Sphereinvest Global High Yield Fund Ltd & Sphereinvest High Yield (Cyprus) Ltd v Eximtech Investments Ltd & Others [Eastern Caribbean Supreme Court]
| Jurisdiction | British Virgin Islands |
| Judge | Bannister J [ag] |
| Judgment Date | 08 February 2012 |
| Court | High Court (British Virgin Islands) |
| Docket Number | CLAIM NO: BVIHC (COM) 2011/0087 |
| Date | 08 February 2012 |
EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
COMMERCIAL DIVISION
CLAIM NO: BVIHC (COM) 2011/0087
(Summary judgment/strike out — whether defences credible — whether pleaded defences should be struck out)
This is a portmanteau application by the Claimants for summary judgment against the five Defendant companies under CPR 15.2 on the grounds that they have no real prospect of defending the claim or in the alternative that their defences be struck out under CPR 26.3(1) as failing to disclose and reasonable grounds for defending the claim or as not complying with the provisions of CPR Part 10.5.
The first Claimant is incorporated in Bermuda and was, until December 2010, called Millennium Global High Yield Fund Limited. The second Claimant is a Cypriot registered company previously known as Millennium High Yield (Cyprus Ltd). They are investment funds open to what are described as “sophisticated” (which I take to mean not risk averse) investors and specialise, it seems, in debt securities.
The Defendants are BVI registered companies. The Claimants' evidence is that those companies are beneficially owned by them (as having been incorporated at the Claimants' expense) but the statement of claim contains no allegation of beneficial ownership. Instead, it alleges that certain assets said to be held by the Defendants and listed in a Schedule to the statement of claim are the Claimants' property (although, contrary to what is said in the body of the pleading, the Schedule does not say which assets are said to belong to the first and which to the second Claimant). It is alleged that these assets are held by the Defendant companies as nominees for or as agents of the Claimants or on trust for the Claimants. The Scheduled assets comprise certain real property situate in the Russian Federation, shares of (apparently) Russian corporations, promissory notes and cash.
There is no specific particularisation of the allegation of nomineeship/trusteeship and none has been sought by the Defendants. Instead, the Claimants say that in 2008 they delegated the management of certain of their Russian assets (including but not limited to those listed in the Schedule to which I have referred), defined as “the Claimants” Assets”, to a Russian company called ZAO UK Prof (“UK Prof”), under the control of someone called Dmitry Chirakadze (“Mr Chirakadze”), and to a Cyprus company called UK Prof Limited, also controlled by Mr Chirakadze and which is said to be the owner of UK Prof. The pleading then lists Mr Chirakadze and certain other Russian individuals as being responsible for the relationship between the Claimants and UK Prof. They are described compendiously as “the Russian fiduciaries” and certain of them were (although none is any longer) directors of certain of the Defendants. The most important of these persons for present purposes is Alexander Batsyn (“Mr Batsyn”). The pleading goes on to allege that UK Prof's authority to manage the Claimants” Assets derived from two powers of attorney, each of which has now either expired or been determined, together with a services agreement, also now determined, for the provision of legal, consultancy and other services. It is then pleadedthat the Claimants” Assets are under the custody, control and management of UK Prof and the Russian fiduciaries pursuant to the powers of attorney, the Claimants remaining the “ultimate beneficial owner (sic)” of the Claimants” Assets.
The statement of claim goes on to plead the incorporation of the Defendants (as I have mentioned) and says that their purpose was to hold the Claimants' Assets and that the Claimants non cash Assets were transferred to the Defendants in 2008, 2009, with the Claimants' cash assets being transferred during 2009, 2010, pursuant to the powers of attorney and the services agreement.
The pleading goes on to say that in January 2010 UK Prof provided the Claimants with a list supposedly showing how, as between the Defendants, certain of the Claimants” assets were held. That list is in evidence and does not include a large number of promissory notes which are listed in the Schedule to the statement of claim. It is also alleged that on 1 December 2008 the first Claimant issued indemnities in favour of Mr Mikhaylov and Mr Batsyn. The statement of claim goes on to allege the breakdown of the relationship in mid to late 2010 and that the Claimants have demanded the return of their property, but that “UK Prof and the Russian fiduciaries” have refused to do so or account for the Claimants Assets. It is not pleaded that any demands have been made upon the Defendant companies for the return of the assets.
The allegation that the Defendants are nominees or trustees for the Claimants of the Scheduled assets can, therefore, only be supported by inference from the facts pleaded. Title to and property in the scheduled items of real property will, in accordance with BVI law, fall to be determined by reference to the law of the Russian Federation. The statement of claim is silent as to whether the Claimants were originally the registered holders of the real property or, if they were, how the transfers were effected and into the name of which party. If the Defendants are now registered as the holders of the real property1, they may turn out to be nominees or trustees for the Claimants if Russian law admits of such a relationship on whatever turn out to be the facts relating to the alleged transfers. It is not pleaded whether the Claimants are the registered holders in respect of the shares or whether they are the original promisees (or assignees of the original promisees) in respect of the promissory notes. Presumably beneficial ownership of these items of movable property falls to be determined by the law of the Russian Federation, but neither side pleads any such thing and it has to be assumed that Russian law in this respect is the same as the law of the British Virgin Islands. If these securities (and the cash) belonged to the Claimants before being
transferred to the respective Defendants, one imagines that unless there was an intention to make a gift, then under BVI law property in them remained in the Claimants, since the transfers are not alleged by the Defendants to have been for consideration. If that is the case, then the Defendants will be nominees for the Claimants of the movable property.Finally, it is alleged that the Defendants have knowingly and dishonestly assisted UK Prof and the Russian fiduciaries in their breach of trust or have converted the Claimants Assets for their own use.
The defences of each of the Defendants are for all material purposes identical. Each was amended in January of this year. As amended, they deny that the defendants hold assets as nominees, agents or trustees. They positively aver that the assets which they do hold (for particulars of which they rely upon an affidavit of Mr Chirakadze sworn in the present proceedings) are held for the ultimate benefit of Mr Chirakadze as part of a partnership or joint venture agreement entered into between Mr Chirakadze and the first Claimant (by a Mr Joseph Strubel) in 2008. They deny that they were incorporated to hold the Claimants” Assets and assert that they were incorporated to hold the property of the alleged partnership/joint venture. They deny that any of the assets which they hold were transferred to them by the Claimants. They say that they received them from various third parties through a series of complex arrangements. They deny that they are bound to account for or return any assets or that they have acted in breach of fiduciary duty. The allegations of dishonest assistance and conversion are similarly denied. The only matters relied upon in support of these denials are “the matters aforesaid”—in other words, that they do not hold assets of the Claimants but assets held for the ultimate benefit of Mr Chirakadze as part of the partnership and that no assets were transferred to them by the Claimants, such assets as they hold having been received from third parties.
Every other allegation in the statement of claim is simply not admitted. The frivolous justification for this is that their directors have recently been changed (the new directors are all, it appears, resident in the Seychelles) and that they therefore have no actual knowledge through their directors of the matters alleged in the statement of claim and are dependent upon the documents in their possession or third party information.
Unsurprisingly, no reply has been served by the Claimants. Neither party has requested any further information.
As I have said, this is put in two ways. The first ( CPR 26.3(1)(b)) is that the defences disclose no reasonable ground for defending the claim. I do not think that this will do. The allegations are that the Defendants were incorporated to receive property for the benefit of the supposed partnership between the first Claimant and Mr Chirakadze and they received property from third parties which they hold for the ultimate benefit of Mr Chirakadze for the benefit of that partnership. In those circumstances, they are not holding property of the Claimants as nominees for the Claimants, they...
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Ray George Claimant/Applicant v Attorney General of the Virgin Islands Defendant/Respondent
...and has no real prospect of succeeding at trial. She noted further the statement of Bannister J in Sphereinvest Global High Yield Fund Limited et al v Eximtech Investments Limited et al, where he indicated that he did not think it right to strike out defences because they could have been be......