Ipoc International Growth Fund Ltd Claimant/Applicant v [1] LV Finance Group Ltd [2] Transcontinental Mobile Investment Ltd [3] OOO Ct-mobile [4] Santel Ltd [5] Avenue Ltd [6] Janow Properties Ltd [7] Barrows Alliance Ltd [8] Cormack Select Ltd [9] Stegman Universal Ltd [10] Smart Finance Ltd [11] Carbert Internation Ltd [12] Carbonell Trading Ltd [13] Rampton Enterprises Ltd [14] Alamosa Holdings Ltd [15] Normanton Ltd [16] OOO Alfa-eco Defendants/Respondents

JurisdictionBritish Virgin Islands
CourtCourt of Appeal (British Virgin Islands)
JudgeGORDON J.A.,Justice of Appeal
Docket NumberCIVIL APPEAL NOS. 20 OF 2003 & 1 OF 2004
Date19 September 2005
[2005] ECSC J0919-4

IN THE COURT OF APPEAL

Before:

The Hon. Mr. Brian Alleyne S.C. Chief Justice [Ag]

The Hon. Mr. Michael Gordon Q.C. Justice Of Appeal

The Hon. Mr. Denys Barrow S.C. Justice Of Appeal [Ag]

CIVIL APPEAL NOS. 20 OF 2003 & 1 OF 2004

Between:
Ipoc International Growth Fund Limited
Claimant/Applicant
and
[1] LV Finance Group Limited
[2] Transcontinental Mobile Investment Limited
[3] OOO Ct-mobile
[4] Santel Limited
[5] Avenue Limited
[6] Janow Properties Limited
[7] Barrows Alliance Limited
[8] Cormack Select Ltd
[9] Stegman Universal Ltd
[10] Smart Finance Limited
[11] Carbert Internation Limited
[12] Carbonell Trading Ltd
[13] Rampton Enterprises Limited
[14] Alamosa Holdings Limited
[15] Normanton Limited
[16] OOO Alfa-eco
Defendants/Respondents
Appearances:

Martin Mann QC, with him Adrian Francis and Colin McKie, Solicitor Advocate, instructed by Maples & Calder of The British Virgin Islands and Winston & Straun of London for the Appellant

Mark Cran QC with Andrew Thomas, Jeffrey Elkinson and Dawn Smith instructed by Conyers Dill & Pearman of the British Virgin Islands and Neil Gotshal & Manges of London for the 1 st Respondent

Clyde Williams with Kissock Laing instructed by Dancia Penn & Co of the British Virgin Islands and McKenna of London for the 2 nd Respondent

Stephen Smith QC with Robert Levy and Samuel Jack Husbands instructed by Walkers of the British Virgin Islands and Lovells of London for the 4 th– 6 th and 16 th Respondents

John Carrington for the 3 rd and 7 th– 15 th Respondents instructed by McW Todman of the British Virgin Islands and Freshfield of London

GORDON J.A.
1

OOO CT Mobile, the third Respondent, (hereafter CTM) is a company incorporated in Russia whose principal asset is a 25.1 % shareholding in a limited liability company incorporated in Russia called OAO Megafon (hereafter Megafon) a large mobile phone operator in Russia. CTM was a wholly owned subsidiary of the second named Respondent, a Bahamian incorporated company called Transcontinental Mobile Investment Limited (hereafter TMI). TMI was itself a wholly owned subsidiary of the first named Respondent, a British Virgin Island (BVI) company, LV Finance Group Limited (hereafter LVF).

2

The Appellant, a company incorporated in Bermuda, entered into two option agreements with LVF to purchase LVF's shareholding in TMI. The first such option agreement was executed on 10 th April 2001 and was in respect of 77.7 percent of the issued share capital of TMI and the second option agreement was entered into on 14 th December 2001 in respect of the remaining share capital of TMI, namely 22.3%. Both option agreements contained clauses for binding arbitration in the event of dispute, the first in Zurich and the latter in Geneva. In both cases the law of the contract was stated to be English law and the proceedings were to be carried on in English.

3

It is the Appellant's case that it duly exercised the option rights conferred by the option agreements and that it is legally and beneficially entitled to the whole of the issued share capital of TMI, by virtue of which it is entitled to absolute control of CTM and through CTM of the latter's holding in Megafon. It is the Appellant's further case that LVF, through a series of transactions, which allegations will be expanded later, sought to block the Appellant's acquisition of the TMI shares. The dispute between the Appellant and LVF has been submitted to arbitration in Geneva and in Zurich. The Geneva arbitration has resulted in an award in favour of the Appellant in respect of the December option agreement and the Zurich award which is on-going has resulted so far in a partial award that the April option has not been properly exercised.

The Proceedings to date
4

On September 2, 2003 the Appellant filed an application in the High Court of the BVI seeking the appointment of Receivers of all of the issued shares in, or property in or ownership rights relating to the 2 nd and 3 rd named Respondents (CTM and TMI) and all property and assets of the 2 nd and 3 rd named Respondents. In addition, the application sought, inter alia, that the receivership should attach to all shares issued in Megafon that were currently or formerly held by or on behalf of the 3 rd named Respondent, and any and all assets in the hands of any of the Respondents which represent the traceable proceeds of any of the aforesaid shares, ownership rights, property or assets. The application was heard ' ex parte' and the Court granted the order as prayed on September 4, 2003. Between September 18, and 19, 2003 by three separate applications all of the Respondents filed applications to revoke the order of September 4.

5

An inter partes hearing of the applications to set aside took place between September 26 and October 1, 2003. That hearing resulted in two orders of the Court, one delivered at the close of the hearing of the applications on October 1, 2003 and the other delivered as a reserved judgment on January 21, 2004. The initial order of the Court granted ex parte will hereafter be referred to as the September Order, the second order delivered immediately after the inter partes hearing will hereafter be referred to as the October Order and the decision delivered in January 2004 will be referred to hereafter as the January Decision. The October Order, inter alia, discharged the September Order as against the 3 rd and 16 th Respondents, CTM and OOO Alfa-Eco, and ordered the Appellant to deposit the sum of $30,000,000.00 as security for its undertakings contained in the September Order and for any potential liability for costs awarded against it (which sum was deposited in Court within the applicable time limit). It would appear that no order was written up deriving from the January Decision. However, the concluding words of the January Decision were:

"In my judgment the 4 th September order should be discharged in its entirety against all the remaining fourteen named Applicants and I so order".

The Appellant is dissatisfied with the October Order and the January Decision and has appealed to this Court. There have been a number of other applications but save for the application by the Respondents for further security for costs, to which passing reference will be made later, they do not impact on this appeal.

6

The Appellant alleges that the Respondents are all involved in a scheme to wrongfully deprive it of the benefits of the option agreements. The allegations are that in December 2002, in other words some 12 months after the execution of the second option agreement, TMI sold 49.9% of the CTM shares to three companies, LV Investments Partner 1–3, (incorporated in Panama) which three LV companies on 21 st July 2003 simultaneously sold to three buyers, namely, Alamosa Holdings Limited (Respondent No. 14), Carbert International Limited (Respondent No.11) and Rampton Enterprises Limited (Respondent No. 13). Also on July 21, 2003 TMI sold its remaining 51.1% shareholding in CTM to three other companies, namely Normanton Limited (Respondent No. 15), Carbonell Trading Limited (Respondent No. 12) and Smart Finance Limited (Respondent No. 10). On that same date LVF sold all of its shares in TMI to three other companies, not parties to these proceedings for $27,000.00. Some 7 days later CTM issued new shares which were allotted to Barrows Alliance Limited (Respondent No.7), Cormack Select Limited (Respondent No.8) and Stegman Universal Limited (Respondent No. 9). Respondents Nos 7 – 15 inclusive (which shall hereafter be referred to as the Intermediary Companies) each sold their shares in CTM in varying proportions to three companies, namely, Santel Limited (Respondent No. 4), Avenue Limited (Respondent No. 5) and Janow Properties Limited (Respondent No 6) which latter three companies are said to be subsidiaries of the 16 th Respondent or at any rate part of the Alfa Eco Group. Respondents 4 – 6 inclusive and 16 will hereafter be referred to collectively as the Alfa Companies.

7

It is the Appellant's case that the commercial purpose of the two option agreements was to enable it to ultimately hold and/or control the CTM 25.1% stake in Megafon. It was common ground between the parties that Megafon is a very large company and the 25.1% stake was therefore itself a very valuable asset. Various figures were bandied about as to the worth of the 25.1 % stake. Suffice it to say that there seemed little argument that the worth could be measured in the mid range of nine figures.

8

The Appellant appealed against both the October Order and the January Decision. The two appeals were consolidated and argued together. All of the respondent save Respondent No. 2 filed counter-notices of appeal which will be dealt with subsequently. As expressed in the Appellant's skeleton arguments, the main issues of the appeal, from the Appellant's point of view, was:

For the most part each of the Counsel for the Respondents adopted such parts of other Counsel's arguments that were applicable. In the circumstances, intending absolutely no disrespect to any such Counsel, arguments on behalf of the Respondents will be referred to generically, save where arguments specific to a particular Respondent are referred to. I should also like, at this stage, to pay tribute to all Counsel who appeared before us for their thoroughness of preparation and presentation. This hearing stretched over a period of six days, which might well have been shortened, but it was the view of the Court that as a large number of issues were being canvassed, it was an appropriate use of court resources to permit full development of argument by Counsel.

  • - whether there are grounds for interfering with the exercise of the trial Judge's discretion as expressed in the October Order and the January Decision;

  • - if so, whether this Court is satisfied that the BVI is forum non conveniens;

  • - if not,...

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