Contract – granting an order of recognition of the receivers and
their powers in this jurisdiction and reasons thereof.
[2011]JRC239A
Royal Court
(Samedi)
23 December 2011
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Before :
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M. C. St. J. Birt, Esq., Bailiff, and Jurats
Tibbo and Crill.
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IN THE MATTER OF THE REPRESENTATION OF
DAVID STANDISH, JOHN MILSOM AND
JEREMY OUTEN, RECEIVERS OF THE ASSETS OF MR MUKHTAR ABLYAZOV
Advocate A. J. N. Dessain for the
Representors.
judgment
the bailiff:
1.
This is an
application by the Representors (“the Receivers”) for recognition
of their appointment for the purposes of exercising their powers within the
jurisdiction. They are not
receivers in the more usual sense relating to insolvency or to the enforcement
of security such as a debenture.
They are persons appointed by the High Court in England to
locate and preserve the assets of the defendant in proceedings in that
jurisdiction pending trial. They
are therefore officers of the English High Court; they do not act for the
plaintiff in those proceedings.
2.
This Court
has not previously had to consider whether it has jurisdiction to recognise
receivers of this nature and accordingly Advocate Dessain has addressed us on
the law.
3.
At the
conclusion of the hearing, the Court granted an order recognising the authority
of the receivers within the jurisdiction, but imposing certain limitations and
restrictions on that authority as compared with the order originally sought by
the Receivers. We now give the
reasons for our decision.
The factual background
4.
The
plaintiff in the English proceedings is JSC BTA Bank (“the Bank”)
which is incorporated in Kazakhstan
and is now apparently controlled by the State of Kazakhstan. Proceedings have been brought in the
High Court against Mr Ablyazov and a number of other
defendants. It is alleged that,
whilst he was chairman of the Bank, Mr Ablyazov
misappropriated the Bank’s funds.
At the time of the making of the receivership order, the claim was in
excess of US$1.8 billion but it was said that further claims were anticipated
which would bring the total sum claimed to $4 billion. Mr Ablyazov
denies the claims and states that they are an attempt by the President of
Kazakhstan to take control of Mr Ablyazov’s
assets in support of a politically motivated claim because Mr Ablyazov is a leading figure in Kazakhstan’s democratic
opposition.
5.
Since
January 2009 Mr Ablyazov has resided in London. The proceedings were commenced against
him in August 2009 and a freezing order was issued against him. When he disclosed his assets pursuant to
the freezing order they were said to be worth several billion dollars. He does not hold his assets in his own
name. He uses a complex network of
companies, trusts and nominees around the world because, he says, it is
necessary to protect himself from unlawful depredations by the President of
Kazakhstan.
6.
On 6th
August, 2010, having concluded that Mr Ablyazov had
failed to make full disclosure pursuant to the freezing order, Teare J decided that the freezing order itself may not
provide the Bank with adequate protection against the risk of dissipation of Mr
Ablyazov’s assets prior to trial and
accordingly made an order appointing the Receivers in respect of certain assets
of Mr Ablyazov.
7.
The receivership
order was extended on three further occasions. On 26th January, 2011, it was extended to cover 212
companies listed in the order (referred to as the “undisclosed assets”). In April 2011 it was extended to cover a
further 389 companies (“the further undisclosed assets”) and
finally on 27th May, 2011,
it was extended to cover a further 35 companies (“the additional
undisclosed assets”). In
broad detail the assets now covered by the receivership order consist
principally of the shares in and assets held by, for or on behalf of some 700
companies incorporated in a number of different jurisdictions.
8.
One of the
companies comprised in the additional undisclosed assets is a Jersey
company called Eurasia Logistics Limited (“Eurasia”)
which is administered in Jersey by Nautilus
Trust Company Limited (“Nautilus”). Nautilus has made it clear that Eurasia will not disclose information without a local
court order, although it has indicated through its advocates that, so far as it
is concerned, Eurasia does not form part of
the property of Mr Ablyazov.
9.
So far,
the Receivers have obtained recognition of the receivership order by the courts
in Cyprus,
the British Virgin Islands, the Seychelles, Luxembourg and Germany.
10. As mentioned earlier, it is important to
emphasise that the Receivers, who are partners in the English firm of
accountants KPMG, are officers of the High Court and have simply been appointed
to recover and preserve the assets described in the receivership order. They are not there to take sides or make
common cause with any of the parties.
They are entirely neutral and are there simply to gather in and preserve
the assets pending the outcome of the proceedings in the High Court. Receivers are appointed in circumstances
where the High Court concludes that a freezing injunction alone will be
insufficient to preserve assets pending the outcome of litigation.
11. The prayer of the Representation includes the
following:-
“(3) Order that the
appointment and powers of the Representors as Receivers pursuant to the Receivership
Order be recognised by the Royal Court, and that the Representors be authorised
and permitted to exercise their powers as Receivers pursuant to the
Receivership Order within the Island of Jersey, including, without prejudice to
the generality of the foregoing, that:-
(a) The Representors be
authorised and permitted to take all such steps within the Island of Jersey as
may seem expedient to recover and preserve the Property, the Undisclosed
Assets, the Further Undisclosed Assets and the Additional Undisclosed Assets
(within the meaning of those terms as defined in the Receivership Order) and to
exercise the powers vested in each Receiver pursuant to the Receivership Order;
(b) The Representors be
authorised and permitted also to identify and locate the Property, the
Undisclosed Assets, the Further Undisclosed Assets and the Additional
Undisclosed Assets (within the meaning of those terms as defined in the
Receivership Order) within the Island of Jersey and to make enquiries and
requests for information, documents and other materials, whether on paper,
microfilm or tape or in any other form, whether electronically or otherwise,
relating to the Property, the Undisclosed Assets, the Further Undisclosed
Assets and the Additional Undisclosed Assets which may be in the possession or
control in whatever capacity of any person within the Island of Jersey.”
12. The receivership order itself contains detailed
provisions which we do not think it necessary to describe. We would however refer to paragraph 12C
of the receivership order:-
“12C Any person upon whom
this Order is served within this jurisdiction or who falls within paragraph
20(2) (including without limitation those persons specified at Schedule 5)
shall:-
(a) give to the Receivers such
information and documentation relating to the Undisclosed, Further Undisclosed
and Additional Undisclosed Assets,
(b) attend on the Receivers at
all such times, and
(c) do all such things
as the Receivers may reasonably
require for the purposes of getting in the Undisclosed, Further Undisclosed and
Additional Undisclosed Assets and carrying out their functions in relation
thereto.”
The reference to paragraph 20(2) of the order
is to persons in other jurisdictions where the order had been declared
enforceable by a court of that jurisdiction.
The law
13. As mentioned earlier, it does not appear that
this Court has previously had to consider whether it has jurisdiction to
recognise the appointment of receivers appointed by a foreign court. However, the issue has arisen in a
number of other jurisdictions.
14. In Schemmer-v-Property
Resources Limited [1975] Ch 273, Goulding J
considered that the English Court
had jurisdiction to recognise the title of a foreign receiver to assets located
in England
provided that there was a sufficient connection between the defendant and the
jurisdiction in which the foreign receiver had been appointed to justify
recognition of the foreign court’s order. In that case, the court held that there
was not a sufficient connection because the US court had purported to appoint a
receiver over a Bahamian company which was not party to the US
proceedings. It also declined to
recognise the receivership on the ground that the proceedings, although
technically civil, were concerned with the enforcement of a penal statute.
15. Schemmer was followed by the Court of Appeal of the Cayman
Islands in Canadian Arab Financial Corporation-v-Player [1984]
CILR 63 which held that the Grand Court of the Cayman
Islands had an inherent power to recognise foreign-appointed
receivers and managers over assets within the jurisdiction based on
well-recognised conflict of laws principles. It adopted the same test as in Schemmer and made an order recognising a receiver
appointed by the Supreme Court of Ontario in relation to a company incorporated
in Ontario.
16. A similar approach, relying upon the inherent
jurisdiction of the court, was applied by the Court of Appeal of St Christopher
and Nevis in Millennium Financial Limited-v-McNamara (15th March 2010)
and by the Royal Court of Guernsey in Terry-v-Butterfield Bank (Guernsey)
Limited (24th February 2006), where receivers appointed by a court in
Virginia, USA over a Bahamian company were recognised. Collas DB
approved the following passage from Dicey and Morris, Conflict of Laws,
(14th Edition) at para 30-127:-
“Receiver appointed by court.
The two clauses of Rule 167 relate
to receivers appointed out of court. The circumstances in which the courts
will recognise the powers of a receiver appointed by a foreign court are
different. These circumstances seem
to obtain where the foreign court had jurisdiction over the defendant whose
property is made subject to the receivership. Such jurisdiction has been said to exist
if there is a ‘sufficient connection between the defendant and the
jurisdiction in which the foreign receiver was appointed to justify recognition
of the foreign court’s order.’
When a sufficient connection will exist cannot be definitively
stated. However, first, it seems
that an appointment by a court in the country where the company is incorporated
will be recognised. Secondly, it is
also likely that the appointment will be recognised if the defendant submitted
to the jurisdiction of the court by whose order the appointment was made,
although such a submission by a subsidiary of the defendant company is likely
to be regarded as an insufficient basis for such recognition. Thirdly, it is possible (but no higher
than that) that an English Court
would recognise the order of the foreign court if that order would be
recognised by the law of the place where the defendant company was
incorporated. Fourthly, there is
something to be said for recognising an appointment made by a court in a country
where the central management and control of the company is exercised,
particularly, perhaps, if there is no likelihood of intervention from the
courts of its place of incorporation.
Similarly, the relevant connection may be found to exist if the appointment
is made by the court of the country where the company carries on business,
particularly if that is the only country where business is carried on.”
The Royal Court held that there was
sufficient connection in that case on the ground that the central management
and control of the Bahamian company had been exercised in the United States and
that the appointment of the receivers would have been recognised in the Bahamas
as the place of incorporation.
17. We see no reason for Jersey Law to take a
different stance, so that such orders are not capable of recognition or
enforcement. We conclude therefore
that the Royal Court
has an inherent jurisdiction to recognise the appointment of receivers
appointed by a foreign court provided that there is a sufficient connection
between the defendant whose assets have been made the subject of a receivership
order and the jurisdiction in which the order has been made. In this case, Mr Ablyazov
is resident in England
and we hold that to be a sufficient connection for these purposes.
Application to the facts
18. We turn therefore to the question of whether
the Court should, in the exercise of its discretion, recognise the receivership
order.
19. In our judgment, it is appropriate to do so. The order was made following a five day
inter partes hearing before Teare
J. He was therefore in an excellent
position to assess whether it was necessary to go beyond a freezing injunction
and make a receivership order in order to ensure that the assets of the
defendant would remain available to satisfy any eventual judgment in favour of
the Bank. The Court has read his
detailed judgment. It is in the
interests of comity that we should make an order permitting the Receivers to
exercise their jurisdiction in relation to those assets which are situated in Jersey.
20. Furthermore, it is significant that this is an
international receivership involving some 700 companies in many different
jurisdictions. There is clearly an
interlocking network of companies and it is reasonable for the Receivers to
seek recognition in a number of jurisdictions. As mentioned earlier, the receivership order
has already been recognised in the BVI, Cyprus, the Seychelles, Luxembourg and Germany.
21. However, we do not think it right to make an
order in exactly the terms asked for by the Receivers. First, like the Court of Appeal in the
BVI, we do not think it necessary or proportionate to give the Receivers power
to require any person in Jersey to attend upon
the Receivers to provide information about the assets. That is a draconian power which should
only be exercised with the specific authority of this Court. Accordingly we order that sub-paragraphs
(b) and (c) of paragraph 12(C) of the receivership order should not be
recognised or enforceable in Jersey without
further specific order.
22. Secondly, the orders originally requested did
not make it clear that, if the Receivers requested information from a person in
Jersey, that person would have the right to
come to this Court in order to argue that it should not have to provide the
information. As originally drafted,
it appeared to be the case that any person refusing to comply with a request
from the Receivers would be in contempt of court. Again, we did not consider that
appropriate. Advocate Dessain
argued that such a person could apply to the English Court but we do not find that
constitutionally appropriate. It is
for this Court to decide whether persons in Jersey
holding confidential information should be forced to disclose that information
or whether there are valid grounds for their not doing so. Accordingly we ordered that any person
affected, which clearly includes any person to whom a request is directed, should
have liberty to apply in respect of the exercise by the Receivers of their
powers in Jersey.
23. Subject to those two provisos, the Court
granted recognition of the receivership order and authorised the Receivers to
exercise their powers within the jurisdiction.
Authorities
Schemmer-v-Property Resources Limited [1975] Ch 273.
Canadian Arab Financial
Corporation-v-Player [1984] CILR 63.
Millennium Financial
Limited-v-McNamara (15th
March 2010).
Terry-v-Butterfield Bank (Guernsey) Limited (24th February 2006).
Dicey and Morris, Conflict of Laws,
(14th Edition).