Julian Svirsky et Al v Arman Oyekenov et Al

• Jurisdiction: British Virgin Islands
• Judge: Ventose JA
• Judgment Date: 12 February 2024
• Judgment citation (vLex): [2024] ECSC J0212-2
• Year: 2024
• Court: Court of Appeal (British Virgin Islands)
• Docket Number: BVIHCMAP2022/0064

Between

[1] Julian Svirsky

[2] Dennis Donin

Appellants

and

[1] Arman Oyekenov

Respondent

[2] Tensigma Limited

First Defendant

[3] Digital Asset Exchange Limited

Fourth Defendant

Before:

The Hon. Mde. Vicki Ann Ellis Justice of Appeal

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

The Hon. Mr. Eddy D. Ventose Justice of Appeal [Ag.]

BVIHCMAP2022/0064

THE EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Civil appeal — Civil Procedure Rules 2000 — Failure to provide sufficient notice under rule 11.11 of the Civil Procedure Rules 2000 — What effect, if any, did the lack of 7 days' notice have on the October Hearing and consequently the Receivership Order — Procedural irregularity — Whether the procedural irregularity would result in an unfair trial or lead to an injustice — Unless order — Whether the unless order complied with the requirements of rule 26.4 of the Civil Procedure Rules 2000 — Failure to require the party in default to remedy the default by a specified date

On 22 ^nd April 2021, the learned judge granted an ex parte worldwide freezing order on the application of the respondent, Mr. Arman Oyekenov (the “Freezing Order”). The Freezing Order prohibited the appellants, Mr. Julian Svirsky and Mr. Dennis Donin from disposing or diminishing the value of any worldwide assets of Tensigma Limited (“Tensigma”) up to the value of US$22,850,000.00. On 22 ^nd December 2021, Tensigma was restored to the register of companies, with Ms. Anna Silver of FFP Limited appointed as the voluntary liquidator.

On 28 ^th September 2022, the respondent applied to the court for various orders including: (1) that Ms. Silver be appointed as receiver over the assets of Tensigma including all cryptocurrency referred to at paragraph 5 of the Freezing Order (the “Cryptocurrency”); (2) that control of the Cryptocurrency be transferred to Ms. Silver (in her capacity as liquidator and/or receiver) within 24 hours after the date of service of the order; (3) that the transfer of control be effected by the appellants providing the private keys of various public blockchain addresses to Ms. Silver; (4) that the appellants comply with paragraph 21 of the Freezing Order and provide to the respondent's solicitors specific information concerning the Cryptocurrency, including the name of the exchange or exchanges at which the Bitcoin and the Ethereum are held; and (5) unless the appellants comply with (4) above: (i) the amended defence be struck out and judgment entered for the respondent; or (ii) the appellants be debarred from further participation in the proceedings (the “Receivership Application”). In support of the Receivership Application, the respondent stated that the appellants breached the Freezing Order by: (1) dissipating 4.2981 Bitcoin on 12 ^th September 2022 with a value on that date of US$96,384.03; and (2) failing to provide information to the respondent's solicitors as required by paragraph 21 of the Freezing Order.

The Receivership Application came on for hearing before the learned judge, who on 6 ^th October 2022 (the “October Hearing”) made the Receivership Order in which he granted the reliefs sought by the respondent. At the October Hearing, all parties were represented including the voluntary liquidator of Tensigma. The learned judge made the Receivership Order and ordered that unless the appellants comply with paragraph 21 of the Freezing Order and provide specific information to the respondent's solicitors: (1) the amended defence be struck out and judgment entered for the respondent; and (2) the respondent be declared the owner of 16,500 shares out of a total of 50,000 shares issued in Tensigma (the “Unless Order”).

Dissatisfied with the decision of the learned judge, the appellants filed a notice of appeal against his decision stating that both the Receivership Order and the Unless Order were: (1) wrong in law; (2) not justified on the facts; (3) subject to serious procedural irregularities; (4) wrongly based on an assessment of the facts and findings at an interlocutory stage. The two main issues that arise in this appeal are as follows: (1) what effect, if any, did the lack of 7 days' notice have on the October Hearing and consequently the Receivership Order; and (2) whether the Unless Order complied with the requirements of rule 26.4 of the Civil Procedure Rules 2000 (“CPR”).

Held: allowing the appeal against the Receivership Order and the Unless Order; setting aside the Receivership Order and the Unless Order; remitting the Receivership Application to be heard before a different judge of the Commercial Court; and ordering that the respondent pay all costs of the appellants on appeal and in the court below, to be assessed by a judge of the Commercial Court if not agreed within 21 days, that:

• 1. A litigant who challenges a case management decision or order must reach a very high threshold in order to justify an appellate court's interference with such a decision or order. The test for interfering with a judge's case management decision or order is not whether the Court of Appeal would have exercised its discretion differently or made a different order or come to a different decision. The Court must be satisfied that the decision exceeded the generous ambit within which reasonable disagreement is possible and may therefore be said to be clearly or blatantly wrong.

  Dufour and Others v Helenair Corporation Ltd and Others (1996) 52 WIR 188 followed; Multibank FX International Corporation v Von Der Heydt Invest SA BVIHCMAP2022/0061 (delivered 5th July 2023, unreported) followed.

• 2. CPR 11.11 provides that a notice of an application must be served as soon as practicable after the day on which it is issued and at least 7 days before the court is to deal with the application. The rationale for 7 days' notice in the context of applications generally is: (1) to allow the respondent to the application adequate time in which to consider the applicant's case on both factual and legal issues; and (2) to enable the respondent to be properly prepared to be able to: (i) address all relevant issues of fact and of law; (ii) adduce all relevant evidence; and (iii) make full submissions on all legal and factual issues. In this case, it has been accepted that the appellants received less than 7 days' notice of the October Hearing as required by CPR 11.11 and as a result, it was a procedural irregularity. As such, the Court must determine whether the procedural irregularity would result in an unfair trial or lead to an injustice and that fairness involved fairness to both parties.

  Rule 11.11 of the Civil Procedure Rules 2000 applied; CEF Holdings Ltd v Mundey [2012] EWHC 1524 (QB); [2012] FSR 35 applied.

• 3. It is clear that the breach of the requirement to give 7 days' notice of the October Hearing meant that the appellants were not able to prepare properly or at all for the legal and factual issues arising from the Receivership Application. At the October Hearing, the appellants were not able to adduce all relevant evidence in opposition to the Receivership Application and to make any submissions on any legal and factual issues. The counsel who appeared for the appellants at the October Hearing was not prepared to respond to the Receivership Application and made it clear to the learned judge that they did not wish to represent the appellants on a pro bono basis. Further, the learned judge did not allow the appellants to make submissions to the court, stating that since the appellants had counsel representing them at the October Hearing, the court would only hear from the legal practitioner, not the parties themselves. In considering the fairness to the respondent, the learned judge had options available to him rather than proceeding with the Receivership Application without hearing evidence and submissions from the appellants. It was also open to the learned judge to treat the October Hearing as an ex parte hearing with a return date at which the appellants would be entitled to be heard. The evidence in support of the Receivership Application did not require the learned judge to proceed as he did. Considering all these circumstances, the decision by the learned judge to proceed with the hearing of the Receivership Application on two (2) days' notice resulted in serious injustice and unfairness to the appellants. Consequently, the appellants' appeal on this ground succeeds.

  St Clair v King and another [2018] EWHC 682 considered; Labrouche v Frey (Practice Note) [2012] EWCA Civ 881; [2012] 1 WLR 3160 considered; Dunbar Assets plc v Dorcas Holdings Ltd and others [2013] EWCA Civ 864 applied; Bilta (UK) Ltd (In Liquidation) v Tradition Financial Services Ltd [2021] EWCA Civ 221 applied.

• 4. Where a party has failed to comply with any court order which does not contain a sanction for non-compliance any other party may apply to the court for an “unless order” in accordance with CPR 26.4. The application may be made without notice but must be supported by evidence on affidavit which: (a) contains a certificate that the other party is in default; (b) identifies the rule or order which has not been complied with; and (c) states the nature of the breach. The court office must immediately refer any such application to a judge, master, or registrar. If an appointment is fixed to consider the application, the court must give 7 days' notice of the date, time, and place of the appointment to all parties. An unless order, if granted by the court, must identify the breach and require the party in default to remedy the default by a specified date. Where the defaulting party fails to comply with the terms of any “unless order” made by the court that party's statement of case shall be struck out.

  Rules 26.4 (2), (4) and (5) of the Civil Procedure Rules 2000 applied.

• 5. In this case, while the respondent's Receivership Application did contain a certificate that the appellants...