IN THE HIGH COURT OF JUSTICE
Claim No: CL-2022-000190
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
B E T W E E N:
BUTTONWOOD LEGAL CAPITAL LIMITED
Claimant
- and -
MR MOHAMED ABDEL RAOUF BAHGAT
Defendant
----------------------------------------------------------
PARTICULARS OF CLAIM
----------------------------------------------------------
1. The Claimant is a company registered at Quastisky Building, P.O. Box 4389, Road Town, Tortola, British Virgin Islands with registration number 1592999. The Claimant was formerly known as Argentum Associates Limited.
2. The Defendant is an individual resident at Aleksis Kiven Katu, 11a B 36, 00510, Helsinki, Finland.
3. On or about 12 January 2011 the Claimant and the Defendant executed by deed a loan agreement (“the Loan Agreement”) under the terms of which the Claimant agreed to advance funds to the Defendant for the purpose of funding proceedings by the Defendant against the Arab Republic of Egypt (“the Proceedings”).
4. The funds advanced pursuant to the Loan Agreement, together with further funding to which the Claimant consented as appears in paragraphs 25 to 30 below, allowed the Defendant to pursue his claim in the Proceedings. In particular, some of the funds advanced by the Claimant were used by the Defendant to pay arbitral fees which were
[Page 2]
due from the Arab Republic of Egypt, without payment of which the Proceedings could not have continued. The Proceedings were concluded by the Final Award of the Permanent Court of Arbitration in The Hague on 23 December 2015 in PCA Case No. 2012-07 (“the Final Award”). By the terms of the Final Award, at paragraph 618, the Defendant was awarded:
5. Following the Final Award the Defendant undertook enforcement proceedings in relation to the same. On or about November 2021, the Defendant settled the enforcement proceedings and received a payment of US$99.5m in respect of the said settlement.
6. The Loan Agreement included the following terms:
[Page 3]
7. The Loan Agreement was expressed, in error, to be regulated by the Consumer Credit Act 1974 (“the Act”). On a proper construction of the Loan Agreement and notwithstanding the governing law of the same it fell outside the spatial reach of the Act for the following reasons:
8. Alternatively if, which is denied, the Act applied to the Loan Agreement, the same was an exempt agreement pursuant to section 16B of the Act, as it then applied, because the amount of credit exceeded £25,000 and the Defendant entered into the same wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by him.
PARTICULARS
(1) The subject matter of the Proceedings was a project to develop mining of iron ore in Aswan, Egypt (“the Aswan Project”);
(2) The Defendant was the founder of the Aswan Project and invested approximately US$39.7m of his own funds into the same;
[Page 4]
(3) The Defendant asserted, in the case he presented in [illegible] that he was the majority shareholder in the Aswan Development and Mining Company (“ADEMCO”) and, by virtue of that shareholding, also the majority shareholder in [illegible] the Aswan Iron & Steel Company (“AISCO”) (paragraphs 363-364 of the Final Award). ADEMCO and AISCO were the companies set up to carry out the Aswan Project;
(4) The Defendant's claim in the Proceedings was wholly or predominantly for damages in respect of the failure of the Aswan Project by reason of breach of the 1980 BIT and/or the 2004 BIT by the Arab Republic of Egypt;
(5) In the premises the funding of the Proceedings was required by the Defendant in order to recoup the losses incurred by him as an investor in the Aswan Project and accordingly was entered into wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by him.
9. On or about 14 June 2012 the Claimant, acting by its chief legal officer, Mr. Zulfiqar Khan, contacted the Defendant’s solicitor, Mr. Subir Karmakar to indicate a concern relating to the Loan Agreement, namely that the Claimant did not hold a consumer credit licence. Thereafter the parties discussed the removal of references to the Act in the Loan Agreement.
10. Further to the said discussion, the Defendant agreed, by letters dated 5 July 2012 and 13 September 2012, that “I confirm that I am agreeable to ...deletion of all references to the Consumer Credit Act 1974 from the text of the Loan Agreement. The Loan Agreement is not therefore regulated by the Consumer Credit Act 1974”.
11. On 24 September 2012 the Claimant received, and provided to the Defendant, legal advice from its solicitors, Messrs Bristows (“the Bristows Advice”), that the governing law of the Loan Agreement should be changed to that of the Cayman Islands, for the following reasons:
[Page 5]
12. For the avoidance of doubt, it is the Claimant’s position that, insofar as the Bristows Advice is inconsistent with the matters set out in paragraphs 7 and 8 above, it was incorrect and/or incomplete.
13. The Defendant refused to vary the Loan Agreement in the manner set out in the Bristows Advice. Funds continued to be advanced by the Claimant under the Loan Agreement until November 2013.
14. On 27 June 2014 Mr. Said Jahani, Mr. David Bennett and Mr. Hugh Dickson of Grant Thornton were appointed as Joint Provisional Liquidators (‘JPLs’) of certain entities in the Centaur group of companies. The Claimant forms part of the Centaur Group of companies; however, it was not put into a liquidation process as it was not insolvent and nor was it necessary to do so.
15. On 11 November 2014, the Claimant authorised representatives of Grant Thornton Australia Limited (“GTAL”) and Mr. Zulfiqar Khan to act on behalf of the Claimant including but not limited to negotiating and agreeing to any future agreements between the Claimant and the Defendant.
16. On various dates between approximately December 2012 and March 2015 the Claimant (and, from around August 2014, GTAL on behalf of the Claimant) and the Defendant entered into negotiations concerning variation and/or replacement of the Loan Agreement. No such variation or replacement occurred. The Claimant does not provide particulars of the said negotiations in these Particulars of Claim because the majority of the communications were marked by the parties as, or alternatively were, “without
[Page 6]
prejudice”. Insofar as may be necessary, the Claimant [illegible] further particulars in the event that the parties reach agreement that without prejudice privilege has been or will be waived.
17. On 17 November 2016 Mr. Greg Fairley, Director of Capital Interchange Limited, contacted Mr Said Jahani and Ms Lisa Gibb of GTAL by email to inform them that he had been appointed by the Defendant to assist him in his negotiations with GTAL. Mr. Fairley was formerly an employee of the Centaur Group and had dealt with the Claimant’s relationship with the Defendant in the course of his employment.
18. On 12 December 2016 Mr. Fairley provided to Mr. Jahani by email details concerning the current state of the Proceedings and indicated that further funding in the sum of £1.3m plus the cost of an ATE insurance premium was required.
19. On 21 December 2016 Mr. Jahani emailed Mr. Tom McDonald of Vannin Capital PCC (“Vannin”), providing summary details of the Proceedings and asking whether Vannin would be interested in co-funding the same.
20. Between January and February 2017 GTAL assisted Mr. Fairley and Vannin with the provision of information to allow Vannin to put forward a proposal to their investment committee.
21. On or around 7 April 2017 Vannin offered, and the Defendant accepted, outline terms as to its investment in the Proceedings.
22. On 18 April 2017 Mr. Jahani wrote by email to Mr. Fairley and the Defendant to indicate that Vannin had asked for a copy of the Loan Agreement and seeking the Defendant’s permission to disclose it. Mr. Jahani noted that Vannin required the Loan Agreement for an inter-creditor deed which Vannin wanted the Claimant to sign as part of the funding agreement Vannin was seeking to agree with the Defendant. Mr. Jahani stated “we need to come to a landing on exactly the final position between ourselves. In particular, if we reach an agreement I would like to ensure this is properly documented with some form of deed so there can be no further confusion or debate around each parties’ entitlements if the case wins/settles”.
[Page 7]
23. Mr. Fairley responded to Mr. Jahani by email on the same day, indicating that the Defendant gave permission to provide a copy of the Loan [illegible] to Vannin and asking Mr. Jahani to supply a copy of the agreement he wanted the Defendant to enter into, stating that this “should include calculations of amounts that Buttonwood would receive in accordance with the original agreement”.
24. Between 20 April 2017 and 25 May 2017, GTAL acting on behalf of the Claimant and the Defendant and Mr Fairley acting on his behalf, entered into negotiations concerning the content of the said agreement. The Claimant does not provide particulars of the said negotiations in these Particulars of Claim because the majority of the communications were marked by the parties as “without prejudice” and/or constitute without prejudice communications in substance. Insofar as may be necessary, the Claimant will provide further particulars in the event that the parties reach agreement that without prejudice privilege has been or will be waived.
25. On 25 May 2017 the Claimant and the Defendant executed a Deed of Settlement (“the Deed of Settlement”). Pursuant to the Deed of Settlement, the parties agreed, by sub-clauses 1(a) to (e):
[Page 8]
26. The Deed of Settlement was agreed to take effect subject to [illegible] of a condition precedent set out in clause 3.2, under the terms of which:
27. By clause 3.1, the Deed of Priority was agreed to have effect on and from the date the Claimant notified the Defendant that clause 3.2 had been satisfied or waived in the Claimant’s sole and absolute discretion.
28. On or about 25 May 2017, the Defendant, Vannin and Fietta entered into the Arbitration Funding Agreement, under the terms of which:
[Page 9]
Buttonwood Receivable”), up to a cap of £11,[illegible] (defined therein as “the Buttonwood Receivable Cap”);
29. On or about 25 May 2017, the Claimant, the Defendant, Vannin, Fietta and Saunders Law entered into the Deed of Priority. The Deed of Priority recorded:
30. By entering into the Deed of Priority and thereby giving its approval to clauses 7.3, 28.1 and 28.2 of the Arbitration Funding Agreement, the Claimant notified the Defendant that clause 3.2 of the Deed of Settlement had been satisfied or alternatively waived. Accordingly, from about 25 May 2017 the Deed of Settlement compromised the existing dispute between the parties as to their obligations under the Loan
[Page 10]
Agreement and provided for the parties’ obligations in [illegible] funding of the Proceedings.
31. The Claimant also avers that, as stated at paragraphs 565 and 569 of the Final Award, the Defendant claimed, from the Arab Republic of Egypt, recovery of amounts due to the Claimant under the Loan Agreement and/or Deed of Settlement (although the Tribunal in its discretion decided that such costs should be borne by the Defendant).
32. Pursuant to the Deed of Settlement the Defendant was required, by clauses 2.1, 4.1 and 4.2, on receipt of any proceeds derived from the Proceedings (including those realised by way of a settlement) (“the Proceeds”), whether those Proceeds were received by the Defendant or Fietta, subject to the terms of the Deed of Priority, to pay to the Claimant immediately:
33. By clause 16.2 of the Deed of Settlement, the parties agreed that the courts of England will have exclusive jurisdiction to settle any dispute arising out of or in connection with the same.
1 For the avoidance of doubt, the Win Only Award Fee was defined, in the Loan Agreement, as the Win Only Funding Fee. ↩
2 For the avoidance of doubt, the Win Only Funding Fee was defined, in the Loan Agreement, as the Win Only Award Fee. ↩
[Page 11]
34. As set out in paragraph 5 above, on or about November 2021 [illegible] Defendant and/or Fietta on the Defendant’s behalf received a settlement in respect of the Final Award in the sum of US$99.5m. The Defendant has wrongfully and in breach [illegible] the said clauses 2.1, 4.1 and 4.2, failed to pay any of the sums set out in paragraph 31 above to the Claimant.
35. Further or alternatively, the sums particularised in sub-paragraphs 32(a) to (d) inclusive above are due and owing to the Claimant pursuant to clauses 4.1 and 9.1(a) and/or (b) of the Deed of Settlement.
PARTICULARS
(1) By clause 5.2 of the Deed of Settlement, the Defendant agreed to procure that Fietta would provide the Claimant with the information with respect to the Proceedings which it provides to Vannin contemporaneously to the provision of the same to Vannin;
(2) In November 2021 the Claimant made a request to Fietta for information about the Proceedings, which Fietta declined to provide, stating that their refusal was “given the terms of the agreements and upon client instructions”;
(3) In the premises the Defendant instructed Fietta not to provide the said information, in breach of clause 5.2;
(4) Pursuant to clauses 9.1(a) and/or (b) of the Deed of Settlement, the Defendant’s breach of clause 5.2 was an Acceleration Event, as defined therein, entitling the Claimant to issue a written notice (an Acceleration Notice) to the Defendant declaring that the Principal and accrued interest are immediately due and payable;
(5) By letter dated 19 January 2022 from the Claimant’s solicitors to the Defendant, the Claimant issued an Acceleration Notice indicating that the sum of £6,329,911.99 (calculated as of 31 December 2021) was immediately due and payable;
(6) The Defendant has failed to pay the said sum.
36. The Defendant further agreed pursuant to clause 7(a) of the Deed of Settlement to indemnify the Claimant in respect, inter alia, of the Claimant’s entire legal expenses in respect of any future actions, claims and proceedings in respect of any of the Released Claims which the Defendant may bring against the Claimant, which term included, by clause 6.1(a), any actual or potential actions, claims, counterclaims, causes of action, and/or rights of any kind whatsoever arising out of or directly or indirectly connected with the Loan Agreement. The Defendant further agreed pursuant to Clause 7(c) of the
[Page 12]
Deed of Settlement to indemnify the Claimant in respect, [illegible] of any costs and expenses incurred by the Claimant in relation to or in connection with the Arbitration.
37. Yet further or alternatively, if, which is denied, the Deed of Settlement is of no effect by reason of any failure to comply with clause 3.2 or any other reason, the Defendant is liable to the Claimant pursuant to the terms of the Loan Agreement.
38. Pursuant to the terms of the Loan Agreement, the Claimant advanced the total sum of £1,823,288.57, comprising the Principal plus the sum of £298,750.00 paid on the Defendant’s behalf to Royal Luxembourg SOPARFI S.A. in respect of an ATE Premium, and a further £101,250.00 advanced in respect of a fund protection fee.
39. The Defendant was required to repay the said sum of £1,823,288.57, together with interest at 16% per annum by no later than the second anniversary of the Loan Agreement. The Defendant has failed to make the said repayment and accordingly the Claimant is entitled to and does claim the same, namely £1,823,288.57 plus interest of £7,124,040.25 (as at 12 April 2022), amounting to a total sum (as at 12 April 2022) of £8,947,328.82.
40. Further, the Defendant was required on successful conclusion of the Proceedings to pay to the Claimant the Win Only Funding Fee and the Win Only Award Fee and has wrongfully failed to pay the same. The Claimant is accordingly entitled to and does claim the same, amounting to the sums of £1,539,557.00 and US$8,119,897.20 respectively (the latter sum being denominated in US$ by reason of the settlement received by the Defendant, and amounting to £6,234,181.87 as at 12 April 2022, by application of the exchange rate of US$1.30248 to the £, based on that day’s daily rate sourced from www.Oanda.com).
AND THE CLAIMANT CLAIMS:
(1) The sums due pursuant to the Deed of Settlement set out in paragraph 32;
(2) Alternatively the sums due pursuant to the Loan Agreement set out in paragraphs 39-40;
[Page 13]
(3) Interest at 16% per annum pursuant to the Deed of Settlement [illegible] the Loan Agreement as applicable;
(4) Further or other relief;
(5) Costs on an indemnity basis as set out in paragraph 36, alternatively costs.
Statement of Truth
The Claimant believes that the facts stated in these Particulars of Claim are true. The Claimant understands that proceedings for contempt of court may be brought against anyone who makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth. I am authorised by the Claimant to sign this statement.
Signed...
Signature
Position: Partner, Willkie Farr & Gallagher (UK) LLP
IAIN MACDONALD
Gough Square Chambers
11 May 2022
[Page 14]
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Claim No:
B E T W E E N:
BUTTONWOOD LEGAL CAPITAL LIMITED
Claimant
- and -
MR MOHAMED ABDEL RAOUF BAHGAT
Defendant
----------------------------------------------------------
PARTICULARS OF CLAIM
----------------------------------------------------------
Claimant’s address for service:
Willkie Farr & Gallagher (UK) LLP
Citypoint
1 Ropemaker Street
London
EC2Y 9AW