Parles A.S. v Winsley Finance Ltd
| Jurisdiction | British Virgin Islands |
| Judge | Mangatal, J |
| Judgment Date | 29 March 2023 |
| Judgment citation (vLex) | [2023] ECSC J0329-4 |
| Docket Number | CLAIM NO. BVIHCM 2022/0123 |
| Court | High Court (British Virgin Islands) |
CLAIM NO. BVIHCM 2022/0123
EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
Mr. Timothy de Swardt and Mr. Merrick Ricardo Watson of Kobre & Kim for the Applicants and the Proposed Applicants.
Mrs. Kimberly Crabbe-Adams and Mr. Gerrard Tin of Harneys for the Respondent.
Mr. Brož, the Czeck Court-appointed Interim Administrator for Mr. Pernicka in attendance, watching proceedings.
Mangatal, J (Ag): The jurisdiction to grant freezing orders against non-cause of action defendants (“NCADs”) is well-established and was authoritatively expounded upon in T.S.B. Private Bank International S.A. v. Chabra and Another. 1 The applications before me raise some important points about the boundaries of the Court's jurisdiction to grant what are often referred to as Chabra injunctions.
An important issue that arises is whether the Court has jurisdiction to grant Chabra injunctions on the application of unsecured creditors in aid of intended liquidations or extant insolvency or bankruptcy proceedings. These questions will involve discussion of the recent majority decision of the Judicial Committee of the Privy Council emanating from this jurisdiction, i.e. Broad Idea International v Convoy Collateral Limited 2 and cases referred to therein.
If the Court does have such jurisdiction to grant Chabra injunctions in aid of intended liquidations and insolvency proceedings, the separate question arises as to whether the Court ought to exercise its discretion to grant such relief. Should the Court exercise its discretion to grant relief in circumstances where the freezing injunctions are being sought by unsecured creditors, and not by a provisional liquidator or other office-holder (emphasis mine).
The question also arises as to whether insolvency/bankruptcy proceedings in a foreign country constitute “ proceedings” for the purposes of section 24A of the Eastern Caribbean Supreme Court (Virgin Islands) Act (Cap. 80), to which proceedings this Court can render assistance ancillary to the foreign proceedings.
Another issue is the relevance of the fact that the insolvency or bankruptcy proceeding is or may be taking place in a foreign country that is not a “designated foreign country” under Part XVIII of the Insolvency Act, 2003 or “a relevant foreign country” under Section XIX of the Insolvency Act, 2003. Those issues will merit reference to the decision of the Court of Appeal, in Net International Property Limited v Adv. Eitan Erez 3, delivered in February 2021, where the leading judgment was given by Webster J.A. and the differences between common law recognition and assistance were considered.
The four applications which were before me at the hearing in January are as follows:
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(1) Parles a.s. (“ Parles”) and Daniel Perner's (together “the Applicants”) Notice of Application filed 20 July 2022 for the continuation of a Freezing Order (“the Freezing Order”) first granted by Jack J (Ag) on 12 July 2022, which was temporarily continued by the learned Judge at the first return hearing on 27 July 2022 until the adjourned return hearing date (“the Continuation Application”).
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(2) The Notice of Application filed on behalf of the Respondent Winsley Finance Limited (“Winsley”) on 31 October 2022, seeking an extension of time to file its evidence.
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(3) The Notice of Application filed by Winsley on 4 November 2022, seeking that the freezing order be set aside (“the Set Aside Application”).
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(4) The Notice of Application filed on 5 January 2023 on behalf of the Interested parties Bohuslav Kabátek and Marek Rybár (together “the Proposed Applicants”) seeking to be added as Applicants to these proceedings (“the Interested Parties Application”).
The Freezing Order was applied for and obtained by way of a without notice, or ex parte application against Winsley pursuant to sections 24 and 24A of the Eastern Caribbean Supreme Court (Virgin Islands) Act (CAP. 80) (“the Act”).
I will start by disposing of Winsley's application for an extension of time. That application was not opposed by the Applicants, save that they seek their costs in the general way pursuant to Rule 65.11(3)(b) of the Civil Procedure Rules 2000 (“the CPR”). Paragraph 1 of the application is granted as prayed, with costs to the Applicants to be assessed if not agreed. I further order that the late filing of Winsley's evidence and the Applicants' reply evidence be allowed to stand.
A further return date for the Continuation Application was itself adjourned on 3 October 2022 to be re-listed on the first available date for one day, after 12 December 2022. This adjournment was to allow for Winsley to file and serve its evidence in response, and for the Applicants to file and serve reply evidence. Directions were made by Jack J (Ag) in relation to those matters and the freezing order continued in effect.
On the 23 January 2023 I commenced the hearing, but as the applications had not been scheduled for the whole day, there was insufficient time and so I continued the hearing on the 24 January. I reserved my decision and I ordered that the freezing order first granted on 12 July 2022 be continued until judgment is delivered in these applications. This is my judgment in respect of the remaining three applications.
Parles is a company incorporated in Czechia in 2007. Mr. Rybín is the sole owner and board member of Parles.
Mr. Petr Pernicka (“Mr. Pernicka”) is a Czech businessman who allegedly owes the Applicants, together with the Proposed Applicants approximately U.S. $12 million.
The Applicants and the Proposed Applicants all say that they are creditors of Mr. Pernicka. According to them, the amounts due and payable at the time that the Freezing Order Application was filed came to CZK (Czech crowns) 276 million or US $11.7 million, as set out in the table below.
| Creditor | Date 12.07.22 | Due 23.01.23 | Due Date |
| Marek Rybár | CZK 107,493,151 | CZK 110,315,068 | 31 December 2023 |
| Bohuslav Kabátek | CZK 24,057,000 | CZK 25,447,500 | 18 March 2018 |
| Daniel Perner | CZK 131,789,589 | CZK 137,546,301 | 31 July 2019 |
| Parles a.s. | CZK 12,648,209 | CZK 13,504,446 | 22 August 2019 |
| Total | CZK 275,987,949 (~US$11.7 million) | CZK 286,813 316 (~US$ 12.9 million) |
Winsley is a company incorporated in the British Virgin Islands (“the BVI”) in 1993. Mr. Pernicka is the sole director of Winsley, and as far as the Applicants were aware at the time when they applied for the Freezing Order before Jack J in July 2022, Mr. Pernicka was and had remained, the sole shareholder of Winsley since incorporation. However, according to Mr. Pernicka's evidence in Pernicka 2, he was the sole shareholder of Winsley up to February 2022 and is no longer a shareholder in Winsley. Mr. Pernicka claims to have transferred his shares to a Mr. Sojak on 23 February 2022. The Applicants question this alleged transfer. They say in effect, that this transfer was a sham. I will return to this matter later in this judgment when I deal with the issue of the risk of dissipation of assets.
It is not in dispute that Winsley was used by Mr. Pernicka in his arms trading business. In particular, Winsley had responsibility for, and claims that it delivered, a part of a S-300 long range missile system to the Croatian Government in 1995. Winsley was not paid for the delivery of the S-300 system and the evidence is that Winsley assigned its claim for payment to Mr. Zubak, a long-time business associate, Croatian citizen and partner of Mr. Pernicka. Mr. Zubak initiated arbitration in 2001. The arbitration failed on a technical point, and was followed by over a decade of litigation, in which the claim is for US$200 million (“the Croatia Claim”). The Croatia Claim was ultimately dismissed by the Zagreb Court in Croatia in October 2021. The original as well as a google translation of the judgment (“the Croatia Judgment”) are exhibited to Rybín 1. I will return to the Croatia Judgment later in this judgment.
It is Mr. Pernicka's evidence, in Pernicka 2, that in November 2021 an appeal was filed in relation to the Croatia Judgment.
Mr. Pernicka at paragraph 23 refers to the fact that Mr. Rybín has claimed that he (Mr. Pernicka) misled him about the prospects of the claim's success. However, Mr. Pernicka denies that, and claims that he believed fully that the Croatia Claim would succeed. He asserts that both he and Mr. Zubak are very aggrieved that it has been dismissed. Mr. Pernicka continues as follows:
“ Winsley supplied a valuable asset to the Croatian government and it has a clear right to be paid for this. Mr. Zubak has appealed the Croatia Judgment and the appeal is due to be heard at any time now.”
A partial copy of a translation of the application to the Court of Appeal (“the Complaint”) is exhibited to Pernicka 2. The extract from the Complaint runs for some 13 pages, and amongst the headings are such matters as incorrect application of statute and rules of limitation, and “ Positions and practice of the European Court of Human Rights and the Constitutional Court of the Republic of Croatia on the issue of recognition of debts and interruption of limitation periods in comparable cases.”
According to the Complaint (at paragraph IV) the Court below:
“… ignores the fact that the contracting and procurement of the S-300 system took place in conditions of aggression by the JNA and Serb forces against the Republic of Croatia and the state of war in the Republic of Croatia, in conditions of the current embargo on arms imports to the Republic of Croatia, [sic] any weapons especially weapons that have strategic effects for the course of the war, and in conditions of...
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