Abu Dhabi Commercial Bank PJSC v Bavaguthu Raghuram Shetty
|England & Wales
|01 April 2022
| EWHC 529 (Comm)
|Case No: CL-2020-000784
|Queen's Bench Division (Commercial Court)
 EWHC 529 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINES AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
HIS HONOUR JUDGE Pelling QC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: CL-2020-000784
Mr Adrian Beltrami QC, Mr Rajesh Pillai QC, Mr Scott Ralston and Ms Rebecca Zaman (instructed by Holman Fenwick Willan LLP) for the Claimant
Ms Ruth den Besten (instructed by Farrer & Co LLP) for the First Defendant
Mr Tim Penny QC, Mr James Sheehan, Mr Frederick Alliott and Mr Sam Goodman (instructed by PCB Byrne LLP) for the Second and Third Defendants
Mr Adam Zellick QC, Mr Tim Taylor QC and Mr Daniel Carall-Green (instructed by KWM Europe LLP) for the Fourth Defendant
The Fifth and Sixth Defendants did not appear and were not represented.
Hearing dates: 29–30 November 1–2 December 2021
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
HIS HONOUR JUDGE Pelling QC SITTING AS A JUDGE OF THE HIGH COURT
HH Judge Pelling QC:
This is the hearing of:
i) An application by the Claimant (“ADCB”) made by an Application Notice dated 7 December 2020 for an Order continuing a Worldwide Freezing Order made by Bryan J on 2 December 2020 (“WFO”) until judgment or further order in these proceedings;
ii) An application by ADCB made by an Application Notice dated 4 November 2021 for Orders:
a) Permitting ADCB to rely on an additional jurisdictional gateway being that set out in paragraph 3.1(9)(a) of CPR PD6B; and
b) Permitting the amendment of the Particulars of Claim; and
iii) Applications by the First to Fourth Defendants for orders setting aside permission to serve these proceedings on the defendants out of the jurisdiction and discharging the WFO.
The Fifth Defendant has accepted service and filed a Defence. Neither the fifth or sixth defendants appeared or were represented at this hearing.
These proceedings are concerned with what ADCB characterises as “ a massive fraud” within NMC Plc (“Plc”), its main UAE based subsidiary NMC Healthcare Plc (“Healthcare”) and its other subsidiaries (together “the Group”).
The Group's business was the operation of private medical facilities mainly in the UAE. The First to Fourth Defendants were the controlling shareholders in Plc and/or Group company officeholders or senior managers. Until December 2019, it appeared that Plc was a successful FTSE 100 company but by April 2020 it had been placed in administration on the application of ADCB and the existence and scale of the fraud became apparent.
In essence, ADCB alleges that the defendants conceived or carried into effect a scheme by which false financial statements were created for Plc, which gave a false impression of Plc's financial strength by concealing the losses that it had accumulated within its subsidiaries as a result of massive dishonest misappropriation. It is alleged that these statements were deployed by or with the encouragement and consent of the defendants as the basis for presentations to ADCB, made for the purpose of inducing ADCB to extend or renew credit facilities to entities within the Group (other than Plc), which ADCB maintains would not otherwise have been agreed or made. ADCB alleges that the first to third defendants benefitted from the scheme because it enabled them to raise sums totalling about US$1 billion from share sales and pledges that would otherwise have been impossible. It is also alleged that entities controlled by the first or second defendants received sums totalling about US$335 million from the sums borrowed. In addition, it is alleged that part of the sums borrowed was used to make payments to employees and others involved in the fraud (including the fifth and sixth defendants) by transfer of the funds so expended to the bank accounts of entities outside the Group controlled by the first to fourth defendants.
The result of this activity is alleged to have led to undisclosed debt within the Group by the date when administrators were appointed (9 April 2020) of between approximately US$4.357 billion and US$5.352 billion. ADCB alleges that without the substantial funds advanced by ADCB amongst others the scheme could not have succeeded or continued for as long as it did. It claims that as a result of the dishonest scheme it has lost sums that it advanced under what are called in these proceedings the “Core Facilities” totalling US$1.2 billion.
ADCB alleges that the fraudulent scheme could have succeeded only as a result of very close control over internal management and accounting information. It alleges that management and control over the affairs of the Group was exercised by the defendants at all material times and it was they who conspired to create the false accounts which enabled the scheme to function for their mutual dishonest benefit. ADCB claims damages from the defendants in deceit and unlawful means conspiracy, the unlawful means alleged being either the fraudulent misrepresentations on which its claim in deceit is based or breach of fiduciary duties which it is alleged were owed by the defendants to Plc.
Although the defendants challenge jurisdiction on the basis that there is no real issue to be tried and no PD6B gateway through which the claimant can pass, at the heart of the jurisdiction challenge is an assertion that England is manifestly not the most suitable forum for the resolution of this dispute which all defendants maintain should be resolved by the UAE courts. Unsurprisingly, ADCB places significant reliance for its case that England is the most suitable forum for resolution of this dispute on the fact that Plc was a FTSE 100 quoted company, that the contracts by which the two most important of the Core Facilities were given contractual effect (the Syndicated Facility Agreement and the Club Facility Agreement) were drafted and completed in London by a prominent London law firm and were subject to London arbitration clauses and on its contention that England is the governing law of the dispute. Equally unsurprisingly the defendants emphasise that Plc was a holding company that carried on no active business activity, that the activity in London was essentially administrative in nature, that the lending which it is alleged lies at the heart of the scheme was lending by ADCB (a UAE registered entity trading in the UAE) to entities within the Group including principally Healthcare, all of which were based elsewhere than England and Wales. They maintain that if what is alleged is true then this was from first to last a conspiracy that was conceived and carried into effect in the UAE. They maintain that the governing law is beyond argument UAE law. Mr Zellick QC on behalf of the fourth defendant submitted that in these circumstances, it is necessary to look no further than the forum conveniens issues that arise in order to reach the conclusion that the court should set aside permission to serve these proceedings on the defendants out of the jurisdiction.
Tempting though it is to adopt the course suggested by Mr Zellick QC (which would necessarily involve assuming that all the other issues that arise are to be resolved in favour of ADCB) the better course is to consider the issues that arise in the conventional order in which they arise, which means that forum is the last issue that I consider. Any other course runs the risk of multiple appeals and hearings, resulting in significant avoidable cost and delay, the allocation to this dispute of a more than proportionate amount of state funded resources and delay to other litigants. I recognise however that if I conclude that ADCB has satisfied all the other requirements but that it has failed on the forum conveniens issue then my conclusions on those issues on which ADCB has succeeded are likely to be regarded as academic and obiter at best.
The First Defendant (“Mr Shetty”) is the founder of the Group. He was the Chief Executive Officer or managing director of Plc from July 2011 to February 2020 and its Joint Non-Executive Chairman from March 2017 to February 2020. It is alleged and it does not appear to be seriously in dispute that he lived in the UAE for about 50 years ending in 2020 when he returned to India. The Second Defendant was Executive Vice Chairman of Plc from July 2011 to March 2014 and a director from June 2017 to February 2020. The Third Defendant was a non-executive director of Plc from July 2011 to February 2014. Each of the First to Third Defendants were directors of Healthcare from 2011 and the First to Third Defendants collectively were at all material times together Plc's majority shareholders, holding slightly less than 60% following the initial public offering of Plc's shares.
The only other defendant I need mention in any detail at this stage is the Fourth Defendant. He is a Chartered Accountant who was Company Secretary of Plc from July 2011 to September 2012, its Chief Financial Officer from 2011 to 2014, deputy Chief Executive Officer from January 2015 to March 2017 and Chief Executive Officer from March 2017 (when he replaced Mr Shetty as Chief Executive Officer) until his removal by the board of Plc in February 2020. He was a director of Plc from June 2014 until February 2020. In common with the first to third defendants, he was one of Healthcare's directors from June 2014 to February 2020.
None of the first to fourth defendants are or ever have been resident...
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