VTB Capital v Universal Telecom

• Jurisdiction: Cayman Islands
• Judge: (Chadwick, P., Mottley and Campbell, JJ.A.)
• Judgment Date: 04 June 2013
• Court: Court of Appeal (Cayman Islands)
• Date: 04 June 2013

Court of Appeal

(Chadwick, P., Mottley and Campbell, JJ.A.)

VTB CAPITAL PLC

and

UNIVERSAL TELECOM MANAGEMENT and UNIVERSAL TELECOME INVESTMENT STRATEGIES FUND SPC

B.C. Freedman, Q.C., N.K. Meeson, Q.C., Ms. L. DaCosta and B. Hart for the appellant;

M.G. Swainston, Q.C., J. Eldridge and J. Golaszewski for the respondents.

Cases cited:

(1) Ahmad Hamad Algosaibi & Bros. Co. v. Saad Invs. Co. Ltd., 2011 (1) CILR 178, considered.

(2) C Inc. PLC v. L, [2001] 2 All E.R. (Comm) 446; [2001] 2 Lloyd”s Rep. 459; [2001] CLC 1054, considered.

(3) Cardile v. Led Builders Pty. Ltd.UNK(1999), 198 CLR 380; 162 ALR 294; 73 ALJR 657; 45 IPR 1; [1999] HCA 18, followed.

(4) Channel Tunnel Group Ltd. v. Balfour Beatty Construction Ltd., [1993] A.C. 334; [1993] 2 W.L.R. 262; [1993] 1 All E.R. 664; [1993] 1 Lloyd”s Rep. 291, followed.

(5) Felderhof v. Deloitte & Touche Inc., 2011 (2) CILR 35, considered.

(6) Fourie v. Le Roux, [2007] 1 W.L.R. 320; [2007] 1 All E.R. 1087; [2007] 1 All E.R. (Comm) 571; [2007] Bus. L.R. 925; [2007] BPIR 24; [2007] UKHL 1, considered.

(7) Grupo Torras S.A. v Al-Sabah (No. 2), English C.A., April 21st, 1997, unreported, referred to.

(8) Jackson v. Sterling Indus. Ltd.UNK(1987), 162 CLR 612; 61 ALJR 332; 71 ALR 457, referred to.

(9) Madoff Sec. Intl. Ltd. v. Raven, [2012] 2 All E.R. (Comm) 634; [2011] EWHC 3102 (Comm), referred to.

(10) Mercedes Benz A.G. v. Leiduck, [1996] A.C. 284; [1995] 3 W.L.R. 718; [1995] 3 All E.R. 929; [1995] 3 LRC 227; [1995] 2 Lloyd”s Rep. 417; [1995] UKPC 31, referred to.

(11) Norwich Union v. Eden, English C.A., January 25th, 1996, unreported, referred to.

(12) Patrick Stevedores Operations No. 2 Pty. Ltd. v. Maritime Union of AustraliaUNK(1998), 195 CLR 1, referred to.

(13) SCF Finance Co. Ltd. v. Masri (No. 1), [1985] 1 W.L.R. 876; [1985] 2 All E.R. 747; [1985] 2 Lloyd”s Rep. 206, referred to.

(14) Siskina v. Distos Cia. Naviera S.A. (‘The Siskina’)ELRWLRUNK, [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.

(15) TSB Private Bank Intl. S.A. v. Chabra, [1992] 1 W.L.R. 231; [1992] 2 All E.R. 245, referred to.

(16) Thane Invs. Ltd. v. Tomlinson (No. 1), [2003] EWCA Civ 1272, referred to.

Injunctions-Mareva injunction-assets of third party-Chabra jurisdiction-jurisdiction to grant Mareva injunction against domestic non-cause-of-action defendant when ancillary to effective enforcement of judgment against cause-of-action defendant not to require cause-of-action defendant to be party to proceedings-not necessary that cause-of-action defendant within domestic jurisdiction or being pursued in domestic court if subject to substantive claim recognized by domestic court

Injunctions-Mareva injunction-assets of third party-Chabra jurisdiction-may grant Mareva injunction against domestic non-cause-of-action defendant when good reason to suppose its assets available to satisfy future judgment against cause-of-action defendant and would be dissipated or put beyond claimant”s reach without order-assets available if non-cause-of-action defendant compellable to satisfy judgment by cause-of-action defendant or any other process (e.g. appointment of receiver)-not to order injunction if no ongoing proceedings capable of resulting in judgment against cause-of-action defendant

The appellant applied for a Mareva injunction in respect of assets held by the respondents.

The appellant, an English bank, entered into a loan agreement with a BVI company based on representations it later alleged were fraudulent. The company failed to keep up repayments and the appellant brought proceedings in the English High Court against, inter alia, its alleged owner, M. As M was a Russian citizen, the appellant made applications to the English High Court for permission to serve the writ out of the jurisdiction and for a worldwide freezing order in respect of his assets, both of which were granted. The appellant also applied for a Mareva injunction against M in the British Virgin Islands.

The appellant believed that M-through his ownership of a second BVI company (T)-owned all of the shares with an economic interest in a fund held by the second respondent (a Cayman company managed by the first respondent, another Cayman company), and that M was attempting to dissipate the assets in this fund to prevent them from being used to satisfy

a judgment against him. The appellant therefore made a domestic application for Chabra-type relief (i.e. a Mareva injunction in respect of assets held by a party who was not a defendant in the main cause of action (‘an NCAD’)) against the respondents and for a Mareva injunction against M as a cause-of-action defendant (‘a CAD’) out of the jurisdiction. The Grand Court (Cresswell, J.) granted the order against the respondents, but refused to do so against M. Further, as M had applied to the English High Court to set aside its earlier orders, the Grand Court ordered that the Mareva injunction would automatically end after two months (by which time M”s application would have been heard) unless the appellant had applied for it to be extended.

After hearing M”s application, the English High Court set aside its earlier orders, but granted leave to appeal and made a temporary freezing order until the determination of that appeal. The Grand Court (Cresswell, J. in proceedings reported at 2012 (1) CILR 7), meanwhile, found that it had no jurisdiction to grant Chabra relief against an NCAD if no CAD was within its jurisdiction, and dismissed the Mareva injunction. The appellant”s appeal to the English Court of Appeal and its subsequent appeal to the Supreme Court were dismissed, and the Eastern Caribbean Supreme Court dismissed the BVI Mareva injunction against M and also dismissed an application for a Mareva injunction against T. This was on the ground that, inter alia, as the UK Supreme Court”s ruling had ended the English proceedings, there was no justification for maintaining the order.

The appellant submitted that the requirements for granting Chabra-type relief had been met as there was no requirement that a CAD should be within the domestic jurisdiction, provided that proceedings ongoing against him were recognized by the court. Further, the requirement that the respondent”s frozen assets could be used to satisfy a judgment debt against M had been met as the appellant would be able to take control of T, if necessary by the appointment of a receiver in the British Virgin Islands, to redeem the shares held by the respondents.

The respondents submitted in reply that the Grand Court had been right to find that there was no jurisdiction to grant an injunction against them when there was no CAD in the jurisdiction. Moreover, even if such authority existed, there was no prospect that their assets could be used to satisfy a judgment against M as the UK Supreme Court had dismissed the appellant”s appeal to serve the writ on him. Further, even if the appellant were able to reinstitute proceedings against M, the BVI court would not appoint receivers over T and it would not, therefore, be able to realize the second respondent”s assets.

Held, dismissing the appeal:

(1) The appellant had failed to show that the criteria for ordering Chabra-type relief had been met, although the court would have had jurisdiction to make such an order even though there was no CAD in the

jurisdiction. The focus of Chabra-type relief was the proper administration of justice, and-when considered with the international nature of litigation and the need to promote mutual assistance between courts-the fact that a CAD was not a party to the proceedings should not affect its availability. Further, although the case law required that the court recognized the cause of action against the CAD, that the NCAD could be duly served in the jurisdiction, and that the injunction must be ancillary to the final order, there was no requirement that the final order against the CAD must be from a domestic court. The following principles could therefore be derived from the case law: the person against whom the Mareva injunction was sought had to be within the domestic court”s jurisdiction; when that person was an NCAD, it was not necessary that the CAD had been brought, or was being pursued, in the domestic court, although he had to be subject to a substantive claim which was recognized by the domestic court; and there was no reason why the CAD should be a party to the proceedings against the NCAD or subject to the jurisdiction of the domestic court (para. 36; paras. 40–48).

(2) There were no grounds for making a Mareva order against the respondents. The making of a Mareva order could only be justified when there was good reason to suppose that the assets in question would become available to satisfy a judgment against a CAD and that, without such an order, the assets would be dissipated or put beyond the claimant”s reach. As the order sought was Chabra-type relief, a Mareva injunction could only be ordered if M could be compelled to cause the assets held by the respondent to be used to satisfy the judgment against him, or if there was some other process by which the appellant could obtain those assets. It was incredibly unlikely, however, that the appellant would be able to compel the respondents to use the fund”s assets to satisfy a judgment against M, and the court did not accept that the appellant would be able to appoint receivers in the British Virgin Islands, particularly as the Eastern Caribbean Supreme Court had dismissed the BVI Mareva injunction and had refused to grant further injunctions. Moreover, even if the appellant were capable of obtaining the assets held by the respondent, there were no active proceedings which could lead to a judgment for them to enforce as the dismissal of the appellant”s appeal by the UK Supreme Court meant that the appellant...