Daselina Investments Ltd v Kirkland Intertrade Corporation

• Jurisdiction: British Virgin Islands
• Judge: Jack, J [Ag.]
• Judgment Date: 17 December 2019
• Neutral Citation: VG 2019 HC 65
• Docket Number: Claim No: BVIHCM2019/0149
• Court: High Court (British Virgin Islands)

EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

(COMMERCIAL DIVISION)

Judges: Jack, J.

Claim No: BVIHCM2019/0149

In the Matter of Kirkland Intertrade Corp

And in the Matter of the BVI Companies Act 2014 (As Amended)

Between

Daselina Investments Ltd

Applicant

and

Kirkland Intertrade Corp

Respondent

Appearances:

Mr. Ryan Hocking and Ms. Laure-Astrid Wigglesworth of Appleby for the applicant

Ms. Dancia Penn QC and Ms. Pamela Rymer-Trumpet of Dancia Penn & Co for the respondent

Mr. Grant Carroll of Ogier for the would-be liquidators

Insolvency Law — Appointment of liquidator — Debt — Arbitration award — Whether application to appoint liquidator ought to be granted — Whether there was proper purpose for grant of adjournment.

Jack, J [Ag.]

1 This is an application issued on 9 ^th October 2019 for the appointment of liquidators over the defendant, a BVI company (“Kirkland”).

The facts

2 The first litigation relevant to the current application were proceedings (BVIHC ( COM) 113 of 2015) issued on 21 ^st September 2015 before this Court. The claimant was Onexim Group Management Ltd (“Onexim”). The defendant was Kirkland. Onexim sought recovery in respect of a $30 million loan said to have been given to Kirkland in 2012. With interest, a total of some $35 million was claimed. The loan was guaranteed by Maxim Finskiy, who plays a continuing rôle in the subsequent disputes. Following the issue of proceedings, there were negotiations involving Onexim, Kirkland, Mr. Finskiy, the current claimant (“Daselina”) and others. These negotiations resulted in a compromise contained in a number of agreements made on 24 ^th February 2016. So far as relevant, Kirkland's indebtedness was reduced; Mr. Finskiy's guarantee continued; and Onexim assigned its claims under the compromise to Daselina. The compromise agreements provided for disputes to be arbitrated before the London Court of International Arbitration (“the LCIA”) in London.

3 On 20 ^th June 2017, Kaye J sitting in this Court stayed the 2015 proceedings, so that the on-going disputes between the parties could be arbitrated before the LCIA. He reserved the costs of the application for a stay. On 18 ^th August 2017, Kirkland and Mr. Finskiy made a request to the LCIA for arbitration against Onexim, Daselina and another company, Intergeo MMC Ltd (“Intergeo”). Pursuant to the LCIA rules, on 7 ^th November 2017 Sir Bernard Eder was appointed as sole arbitrator. (Onexim had no interest in the dispute and took no part in the arbitration. The issues with Intergeo are not relevant to the current application.)

4 The arbitration seems originally to have proceeded in the usual way. On 4 ^th January 2019, Sir Bernard heard an application by Daselina and Intergeo that Kirkland and Mr. Finskiy provide security for costs in the sum of $1.25 million by 15 ^th January 2019. Later that day, he made such an order.

5 Instead of complying with the order for security for costs, on 15 ^th January 2019 Kirkland and Mr. Finskiy wrote to the LCIA saying that they were withdrawing their claims in the arbitration (or at least that is what they purported to do). They alleged that Sir Bernard and the LCIA itself were biased against them. By letter of 1 ^st February 2019 Kirkland and Mr. Finskiy confirmed that their letter of 15 ^th January 2019 should be treated as a challenge to the sole arbitrator.

6 Under the LCIA rules, that challenge stood to be considered by another arbitrator and on 16 ^th February 2019 Prof Albert Jan van den Berg was appointed to arbitrate this challenge.

7 Whilst that was proceeding, Sir Bernard held an oral hearing on 6 ^th February 2019. Daselina and Intergeo attended, but Kirkland and Mr. Finskiy did not. On 18 ^th March 2019 Sir Bernard delivered a partial final award. By this, he dismissed Kirkland's and Mr. Finskiy's claims and ordered that Kirkland and Mr. Finskiy pay Daselina US$26 million principal, $10,974,298.66 pre-award interest and continuing interest at 12 per cent calculated on the basis of a 360 day year, compounding at six month rests. There were various subsidiary awards including a provision that Kirkland and Mr. Finskiy had to pay the monies without counterclaim or set off.

8 The current application for the appointment of a liquidator is founded on the sums awarded by the partial final award.

9 On 10 ^th May 2019 Prof van den Berg rejected the challenge to the impartiality of Sir Bernard Eder and of the LCIA itself. This marked the end of any challenge under the LCIA rules to Sir Bernard's award. The UK Arbitration Act 1996 provides for limited rights of appeal against arbitration awards, but any challenges must be brought within 28 days: section 70(3). Neither Kirkland nor Mr. Finskiy have sought to challenge the partial final award before the courts in London, the seat of the arbitration. Indeed, under Article 26.8 of the LCIA Rules 2014, the parties waived their right to appeal to the English courts on points of law. (Section 69(1) of the UK Act allows such a waiver.)

10 Daselina served a formal letter of demand for $36,974,298.66 on Kirkland's registered agent here in Tortola on 23 ^rd September 2019. No monies were paid. Instead a firm of US attorneys, Shutts & Bowen LLP (“Shutts”) responded by a letter of 4 ^th October 2019.

Procedural history

11 On 9 ^th October 2019 Daselina issued the current application for the appointment of liquidators over Kirkland. The application was served on Kirkland's registered agent the following day.

12 This matter came on before me on 2 ^nd December 2019. Ms. Dancia Penn QC appeared on behalf of Kirkland. She explained that she had only been instructed the previous week and needed more time to present Kirkland's case fully. (In postjudgment submissions, Ms. Penn said that she had not sought an adjournment for this purpose. 1) Kirkland had served an affidavit of Ms. Nisha Telesford and two affidavits of Harold E Patricoff of Shutts. Ms. Penn QC had served a skeleton argument. It seemed to me that Ms. Penn's desire for more time was caused by Kirkland's late instruction of her. Mr. Patricoff and Shutts were closely involved with the representation of Kirkland in the arbitration. He was able to put forward the details of Kirkland's case in opposition to the application. Ms. Penn was unable to identify any specific matters on which she would seek to adduce further evidence on Kirkland's behalf. If she had sought an adjournment, I would have refused it. There would have been little prejudice to Kirkland, but potentially some prejudice to Daselina, if I adjourned the proceedings.

13 Ms. Penn indicated that she might or might not seek to put in a further affidavit, whilst I considered my reserved judgment. In the event, she has not.

Registration under the New York Convention

14 Ms. Penn QC's primary submission was that the Court should not, or at least should not indirectly by means of winding up proceedings, enforce the partial final award without ensuring that Daselina registered the award in accordance with the New York Convention 2. Until the coming into force of the BVI Arbitration Act 2013 in the following year, she argued (although this is disputed by the applicant), that it was not possible to register a foreign arbitration award in this Territory under the Convention, but that the 2013 Act changed this. This was now, she submitted, the required method of enforcing an award.

15 This, she submitted, was the key difference with the Privy Council decision (on appeal from this Territory) in Vendort Traders Inc v Evrostroy Grupp LLC 3. In that case, Evrostroy on 24 ^th May 2012 served a statutory demand on Vendort based on an arbitration award delivered on 1 ^st November 2011 under the LCIA Rules. Vendort applied to set aside the statutory demand on two bases: firstly that the award had been obtained by fraud and secondly that the award needed to be registered under section 28 of the Arbitration Ordinance. All three instances dismissed the allegation of fraud on the facts. All three instances also held that an award did not need to be registered under the then existing legislation before a statutory demand could be served in respect of it. By contrast, under the 2013 Act, enforcement is now possible under the New York Convention, and this, she argued, is now the only route to enforcement. A failure on the part of the Court to insist on this would be a breach of international law.

16 I reject the argument that recognition under the New York Convention is the only means by which this Court can take cognizance of the debt created by the arbitration award. Seeking to appoint liquidators is not a method of enforcement. As Farrara J held in PT Ventures SGPS SA v Vidatel Ltd 4 at para [46]:

“[I]t is settled law that winding up proceedings are not, strictly speaking, enforcement proceedings. An unsecured creditor is not going against any specific asset of the company by applying to appoint liquidators. Such proceedings a class of remedy involving all unsecured creditors of the company.”

Breach of international law

17 As to breach of international law, what Article V of the New York Convention provides is:

• “1. Recognition and enforcement of the award may be refused, at the

  • request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

  • (a)The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

  • (b)The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or

  • (c)The award deals...