Flavio Maluf v Durant International Corporation

• Jurisdiction: British Virgin Islands
• Judge: Farara JA
• Judgment Date: 13 January 2022
• Judgment citation (vLex): [2022] ECSC J0113-2
• Docket Number: BVIHCMAP2021/0025
• Court: High Court (British Virgin Islands)

[2022] ECSC J0113-2

THE EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Before:

The Hon. Mde. Louise Esther Blenman Justice of Appeal

The Hon. Mde. Gertel Thom Justice of Appeal

The Hon. Mr. Gerard St. C Farara Justice of Appeal [Ag.]

BVIHCMAP2021/0025

Between:

Flavio Maluf

Appellant

and

[1] Durant International Corp

[2] Matthew Richardson (as Liquidator of Durant International Corp)

[3] Kevin Hellard (as Liquidator of Durant International Corp)

Respondents

Appearances:

Mr. John Machell, QC and Mr. Timothy de Swardt for the Appellant

Mr. Adrian Francis for the Respondents

Interlocutory appeal — Preliminary issue — Whether leave was required to appeal order dispensing with service — Fresh evidence — Ladd v Marshall principles — Service Out of the Jurisdiction — Part 7 of Civil Procedure Rules — Whether service had been effected on the appellant in accordance with Brazilian law — Whether service on appellant had been effected in accordance with Hague Service Convention — Whether service on the appellant in Brazil by sending Letters Rogatory directly to the Brazil courts was contrary to the Reservation by the Federal Republic of Brazil to Article 10 of the Hague Convention — Whether good service had been effected on the appellant in accordance with the Service Out Order — Rules 13.3 and 13.4 of the E-litigation Portal Rules — Whether the purported service was ineffective under rule 13.4 of the E-Litigation portal rules — Judicial discretion — Test for dispensing with service — Exceptional circumstances — Whether the judge erred in making an order dispensing with service of the BVI Court Documents on the appellant pursuant to CPR 7.8B — Whether the judge erred in failing to discharge the freezing order on the basis that the validity of the claim form had expired

This interlocutory appeal concerns two separate proceedings commenced in the Commercial Court in the Territory of the Virgin Islands (“BVI”). On 6 ^th November 2017, Durant International Corp (“Durant”), a company incorporated in the BVI, was put into liquidation by order of the Commercial Court in Claim No. 134 of 2017 and the second and third respondents appointed joint liquidators (“the Liquidation Proceedings”). It is alleged that the appellant, Mr. Flavio Maluf, a resident of the Federal Republic of Brazil and his father, the then mayor of São Paulo, between 1993 and 1996, committed fraud against the municipality of São Paulo in the Federal Republic of Brazil involving massive kickbacks and bribes. The moneys arising from the said fraud have allegedly been laundered through numerous companies, including the first-named respondent, Durant. The appellant was at all material times a director of Durant. The alleged fraud has been the subject of civil and criminal proceedings brought by the municipality and the Federal Republic of Brazil. These include civil proceedings before the Royal Court of Jersey resulting in a money judgment against Durant and another BVI company, and criminal proceedings in Brazil and in France resulting in convictions against the appellant and his father in Brazil and the appellant in France.

On 22 ^nd April 2020, the learned judge granted ex parte in the Liquidation Proceedings a world-wide freezing order against the appellant up to the value of US$45 million (“the Freezing Order”) on the undertaking of the liquidators to issue and serve a claim form against the appellant for appropriate relief. On the same day, the judge also granted permission to Durant, on an ex parte application in the Liquidation Proceedings, to serve the claim form, statement of claim and other documents (“the BVI Court Documents”) on the appellant out of the jurisdiction, in Brazil (“the Service Out Order”).

The Service Out Order provided for Durant to serve the BVI Court Documents and all further documents required to be served out of the jurisdiction on the appellant at his address in Brazil or other address for service in Brazil. It also provided for the BVI court to issue a Letter Rogatory to the relevant court in Brazil in the form exhibited to the Service Out Order. Pursuant to the Service Out Order, the learned judge issued a Letter Rogatory dated 22 ^nd April 2020 addressed to the President of the Superior Court of Justice (“SCJ”) in Brazil, in each claim, seeking assistance from the Brazilian Court by granting exequatur to: (i) without notice to the appellant, enforce the Freezing Order in Brazil; and (ii) serve the appellant with the claim form in the Debt Claim (then to be filed by Durant) and the Freezing Order at his address in Brazil stated in the Letter Rogatory. By order dated 4 ^th May 2020, the judge varied paragraph 1 of the Service Out Order to permit service of the revised claim form and revised statement of claim.

Following this, on 7 ^th May 2020 Durant by its liquidators brought an action (No. 62 of 2020) against the appellant seeking repayment of outstanding loan debts owed to Durant by the appellant (“the Debt Claim” or “the substantive proceedings”). In the alternative, they sought compensation in equity for alleged breaches of fiduciary duty, knowing receipt and dishonest assistance in relation to the loan.

By application dated 27 ^th November 2020 (“the Application”), the appellant challenged the jurisdiction of the BVI Court in both the Debt Claim and the Liquidation Proceedings on the basis that service had not been validly effected on him in Brazil; and for an order discharging the Freezing Order. In a judgment delivered 23 ^rd August 2021 after a hearing, the learned judge dismissed the appellant's application, made an order dispensing with service of the BVI Court Documents on the appellant (“the Dispensation Order”), continued the Freezing Order and awarded costs of the Freezing Order and the appellant's Application to Durant (in liquidation).

The appellant has appealed to this Court against the judgment and orders made by the learned judge on 23 ^rd and 24 ^th August 2021. The following issues arose for this Court's determination: (i) whether good service had been effected on the appellant in Brazil pursuant to the Service Out Order; (ii) whether the judge erred in concluding that good service had been effected on the appellant in accordance with Brazilian law; (iii) whether the appellant had been served personally in Brazil with the BVI Court Documents; (iv) whether the judge erred in not considering the provisions of CPR 7.10(3) in circumstances where the BVI Court Documents were sent or delivered, not through diplomatic channels, but directly to the judicial authorities in Brazil; (v) whether the purported service was ineffective under rule 13.4 of the E-Litigation portal rules; (vi) whether the judge erred in making an order dispensing with service of the BVI Court Documents on the appellant pursuant to CPR 7.8B; and (vii) whether the judge erred in failing to discharge the Freezing Order on the basis that the validity of the claim form in the substantive proceedings had expired.

The respondents, in their skeleton arguments, raised the preliminary issue of whether the appellant was required to apply for and obtain leave to appeal the Dispensation Order. Further, the appellant, after the hearing of the appeal, applied to this Court for an order that the written opinion of the Deputy Federal Attorney General of Brazil dated 8 ^th November 2021 issued in proceedings in Brazil be admitted as fresh evidence in the appeal proceedings.

Held: dismissing the appeal, affirming the orders of the judge in the court below dated 23 ^rd and 24 ^th August 2021 dispensing with service and continuing the Freezing Order; setting aside the order awarding costs to the respondents in the court below and ordering that each party bear their own costs of this appeal and in the court below, that:

• 1. Section 30(4) of the Eastern Caribbean Supreme Court (Virgin Islands) Act provides that, subject to the exceptions stated therein (none of which are applicable to the instant matter) no appeal shall lie without the leave of the Court of Appeal from any interlocutory order or interlocutory judgment made by a judge of the High Court. In this case, it is pellucid that the learned judge considered and, for the reasons foreshadowed in his unsealed judgment circulated to counsel for the parties, granted the appellant's application filed subsequently to dispense with service. It follows therefore that the order of a single judge of this Court granting leave to appeal the judgment “in so far as it concerns issues of service”, clearly incorporates an appeal challenging the Dispensation Order of the court below. Accordingly, the respondents' preliminary point is without merit and is dismissed.

  Section 30(4) of the Eastern Caribbean Supreme Court (Virgin Islands) Act Cap. 80 of the Revised Laws of the Virgin Islands, 1991.

• 2. The three step test in Ladd v Marshall to be applied by an appellate court when considering whether to grant to a litigant permission to adduce fresh evidence on the hearing of an appeal, is intended to ensure that the important requirement of bringing finality to litigation and the overriding objective and duty of a court to manage litigation justly and proportionately are complied with, and permission to adduce fresh evidence is only granted in circumstances where the application satisfies all three requirements of the test. In the instant matter, the appellant's application, made after the hearing of the appeal, for an order that the written opinion of the Deputy Federal Attorney General of the Republic of Brazil dated 8 ^th November 2021 issued in proceedings before the courts in Brazil, satisfies all three limbs of the test and should granted. Specifically, had the November 2021 opinion been before the judge below it would probably have had an important influence on the judge's determination of the issue of service of the BVI Court Documents in accordance with Brazilian law, and...