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Home > Legal & Regulatory docs.

Pezold v Border Timbers Ltd 2020 EWHC 2172 QB - 06 August 2020

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Country
  • United Kingdom
  • Zimbabwe
Year

2020

Summary

...

Background

It is unnecessary for me to go into any detail regarding the underlying facts giving rise to these proceedings. In brief, the Claimant is a German, Swiss and Austrian national resident in Zimbabwe. The Defendant is a Zimbabwean company engaged in commercial forestry. The Claimant and his family were formerly 86.49% shareholders in the Defendant, through which they owned a large estate in Zimbabwe. For simplicity, I will refer in this judgment simply to the Claimant.

In September 2005, the estate was expropriated by the Zimbabwean government as part of its Land Reform Programme. In 2010, both the Claimant and the Defendant commenced ICSID arbitrations against the state of Zimbabwe claiming relief in respect of the expropriation. The Claimant could obviously only claim for his 86.49% shareholding whereas the Defendant could claim for 100% of the estate. The purpose of the separate claim by the Defendant was therefore to ensure that recovery was made in respect of the minority interest.

On 21 January 2015, the Defendant was provisionally placed into a form of administration in Zimbabwe known as judicial management under ss. 299 and 300 of the Companies Act then in force. This was subsequently extended indefinitely on 2 March 2016. The Defendant's Judicial Manager is a Mr Peter Bailey.

Meanwhile, the ICSID arbitrations were continuing and, on 28 July 2015, awards were made granting both claimants materially identical relief, namely compensation of around US$124 million failing restitution of the Defendant's forestry assets by a certain date. Each claimant was also awarded around US$1 million in moral damages. The awards in respect of the estate (but not the moral damages) were overlapping and provided that discharge by the Government of Zimbabwe of its liability in respect of the estate to one claimant would discharge its liability pro tanto to the other, thereby avoiding double recovery.

On 23 October 2015, the Government of Zimbabwe applied to have the awards annulled. By this time, the Claimant and his family had substantially disposed of their interests in the Defendant to a third party. The Defendant, while wishing to contest the annulment application, was either unwilling or unable to pay the costs of doing so. Accordingly, on 22 July 2016, Mr Bailey concluded an agreement on its behalf with the Claimant whereby (in essence) the Claimant undertook to manage the annulment proceedings on behalf of the Defendant and to pay its costs, while the Defendant undertook not to settle or enforce the award in its favour without the prior written consent of the Claimant. The Claimant's witness statement asserts that one of the purposes of this latter provision was to ensure that the Defendant did not succumb to pressure from the Zimbabwean government to enter into a sham settlement which would have the effect of preventing the Claimant from recovering his proper share of the compensation payable.

From early 2019 onwards, the Claimant became increasingly concerned that the Defendant, with the encouragement of its new shareholders, was seeking to negotiate a settlement with the Zimbabwean government without his permission in breach of the July 2016 agreement. The present proceedings were accordingly issued seeking a final injunction restraining the Defendant from settling its award without the Claimant's consent. At the same time, an on notice application for an interim injunction was issued, as well as a without notice application for permission to serve by alternative means.

Although I am not concerned with the merits of the underlying dispute, I record the Defendant's position that it is not bound by the July 2016 agreement and that any restraint on enforcement should in any event apply mutually. I should also note that there are parallel proceedings on foot brought by the Defendant's current majority shareholder against the Claimant for a similar injunction restraining him from enforcing his award in so far as it relates to the Defendant. The court has ordered that both sets of proceedings are to be managed together, and although the latter action has no direct bearing on this application, its outcome undoubtedly will.

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