VTB Capital v Malofeev
| Jurisdiction | Cayman Islands |
| Judge | (Cresswell, J.) |
| Judgment Date | 16 January 2012 |
| Court | Grand Court (Cayman Islands) |
| Date | 16 January 2012 |
(Cresswell, J.)
C. Freedman, Q.C. and N. Meeson, Q.C. for the plaintiff;
J. Smouha, Q.C., J. Eldridge and J. Golaszewski for the second and third defendants.
(1) Ahmad Hamad Algosaibi & Bros. Co. v. Saad Invs. Co. Ltd., 2011 (1) CILR 178, applied.
(2) Black Swan Inv. I.S.A. v. Harvest View Ltd., BVI Commercial Ct., Case No. BVI HCV (Com) 2009/399, March 23rd, 2010, not followed.
(3) Cardile v. Led Builders Pty. Ltd.UNK(1999), 198 C.L.R. 380; 162 ALR 294; 73 ALJR 657; 45 IPR 1; [1999] HCA 18, referred to.
(4) Channel Tunnel Group Ltd. v. Balfour Beatty Constr. Ltd., [1993] A.C. 334; [1993] 2 W.L.R. 262; [1993] 1 All E.R. 664, referred to.
(5) Felderhof v. Deloitte & Touche Inc., 2011 (2) CILR 35, applied.
(6) Meespierson (Bahamas) Ltd. v. Grupo Torras S.A.UNK(1999), 2 ITELR 29, referred to.
(7) Mercedes Benz A.G. v. Leiduck, [1996] A.C. 284; [1995] 3 W.L.R. 718; [1995] 3 All E.R. 929; [1995] 2 Lloyd”s Rep. 417; [1995] UKPC 31, referred to.
(8) Siskina v. Distos Cia. Naviera S.A., The SiskinaELRWLRUNK, [1979] A.C. 210; [1977] 3 W.L.R. 818; [1977] 3 All E.R. 803; sub nom. Shanker (Ibrahim) & Co. v. Distos Cia. Naviera S.A., [1978] 1 Lloyd”s Rep. 1, referred to.
(9) Solvalub Ltd. v. Match Invs. Ltd., 1996 JLR 361, referred to.
(10) Swift-Fortune Ltd. v. Magnifica Marine S.A., [2007] 1 SLR 629, referred to.
(11) TSB Private Bank Intl. S.A. v. Chabra, [1992] 1 W.L.R. 231; [1992] 2 All E.R. 245, referred to.
(12) Telesystem Intl. Wireless Inc. v. CVC/Opportunity Equity Partners L.P., 2002 CILR N[22], considered.
(13) VTB Capital Plc v. Nutritek Intl. Corp., [2011] EWHC 3107 (Ch), considered.
(14) Yukos CIS Invs. Ltd. v. Yukos Hydrocarbons Invs. Ltd., BVI Commercial Ct., Case No. BVI HCV (Com) 2010/85; on appeal, Eastern Caribbean C.A., Case No. BVI HCVAP 2010/028, September 26th, 2011, dicta of Kawaley J.A. not followed.
Injunctions-Mareva injunction-assets of third party-Chabra jurisdiction-jurisdiction to grant free-standing Mareva injunction against non-cause-of-action defendant when ancillary to effective enforcement of judgment against cause-of-action defendant requires cause-of-action defendant to be party to proceedings
The plaintiff sought freezing injunctions in the Grand Court against the defendants and leave to serve the first defendant outside the jurisdiction.
The plaintiff was a bank with its registered office in London. The first defendant was a Russian citizen based in Moscow, with controlling interests in a number of companies in offshore jurisdictions. The second and third defendants were companies incorporated in the Cayman Islands. The first defendant (through a company incorporated in the BVI) had the sole ultimate beneficial interest in the participating shares of the third defendant. The plaintiff brought proceedings against, inter alia, the first defendant in the English Chancery Division (‘the English proceedings’); the Cayman defendants were not parties to these proceedings. The Chancery Division granted, ex parte, leave to serve the first defendant outside the jurisdiction and a worldwide freezing order with permission to enforce the order against his assets in Cyprus, the BVI and the Cayman Islands. The courts of the BVI and Cyprus also granted the plaintiff freezing orders in support of the English proceedings. On the first defendant”s application, the Chancery Division (Arnold, J.) set aside permission to serve the proceedings outside the jurisdiction as Russia was
the appropriate forum; further, even if it had upheld the order for service out, it would not have continued the WFO until trial as there was no real risk of dissipation of the assets and/or there was material non-disclosure by the plaintiff. However, as the matter was proceeding to appeal, the WFO was continued until after its disposal.
In the Grand Court, the plaintiff sought a freezing injunction restraining the first defendant, until the final determination of the English proceedings, from removing from the Cayman Islands, or in any way diminishing the value of, any of its Cayman assets, including any shareholding in the Cayman defendants. As against the Cayman defendants, the plaintiff sought an injunction preventing them from dealing with or diminishing the value of any shares they held in a Russian telecommunications entity, Rostelecom, until the English proceedings had been concluded. Rostelecom shares were traded on various international stock exchanges; the manner in which the shares were held was complex and subject to various repurchase agreements involving Gazprombank, such that in fact they might not have been owned at all, but been the subject of a right vested in the third defendant to repurchase them at a price below market value.
The Grand Court (Cresswell, J.) held that it had no jurisdiction to serve the first defendant outside the jurisdiction (upheld on appeal, see 2011 (2) CILR 420) but made a freezing order in relation to the Cayman defendants pending determination of the proper scope of the court”s ‘Chabra jurisdiction’-a jurisdiction to grant a free-standing freezing injunction against a non-cause-of-action defendant (NCAD), if such injunction would be ancillary and incidental to the effective enforcement of a prospective judgment against a cause-of-action defendant (CAD) because assets to which the NCAD was beneficially entitled (and in which the CAD also had a beneficial interest) might become available to satisfy a judgment against the CAD. The freezing order was subsequently varied to provide that it did not prohibit the third defendant or its wholly-owned subsidiaries from entering into repurchase agreements with Gazprombank in certain terms.
The plaintiff applied for a continuation of the freezing order against the Cayman defendants. It submitted that (i) it was necessary to domesticate the WFO so that it would operate in personam against the Cayman defendants; (ii) the court”s Chabra jurisdiction applied notwithstanding that the first defendant, the CAD, was not amenable to the jurisdiction of the Grand Court-what mattered was whether a freezing injunction would assist in the enforcement of a prospective judgment against him, not where causes of action could have been enforced against him; (iii) this accorded with the position in England and Wales and other common law jurisdictions; and (iv) in the circumstances of the case, the court should exercise its power-the plaintiff had demonstrated a good arguable case on the substantive cause of action in the English proceedings and there was a real risk of dissipation of assets subject to the claim.
The Cayman defendants submitted that (i) the court had no power to grant a free-standing freezing injunction on the Chabra basis without a
CAD amenable to the jurisdiction of the Grand Court; (ii) there were important practical reasons for this-a plaintiff joining a NCAD had to establish that the NCAD held assets which were also assets of the CAD; this required an investigation into the relationship between the NCAD and the CAD which could not properly be carried out unless the CAD was also a party to proceedings; (iii) whether or not an extension of the Chabra jurisdiction was justified on public policy grounds was a matter for the legislature; and (iv) even if the court had power to grant the relief sought, in the circumstances of the case it should not exercise it-in the light of the most recent High Court judgment (Arnold, J.), the plaintiff could not establish a good arguable case on the substantive cause of action or a real risk of dissipation of assets; further, the plaintiff had not made full and frank disclosure to this court.
Held, dismissing the plaintiff”s application for a continuation of the freezing injunctions:
The court had no jurisdiction to grant the order sought. The purpose of the Chabra jurisdiction was to ensure that the enforcement of a future judgment against a cause-of-action defendant was not frustrated by the dissipation of assets held by a non-cause-of-action defendant which would or might otherwise become available to satisfy that judgment. However, it was central to this jurisdiction that a cause-of-action defendant was a party to the proceedings and, following the Court of Appeal”s decision in this matter, there was no cause-of-action defendant in these proceedings. Further, as the Law Reform Commission was actively considering a number of the issues raised in this matter, it would be inappropriate for the Grand Court to extend the current state of the law, especially since it had been clearly set out by the Court of Appeal. Even if the court had jurisdiction to grant the order sought, it was doubtful whether it would have been appropriate to exercise it as (i) the English High Court had found against the plaintiff on the issues of risk of dissipation and material non-disclosure; (ii) there was force to the defendants” submissions as to non-disclosure in these proceedings; (iii) the assets sought to be restrained were traded on international stock exchanges; (iv) there was the complication of the repurchase transactions; and (v) some protection was provided by the existing order in the BVI (para. 65; paras. 69–70).
1 CRESSWELL, J.: On August 18th last year, I refused to grant leave to serve out against the first-named defendant, Mr. Malofeev. That decision was upheld by the Court of Appeal on November 30th, 2011 (see 2011 (2) CILR 420)-I refer to the judgment of the Court of Appeal for its full terms and effect. On the same date (August 18th), I granted holding relief against the second defendant (‘D2’) and the third defendant (‘D3’) stating:
‘I am persuaded, not without considerable hesitation, that I should grant holding relief against D2 and D3 for a limited period of time so that the...
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VTB Capital v Universal Telecom
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