Emmerson International Corporation v Renova Holding Ltd; Emmerson International Corporation v Viktor Vekselberg

• Jurisdiction: British Virgin Islands
• Judge: Baptiste JA
• Judgment Date: 07 February 2023
• Neutral Citation: VG 2023 CA 29
• Docket Number: BVIHCMAP2019/0018
• Court: Court of Appeal (British Virgin Islands)

BETWEEN:

Emmerson International Corporation

Appellant

and

Renova Holding Limited

Respondent

BETWEEN:

Emmerson International Corporation

Appellant

and

[1] Viktor Vekselberg

[2] Ren Ova Holding Limited

[3] Berdwick Holdings Limited

[4] Tiwel Holding Ag

Respondents

Before:

The Hon. Mr. Davidson Kelvin Baptiste Justice of Appeal

The Hon. Mde. Louise Esther Blenman Justice of Appeal

The Hon. Mde. Gertel Thom Justice of Appeal

BVIHCMAP2019/0018

BVIHCMAP2019/0020

THE EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Interlocutory appeal — Commercial Appeal — Grounds on which appellate court will upset decision of trial judge — Real risk of unjustifiable dissipation of assets — Allegations of dishonesty in proving risk of unjustifiable dissipation — Disclosure — Delay in applying for freezing order — Delay in proving risk of unjustifiable dissipation of assets — Disclosure — Duty to make full disclosure in ex parte application — Rules 7.3 (2) (a) and 7.3(4) of the Civil Procedure Rules 2000 — Service of claim out of jurisdiction

Emmerson International Corporation (“Emmerson”) appealed against the order of Jack J made on 19 ^th June 2019 (“the Discharge Order”) in which the learned judge discharged freezing orders previously granted by Wallbank J against the respondents. This appeal (“the Discharge Appeal”) is one of three related appeals filed by Emmerson. The second is an appeal against the decision of Wallbank J to impose a temporary confidentiality club for documents to be disclosed by Renova Holding Limited (“Renova”) pursuant to a freezing order made against it (the “Confidentiality Club Appeal”). The third appeal challenged the decision of Jack J refusing a last-minute request by Emmerson to adjourn the Discharge Hearing (the “Adjournment Appeal”).

The main part of the proceedings concerns a joint venture referred to as Integrated Energy Systems (“IES”) relating to certain Russian electricity generation and distribution assets. The proceedings are mainly between the Renova Parties (or “RPs”) - (various companies within the ‘Renova Group’ plus Mr. Vekselberg) and the Abyzov Parties (or “APs”) - (Mr. Abyzov and companies said to be beneficially owned by him, plus Mr. Titarenko pursuant to certain alleged assignments).

Emmerson advanced 32 grounds of appeal in respect of the Discharge Appeal.

Held: dismissing the Discharge Appeal and the Adjournment Appeal and awarding costs to the respondents to be assessed by a judge of the Commercial Court, if not agreed within 21 days, that:

• 1. The key principles applicable to the question of risk of dissipation are well established. A claimant must show a real risk, judged objectively, that a future judgment would not be met because of an unjustified risk of dissipation. The risk of dissipation must be established by solid evidence; mere inferences or generalised assertions are insufficient. Further, the risk of dissipation must be established separately against each respondent. It is not enough to establish sufficient risk of dissipation merely to establish a good arguable case that a defendant has been guilty of dishonesty; it is necessary to scrutinise the evidence to see whether the dishonesty in question points to the conclusion that assets may be dissipated. The respondent's former use of offshore structures is relevant but does not itself equate to a risk of dissipation. Indeed, businesses and individuals often use offshore structures as part of the normal and legitimate way in which they deal with their assets. Each case is fact specific and relevant factors must be looked at cumulatively.

  Fundo Soberano de Angola v dos Santos [2018] EWHC 2199 (Comm) applied.

• 2. In this case, Jack J did not disregard the allegations of dishonesty against Mr. Vekselberg. Jack J noted that there are many allegations of dishonesty against Mr. Vekselberg and recognised that all of them are disputed and will need to be determined at the trial of the action. He also accepted that they had some weight in assessing the risk of dissipation but stated that the weight to be attributed to them was negligible. Weight being a contextual evaluation for the judge, this Court would not interfere with the judge's attribution of weight unless it is perverse. This standard has not been met in this case. Jack J did not apply a summary judgment test. Further, it is not established that Mr. Vekselberg controls any of the companies in the Renova Group and even if such control is established, it only proves the existence of such control which itself is not indicative of how that control is likely to be exercised.

  Fundo Soberano de Angola v dos Santos [2018] EWHC 2199 (Comm). applied; Jarvis Field Press Ltd v Chelton [2003] EWHC 2674 (Ch) applied; Thane Investment Ltd v Tomlinson (No 1 [2003] EWCA Civ 1272 applied; VTB Capital plc v Nutritek International Corp [2012] EWCA Civ 808 applied.

• 3. In the absence of cross-examination, the court is not entitled to reject any written evidence as being untrue, unless on the basis of all the evidence before the court it considers that that written evidence is incredible. This is a strict standard. Jack J was entitled to conclude that that strict standard was not satisfied on the evidence before him; consequently, there was no basis to conclude that any documents falling within the scope of the Asset Disclosure Judgment had been withheld. Jack J also indicated that the lack of documentation concerning the LTI Scheme remained relevant to his assessment of whether there was a real risk of unjustifiable dissipation, but nevertheless concluded that the evidence indicated that the Liwet Transfers were legitimate transactions intended to mitigate against the effect of United States sanctions. Similarly, there was no basis to conclude that the Cypriot trusts to which the Liwet shares had been transferred were shams, as that would have required a finding of dishonesty on the part of all those involved, for which there was no evidence. In the circumstances, Jack J's conclusion that the Liwet Transfers do not provide any evidence, still less solid evidence, of a real risk of unjustifiable dissipation cannot be said to be plainly wrong and does not therefore attract appellate interference.

  Wards Solicitors v Hendawi [2018] EWHC 1907 (Ch.) applied.

• 4. While Jack J did not think it was necessary to rule on the admissibility of the expert accountancy report produced by Paul Doxey (“the Doxey Report”) in relation to the LTI, he had nevertheless read the report de bene esse and concluded that it had little relevance to Emmerson's argument. Indeed, Mr. Doxey concluded in his report that the absence of documents relating to the terms of the LTI Scheme would not have prevented liabilities relating to that scheme being recorded in Renova's audited consolidated financial statements for 2017 (“the 2017 Audited Accounts”). The learned judge's approach was therefore sensible and there was nothing procedurally unfair or irrational about it.

• 5. Paragraph 1 of the Asset Disclosure Order simply stated that Mr. Vekselberg and Renova must produce documents relating to the Liwet Transfers (or procure Renova Innovation Technologies Ltd (“RITL”) or Liwet to produce those documents). The purpose of the Asset Disclosure Order was to ensure that documents relating to the Liwet Transfers were produced. Renova's confirmation that all documents within its control falling within the scope of the Order had been disclosed by Mr. Vekselberg, meant that the purpose of the order was achieved. That being the case, it did not matter who, as between Renova and Mr. Vekselberg, provided those documents to Emmerson. Even assuming that Renova has somehow submitted to the jurisdiction of the BVI Court, that manifestly provided no basis from which to infer a real risk of dissipation. Nor would it provide a basis on which to strike out the discharge application.

  Sans Souci Limited v VRL Services Limited [2012] UKPC 6 applied.

• 6. The mere fact of delay in bringing an application for a freezing injunction does not, without more, mean there is no risk of dissipation. If the court is satisfied on other evidence that there is a risk of dissipation, the court should grant the order, despite the delay. The delay in Emmerson seeking a freezing order after 16 ^th May 2018 was a relevant factor which Jack J was entitled to take into account. Jack J noted that there was no evidence that any of the respondents had sought unjustifiably to dissipate assets after they had received notice of Emmerson's application for an Asset Disclosure Order, which expressly stated that Emmerson was considering applying for freezing relief. Jack J was clearly entitled to take the view that the absence of any unjustifiable dissipation of assets since May 2018 indicated that there was no real risk of any unjustifiable dissipation of assets in the future and that the delay rendered freezing relief inappropriate in the circumstances. In the circumstances, there is no basis for appellate intervention.

  JSC M P Bank v Pugachev [2015] EWCA Civ 906 applied; Candy v Holyoake [2017] EWCA Civ 92 considered; Madoff Securities International Ltd v Raven [2011] EWHC 3102 (Comm) applied.

• 7. A party making an ex parte application has a duty to make full and frank disclosure of all the material facts and matters. The test of materiality of a matter not disclosed is whether it would be relevant to the exercise of the court's discretion. Materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers. Material matters include arguments which might be raised by the respondents and any relevant defences. In this case, Emmerson had a duty to disclose the argument raised by the respondent at the hearing of the Asset Disclosure Application, that any application for a freezing order should be heard inter partes. In the circumstances, Jack J was entitled to...