercial activities and there are many state organisations which are so involved, the simple question here is whether or not SNPC and/or Cotrade are to be equated with the State of the Congo. The fact that a body is, on its face, a separately constituted legal entity with a separate corporate personality is plainly not decisive because of the number of State organisations which exist and which are part of the apparatus of the State and carry out governmental activity or functions. The Trendtex decision establishes that the key questions are those of "governmental control" and "governmental functions" and that these are to be determined as a matter of English law, although the English courts may have regard to the position under the law where the body is incorporated and account can be taken of the view of the government concerned. An entity which is constituted in such a way that its purpose is to assist, promote and advance the industrial development, prosperity and economic welfare of the area in which it operates, can be seen as effectively carrying out government policy in the way that a government department does and therefore to assume the position of an organ of government (see Mellenger -v- New Brunswick Development Board  1 WLR 604 (CA) at page 609, although in that case the entity had never pursued any ordinary trade or commerce at all and was equivalent to the Board of Trade in England, as it then was).
- Here the founding statute, the byelaws and the convention to which I have already made reference reveal the State's involvement in SNPC and its control of the board of directors. Mr Gokana's own position as Special Adviser to the President of the Congo as well as being President and DG of SNPC speaks for itself.
- On the materials available to me, I agree with paragraph 32 of the judgment of Tomlinson J where he found that SNPC is simply part of the Congolese State and has no existence separate from the State. The Congolese legislation and SNPC's byelaws do demonstrate "that its purposes are to undertake the exploitation of Congo's oil reserve on behalf of the Congo, to hold that State's oil related assets on its behalf and to represent the State on oil related matters. It is financed by the State, its function is to act on behalf of the State and it is under the financial and economic control of the State with its officers being government appointees." Whilst it previously traded through SNPC UK and now trades itself or through its subsidiary Cotrade, it acts as the trading arm of the State and is controlled by it, whilst putting into effect Government policy in relation to oil and oil products. The two decisions of the French Court of Appeal to which I have referred earlier, are to the same effect.
- SNPC UK was formed on 27 May 1998 and was the subject of a voluntary creditors winding up on 24 June 2004. It was on 3 August 1999 that Mr Gokana and Dr Nwobodo were appointed directors. Mr Gokana resigned on 31 March 2001 and Mr Itoua and Mr Elenga were appointed on 9 April of that year. Although the evidence from Dr Nwobodo was that he traded oil for SNPC through SNPC UK for about a year and that Mr Christel then took over the trading, there is no record of the latter ever being appointed a director or officer of the company.
- To the extent that SNPC UK's activities are relevant, I have sufficiently set them out in the section of this judgment which relates to Mr Gokana and his connection with SNPC and SNPC UK. The companies with which Sphynx Bermuda and Sphynx UK dealt were essentially the same as those with which SNPC UK dealt, throughout its short life, which is unsurprising, given the limited nature of the market for Congolese oil and the fact that the connections of SNPC UK were those made by Dr Nwobodo and Mr Gokana when they commenced trading for it.
Cotrade - (La Congolaise de Trading)
- Cotrade has declined to participate in this action and has not therefore given disclosure of documents. Selective disclosure was given of the Cotrade/AOGC contract and of a framework agreement made between Cotrade and SNPC but no other material which would enable any testing of the evidence of Mr Gokana. Mr Christel did not make a statement or give evidence. No other documents emerged which revealed its corporate, transactional, accounting or banking arrangements or anything of its relationship with SNPC.
- Cotrade was registered at the RCCM, the equivalent of the companies' registry in Congo, on 21 July 2003 and Mr Gokana's evidence was that it was a Societe Anonyme Unipersonelle (SAU) with SNPC as its sole shareholder. In July 2003 Mr Itoua was already the President and DG of SNPC and he was then appointed the President and DG of Cotrade. On his appointment as Minister of Energy in the Congo in 2005, Mr Itoua was, according to Mr Gokana, replaced by Mr Christel as President and DG of Cotrade (and by Mr Gokana on 14 January 2005 as President and DG of SNPC), but this did not appear on a search of the RCCM records of Cotrade by Maitre Brudey, the Congolese lawyer instructed by Kensington. Additionally, it emerged in cross examination of Mr Gokana that Mr Elenga, SNPC's legal adviser and a former director of SNPC UK, was joint DG of AOGC with Mr Christel. It appeared likely to Maitre Brudey that Mr Gokana, as the successor to Mr Itoua, would also be a director of Cotrade but the RCCM entries do not show this. Whether that is so or not, his position as President and DG of SNPC (see Article 17 of SNPC's byelaws) and Special Adviser on oil to the State President and the fact that the current President and DG of Cotrade is the State President's son indicate complete control by the State over its day to day activities.
- Cotrade's first dealings with AOGC appear to have taken place in December 2004. Mr Gokana described Cotrade as the trading arm of SNPC and its role as that of selling consignments of SNPC oil. Its mandate is to sell crude oil and oil products.
- On 24 January 2005 Cotrade concluded a framework contract with SNPC, signed by Mr Gokana for SNPC and Mr Christel for Cotrade. This was disclosed during the trial on 26 October. It is plain that Cotrade is one of the subsidiaries referred to in the founding statute of SNPC, as is set out in this contract.
i) It recited law 1-98 of 23 April 1998 and the provision that SNPC should exercise its activities either directly or through subsidiaries. It also referred to the internal restructuring of SNPC and the formation of subsidiaries to specialise in different trades, Cotrade being formed to trade in oil and oil products.
ii) The contract gave Cotrade exclusive rights to sell for SNPC as its agent (commissionaire) and an option to purchase oil from SNPC in its own right and for its own profit. The contract was a framework agreement under which Cotrade could, by notice, exercise its option to purchase cargoes 45 days before the scheduled lifting date and a contract would then be negotiated, with a purchase price which was to be set, bearing in mind the market value. If Cotrade did not exercise its right to purchase in its own name, then it was to act as commissionaire and to trade the oil, in its own name but as agent for SNPC, in the international market, at prices to be agreed between SNPC and Cotrade. It was to receive a commission in respect of such sales.
iii) SNPC was entitled to request pre-payment prior to lifting the cargo and to seek pre-financing of projects on a priority basis from Cotrade, and only to look elsewhere if Cotrade did not agree within time limits to provide it.
iv) The Contract was to last for 2 years but would be cancelled automatically if SNPC should cease to hold the majority of Cotrade's capital or should lose control of it.
- There is no evidence before me as to the basis upon which Cotrade was concerned in the cargo which is the subject of this action. Cotrade existed as a subsidiary of SNPC in order to carry out part of SNPC's functions in relation to the trading of oil and oil products. That was its raison d'etre. It is apparent that any negotiations between Cotrade and SNPC for a sale would be between a parent company and its subsidiary over which it exercised control. Further, any sale prices negotiated by Cotrade as agent for SNPC had to be agreed between them. In practice, this must, in the absence of any direct documentary or other direct evidence, and in the light of Mr Gokana's extensive powers as President and DG of SNPC as set out in its byelaws, mean, at the highest, some discussion between Mr Gokana for SNPC and Mr Christel for Cotrade, whichever arrangement was made for a cargo. This assumes significance for this cargo, since Mr Gokana maintains that he acted for AOGC in negotiating the purchase of the cargo, as buyer, from Mr Christel of Cotrade. I cannot see how there could be any meaningful commercial negotiation or agreement, given Mr Gokana's position at SNPC in 2005. The sale, if there was one from SNPC to Cotrade, and the sale from Cotrade to AOGC were said to be the result of negotiation and agreement between the very same people, which has such an air of unreality about it that I am unable to accept the evidence given in relation to it. If Cotrade was selling as agent for SNPC, Mr Gokana would have to approve, on behalf of SNPC, the price to be paid by his company AOGC to Cotrade, which is equally unreal, quite apart from the conflict of interest involved.
- No copy of Cotrade's byelaws has been made available to the Court (because no disclosure has been made of it and Maitre Brudey could not obtain a copy from the RCCM) but it is clear that its function is to operate on behalf of SNPC. Inasmuch as SNPC carries out its functions through subsidiaries and is under the control of, and represents, an emanation of the State, it follows that its subsidiaries, under its control, must also be under State control and share the same character. If SNPC is part of the State and has no separate existence from it, the same must be true of its subsidiary which carried out part of its functions. The identity of its President and DG confirms this view.
- Whilst the absence of disclosure has obstructed the Court and I remain conscious that the burden of proof rests on Kensington to establish that debts owed to Sphynx Bermuda are debts owed to the Congo and that entities such as SNPC and Cotrade can be equated with the Congo for that purpose, I have no doubt that the failure of Cotrade to participate in these proceedings and to give disclosure or adduce evidence is the result of a calculated decision, because its status as an arm of the State, like that of its parent company, would otherwise be even more clear than it is. The links between it, SNPC and the Congo itself, not least in the person of Mr Christel, speak for themselves.
- When cross-examined, Mr Gokana did not deny that if he wanted Cotrade to do something and told it what to do, it would do it. I am satisfied that he could and did exercise such control and that he did so in his capacity as President and DG of SNPC and Special Adviser on oil matters to the President of the Congo.
- AOGC was incorporated on the 9 January 2003 in the Congo with the minimum capital requirement under Congolese law. It was created as a SAU with Mr Gokana as the sole shareholder and director. The evidence of Maitre Brudey was that, when he conducted a search on the 25 August 2005, he could find nothing that indicated any change in the nature of AOGC or in its governance. He had however independently seen a Declaration de Modification dated 31 March 2005 which mentioned an increase in capital but he doubted the validity of this insofar as Mr Gokana had said, in his statement, that a new shareholder who had been introduced had not paid up his shares. Maitre Brudey considered that Mr Gokana was still the legal owner of AOGC in its entirety. He was not cross-examined on this.
- The Declaration also referred to "maintaining Mr Bantsimba as chairman of the board and Mr Malonga as the general manager" and to the registered office of AOGC at an address which represented a change from the previous address, though not recorded as such. I find that the Declaration, whilst containing errors of a kind to which the RCCM appears prone, demonstrates that the various Minutes of resolutions said to have been passed on February 3, 4 and 23 were documents which had been filed with the RCCM by 31 March, even though the RCCM failed to disclose their existence to the office of Maitre Brudey when a search was made and a copy Extrait produced.
- Mr Gokana's evidence was that he set up AOGC as a SAU and wanted to build it up as a company to trade with suppliers of oil, oil products and gas and in due course to become an exploration and production company, active in the Gulf of Guinea and in places like Congo, Zaire, Angola and Gabon. He maintained that AOGC had acquired a stake in GPL SA which was a company which bought butane gas, bottled it and sold it, in which SNPC had an interest. A 55% stake was apparently acquired, largely by taking over a debt owed to SNPC. According to Mr Malonga, AOGC has its own transport business and a petrol station concession in Pointe Noire and employs over 70 persons as well as owning stakes in other businesses with nascent activities.
- Mr Gokana maintained that he set about the reorganisation of AOGC before he was appointed Director General of SNPC and that the latter appointment had nothing to do with that reorganisation. He wanted to reorganise AOGC in such a way to encourage investors to take shares in the company to enable it to grow. He had already engaged Mr Malonga, an old friend, as joint Administrateur General at AOGC (who started on 3 January 2005) and, when he himself was appointed Director General of SNPC, he appointed Mr Malonga as AOGC's Director General and turned AOGC into an SA. The reorganisation of AOGC was completed on 23 February 2005 and a board of Directors (Conseil d'Administration) was put in place consisting of three persons. The first was Mr Bantsimba, a cousin of his through marriage whom he had known since childhood. He worked for a Congolese government department and was the Director responsible for urban control and town planning. The second person was Mr Ndeko whom he had known from school days and with whom he had worked at ELF. He is currently on secondment to the Oil Ministry in the Congo. The third person was Mr Okoumou, another old friend from ELF and a distant member of his clan who was head of the IT department at SNPC. Mr Gokana said that most people in Congo worked for the State, so that the Directors' other employment was of no import.
- The capital of AOGC was increased to CFAF 100 million but the capital had not been entirely paid up. The paid up capital is equivalent to less than $5000. A cousin of his, Mr Mjondo, had acquired 10% of AOGC but he had not paid for his shares. Mr Mjondo was introduced because two shareholders were needed to change AOGC from being an SAU to an SA.
- The documents exhibited to the notary's (Mr Louboula's) hearsay statement and his evidence in that statement satisfy me that resolutions were passed in General Meeting and by the Board as set out in those documents. The effect was to change AOGC from an SAU with a sole director (Mr Gokana) to an SA with a Board and to appoint new Board members. The notarised assignment of 10% of Mr Gokana's shares to Mr Mjondo and the Minutes of the Extraordinary General Meeting of 23 February, recording the increase of share capital pro rata to the existing holdings (90% - 10%), respectively refer to payment for the shares and full subscription by payment by Mr Mjondo. As Mr Gokana's statement revealed that this had not taken place, these documents do not evidence the true situation. Whatever the position as a matter of Congolese law, the reality is that it is Mr Gokana who still owns AOGC.
- For reasons explored in the cross-examination of Maitre Brudey, I find that the document exhibited by the notary as an Extrait produced by the Greffe of the RCCM dated 14 October 2005 does record the effect of changes made in the corporate status of AOGC (subject to questions of ownership of the shares), although it appears from the format of the document that it must have been produced by the Notary, not by the Greff, before the Greff stamped it and that the procedure adopted to obtain the document was therefore unconventional. Mr Louboula was not frank about this in his statement.
- The evidence of Mr Gokana and Mr Malonga was that the day to day management of AOGC was now vested in Mr Malonga who reported to the board of directors. Mr Gokana had no day to day involvement in its management although he was kept informed by Mr Malonga who spoke to him on a regular basis. Mr Gokana accepted that, as the principal shareholder, he maintained a high degree of overall control and was certainly involved in the making of any major decisions. For the first half of 2005, whilst Mr Malonga acquainted himself with his duties, Mr Gokana accepted that he maintained some involvement and said that it was he who had negotiated AOGC's purchases of oil, including the cargo at issue with Mr Christel of Cotrade.
- What emerged from Mr Malonga's evidence was however highly significant. It transpired that all the oil trading activities, in which AOGC's name was used, were effected by Mr Gokana, without any reference to anyone else at AOGC, whether Mr Malonga or the Board. He alone was responsible for purchases and sales of oil and for the action needed in relation to them. No one else was involved at AOGC at all. Moreover there was an AOGC bank account at the Brazzaville branch of BGFI over which Mr Gokana had exclusive control and which he used for monies connected with the international oil business. In consequence, Mr Malonga, a financier, was not able to answer any questions about the apparent discrepancies which appeared on the accounts, or the differences between the figures in the accounts and the revenue from sales of oil of which disclosure had been given or on which information had been obtained.
- The Board of AOGC was given no meaningful financial information at the two Board Meetings which had occurred and there was no discussion of oil trading activities at those meetings, nor were such activities referred to in the report of past activities (save for an inaccurate passing mention which referred to Sphynx UK) or in schedules of activities for the future. The accounts for 2003 and 2004 were internal documents only and were not audited (contrary to Mr Malonga's statement) and contained a number of anomalies which remain unanswered in relation to its assets. In particular the 2003 accounts do not correlate with the receipts for oil sold as disclosed, which suggests that there was at least one more cargo sold in 2003 than the disclosed documents revealed, apart from the first Sphynx Bermuda cargo which was included, although it had nothing whatever to do with AOGC.
- In cross-examination of Mr Malonga, it emerged that the other activities of AOGC, of which he made much in his statement, were insignificant in monetary terms with Mr Gokana's oil sales, which accounted for about 99.5% of AOGC's revenue, as set out in the un-audited accounts. In his statement Mr Malonga had said that AOGC operated principally as a holding company for its subsidiaries, traded in oil and gas and also managed a petrol station concession in Pointe-Noire. The subsidiary, GPL, acquired by purchase of a 55% interest, operated independently of AOGC, and the other activities of AOGC and its other subsidiaries were mainly at a formative stage and were more limited than his statement suggested.
- Contrary to Mr Malonga's statement, AOGC had paid no corporation tax on its profits. No annual returns to the tax authorities were produced. The office building of AOGC belonged to Mr Gokana but the assets of AOGC, and particularly its cash assets, remained shrouded in mystery. The accounts, which had only recently been prepared for 2003 and 2004 revealed little cash in hand at the end of 2003 or 2004, and it was impossible to see where the money could have come from to pay Cotrade for a cargo of crude oil in May 2005 as was stated by Mr Gokana to be the case, but of which Mr Malonga knew nothing. Neither Mr Gokana nor Mr Malonga was prepared to answer for these sets of accounts.
- In his statement Mr Malonga had sought to convey the impression that AOGC had been involved in oil trading prior to his arrival, that the Nordic Hawk cargo was the first such transaction after he joined AOGC and that there had been no oil trading since. This was clearly untrue and he admitted that AOGC had carried on trading uninterruptedly after the Interim Third Party Debt Orders were made in April. It had made no difference when Sphynx Bermuda's accounts were frozen by Court orders. Prior to April 2005, AOGC had only sold oil to Sphynx Bermuda, according to the documents disclosed.
- I am entirely satisfied that the oil business carried on in the name of AOGC, was in fact carried on by Mr Gokana without reference to AOGC, its Board or its corporate structure. It was his own sphere of activity, which he kept to himself. All that Mr Malonga, the Managing Director/CEO did in connection with this was, as he admitted, to sign the documents which were put before him and which Mr Gokana instructed him to sign, whether contracts for oil or invoices or assignments. I am equally satisfied that when Mr Gokana was carrying on this business, he was doing so in his capacity as President and DG of SNPC and as Special Adviser on oil to the President of the Congo. Whilst there may have been room for personal benefit, the real and main purpose for using AOGC was to create the semblance of an independent company selling Congolese oil. These matters are explored later on in the judgment.
- Sphynx Bermuda was incorporated on 15th February 2002. It is now clear, although this was not always the case, that the ultimate owner of Sphynx Bermuda is Mr Gokana. Sphynx Bermuda is a company typical of many in Bermuda, an offshore tax haven, with a service company operating on shore which effects all the meaningful business carried on, save for the actual signature of contracts which bind the offshore company, thus securing fiscal advantages.
- When Kensington discovered the existence of the Glencore/Sphynx Bermuda contract in respect of the cargo, and obtained Interim Third Party Debt Orders in April of this year, it went on to obtain disclosure orders both in this country and in Bermuda from which it emerged that Sphynx Bermuda had professional Bermudan directors provided by a local corporate services company, Consolidated Services Limited (Consolidated). The directors were a Mr Williams and a Mr Jones. The former swore an affidavit in which he stated that Sphynx Bermuda's directors and officers had no knowledge that the company was carrying on any business at all and had no knowledge of the Glencore contract or any records relating to it. There had been an absence of communication between the directors of Sphynx Bermuda and its then unidentified "principal" with regard to trading contracts and trading activity, although a bank account had been opened with a mandate in favour of this principal.
- The identified shareholder for Sphynx Bermuda was Lockwood Enterprises Limited, a company incorporated in the British Virgin Islands (BVI). An application was made in the BVI, on notice to the Sphynx Companies' English solicitors, for disclosure in relation to those holding companies. The order made on 25 July 2005 resulted in the information that, until 28 April 2005, the shareholder of Lockwood was Consolidated Nominees Limited (connected to Consolidated) and its directors were also Mr Williams and Mr Jones. On 28 April 2005 Mr Williams and Mr Jones had resigned in favour of two of Mr Gokana's contacts, Mr Pongault and Mr Ippet-Letembet. On that date however, instead of the nominee company shareholder, the shareholder became Mr Gokana himself.
- It was on 10 July 2002 that Consolidated had told HSBC that Consolidated Nominees held the shares of Lockwood on trust for Mr Gokana, in whose favour the bank mandate operated.
- Sphynx Bermuda's finances have therefore been under Mr Gokana's sole control throughout its existence. No financial statements or accounts, whether audited or otherwise exist for it, according to Mr Gokana. He ran its business with, as it now appears, some assistance from SNPC's consultant Dr Nwobodo.
- On 19 April 2005, after notification of the court orders obtained by Kensington the directors retracted the authority which they had previously granted to Mr Gokana as sole signatory on the bank accounts but on 28 April 2005 they resolved to reinstate Mr Gokana and then resigned as directors and officers in favour of two of Mr Gokana's contacts selected by him for the purpose, namely Mr Pongault and Mr Ippet-Letembet. These activities on 19 and 28 April did not become known to Kensington or the world at large until later.
- On 25 April 2005 Sphynx Bermuda's attorneys disclosed a copy of the contract between it and AOGC (dated 10 March 2005) and another document relating to AOGC which was said only just to have come into the company's possession, after the original disclosure order. It was not until 10 May 2005, pursuant to a further order of the Bermudan Court that Mr Williams confirmed that Mr Gokana was the previously unidentified principal of Sphynx Bermuda and said that he had never had any contact with Mr Gokana, his only point of contact being with Mr Chaffey who had previously worked under Mr Gokana at SNPC UK, when it was the trading arm of SNPC. The AOGC Contract had been provided to Consolidated by Mr Gokana's Swiss lawyer and "agent", Nicolas Junod of Froriep Renggli (who had been responsible for liaising with the Bermudan incorporators of Sphynx Bermuda) only after the commencement of the enforcement proceedings.
- The disclosure process revealed that Mr Gokana was the sole signatory on the bank accounts of both Sphynx Bermuda and Sphynx UK at HSBC. He had never been and is not now a director or officer of either company, although HSBC was wrongly informed in the mandate document for Sphynx Bermuda that he was. The Bermudan directors and officers did not even know the number or branch for Sphynx Bermuda's bank accounts and all bank statements and the like were sent by HSBC to the personal residence of Mr Gokana in France.
- No director or anyone authorised by the directors ever signed any contract for the company. Notwithstanding that he was not a director or officer of Sphynx Bermuda, Mr Gokana frequently signed contracts on its behalf, considering himself justified in doing so because he owned it. Likewise he felt he could authorise others to sign for it, as he did when asking Dr Nwobodo to sign the Glencore contract, which he did, according to the latter, because he was too busy to sign it himself. Contracts concluded for Sphynx Bermuda were generally signed by Mr Gokana or Mr Chaffey or "pp Mr Chaffey" or, latterly, Dr Nwobodo. Mr Gokana accepted in cross-examination that it was possible that he was not made a director because he did not want his connection to be known.
- The share capital of Sphynx Bermuda was only $12,000 but it carried out about $472m worth of business in the course of 27 months between January 2003 and April 2005. Mr Gokana said that, because it always traded on a back to back basis there was no need for significant capital. An examination of its bank statements reveals that there was virtually no connection between the cash passing through its bank accounts and the sums it should have received for the oil it sold, according to the contract documents now produced. The proceeds of only one cargo (the Addax cargo) were received by the company. In every other case the money was remitted, it seems, by Sphynx Bermuda's purchaser to AOGC in the Congo, although AOGC's bank statements have never been disclosed.
- Mr Gokana's ownership and control of Lockwood and Sphynx Bermuda was unknown to Kensington or to the world at large until July of this year. In his statement of 12 August 2005, Mr Gokana stated that he was the 100% beneficial owner of Sphynx Bermuda Limited and Sphynx UK Limited, as well as the owner of 90% of the issued share capital of AOGC.
- It is now known that Sphynx Bermuda's incorporation documents identified Mr Gokana as the "principal," namely the beneficial owner, from the outset. It is also now clear from the evidence that Sphynx Bermuda's substantial oil and gas trading business was never run from Bermuda at all, nor from Sphynx UK in London but was run by Mr Gokana from "France and the Congo or wherever he happened to be at the time". Like the previous directors, who knew nothing of any business done by Mr Gokana or Dr Nwobodo, the new directors Mr Pongault and Mr Ippet-Letembet do not play any active role in the company. Mr Gokana, with the assistance of Dr Nwobodo, particularly in 2005, has at all times run the business. All Sphynx Bermuda's documents were kept by Mr Gokana at his homes in Paris or Brazzaville, save for whatever appeared on Dr Nwobodo's computer, which he was never asked to disclose until the trial and which never were disclosed.
- All Sphynx Bermuda's oil and gas purchases were from SNPC or AOGC. It was never involved in anything other than the Congo's oil or gas and never made a single purchase from other oil producers or traders. On the evidence I heard, none of the purchasers from Sphynx Bermuda ever questioned the authority of Mr Gokana or Dr Nwobodo to conclude or sign contracts for it, nor ever checked on its substance nor its ability to perform multi million dollar contracts. In my judgment, it is clear, as appears hereafter, that, when running the business of Sphynx Bermuda, Mr Gokana was at all times acting in his capacity as President and DG of SNPC and as Special Adviser on oil to the President of the Congo. Whatever personal benefits he may also have obtained, the primary objective here, as with AOGC, was to interpose a company between Cotrade and the buyer of oil in the international market.
- Sphynx UK was incorporated on 7 February 2002, at about the same time as Sphynx Bermuda, with a capital of £1000. The holding company of Sphynx UK was also a BVI company, Litchfield Development Limited. Sphynx UK has a professional company secretary, Jordan Company Secretaries Limited and the latter's only contact with Sphynx UK was Mr Chaffey who told Jordan on 20 April 2005 that he no longer worked for Sphynx and that all further communication should be referred to Mr Gokana. The directors of the company are Mr Hounounou and Mr Massie who are expatriate Congolese living in France and have never played any active role in the company.
- As with Lockwood, so also Litchfield, until 28 April 2005 had a sole shareholder which was Consolidated Nominees, which was also its sole director. On that date Consolidated Nominees resigned its directorship in favour of Mr Pongault and Mr Ippet-Letembet and transferred the sole share to Mr Gokana. Until July therefore Mr Gokana's control of Sphynx UK, like Sphynx Bermuda, through the BVI company, was not known to Kensington and could not have been ascertained by reference to public documents.
- The sole signatory on Sphynx UK's bank accounts with HSBC was and is Mr Gokana who, although the ultimate owner, was neither a director or officer of Sphynx UK. The mandate described his position with Sphynx UK as "official". It is now clear that Mr Chaffey was also connected to Sphynx UK though no powers were conferred on him by the corporate documents of Sphynx UK either. He ran the administrative side of the UK company in the same way as he had run operations when at SNPC UK, but contracts negotiated by Mr Gokana for Sphynx Bermuda were drafted by him outside the country and contracts negotiated by Dr Nwobodo, which included all those for oil trades in 2005 were drafted by the latter. It is hard to see what functions were actually undertaken by Sphynx UK, as all the records of trading were kept elsewhere than at the offices, which had been leased.
- Sphynx UK was intended to act as a service company for Sphynx Bermuda and Mr Gokana's evidence was that a service contract had been drawn up but was never signed. It has not been disclosed. Sphynx UK never made any charges to Sphynx Bermuda for its services and its accounts showed loans from Mr Gokana and Sphynx Bermuda.
- In a letter dated 17 August 2004, Sphynx UK's accountants, Baker Tilley noted that Mr Gokana, although neither a director nor shareholder, appeared actively to control the company and could thus be deemed to be a "shadow director". They also noted that the company was insolvent and was dependent upon the continued financial support of Mr Gokana and its parent company.
- Whilst accepting that the public records would show no connection with him until 28 April 2005 at the earliest, Mr Gokana accepted that it was always intended that he would run Sphynx Bermuda and Sphynx UK, stating that the structure was one which was put forward by his legal adviser, Mr Junod, which he felt would be appropriate. It has earned no revenues since its establishment but plainly exists for no other purpose than to act as a contact/service company for Sphynx Bermuda.
The History of Prior Trading of Congolese oil
- After SNPC was set up in April 1998 on the recommendations of Mr Itoua, the President's Special Adviser on oil at that time, Mr Gokana and Dr Nwobodo (also advisers but lower in the hierarchy at that time), SNPC UK was incorporated in May of that year. Mr Gokana and Dr Nwobodo were appointed directors on 3 August 1999, the former as managing director. Mr Itoua became President and DG of SNPC in early 1999 and the rights formerly held by Hydro Congo to royalties and taxes from the oil companies were transferred to it.
- It appears that SNPC UK commenced its servicing activities in 1999 with Mr Gokana, under Dr Nwobodo's tutelage and direction, commencing to market SNPC's oil.
- Complex pre-financing schemes were concluded such as the $200 million Glencore/SNPC scheme with banks, whereby funds were provided to SNPC and repayment was made by the utilisation of oil cargo. These pre-financing arrangements were approved by the government of the Congo and secured against the oil produced. Tomlinson J, in his judgment in Kensington International Limited -v- Republic of the Congo  EWHC 2331 referred to the evidence and publicly available material which showed that the 2002 pre-financing structure he had to consider was deliberately selected by the Congo and its legal advisers in an attempt to prevent the Congo's creditors from seizing oil in the hands of SNPC and to reduce the risk of action by the Congo's creditors.
- In addition to large scale pre-financing schemes, arrangements were made in respect of pre-payments for individual cargoes. Advances were made of a proportion of the purchase price before the due date for payment, which were repaid by deliveries of oil charged for that purpose with the repayment of the debt plus interest. I find that these arrangements, which were very expensive for SNPC, were also motivated by the desire to prevent seizure of assets.
- One of the contracts concluded in 2000 between SNPC and Glencore contains an apparently anachronistic reference to Cotrade, but the company of that name which was referred to was Cotrade Investments Limited with an address in Nassau in the Bahamas. That company was at one stage put forward as the projected seller of the cargo by Mr Gokana "fronting" for SNPC, as Glencore saw it. Mr Bétemps was the contact given for Cotrade. His name appears in connection with other pre-financing arrangements involving Sphynx Bermuda, Crossoil and Lanbury in 2003. It was Mr Gokana who informed Glencore of the nominated seller, according to him, on the instructions of SNPC. Cotrade was then addressed C/O SNPC UK, by Glencore. Payment for the oil was to go to SNPC regardless, but the sale was in any event ultimately effected in the name of SNPC.
- Mr Gokana left SNPC UK in April 2001 having been in charge of it since its formation and having traded oil for it with the assistance of Dr Nwobodo in the interim. Mr Gokana described the circumstances in which he came to leave SNPC UK in the manner set out earlier in this judgment. Dr Nwobodo remained in place as a director of SNPC UK until it was liquidated in mid 2004.
- Mr Gokana created ITMS in Paris in February or March 2001 in order to trade crude oil and oil products and to provide market intelligence/information for SNPC, according to his evidence. He appointed his French resident brother in law, Mr Pongault as a director. ITMS never got off the ground. It never carried out a single transaction. Contrary to Mr Gokana's evidence, I find that this was not because of inability to do so or high costs in Paris but because of problems which arose in relation to cargoes from the Congo and his inability to persuade those in power that he could be entrusted with oil sales for it. Although Mr Gokana professed, in his evidence, to be seeking cargoes from Equatorial Guinea, he must have known that his only realistic prospects lay in obtaining oil from the Congo and, on his own admission, he went back to the Congo at the end of 2001 in order to make a presentation to ministers there for that purpose. There he met the foreign minister Mr Adada (a former oil minister) who regarded him as his protégé and the current minister for oil Tati Loutard. It is to be inferred that, over the course of the ensuing year, he persuaded those in power that he could sell the Congo's oil through companies that he set up, with a diminished risk of attachment, and that, as Mr Itoua's star waned, so Mr Gokana rose to a position of power and influence, becoming the Special Adviser on oil to the President at the end of 2002. It may very well be that his intention had been to use ITMS for business other than the sale of Congolese oil but I am clear that, although he may have hoped to obtain other business and make money for himself at that stage, the sale of Congolese oil, without attachment of it or its proceeds, was amongst his objectives.
- The timing of these events and the creation of the Sphynx companies at the beginning of 2002 is significant. On the 16 January 2002 Mr Junod, Mr Gokana's Swiss lawyer (who appears, with his firm, to have been responsible for setting up many of the pre-financing arrangements) prepared a Memo for Mr Gokana on the "Establishment and Operation of a New Trading Entity". This Memo suggests a three fold structure involving a trading company in Bermuda (a tax haven), a service company in London and a holding company in Bermuda or the Bahamas, also for tax reasons. The Memo referred to the opening of bank accounts with banks which had trading company experience and referred to the oil trading centres of London, Geneva and New York. It expressly said "Paris should be avoided".
- There was a very good reason to avoid Paris because there had been recent litigation there in which SNPC's assets had been seized in execution of an English judgment and an Arbitration Award against the Congo in respect of its debts. On the 24 October 2001, Creditors of the Congo obtained a freezing order in respects of SNPC's bank accounts in Paris in connection with the enforcement of an English judgment against the Congo. Mr Gokana refused to accept that this was the meaning of the expression in the Memo or that this had anything to do with his decision to liquidate ITMS and to start afresh with Sphynx Bermuda and Sphynx UK, as set out in Mr Junod's Memo, but I reject his evidence on this. He also gave evidence that, on his return to the Congo at the end of 2001, he did not discuss with Mr Adada or Tati Loutard the orders for saisie conservatoire in Paris. This cannot be true and I find that he went back to the Congo to discuss what to do next, now that France had proved a place of difficulty for SNPC. In consequence, the idea of using a French company, such as ITMS, was abandoned and the structure then suggested by Mr Junod in January was, in part, put in place.
- Mr Junod's Memo also referred to the requirements for the service company and the trading company to operate with a proper service agreement, with proper remuneration for services rendered, corresponding to the work done, with proper administration of oil contracts and for the conclusion and signature of the oil contracts themselves to be effected outside the UK in order to avoid tax liabilities there. The trading company was to be properly capitalised in an amount proportionate to the scope of its trading activities.
- It is plain that, other than setting up Sphynx UK and Sphynx Bermuda, much of this advice was not implemented. There was no overarching holding company in Bermuda or the Bahamas to receive and manage the trading profits, as Mr Junod had suggested. Separate shareholding companies were created in the BVI for the Bermudan and English companies but no money was ever sent to them.
- Mr Gokana was the ultimate owner and he directed that, with one exception in respect of the Addax cargo, all the proceeds of Sphynx Bermuda's sales should go directly to AOGC in the Congo, without ever touching the Bermudan or BVI companies at all. AOGC was set up in the Congo where its oil receipts would be subject to Congo's control.
- The Memo stated, in referring to Mr Gokana, that:-
"The head and shareholder, direct or indirect, of the parent company is a petroleum industry professional having the status of a private person. The fact is that nowadays links with the public function constitute an impediment to business and banking activities".
Although Mr Gokana would not accept it, this appears to me to be a clear reference to the desirability of avoiding any obvious connection of the companies to the Congo State, because of the possibility of seizure of assets which could be seen as belonging to the State, if held by persons or entities associated with it. The Memo, Mr Gokana accepted, referred to himself and it emphasised that any connection between himself as a "private person" and the State was unhelpful.
- Notwithstanding Mr Gokana's evidence that he was only asked to carry out specific tasks for the Congo's government in late 1998 (the review of the oil industry which led to the establishment of SNPC) and December 2002 (assistance in resolution of the dispute with Total), it is clear that he was at all times close to the Congo's government and its ministers and as from December 2002, he was one of only three Special Advisers to the President. In January 2005 he became President and DG of SNPC. The inference to be drawn of a continuous relationship of trust and confidence over the preceding years when at SNPC UK, ITMS and Sphynx, is, in my judgment, inevitable.
- Mr Gokana's evidence was that he did not set up the Sphynx companies' structure for fiscal reasons but because it was a structure recommended to him for his private use. He said in evidence that it was to establish a private structure for him, so that he could trade oil from the Congo and carry out exploration and production of oil from the Congo. He had a secondary concern that contracts should be signed outside the UK to avoid corporation tax in the UK but that was not the main reason for the structure. I find that the main reason for the structure was its privacy, but not for himself as such. The reason was the desire for secrecy and the concealment of any legal or formal connection between the Sphynx companies, or himself, and the State of the Congo. The intention was that Sphynx Bermuda should appear to be an independent oil trading company after the fashion of other independent oil traders.
- Judgment was given in Paris by the first instance court on 23 January 2002 in which it was decided that SNPC's assets were tied up with those of the Congo and that SNPC was simply an emanation of the State. Almost immediately afterwards, on 7 and 14 February 2002, the Sphynx companies were incorporated and in late February the professional directors of Sphynx Bermuda resolved to open a bank account for which Mr Gokana was the sole signatory. In May, Sphynx UK mandated HSBC to accept Mr Gokana as the sole signatory of its bank accounts.
- After Mr Gokana had left SNPC UK in April 2001 and whilst he was involved in ITMS, SNPC UK had continued to operate as a service company for SNPC with Dr Nwobodo trading for it until the arrival of Mr Christel, the Congo President's son in about April 2002. Thereafter, according to Dr Nwobodo, Mr Christel asserted himself and Dr Nwobodo's role diminished, save for the provision of market information. Dr Nwobodo remained on SNPC UK's payroll and continued to receive quarterly consultancy fees from SNPC, attending the quarterly pricing meetings in Brazzaville in the second week of each quarter. I find that Dr Nwobodo's role at SNPC must have continued with Mr Christel in much the same way as it had done previously when Mr Gokana was a director of SNPC UK, however keen Mr Christel was to flex his commercial muscles.
- In August 2002 however creditors of the Congo obtained an injunction in the Cayman Islands blocking a $210 million Vitol pre-financing deal and it was at the end of the year and the beginning of the following year that the four English judgments, which are the subject of the Third Party Debt Orders, were obtained. Mr Gokana became a Special Adviser to the President on oil and at about that time Sphynx Bermuda concluded its first contract with SNPC for which the lifting took place in January 2003.
- The French first instance judgments were confirmed on appeal in January 2003 and AOGC was then introduced into the business in March. Moreover, on 7 April 2003, following a judgment obtained against the Congo in August 2002 by creditors of the Congo (Walker and AF-Cap), interim charging orders in this country were obtained over the share capital of SNPC UK, because its shares were owned by SNPC which had been held by the French courts to be an emanation of the State of Congo. It was later that month that Tomlinson J was to find that SNPC was "simply a part of the Congolese State and has no separate existence from the State". The interim orders were made final on 17 October 2003 and SNPC UK ceased business.
- In the report of its first meeting of creditors, the statement was made that SNPC UK "ceased operation in November 2003 due to "fall out" from a legal action and judgment against the parent company by people who had claims against the government of the Republic of Congo which made it impossible for subsidiaries to continue to operate with a Third Party that had claims to the shares of the company". The difficulties in using SNPC UK must have become apparent to the Congo's advisers from the moment that SNPC's assets were the subject of action in Paris and elsewhere but as few funds were to be found there, this may not have seemed important.
- The desire to use the Sphynx companies to channel the oil or its proceeds was, I find, the underlying reason for the establishment of the Sphynx companies and their utilisation. No other purpose could be served by SNPC UK, prior to its demise in late 2003, selling oil to Sphynx Bermuda, when Dr Nwobodo at SNPC UK had all the necessary contacts to sell the oil directly into the market without using Sphynx Bermuda as an intermediary. His trading experience exceeded that of Mr Gokana and on both his evidence and that of Mr Gokana, his name and contacts were sufficient to sell any cargo of Congolese oil into the limited market for Congolese oil to potential purchasers who were well aware of his ability to procure delivery of the cargo. The idea that SNPC UK or SNPC in the Congo would happily give away profits to a private middle man when they were perfectly capable of selling the oil itself to established purchasers such as Glencore, Vitol or Trafigura, is fanciful.
- There was only one purchaser for Sphynx Bermuda which had not been a purchaser from SNPC UK and that was an entity called Crossoil which had pre-financing arrangements with Lanbury. Both of these companies were represented by Mr Junod (Mr Gokana's Swiss lawyer) who signed contracts on their behalf. Both were also connected to Mr Bétemps who was also the named representative of Cotrade Investments Limited in the 2000 proposed sale, which was finally concluded between SNPC and Glencore and where Glencore had referred to Cotrade as "fronting for SNPC". Mr Bétemps was an officer of both Crossoil and Adfin which received a commission for setting up pre-financing arrangements for Sphynx Bermuda. Whilst all these companies remain shrouded in some mystery, I conclude that their presence, which added another entity between the Congo and the ultimate purchaser, can only have been to protect oil or proceeds from attachment, unless there be some other nefarious purpose. The effect of the arrangements was to bring about prepayment to Sphynx Bermuda which prepaid money to AOGC before oil left the Congo so that the oil was then charged with the repayment of the debts. Crossoil was the purchaser from Sphynx Bermuda for four of the first five contracts in 2003. Five further sales were concluded with Quantic or Elidovo, which were equally insubstantial mysterious purchasers, both of which had previously bought from SNPC UK.
- Sphynx Bermuda participated in its first transaction in December 2002/ January 2003, at a time when creditors of the Congo were adopting an aggressive stance in relation to enforcement of the Congo's debts against SNPC assets. AOGC was founded by Mr Gokana at around this point and became involved in the second transaction of Congolese oil in which Sphynx Bermuda was involved, in order to provide a further barrier to discovery of the link to SNPC. In his first statement in August 2005, before Kensington obtained copies of the Sphynx companies' bank statements, Mr Gokana said that international market purchasers had always paid the purchase price to Sphynx Bermuda which then paid AOGC. This was doubtless to give the impression of arm's length transactions between independent companies, but after the bank statements had revealed the true position, he conceded that payments were made direct to AOGC.
- In the 27 month period between January 2003 and April 2005, 23 cargoes were traded by Sphynx Bermuda, including, as the penultimate cargo, that on the Nordic Hawk. A further 6 cargoes were traded thereafter (according to Annex 1 to Mr Gokana's second statement in late October 2005) and a further two in October 2005 were disclosed in a letter from Sphynx's solicitors sent during the course of the trial. Dr Nwobodo gave evidence of a further cargo sold to Vitol in March 2005 which did not appear in any of these lists (another failure in disclosure by the third parties) and of another deal concluded in the previous week or two for a November 2005 lifting for Vitol, notwithstanding Mr Gokana's evidence that there was no oil available in November or December for sale.
- Mr Gokana's evidence was that he manipulated the transactions between Sphynx Bermuda and AOGC, "working" them according to his needs, organising them "in a way that suited" and allocating the money between the two companies as he saw fit. He made no distinction whatsoever between the interests of Sphynx Bermuda and those of AOGC which he regarded as his companies. Both he and AOGC's DG Mr Malonga described these as "paper transactions" and the documented terms can have no commercial significance at all.
- As already mentioned, disclosure given by the Sphynx companies, AOGC and Cotrade has been woefully inadequate. Cotrade has not participated in the proceedings but the others have. Glencore has given disclosure in the conventional manner but the other companies' disclosure is limited in the extreme. Their approach from 10 April onwards to orders for disclosure and information has been to give as little as possible and the result has been a gradual drip of information as material has emerged largely from third parties, which has led to concessions in statements made by witnesses in August, September and October and in evidence given at the trial. No transactional documents at all were disclosed in relation to the cargoes after April 2005, save for a contract document which Dr Nwobodo obtained from Trafigura and which he made available on the seventh day of the trial. I find that Mr Gokana was keen to keep back information on cargoes traded until the proceeds of sale were in the Congo.
- It appears likely however that the absence of much of the documentation which might be expected as part of conventional disclosure is because such documentation does not exist and has never existed. It is clear that neither Sphynx Bermuda nor AOGC troubled themselves over-much with documentation, nor with the formalising of the transactions which they allege to exist. Whilst this is more readily understandable as between AOGC and Sphynx Bermuda because they were both under the control of Mr Gokana whose evidence was that he allocated profit between them as he saw fit, this does not explain the position as between AOGC and SNPC/Cotrade, on the Third Parties' case.
- Out of 22 contracts said to exist between SNPC/Cotrade and AOGC between January 2003 and April 2005, there were only three signed contracts. Seven unsigned contracts have been produced and twelve contracts are missing in their entirety, whether because they never existed or because no disclosure of such documentation has ever been made. Where contract documents have been disclosed of any kind, anomalies in the prices set out appear, as compared with those reported by KPMG, the auditors appointed by the World Bank to report on oil receipts of the Congo. Additionally, very few of the prepayment agreements in which Sphynx Bermuda was involved were supported by any Cessions de Creances giving direct rights against SNPC, a most surprising omission, since this left the lender of the prepaid sums a remedy against the insubstantial Sphynx Bermuda or another insubstantial intermediate buyer such as Crossoil.
- Mr Gokana said that formal contracts were not essential and whilst telephone deals should be reduced to writing for regularisation, this was sometimes forgotten. In a country where efficiency is not a byword, this may be understandable but there were no documents disclosed at all which showed any negotiation or conclusion of agreements between AOGC and SNPC/Cotrade, whether in the shape of emails, faxes or exchanges of any kind other than the limited number of formal agreement documents to which I have referred. Mr Gokana said that he carried the information in his head so far as negotiations were concerned, dealing with one cargo at a time. Documents were therefore not to be expected although there might have been an occasional note at one time.
- The obvious conclusion to draw in relation to the position between AOGC, on the one hand, and SNPC or Cotrade, on the other, is that there was no real negotiation at all and that the contract documents which have emerged, whether signed or unsigned are the product of the desire to show that arm's length negotiations did occur and arm's length transactions were concluded.
- Dr Nwobodo gave evidence of one occasion only in 2003, when he was a director of SNPC UK when he was asked, by Mr Itoua, because of Mr Christel's absence, to negotiate a cargo price for SNPC with Mr Gokana of AOGC, which he did. He said that the deal was done by reference to market prices and in accordance with usual practice where both parties knew the market. There was negotiation only over a few cents a barrel, with the result that a deal was done over the telephone in less than 24 hours. The other cargoes were all said to have been negotiated between Mr Christel (for SNPC and then Cotrade) and Mr Gokana for Sphynx Bermuda (for the first cargo) and then for AOGC. I did not hear from Mr Christel, the President's son and President and DG of Cotrade which effectively took the place of SNPC UK, but I did of course hear from Mr Gokana, who testified to negotiations on behalf of AOGC with Mr Christel.
- Whilst Dr Nwobodo's evidence gave me pause for thought, it is significant that it was given in his evidence in chief and under cross examination, when set against his statement, which at paragraph 17, had set out a different version of events. In that paragraph he said that he was aware that Sphynx Bermuda and AOGC's activities included the purchase of crude oil consignments, initially from SNPC but later from Cotrade, because he negotiated sales of some consignments to AOGC/Sphynx Bermuda on behalf on SNPC. He went on to say that as far as he was aware, Mr Gokana's activities through AOGC and Sphynx Bermuda were independent of the Congo and all the transactions between AOGC and Sphynx Bermuda, on the one hand, and SNPC and Cotrade, on the other, were transactions at arm's length. He then said that he could say that with certainty with regard to those transactions in which he was involved on SNPC's behalf and that the negotiations carried out were exactly the same as any negotiation with any other third parties.
- I have already referred to Dr Nwobodo's explanation for this and other inaccuracies in his statement which suggests a cavalier attitude towards the making of such a statement. Whilst in some other areas I was disposed to accept Dr Nwobodo's evidence, on this point I found myself unable to do so. I consider that a paragraph of this kind could not appear in a statement, referring to multiple cargoes being negotiated by the maker of the statement with AOGC/Sphynx Bermuda, when the maker of that statement knew that only one such cargo had been negotiated, if he had, at the time the statement was signed, any proper regard for the truth. The vagueness of Dr Nwobodo's recollection of the particular transaction and its timing (initially said to be in either 2004 or 2003, but later 2003) does not give any plausibility to his oral evidence and I find that what he said orally about it was merely said in an effort to explain away and mitigate the inaccuracy of the paragraph of his statement which he had admitted was inaccurate, but which he had put forward as a matter within his own knowledge and as true, or to avoid questioning about the so called negotiations. I find that no such negotiations occurred between him and Mr Gokana.
- I am driven to the conclusion that, notwithstanding the evidence of the third parties' live witnesses, there could in reality have been no arm's length transactions concluded between SNPC/Cotrade on the one hand, (whether concluded through SNPC UK or Cotrade, by Mr Christel or Dr Nwobodo) and Mr Gokana for AOGC/Sphynx Bermuda on the other.
- The position in 2005 speaks for itself. At that stage Mr Gokana was the President and DG of SNPC, operating through its subsidiary Cotrade to sell oil on the market for monies which would find their way into the State treasury. This was apparently done under the framework agreement of 24 January 2005, under which Cotrade either acted as agent for SNPC in selling the cargo or bought it from SNPC and sold it for its own account. Mr Christel is the Congo President's son and the President and DG of Cotrade and he is supposed to have negotiated with Mr Gokana who was then not wearing his SNPC hat but was acting on behalf of his own private companies AOGC and Sphynx Bermuda. I find that it is unreal to think that there could have been any arm's length negotiation between them in circumstances where Mr Christel would, on the hypothesis being put forward, understand that monies, which would otherwise find their way into the coffers of the State, were going to line Mr Gokana's private pocket and when both he and Dr Nwobodo were able to negotiate sales directly into the international market, as a result of the experience he had gained at SNPC UK and which Dr Nwobodo had obtained over many years of trading. There cannot have been negotiations for sale at all. I find that this was the position throughout 2003-2005, when Mr Christel is supposed to have been negotiating with Mr Gokana, first at SNPC UK and then from Brazzaville, although it is seen most starkly in 2005.
- The evidence of the Third Parties' live witnesses was that an allocation of oil was made by SNPC/Cotrade to Mr Gokana and that he then went out into the market to obtain a price from a purchaser such as Glencore, before reverting to Mr Christel to negotiate a price between his companies and SNPC/Cotrade. I find that there was, as Mr Gokana himself said, no risk in any of the transactions for AOGC or Sphynx Bermuda because the deals were truly back to back in the sense that there was no negotiation with SNPC/Cotrade which was independent of the price already obtained by Mr Gokana from the purchaser from Sphynx Bermuda and that prices were put into contractual documents as suited Mr Gokana, whether or not he and others took any element of "profit" or "commission" on the way.
- Thus purchase monies paid by entities such as Vitol were (with one exception) always to be paid directly to AOGC without any element going to Sphynx Bermuda by way of true margin on a negotiated sale. When paid to AOGC, they were transmitted to the bank account over which Mr Gokana had exclusive control and with which AOGC, as a company, had nothing to do.
- It is plain, in my judgment, that any build up of any funds in AOGC or Sphynx Bermuda had nothing whatever to do with any commercial negotiation of arm's length sale transactions but was purely a decision of convenience as to what money should be left in such companies, whether in the context of expenses to be paid or the build up of foreign currency, or personal perquisites, whilst the vast majority of the proceeds went to the Congo via Cotrade or SNPC. The "profit" or "commission" element which may have accrued to Sphynx Bermuda or AOGC was not therefore true profit nor commission as the result of true negotiated sales between SNPC/Cotrade and AOGC.
- So far as the AOGC/Sphynx Bermuda contracts are concerned, Mr Gokana's evidence was that he allocated profits as he saw fit between his companies and organised the contracts in a way that suited him, as he was effectively on both sides of the transactions. For these purposes he was both AOGC and Sphynx Bermuda. The written contract was therefore a formality only and when he referred in his statement to the parties being "bound before the contract was signed," this bore no relation to reality. He explained this by saying that he meant that he had effected allocation in his head in arriving at a distribution of profits between them and thus the prices to be paid.
- KPMG's audit of the Congo's oil sales record the 2003 sales reportedly made through AOGC as direct sales to Sphynx Bermuda, whilst invoices for at least two transactions were sent directly from SNPC to Sphynx Bermuda, thus ignoring the presence of AOGC in the chain.
- The contract documents, where they existed in signed form, were often signed by Mr Gokana, both for Sphynx Bermuda and for AOGC, and on occasion purportedly signed by him on the same day in both Paris and Brazzaville. Invoices and draw down requests were also signed by him. Some documents signed by him refer to him as director or managing director. When not signed by him, Sphynx Bermuda documents were usually signed by Mr Chaffey or "pp Mr Chaffey".
- Mr Gokana said that before he was President and DG of SNPC, he would prepare the contracts between SNPC/Cotrade/AOGC and between AOGC and Sphynx Bermuda and between Sphynx Bermuda and the purchasers. He regarded the paperwork as something of a formality but, in the context of trades between AOGC and Sphynx Bermuda, there was in truth nothing to formalise. That, I find, is equally the case between AOGC and SNPC/Cotrade. The contractual documentation therefore is wholly artificial and reflects nothing more than Mr Gokana's decision as to where funds should be put, whether in Bermuda, in AOGC's bank account or in Cotrade's bank account. The only genuine sales in the chain of transactions were therefore the sales from Sphynx Bermuda to conventional oil traders in the international market, such as Vitol and Trafigura where prepayment arrangements were the norm. Apart from the mysterious Crossoil, Quantic and Elidovo transactions, about which it is not possible to come to any firm conclusion, all the other transactions in the chain were cosmetic, although they may have provided some scope for personal enrichment as well.
- Dr Nwobodo in his position as consultant to SNPC, which he equated with the Congo, saw no conflict of interest when selling oil for Sphynx Bermuda and AOGC to international market purchasers as he did in 2005, at the request of Mr Gokana. He was not paid for this apart from his SNPC consultancy fees and regarded his advice to Mr Gokana as part of his consultancy services to the Congo. He had once been paid an un-negotiated fee for advice to Mr Gokana in the past, on his own evidence, and said he would expect something similar in the future. It is plain however that he saw no distinction in negotiating for or rendering advisory services to SNPC, SNPC UK, AOGC, Sphynx Bermuda and Mr Gokana. He appears to have been equally happy, on his own evidence, to negotiate or sign contracts for any of these entities.
The later Transactions after the Nordic Hawk
- Although not disclosed by the third parties until the second statement of Mr Gokana dated 24 October 2005 was served, there were three shipments of oil in April, June and July 2005, as set out in Annex 1 to that statement. Additionally it transpired from Dr Nwobodo's evidence that there was a March cargo which had not been disclosed. By a solicitors letter of 27 October 2005 two October liftings were also revealed and, once again, from Dr Nwobodo's evidence it emerged that there was a November cargo which had recently been agreed. All of the oil cargoes in 2005 had been negotiated by Dr Nwobodo at, he said, Mr Gokana's request. I have no doubt at all that this was done in order to conceal any obvious connection between Mr Gokana and the cargoes in question since, were he to negotiate with market purchasers, the connection to the Congo would be obvious, since he was the President and DG of SNPC.
- From April 2005 onwards however, subject to what appears in a later section of this judgment, it was AOGC which sold direct to buyers because, as Mr Gokana said, the Sphynx accounts had been frozen by a court order. As Mr Malonga recognised, notwithstanding the paragraph to the contrary in his statement, AOGC was able to continue trading uninterruptedly without the need for Sphynx Bermuda to be involved in the chain at all.
- This reinforces the point that the chain of companies involved could only have been there for the purpose of attempting to disguise the links between SNPC, Mr Gokana, AOGC and Sphynx Bermuda. There is no legitimate purpose for this chain of companies to be involved between Cotrade and Glencore. Any service company, such as SNPC UK, could have acted as agent for Cotrade in selling the cargo directly to Glencore - something which Mr Christel, Mr Gokana or Dr Nwobodo could easily have done. Each of them had the necessary trading contacts as a result of their work at SNPC UK and there is no doubt that Dr Nwobodo's experience in oil trading was such that total confidence was placed in him by Mr Gokana, who accepted that he selected him to sell the Nordic Hawk cargo because of his skill and experience.
- When it emerged in Dr Nwobodo's evidence that he, SNPC's consultant, had sold all the 2005 oil cargoes in the name of Sphynx Bermuda or AOGC, and had drawn up the contracts himself, it became obvious that AOGC and Sphynx Bermuda were being used by Mr Gokana as a façade where the underlying reality was a supply of oil by SNPC/Cotrade to end purchasers with payments made, by one means or another, to SNPC. Where pre-financing or pre-payment arrangements were made, the oil supplied was already charged with the debt incurred in respect of the advance, but in the rare case where this was not done, the payment was truly destined for SNPC/Cotrade and not for any of the companies which ostensibly were presented as intermediate sellers.
- Mr Gokana orchestrated the chain of transactions between Sphynx Bermuda and SNPC. He had control over all the entities concerned and directed what should take place, including the creation of contractual documents and invoices which were intended to present the appearance of commercial transactions between independently operated companies. This was a fiction. It is plain that this was done for the benefit of the Congo since there is no other reason which could explain it. Wholesale corruption on the part of Mr Gokana was not put forward as an explanation and whilst Kensington suggested that there was some siphoning of monies from the Congo through the use of this structure, it is plain in my judgment that the structure was designed and operated to conceal the fact that it was the Congo, through SNPC/Cotrade, which was selling the oil in the international market and receiving the proceeds for it. Mr Gokana was not activating this scheme primarily for his own benefit but for the benefit of the Congo.
The Transaction in issue
- I heard no witness from SNPC or Cotrade as to the circumstances in which a cargo was made available to Mr Gokana in February 2005, other than Mr Gokana. Mr Gokana was by then the President and DG of SNPC. He said that he was called by Mr Christel who told him that Cotrade had a cargo to sell, which was allocated to AOGC and asked Mr Gokana who he should deal with at AOGC in order to negotiate the deal. Mr Gokana told him that he would negotiate for AOGC. He then asked Dr Nwobodo to negotiate the sale to a purchaser in the open market. It was only on conclusion of that sale that he personally negotiated the purchase of the cargo on behalf of AOGC (with Mr Malonga in tow, who had no experience of oil trading at all) with Mr Christel of Cotrade, the trading arm of SNPC.
- According to Mr Gokana and Dr Nwobodo, the former approached the latter, SNPC's consultant in oil matters and his friend and former colleague, (who advised him also from time to time and to whom he had at one time sent an unrequested fee of $53,000) and asked him if he would negotiate the sale of the cargo for Sphynx Bermuda, as Mr Gokana was too busy with his new responsibilities. He gave him details of an American by the name of Mr Lampert who was said to be interested in buying the consignment. However Mr Gokana's evidence was that there was a need for some urgency as the cargo was already in the storage tanks at the shipping terminal and the lifting was scheduled within 30 days. As the lifting period ultimately agreed was 25-26 March and the Glencore contract was made on 23 February, this would place any such conversation on the 20 February or thereabouts. That dating does not make sense.
- If there had been any question of selling to a Mr Lampert, this could only have occurred before this date, on the basis of an allocation made in January for the March lifting, with conversations with him after 20 January, as the evidence showed that allocations were made on the twentieth of each month for a lifting two months hence and because the timing of the contract with Glencore does not otherwise allow for any exploration of a possible sale elsewhere.
- According to the hearsay evidence of Mr Wakefield of Glencore, he was approached by Dr Nwobodo in February and they had lunch together during which Dr Nwobodo said that he might be able to make a spot cargo available to Glencore. (This was confirmed by the disclosure of Dr Nwobodo's diary after he had given evidence, which showed such a lunch on 7 February.) Interest was expressed by Mr Wakefield but the matter went no further at the time. He knew that Dr Nwobodo had tried unsuccessfully to sell the cargo to a trader in the US after that. It was about two weeks later, according to Mr Wakefield, that Dr Nwobodo telephoned to say he was in a position to offer a cargo of Djeno Crude with lifting dates of 25-26 March. Terms were discussed. Having checked with the terminal operators (Total) that such a cargo existed, he and Dr Nwobodo concluded a contract on the telephone, by which Glencore bought from Sphynx Bermuda, "the company which he [Dr Nwobodo] told me he now represented".
- The dating of the negotiations appears from Glencore's internal records and the email from Mr Wakefield to Dr Nwobodo of 23 February. On 22 February there is a reference in an internal note to "920 [thousand] bbls allocated to Glencore from Sphynx Bermuda. Nwobodo wants to agree price by Thurs 24/2". Other internal notes show that Glencore had agreed to buy and sell the cargo on 23 February and that Dr Nwobodo was to send a confirmation by email. In fact Mr Wakefield sent an email confirming the purchase that day, seeking confirmation of receipt but it was not until 2 March that Dr Nwobodo confirmed by email the sale by Sphynx Bermuda.
- It is clear that the Glencore deal was done on 23 February and that Dr Nwobodo then informed Mr Gokana, directly or indirectly, of the price. Mr Gokana's evidence is that he then negotiated a price with Mr Christel. How Mr Gokana could do this in a satisfactory way is difficult to fathom as he was President and DG of SNPC and was supposedly negotiating for a company which he effectively owned (AOGC) with the DG of a SNPC subsidiary, which in turn obtained the cargo from SNPC under the "framework" contract. I cannot accept that any discussions which took place between them as to the price to be paid could be at "arm's length" and I do not accept Mr Gokana's evidence about any such discussions.
- On the evidence, I find that the contract document, signed for AOGC by Mr Malonga and for Sphynx Bermuda by Dr Nwobodo and dated 10 March 2005, was not signed until 20 April and that this was effected in the context of the forged assignment referred to later in this judgment, as part of a conspiracy to establish that AOGC was entitled to the sale proceeds from Glencore. This appeared not only from Dr Nwobodo's evidence under cross-examination, but also from the date when that contract first surfaced in the form of a fax of that date. The AOGC/Cotrade contract document dated 20 March did not emerge in disclosure until 21 September 2005 and I conclude that this was another back-dated document, created at about that time. The manner in which this document came to be created reinforces the conclusion, to which I would have come in any event, that there were no separate negotiations between Cotrade and AOGC.
- The provisions of Article 11 of the SNPC byelaws prevent any member of the Board having an interest in any contract with SNPC or any company in which it is interested, despite Mr Gokana's protestations that this is not what the Article meant. In consequence, if Mr Gokana had been in genuine negotiations with Cotrade, there was not only a conflict of interest on his part but he was in flagrant breach of the byelaws, as Mr Christel would have known. The conclusion to be reached is that either there was blatant corruption in a scheme to defraud SNPC/Cotrade for the benefit of Mr Gokana (an activity which is not uncommon in some African countries) or this was an arrangement which SNPC and Cotrade sanctioned at the highest level because of the perceived advantages to those companies in disposing of oil in a manner which was intended to distance SNPC/Congo from the money paid by a market purchaser.
- Mr Gokana was President and DG of SNPC, the representative of the President of the Congo on the Board of SNPC and Special Adviser to him on oil, whilst Mr Christel is the son of that President as well as President and DG of Cotrade. Both were close to the President of the Congo. Mr Gokana had been involved in the review of the country's oil industry in 1998, a review of the arrangements with a major concessionaire in 2002-3 and both he and Mr Christel had operated SNPC UK and sold oil for SNPC, with elaborate pre- financing, during times when it was clear that creditors were seeking to attach Congolese oil and its proceeds in relation to debts due from the Congo. All of this suggests that the true explanation for the interposition of AOGC and Sphynx Bermuda was the desire to channel oil and funds from and to the Congo without attachment by creditors.
- Mr Gokana's evidence was that it was a matter for him to determine what price was paid between Sphynx Bermuda and AOGC as these were both his companies. He said that he "worked" the contracts as he saw fit. As already mentioned, it became clear in his evidence and that of Mr Malonga that he controlled not only all the oil trading done in the name of both companies but also the movement of money. No-one else, including Mr Malonga the Chief Executive Officer of AOGC had any knowledge of what oil or gas trading was done at all in the name of AOGC, or what happened to the proceeds. AOGC had an account at the BGFI Bank in Brazzaville, over which Mr Gokana had exclusive and complete control. Contrary to what Mr Gokana had said in his first statement, virtually all monies payable to Sphynx Bermuda in 2003-2005, were transmitted by the purchaser to AOGC's account there, to which Mr Gokana alone had access.
- It is clear to me that Mr Gokana used AOGC's name for the sale of oil through Sphynx Bermuda to purchasers in the open market, which, on the evidence was a small one, as Congolese oil was subject to limited production and had its own special characteristics. It is equally clear that he used AOGC's bank account at BGFI, over which he had total control, to channel and feed money to Cotrade/ SNPC and that the proceeds of this cargo were intended to be paid to AOGC for this purpose. Mr Pongault, Sphynx Bermuda's director, who could only have got his information from Mr Gokana when swearing an affidavit on 19 May 2005 stated, as did Mr Gokana in evidence, that Cotrade was bound to pay SNPC for the cargoes. The money was therefore plainly intended at all times to go to SNPC.
- There was no reality to the obligations which appeared in the contract document for the cargo executed for AOGC by Mr Malonga and for Sphynx Bermuda by Dr Nwobodo who was not a properly authorised signatory, because there never was any negotiated contract between them. It was not even a paper transaction as was suggested in evidence - it was not a transaction at all, and Sphynx Bermuda would not have seen any proceeds from it.
- Equally there was no reality to any supposed contract between AOGC and Cotrade because there had been no negotiation of terms at all between Mr Gokana and Mr Christel and no agreement was ever reached between them. Both the signed document dated 20 March between Cotrade and AOGC and the 10 March document between AOGC and Sphynx Bermuda were no more than cosmetic pieces of paper designed to give an appearance of reality to a fiction.
- I find that monies sent by Glencore would have been remitted, on Mr Gokana's instructions, directly to AOGC's account over which he had complete control. This was his invariable practice, save in relation to the Addax cargo which did go to Sphynx Bermuda. Once the money was in AOGC's BGFI account, Mr Gokana would use the funds as Cotrade or SNPC required which in practice meant as the State of the Congo required. No doubt the money would have moved speedily into Cotrade's coffers for use by the State.
- The documentation supports this conclusion. Not only was the vessel nominated directly by Glencore to SNPC in Brazzaville, without any transmission of the nomination up the supposed contractual chain, but Mr Little of Glencore informed SNPC in Brazzaville directly (with a copy to Dr Nwobodo of Sphynx Bermuda at Sphynx UK's offices) of the shipping documents required, which included Bills of Lading and the usual certificates and other documents normal in the trading of oil. The three original Bills of Lading were however to be made out "to the order of Glencore Energy UK Ltd" and were all to be sent, not to AOGC or Sphynx Bermuda, but direct to Glencore's contact office in London, for payment against documents.
- These Bills were to name the shipper as "SNPC, Supplier to Sphynx Bermuda Ltd for a/c Glencore Energy UK Ltd" but it is significant that the shipping documents were never to pass through AOGC's or Sphynx Bermuda's hands and payment was to take place 30 days after the Bill of Lading date against presentation of seller's invoice and shipping documents, under the terms of the Sphynx Bermuda/Glencore contract, including a full set of 3/3 original Bills. Neither AOGC nor Sphynx were to be involved in the chain of passing on documents against payment for the obvious reason that Mr Gokana would instruct Glencore to pay the purchase price directly to the AOGC account at BGFI whence the sum would be remitted to Cotrade/SNPC.
- There was discussion between Sphynx Bermuda and Glencore about possible payment for the cargo being made one day after presentation of shipping documents as appears in an email from Glencore to Dr Nwobodo dated 14 March 2005. The suggestion was made by Glencore of a new clause to be included in the purchase contract which had not yet been finalised. This would provide for an early payment of a discounted price. Dr Nwobodo's reply of 15 March enclosed a draft contract and stated that, as soon as he heard from Mr Gokana, they could make any necessary additions to the contract to accommodate the latter's wishes with regard to early payment. Mr Gokana's connection with the cargo was thus revealed, if Glencore personnel had not appreciated it earlier. Mr Wakefield's statement refers to discussion of a possible prepayment of $20m with the balance payable 30 days after the Bill of Lading date and to an offer made of early payment at a discount which was rejected. Mr Wakefield's evidence is that the contract was signed in March 2005 and I find that it was so signed by Glencore, on or about 18 March, when internal entries at Glencore make reference to its terms and Dr Nwobodo's diary reveals a meeting with Glencore. He appears to have signed it at the same time for Sphynx Bermuda.
- It is clear from Mr Gokana's past practice that he would have required payment to AOGC's account at BGFI, had the Third Party Debt Orders not been made on 10 April. Mr Townson, Glencore's solicitor, in his statement, said that Glencore had not received an invoice nor instructions for payment from Sphynx Bermuda as at 19 April 2005, nor any requirement as to the method of payment nor details of the receiving bank. Sphynx Bermuda had not asked for a letter of credit. These circumstances appear to me to be sufficiently unusual to attract attention particularly given the likely length of the voyage and the time of arrival at Lavera. The payment was due on 26 April 2005 but Glencore ultimately received the shipping documents on 16 May, including the original Bills which would have entitled it to obtain possession of the cargo from the vessel on arrival at Lavera. The cargo was delivered to BP against a Letter of Indemnity, as often occurs, but the fact remains that the documents arrived direct at Glencore's office, according to Glencore's evidence on 16 May in a couriered package sent by the ship's agents. There appears to have been no question of payment being sought against presentation of shipping documents at all. The seller's invoice was sent separately and arrived by a fax sent from the Congo by AOGC personnel, in the name of Sphynx Bermuda, on 25 April with instructions to pay AOGC (with an invalid forged assignment). Without any letter of credit, and no suggestion of intermediate payment to Sphynx Bermuda, it seems that payment was simply to be made, without any security on the 30th day, by Glencore to an account to be nominated by Mr Gokana, acting nominally for Sphynx Bermuda.
- Whilst I can make no findings on this aspect, because of the absence of direct evidence, it appears to me that such a payment mechanism is unlikely in the absence of some discussion between Mr Wakefield or Mr Little for Glencore and Dr Nwobodo or Mr Gokana to whom Mr Wakefield had been referred in Dr Nwobodo's email of 15 March. No one sought to cross-examine the Glencore personnel on the witness statements which Sphynx Bermuda put in evidence under the hearsay rules, after Glencore had informed the other parties that it did not intend to appear or call evidence. There were two Bills in fact, which referred to the shipper as Total E&P Congo for the account of, in the one case, SNPC, and in the other case, for the account of Republique de Congo. In the small world of oil trading, I do not consider that Glencore's personnel, whether Mr Wakefield, who knew of Mr Gokana's and Dr Nwobodo's SNPC connections, or Mr Little, could not have appreciated that Sphynx Bermuda was somehow linked to the Congo (although ignorant of the exact nature of the link) and that payment would ultimately to go to SNPC. Glencore had never dealt previously with Sphynx Bermuda but dealt here with Dr Nwobodo without any investigation of his authority or Sphynx Bermuda's substance. Having an agreement in writing to pay against shipping documents to be sent direct from Brazzaville to London, whatever the location of transmission of the seller's invoice, it seems that payment would have been made simply on the basis of the invoice.
- Glencore's concern was with the delivery of the Congolese oil which, it knew, emanated from SNPC. How SNPC organised the delivery and whether there were arm's length transactions between properly constituted companies by way of intermediate sales were matters which were not within Glencore's knowledge. Nor, I imagine, were its personnel much concerned with such matters, adopting an essentially practical approach to the workability of transactions of this nature.
- In his statement at paragraph 15, Mr Wakefield stated that he knew nothing about Sphynx Bermuda except that Dr Nwobodo was apparently authorised to act on its behalf and that it was in a position to offer a cargo of Congolese oil. He said:-
"The company was of no real importance to me - what mattered was my personal contact with Ike Nwobodo who, over many years, had proved to be a professional and trustworthy contract party. I knew that he had good contacts in the Congo and I had sufficient confidence in his ability to perform the contract to on-sell to BP."
- The identity of Sphynx Bermuda was therefore of no concern to Mr Wakefield on his evidence. His concern was to obtain a cargo of oil for which Glencore would pay a commercial price. Without any legal analysis, he treated Dr Nwobodo, Mr Gokana and Sphynx Bermuda as sellers who could get and sell oil from the Congo, without enquiring into the precise nature of the relationships which might enable them to do so. I have no doubt that he knew of their close connections to SNPC and the Congo and, as a trader, treated them and Sphynx Bermuda as able to obtain oil from it without any examination of Sphynx Bermuda's status or relationship to the Congo.
- This transaction, like all the others, was controlled by Mr Gokana from start to finish. I find that he controlled it by using Cotrade, AOGC and Sphynx Bermuda and creating, as necessary, pieces of paper which were intended to convey the impression of real contracts between substantial and independent companies. All this he did because he was the President and DG of SNPC and Special Adviser to the Congo President on oil, with a view to selling oil and obtaining proceeds for the Congo with diminished risk of attachment.
Events following the Third Party Debt Orders on 10 April 2005.
- The desire of Mr Gokana, in his position as President and DG of SNPC, to avoid attachment of assets and to obtain the proceeds of sale of the cargo, without regard for business propriety or honesty is shown by the events which surround an attempted assignment by Sphynx Bermuda to AOGC of its right to the payment of the purchase price for the cargo from Glencore.
i) On 10 April 2005 Kensington obtained interim Third Party Debt Orders in relation to the debt due from Glencore in respect of the purchase of the cargo.
ii) I find as a fact that Sphynx Bermuda and AOGC, in the persons of Mr Gokana, Mr Malonga and also Dr Nwobodo were made aware of these orders very shortly after they were made. Not only were copies of the orders couriered out to AOGC on 11 April but Glencore was notified immediately and Dr Nwobodo spoke to Mr Wakefield or someone at Glencore who informed him of it, whilst Mr Gokana spoke to Mr Destribas of Glencore also. Mr Malonga said he was told about it by Mr Gokana. There is no doubt in my mind, and I find as a fact, that Mr Gokana and the others knew of the existence of the order by, at the latest, 12 April.
iii) Knowing of this order, Mr Gokana sought to create an assignment of the debt due from Glencore which would take priority to any Third Party Debt Order. Mr Gokana, Mr Malonga and Dr Nwobodo gave conflicting evidence as to the initiation of this instrument, but I find, in accordance with Mr Malonga's evidence which accords with the inherent probabilities, that it was Mr Gokana, as the man in charge, who not only made the suggestion of such an assignment, but insisted on its implementation.
iv) A document in French entitled Accord de Garantie was executed by Dr Nwobodo for Sphynx Bermuda and by Mr Malonga for AOGC, which was conveniently dated 30 March 2005. Mr Malonga, in his first statement, maintained that this was the date of execution but in a second statement said it was 13 April. If it was 13 April, it would have been executed in immediate response to receipt of information about the 10 April orders made by this Court. It purported to be an irrevocable assignment to AOGC of Sphynx Bermuda's right to payment from Glencore.
v) Dr Nwobodo's evidence was that he signed this document in Brazzaville at the instance of AOGC's internal lawyers and that he thought it may well have been after 20 April when he sought by email from the Congo, and obtained, a copy of the Sphynx Bermuda/Glencore Agreement duly signed. He accepted that the details of this might well have been inserted in the Assignment at that stage. He said he was asked to sign the Assignment and the Sphynx Bermuda/AOGC contract (which contained the date of 20 March) at the same time in order to make for consistency between all the contractual documents relating to the cargo and he did so. I find that he was right in thinking that this took place after 20 April since the Assignment first surfaced in public on 25 April when it was sent to Glencore with a Sphynx Bermuda invoice, also signed by Dr Nwobodo, seeking payment to AOGC. According to his diary, Dr Nwobodo left Brazzaville for London on 25 April, having arrived from Paris on 11 April. Both the AOGC/Sphynx contract and the Accord de Garantie were backdated from an execution date after 20 April and I find that the latter was intended to defeat any rights Kensington might have.
vi) No such document exists in respect of any other deal and, given the now accepted position that Mr Gokana allocated profit between AOGC and Sphynx Bermuda as he saw fit, as both were his companies, any suggestion that the assignment was a precautionary security for AOGC, as all three of Sphynx's witnesses maintained at one time or another, is fatuous. They could offer no sensible reason for the assignment and the only reason there can be for it is the desire to evade the effect of this Court's orders of 10 April and later orders in relation to the cargo, by creating a backdated instrument with the intention that it should be thought that it had been executed on the date shown, namely 30 March.
vii) In fact the assignment could not be effective vis à vis Glencore because the SNPC terms and conditions, incorporated into the Glencore contract, required the consent of both parties to any assignment by Sphynx Bermuda Glencore, with knowledge of the Court order, did not comply with the demand to pay AOGC.
- Mr Gokana had exclusive control over Sphynx Bermuda's bank accounts and it now transpires that he emptied those accounts on 9 and 13 May at a time when Third Party Debt Orders had been made against Sphynx Bermuda in Bermuda, and disclosure orders had been made in England which were to be complied with by 18 April. The deadline was not met but the orders led to an affidavit by Mr Pongault dated 19 May which, whilst purporting to be made from his own knowledge, save where he identified a source, was in fact, although not so stated, made on information received from Mr Gokana, who alone had access to banking information. In the affidavit he revealed the existence of a contract between Sphynx Bermuda and AOGC and said that details of account balances would be given shortly. In a second affidavit of 25 May, with the same wording as to personal knowledge and sources of information, it was revealed in an exhibited letter from the Sphynx companies' solicitors that on 9 May figures not far short of $2m and €4m had been remitted to AOGC's account at BGFI, with smaller sums being remitted to Mr Junod ($75,000) and Sphynx UK ($45,000) on 13 May. The delay in compliance with disclosure orders allowed the removal of these funds and thus avoided an otherwise inevitable injunction. These transfers occurred at the very time when, as those London solicitors well knew from a letter to them advising them of it, (and I find that Mr Junod and Mr Gokana also knew as a consequence), Kensington was applying in the BVI for orders as to disclosure of the ownership of the holding companies of Sphynx Bermuda and Sphynx UK. A freezing order on the HSBC accounts was in fact granted by Andrew Smith J in London, on 13 May 2005.
- Another attempt to escape from the effect of existing or anticipated court orders appears from the documents disclosed in relation to a sale contract concluded on 6 May between Sphynx Bermuda and Vitol as confirmed in an internal email within Vitol and its managing director's statement. There Mr Fransen refers to the deal done with Sphynx Bermuda whom Vitol recognised as having the right to sell oil from the Congo and with whom it had concluded previous purchases. (This was a reference to a March lifting not disclosed by the Third Parties but referred to in Dr Nwobodo's diaries). After the Third Party Debt Orders and disclosure orders had been made in April in relation to the cargo sales and proceeds and a freezing order had been made on 13 May 2005 in respect of Sphynx Bermuda's bank accounts at HSBC, Dr Nwobodo sent an email to Vitol on 19 May enclosing a draft contract for the cargo scheduled for lifting at the end of June 2005, asking Vitol to note the name of the seller which was given in the draft as AOGC instead of Sphynx Bermuda. There had, according to Mr Fransen, been a preceding telephone conversation in which Dr Nwobodo had asked for the change, and in evidence, Mr Gokana said that the change of seller was because Sphynx Bermuda's accounts were frozen. Vitol agreed to the change and the invoice was sent by and payment remitted to AOGC. The Vitol documents show that it regarded AOGC and SNPC as effectively one and the same.
- In fact, as it emerged in the evidence, each sale after this was done in the name of AOGC and all oil sales in 2005 by Sphynx Bermuda and AOGC were negotiated by Dr Nwobodo, but this appears to be the only example of a sale concluded in the name of Sphynx Bermuda which was switched to AOGC, plainly in order to obviate any problems which might arise in relation to freezing of Sphynx Bermuda's assets in the shape of contractual rights to receive payment. The intention was to use AOGC directly from this point onwards instead of channelling oil through AOGC to Sphynx Bermuda for on- sale. As the Third Parties' witnesses conceded, AOGC continued selling uninterrupted by the Court Orders and the loss of use of Sphynx Bermuda made no difference to the business actually done.
- Evidence was given by Mr Malonga in his statement and by Mr Gokana orally of a payment made by AOGC to Cotrade on 13 May 2005 following pressure by Cotrade for remittance of the purchase price. Mr Malonga said that all questions of payment were a matter for Mr Gokana. In a letter dated 29 April from Mr Elenga at Cotrade to Mr Malonga at AOGC, the former referred to a contract dated 2 March 2005 between AOGC and Cotrade (the contract document disclosed was in fact dated 20 March) and sought payment of $36,688,705. A further letter of demand was sent on 10 May, threatening legal proceedings. Mr Gokana's signature appeared on a bank instruction addressed to BGFI for the transfer of 20million CFA francs to Cotrade, which was produced by AOGC with a debit note from the bank for the payment, of the same date.
- No bank statements were produced for AOGC to show how such a payment could have been made by AOGC whose funds, in accordance with its unaudited accounts and any calculation of available cash flow, would not have allowed for it. The KPMG audit report for SNPC for the first quarter of 2005, whilst not covering the period when the payment was allegedly made, was dated 30 June. The report refers to the Nordic Hawk cargo as one for which no payment has been received and, as at the date of the report, says that the authors' understanding is that legal proceedings are to be commenced in respect of the cargo. The KPMG report on SNPC for the first half year of 2005 makes no reference to receipt of the sum and I find that it was not paid, or if paid, was thereafter reversed. The documents appear to show an accounting debit entry only at the bank and I find that this could not have represented a real permanent transfer of available funds.
- If, however, payment was made for this cargo by AOGC to Cotrade, by a transfer on 13 May 2005, it was done without the knowledge of Mr Malonga or anyone else at AOGC and merely emphasises the point that the proceeds of sales in AOGC's hands were always at Mr Gokana's disposal and were accumulated there for the benefit of Cotrade, SNPC and the Congo. The evidence shows that Mr Gokana did what he wanted with regard to contracts and money as between Sphynx Bermuda and AOGC and the same position obtained between the latter and Cotrade, over which he was in a position to exercise control in the interests of SNPC and Congo. Any letters of demand and payment were therefore cosmetic.
The Principles of Law
- The Third Parties rightly state that the principles set out in Salomon -v- A. Salomon & Co Limited  AC 22 are fundamental, requiring the Court to recognise and respect the separate legal personality of a corporate entity. The authorities make it plain that the separate personality of the company cannot be ignored merely because a court considers that it might be just to do so. There are however a number of cases where the courts have thought it right to "pierce the corporate veil," although the meaning of the expression and its out-working differs in the varying contexts of the authorities concerned.
- The words or phrases which appear in the authorities where "piercing" has taken place and which are used in the context of justifying the court's view, involve an element of impropriety and dishonesty. This is made plain by Hobhouse LJ in Ord -v- Bellhaven Pubs Ltd  BCC 607 at p 615F. Transactions or business structures which are a "device" or "stratagem," a "mask" a "cloak" or a "sham" can give way to the court's examination and determination of what lies behind them and the real situation which obtains. The classic definition of a "sham" appears in Snook -v- London and West Riding Investments Limited  2 QB 786 (CA). There Diplock LJ said that, if the word had any meaning in law, it meant "acts done or documents executed by the parties to the "sham" which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intended to create". For that purpose the parties to the acts or documents had to share a common intention that the actual documents were not to create the legal rights and obligations which they gave the appearance of creating. The decision in Stone -v- Hitch  EWCA Civ 63 emphasises the need for such a common subjective intention on the part of those concerned.
- The decision of the House of Lords in AG Securities Limited -v- Vaughan  1 AC 417 establishes that "sham" does have a meaning in law, namely an attempt to disguise the true character (of the agreement) which it was hoped would deceive the court. As Neuberger J (as he then was) put it in National Westminster Bank -v- Jones  1 BCLC 98, a sham agreement is one where the parties intend to give the impression that they are agreeing that which is stated in the agreement, whilst in fact they share the common intention of not honouring their respective obligations or enjoying their respective rights under it. It is simply an agreement which the parties do not really intend to be effective, but is merely entered into for the purpose of leading a court or Third Party to believe that it is to be effective. (The position is a fortiori where the documents do not reveal an executed agreement or the semblance of conclusion of a real agreement.)
- In Re Polly Peck International Plc  2 AER 433 at page 444 Robert Walker J (as he then was) quoted Staughton LJ in an earlier decision, pointing out that it was better to speak of "substance", "truth", "reality" and that which was "genuine", rather than use the words "disguise, cloak, mask, colourable device, label, form artificial, sham, stratagem and pretence". The point is rightly made that a court looks for the substance of a matter, and, in doing so, looks for the legal substance, not its economic substance, if different.
- Examples of entities, structures or transactions which the court has not accepted at face value, on the basis of such or similar reasoning, are cases such as Gilford Motor Company Limited -v- Horne  1 Ch 935 and Jones -v- Lipman  1 WLR 832. In the former, the Court of Appeal held that a former managing director, who was bound by a restrictive covenant following departure from his employers, was unable to escape the effect of his covenant by carrying out business through a company which he had formed for that purpose. Lord Hanworth MR said (at page 955):-
"I have not any doubt on the evidence I have had before me that the Defendant Company was the channel through which the Defendant Horne was carrying on his business. Of course, in law the Defendant Company is a separate entity from the Defendant Horne but I cannot help feeling quite convinced that at any rate one of the reasons for the creation of the company was the fear of Horne that he might commit breaches of covenant… and that he might possibly avoid that liability if he did it through the Defendant company… I am quite satisfied that this company was formed as a device, a stratagem, in order to mask the effective carrying on of the business of Horne. The purpose of it was to try to enable him under what is a cloak or a sham, to engage in business which, on consideration of the agreement which had been sent to him before the company was incorporated, was a business in respect of which he had a fear that plaintiffs might intervene and object."
In consequence, an injunction was issued to prevent Horne and his company from breaching the covenant given, but as has been pointed out, this may not really be a case of piercing the corporate veil, inasmuch as it merely prevented Mr Horne doing, through a company he controlled, what he could not legitimately do himself.
- In Jones, Mr Lipman had agreed to sell his property but, prior to completion, transferred it to a company which he had created in an attempt to avoid a decree for specific performance and to leave the Plaintiff company with a claim in damages only. The court found that the motivation for the transfer was solely for this purpose and that the company was wholly owned and controlled by Mr Lipman, who could compel it to transfer the property and that it was a device, sham or mask. Specific performance therefore was ordered against both the individual and the company.
- A somewhat similar transfer was made by Mr Marcan in Lloyds Bank Limited -v- Marcan  1 WLR 1387. Here, the same judge as in Jones, although by now in the Court of Appeal, found that there was dishonesty by a mortgagor who, knowing of the bank's application for possession of the property, granted a lease to his wife for a term of twenty years with the intention of depriving the bank of the ability to obtain vacant possession of the property as and when a possession order was made. He said:-
"If he disposes of an asset which would be available to his creditors with the intention of prejudicing them by putting it, or its worth, beyond their reach, he is in the ordinary case acting in a fashion not honest in the context of the relationship of debtor and creditor"
The court insisted upon the need for dishonesty before a transaction could be avoided under statute (section 172 of the Law of Property Act 1925). Cairns LJ said that:-
"a conveyance for good consideration would be regarded as fraudulent if made with the deliberate intention of hindering creditors and for the benefit of the debtor himself rather than as a bona fide… arrangement"
- In Adams –v- Cape Industries Plc  1 Ch 433 the Court of Appeal considered at length various arguments for "piercing" the corporate "veil." There Cape Industries had so organised its affairs that, in place of a pre-existing subsidiary in the USA, the business of which it brought to an end, a new company was established which the court found was owned, in law and equity, by Mr Morgan, the former chief executive of the US subsidiary. The court had to consider whether or not Cape, under the new arrangements, was present in the USA for jurisdictional purposes or had submitted to the jurisdiction of the Texas court. Cape was itself an English Company and none of its subsidiaries operated in the USA at the relevant time. The court found that the agency of Mr Morgan's company was insufficient to create presence within the jurisdiction because that company was carrying on its own business and not the business of the parent. It rejected the "single economic unit" argument which would have enabled the Texas judgment to be enforced against Cape and also the argument about piercing the corporate veil.
- In the latter connection there appears a discussion at pages 542-544 where the court concluded that the interposition of a company, the shares of which were held by a nominee on trust for a Cape subsidiary was a façade or mask put in place in an attempt to avoid identification of the company with Cape. It was a "creature of Cape" so that although the seller of Cape's subsidiaries' products was nominally a Lichtenstein company with no apparent connection to Cape, the reality was that it was Cape's subsidiaries which were still effecting the sales. The court accepted that it would lift the corporate veil where a defendant, by the device of a corporate structure, attempted to evade such rights of relief against it as Third Parties already possessed, whilst rejecting the notion that the corporate veil would be lifted where the corporate structure was created to evade rights of relief which third parties might in the future acquire. The corporate structure could legitimately be used so as to ensure that the legal liability (if any) in respect of particular future activities of the group (and correspondingly the risk of enforcement of that liability) would fall on a particular member of the group, rather than upon its parent or other associated companies.
- In the Tjaskemolen  2 LLR 465 at page 469, Clarke J before referring to the discussion in Adams, stated, in reliance on other authorities that "where an alleged transfer of a vessel is in the relevant sense a sham or façade, the court will hold that the original owners retain the beneficial ownership in the vessel." Then, by reference to Woolfson -v- Strathclyde Regional Council  SLT 159, he held that the relevant principle was that it was only appropriate to pierce the corporate veil where special circumstances existed indicating that it was a mere façade concealing the true facts. He then went on to say that an individual or group could arrange his or its corporate affairs in such a way as to minimise cross-liability in advance of such liability being incurred but:-
"In my judgment the position is or may be different where a group arranges its affairs in such a way as to divest a company within the group of its assets with the purpose and effect of ensuring that they would not be available to meet its existing liabilities, at any rate where the transfer is made to another member of the group at an undervalue. Depending upon the facts, such an agreement is likely to be held to be sham or façade, as those expressions are used in the cases."
- Whilst decisions such as Creasey -v- Breachwood Motors Limited  BCC 638 have gone beyond the bounds of proper application of the principles, by ignoring the need for dishonesty where assets are disposed of which defeat the claims of creditors, there is, in my judgment, no doubt that transactions or structures, which have no legal substance, and which are set up with a view to defeating existing claims of creditors against the entity responsible for setting up those transactions or structures and lying behind them, can, if they are purely a sham and a façade, be treated by the court as lacking validity. This enables the court to deal with the underlying reality and not the mask or creature that is being put forward with the object of deceit or dishonest concealment.
- The point is put clearly by Sir Andrew Morritt V-C in Trustor AB -v- Smallbone (No 2)  1 WLR 1177 at paragraph 23, in the context of a managing director of a company who transferred the company's assets to another company which he owned and controlled, which then distributed some of what it had received to the managing director, his wife and a further company under his control. Summary Judgment was ultimately given against both the managing director and the distributing company for all the amounts which that particular company had received, notwithstanding that the managing director himself had not received the totality. The Vice Chancellor said:
"In my judgment the court is entitled to pierce the corporate veil and recognise the receipt of the company as that of the individual in control of it if the company was used as a device or façade to conceal the true facts thereby avoiding or concealing any liability of those individuals."
- It was found that the company was such a device or façade, in that it was used as the vehicle for the receipt of the monies of the Claimant and its use was improper, as it was the means by which the managing director committed unauthorised and inexcusable breaches of his duty as a director of the Claimant.
- It is not necessary in my judgment for there to be a divestment of assets at an undervalue to justify the court piercing the corporate veil in relation to particular transactions, as the Third Parties argued. Whilst the liability which was hidden in the Trustor case was clear, with a company being used by the managing director to conceal his theft, the principle is capable of application to a situation where the transactions in question are sham and the companies are utilised for the avoidance of existing liabilities. Unlike Adams, the liabilities of the Congo are not future potential liabilities but existing liabilities under extant judgments. Furthermore Mr Gokana exercised control over Sphynx Bermuda and AOGC whilst President and DG of SNPC and for and on behalf of the SNPC and the Congo, with the clear aim of avoiding the attachment of its assets by judgment creditors by the creation of an artificial scheme of sales and purchases between supposedly independent companies which were in fact controlled by him. Such behaviour is not honest as between debtor and creditor.
- In applying the principles set out in the authorities to the facts as I have found them and to the dispute which I have to determine, the following questions arise:-
i) Does the chain of "contracts" between Cotrade and Glencore in relation to the cargo, represent a series of "sham" transactions which are intended to conceal the reality of a sale from Cotrade to Glencore or are they real transactions which impose genuine rights and obligations on all the parties concerned?
ii) If not, are any of the transactions in the chain "sham" transactions within the meaning of the expression as used in the authorities?
iii) Are AOGC and Sphynx Bermuda merely devices, façades or masks concealing the identity of the real seller of the cargo which is the Congo, or are they genuine traders in oil?
iv) Has the structure of companies and sales been put in place with the object of evading enforcement of the indebtedness of the Congo, which is responsible for creating the sham companies and structures?
v) Are those responsible for the structure dishonest in the relevant sense of the word, so that the court can look behind the companies and transactions and treat the debt owing by Glencore as a debt owing to the Congo?
- In answering these questions it is necessary to look at each stage of the contractual chain, at each entity involved, at the motivation of the individuals concerned in them and the manner in which the corporations concerned have been utilized.
- As is clear from my earlier findings, SNPC and Cotrade are both to be equated with the Congo. They have no separate existence and are part of the State. Debts owed to either of them are debts owed to the Congo.
- Further, the corporate nature of AOGC and Sphynx Bermuda has been persistently ignored throughout the history of these entities. Mr Gokana has used AOGC's name and its bank account at BGFI for the purpose of the sales of SNPC and Cotrade's oil without any regard for the corporate personality, organisation or interests of it. No one else at AOGC had any knowledge of anything he was doing in relation to this oil business or of the proceeds of the sales which he paid into the account which he alone controlled and from which he doubtless paid the proceeds to Cotrade. Mr Gokana was acting not for himself in all of this (although he may have gained some personal benefits) but in his capacity as President and DG of SNPC and Special Adviser to the President of the Congo in oil.
- The same position holds good for Sphynx Bermuda. Mr Gokana ignored its corporate organisation and again utilized it as a front and a façade for the selling of oil which emanated from the Congo. Apart from the Addax cargo, no monies passed through the Bermudan company's accounts at all. Instead monies were remitted directly from Sphynx Bermuda's purchaser into the AOGC account from which Cotrade was paid. In the case of the cargo at issue, this was what was intended, with payment directly to AOGC whether against the shipping documents, which themselves were never to pass through Sphynx Bermuda's hands, as an invoice requiring payment to AOGC.
- Mr Gokana's own evidence recognised that there were no genuine arm's length transactions between AOGC and Sphynx Bermuda, as there could not be, since he owned both and treated them both as names/entities of which he could make use. He was responsible for the "arrangements" between them, on both sides. The contract between them was therefore in every sense of the word an unreal one and a façade. It was truly a sham because no real rights or obligations were created at all, whilst Mr Gokana decided what money should remain with each.
- Likewise, the transactions between AOGC and Cotrade were not genuine arm's length transactions at all. For the reasons I have already given, the contract documents which were produced were equally "paper transactions" since Cotrade, in the guise of Mr Christel, and AOGC, in the guise of Mr Malonga, were both acting in the interests of the Congo, on the instructions of Mr Gokana, to ensure that the proceeds of sale to international buyers such as Vitol found their way to Cotrade, creating an appearance of real contracts and real trading between the companies interposed. It was once again Mr Gokana, the President and DG of SNPC who directed the channelling of oil and funds without any real contracts at all between the entities supposedly concerned. The shambolic nature of the documentation which was supposed to record the transactions in the chain of sales illustrates the sham nature of those transactions.
- I have found that both AOGC and Sphynx Bermuda were, like Cotrade, under the control of Mr Gokana and that he exercised such control in his capacity as President and Director General of SNPC and Special Adviser to the President of the Congo in relation to oil. The companies were used as creatures of the Congo being utilized by him for the Congo. They therefore constitute a façade behind which Cotrade, SNPC and the Congo have attempted to hide. Whether or not Sphynx Bermuda or AOGC were ever intended to, or did, or do, carry out other functions (and AOGC appears to do so) they were used throughout by Mr Gokana as ciphers for the Congo's activities and are controlled by it through him.
- It is clear that the underlying reason for this was to avoid, so far as possible, attachment of the oil or of the proceeds of sale by creditors of the Congo in circumstances where it was known that such creditors were taking aggressive action with a view to enforcement of the Congo's debts. The absence of any legitimate reason for the interposition of either of these companies, on the facts as I have found them to be, is irresistible. This was a deliberate scheme to create an appearance of contracts and independent oil trades and traders which was devised to enable SNPC and Cotrade to sell their assets (oil) against payment from international market buyers, without their assets (neither the oil nor the proceeds) becoming available to meet existing liabilities.
- In such circumstances I answer the questions posed at the commencement of this section of the judgment in the following manner:-
i) The sale from Sphynx Bermuda to Glencore was a genuine sale transaction but the others were not. Glencore was untroubled about the identity of its sellers, knowing that Dr Nwobodo and Mr Gokana had close connections with SNPC/Congo and, confident that the oil would be delivered, would have been prepared to adopt the practices suggested to them for payment by those two individuals.
ii) The sales of the cargo between Cotrade and AOGC and AOGC and Sphynx Bermuda were sham in the sense that they were not genuine sales transactions at all, with concomitant legal rights and obligations. They were devised to hide the reality of a sale by Cotrade, which is part of the State of the Congo, to Glencore.
iii) Although AOGC is a corporate entity which carries on some business of its own, its use in the sale of the cargo was a sham. It and its BGFI bank account were used as a façade or mask to conceal the identity of the seller and true recipient of the proceeds of sale. Sphynx Bermuda was similarly used as a façade without regard for its corporate nature. Both were utilised in this manner by Mr Gokana in his capacity as President and DG of SNPC and were ciphers under the control of SNPC through him for this purpose.
iv) The structure of companies and sales was therefore put in place and employed by the Congo/SNPC/Cotrade with the object of evading enforcement of existing liabilities of the Congo by hiding its assets from view.
v) Those involved in creating and masterminding the use of the structure were dishonest in the relevant sense of the word because of this objective when creating and using the sham companies and transactions in question, to avoid enforcement of existing liabilities.
- Where monies are owed by Glencore to Sphynx Bermuda in respect of the cargo therefore, the court is entitled to, and must in justice, "pierce the corporate veil" and recognise that debt as owed to the Congo and that any receipt by Sphynx Bermuda would be the receipt of Cotrade at the top end of the "sham" chain. The whole purpose was to use Cotrade, AOGC, Sphynx Bermuda and the chain of transactions as a device or façade to conceal the true facts of a sale by Cotrade to Glencore, thereby avoiding or concealing the liability of Cotrade to have its oil or proceeds attached in execution of existing judgments given in respect of the Congo's debts. In my judgment, such conduct is dishonest within the meaning of the authorities and Mr Gokana, with the assistance of others, was thereby engaged in this scheme to use these companies and transactions in a manner calculated and intended to defeat the claims of the Congo's creditors.
- Kensington are therefore entitled to final Third Party Debt Orders in respect of the purchase price for the cargo. The effect of making the interim orders final will be to discharge Glencore from liability for the debt on payment to Kensington, the judgment creditor, in accordance with the orders and the provisions of CPR 72.9
Bank accounts at HSBC
- A further interim Third Party Debt Order was made in respect of debts due from HSBC Bank Plc to Sphynx UK and Sphynx Bermuda on 1 September 2005. By letters of 9 September 2005, HSBC advised that the amount due to Sphynx UK on its bank accounts was £91,479.18 at that date after and in accordance with the Attachment of Debts (Expenses) Order 1996 and that the amount of £209,637.97 was due to Sphynx Bermuda on the same basis. HSBC stated that it was not its intention to appear at any hearing in relation to any application to make the interim order a final order.
- In support of the application for an interim order, the statement of Mr Schwarzkopf referred to the history of the proceedings with regard to the interim Third Party Debt Orders relating to the cargo and maintained that, if the court should pierce the corporate veil of Sphynx UK and Sphynx Bermuda in connection with the cargo proceeds, then the funds held by the Sphynx companies at HSBC would be assets that Kensington could attach in order to enforce the self same judgment which it was seeking to enforce in relation to the cargo proceeds. In consequence Kensington asked for the return date to be fixed for the same time as the trial of the Third Party debt proceedings relating to the cargo, stating that the new application did not involve any issue which had not already been raised in those proceedings.
- No notification of any objection to payment out has been made by any persons other than those involved in these proceedings and the focus at this hearing has been on the cargo proceeds rather than the bank accounts. It has always been clear that the Sphynx companies' objected to the interim Third Party Debt Order in respect of their bank accounts as well as objecting to the interim Third Party Debt Orders in respect of the cargo proceeds.
- Counsel for the Sphynx companies contended that Kensington had to establish that the money in the accounts was owned by the Congo and that no evidence had been directed to that point in the action. He rightly stated there was nothing to trace the monies in the accounts to the Glencore transaction and stated that there was nothing to trace them to any transaction about which evidence had been heard. Moreover it was argued that no case had been made for piercing the corporate veil of Sphynx UK in any event, whether with regard to the cargo proceeds or anything else, whilst the case made against Sphynx Bermuda related solely to the cargo proceeds.
- The Sphynx companies also pointed to the Baker Tilly letter which referred to the funding of Sphynx UK by its parent and Mr Gokana and suggested that any money in the Sphynx companies belonged to Mr Gokana.
- Because issues arose as to the provenance of the money in the Sphynx companies' accounts and the balances remaining after monies had been remitted from them on 9 and 13 May 2005, as set out earlier in this judgment, and limited attention had been paid to the materials relating to these accounts, I decided to adjourn consideration of the application to make the Third Party Debt Order in respect of the bank accounts final, until the parties had been given the opportunity to make further submissions on the evidence which had already been adduced. I set time limits for the provision of those submissions in writing.
- Despite the lack of disclosure given, the parties were able to make submissions with regard to the provenance of funds in the HSBC bank accounts, statements for which had been disclosed. Kensington carried out a first in/first out analysis of the Sphynx companies' accounts, so far as it was possible to do so, from which it was argued that the funds in each of the bank accounts were the residue of the proceeds of the Congo's oil trading, although not of the Glencore transaction.
- From this analysis the following emerges:-
i) The balance remaining in Sphynx Bermuda's Euro call deposit account is the residue of a payment of €600,000 made by AOGC on 27 April 2004, together with accrued interest payments. On the evidence, I am satisfied that the only sizeable sums which AOGC ever obtained were the result of the oil trading activities conducted in the manner outlined earlier in this judgment. The likely immediate source of funds was the receipt of $7,995,954 by AOGC from Trafigura on 8 April 2004 in respect of the March 2004 Djeno cargo.
ii) The balance remaining in Sphynx Bermuda's US dollar call deposit account is the residue of the Addax cargo payment, together with interest payments. The Addax cargo payment was the only example of a payment of the purchase price moving from the international market purchaser through Sphynx Bermuda to AOGC.
iii) The balance remaining in Sphynx UK's sterling account is the residue of a number of payments made by Sphynx Bermuda on 17 September 2003, 9 December 2003 and 12 May 2005, together with interest payments. Those payments from Sphynx Bermuda themselves derived from two payments received on 1 May 2003 and 2 July 2003 from an unidentified source, with the reference "BEI:DWCIBSNS", and a 12 May 2005 payment which is the product of the Addax cargo.
- On the findings which I have made in relation to AOGC and Sphynx Bermuda, the monies in Sphynx Bermuda's accounts represent the proceeds of the Congo's oil trading and therefore represent monies which belong to the Congo, subject to any amounts which were paid to Mr Gokana for his services, by a binding agreement with Cotrade/SNPC/The Congo. If it was the fruit of Mr Gokana's corruption, without the proper assent of Cotrade/SNPC/The Congo, then he and his companies would hold such monies on constructive trust for the Congo. If however it was the fruit of an agreement with those properly authorised to act for those bodies, whoever that might be, other than himself, then the money would belong to him.
- I have found that any build up of any funds in AOGC or Sphynx Bermuda has nothing whatever to do with any commercial negotiation of arm's length sales transactions but is purely the result of a decision of convenience as to what money should be left in such companies, whether in the context of expenses to be paid or the build up of foreign currency or as personal perquisites. The "profit" or "commission" element which may have accrued to Sphynx Bermuda or AOGC was not therefore true profit or commission as the result of true negotiated sales between SNPC/Cotrade and AOGC, but the evidence does not establish whether or not it represents Mr Gokana's personal "cut", as both counsel for Kensington and counsel for the Third Parties contended in the alternative, at one time or another in the course of the hearing or thereafter in writing. No evidence was adduced from Mr Christel of Cotrade, nor from any representative of the Board of Directors of SNPC, of which Mr Gokana became President and DG only in January 2005.
- I have therefore to decide, on the basis of inference, whether or not the money in Sphynx Bermuda's bank accounts at HSBC is there simply for convenience, but belongs to the Congo, whether it represents a corrupt "rake-off" or whether it constitutes a payment for services rendered which has been properly authorised by the Congo. Kensington has not established, to my satisfaction that the former is the true position, and as a matter of probability, given Mr Gokana's position, it seems likely that he, Mr Itoua, Mr Christel and others in the higher echelons of the State apparatus were agreeable to the personal receipt by him of some monies for his work, particularly in respect of the transactions which took place before he became President and DG of SNPC. His participation in the scheme before he took on that role, is likely to have been seen as something deserving of reward.
- It was also argued by the Third Parties that the position of Sphynx UK is different from that of Sphynx Bermuda. I have found that the underlying reason for the establishment and use of both Sphynx companies was the same and that both were creatures of the Congo being used for the purpose of evading the payment of judgment debts. Sphynx UK was intended to be a service company to Sphynx Bermuda and both were run by Mr Gokana on the same basis. The service company existed in order to facilitate the operation of scheme which the Congo, through Mr Gokana, created and implemented. All its funds derived from the self-same trading transactions as the funds in Sphynx Bermuda's bank accounts.
- Nonetheless the money left in Sphynx UK was there in order to cover its expenses, whether for rent or other matters and I cannot say that the money there for those purposes equates to the Congo's money, especially when there are entries in the accounts recording loans for funds provided. The money in the hands of HSBC represents a debt owed to Sphynx UK, whether or not the latter owed money to Sphynx Bermuda or Mr Gokana. The company itself is not a sham for all purposes and money in its hands should be available to all its creditors.
- In these circumstances I decline to make final the interim Third Party Debt Order in respect of debts due from the HSBC.