Alternative Investment Solutions (General) Ltd v Valle De Uco Resort & SPA SA and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cranston |
| Judgment Date | 22 February 2013 |
| Neutral Citation | [2013] EWHC 333 (QB) |
| Docket Number | Case No: HQ12X04556 |
| Court | Queen's Bench Division |
| Date | 22 February 2013 |
[2013] EWHC 333 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Cranston
Case No: HQ12X04556
Mr Alain Choo-Choy QC and Mr James Fletcher (instructed by Squire Sanders) for the Claimant
Mr Paul McGrath QC (instructed by Addleshaw Goddard) for the Defendants
Hearing dates: 5-6 February 2013
Approved Judgment
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.
INTRODUCTION
Last October the claimant obtained, without notice, a worldwide freezing order against the defendants. In broad outline the claimant had provided finance for a proposed luxury development of the defendants in Argentina, had not been repaid and feared it never would be. This is the defendants' application to discharge that order. The defendants contend that the order should never have been granted: first, none of the allegations advanced before the judge could be supported to justify the relief obtained; and secondly, the claimant failed to comply with its duties of disclosure to the court resulting in the judge not having the benefit of all the relevant evidence and full and proper submissions. My conclusion is that for the time being a world wide freezing order is justified.
BACKGROUND
The second and third defendants are two British nationals, resident in England, Jonathan (known to his business associates as "Jonty") Crossick and Alise Crossick. They have been involved with a number of development schemes abroad and are associated with a large number of companies, including Ready 2 Invest Ltd. The first defendant, Valle de Uco Resort & Spa SA ("VDU"), is a company incorporated in Argentina having its principal office in Buenos Aires. The Crossicks are directors and majority shareholders of VDU. The claimant is Alternative Investment Solutions (General) Limited, a private limited company incorporated in England and Wales, which makes investments in various enterprises. At the relevant times it has acted through its sole director, Paul Chandler.
VDU owns a 310 hectare site in Mendoza Province, Argentina ("the site"). A Business Plan published in 2009, with the imprimatur of the Crossicks, set out plans for a project to develop a luxury resort on the site to be called the Valle De Uco Golf and Wine Resort. There would be vineyards and an 18-hole golf course designed by a leading professional golfer, Eduardo Romero, together with a number of residential villas, a boutique hotel and spa, and various other amenities. VDU was the vehicle to develop the site.
There were a number of meetings and contacts in the second part of 2009 between Mr Chandler and Mr Crossick about a possible investment of $6 million in the project. Eventually, the claimant signed a loan agreement on 5 February 2010 to provide £1 million to VDU. Interest was to be payable at a rate of 24 percent per annum on 10 December 2010 and on the redemption dates. The governing law of the agreement was English law. Disputes were subject to the jurisdiction of the English courts. The claimant provided money in tranches with the last tranch being paid on 16 August 2010. Although some interest payments were made to the claimant, the last payment was in April 2011. In short the loan is in default.
Under clause 9 of the loan agreement VDU agreed on the date of the agreement that it would enter into a charge as security for the loan. Charge was defined as a legal charge "in the agreed form attached hereto". However, there was no form attached. The Business Plan for the project spoke of investors receiving a first legal charge over part of the development proportionate to their investment. At some point it appears to be thought that the claimant's charge would cover 55 percent of the development. In December 2010 the claimant's Argentinean lawyer estimated the cost of implementing the charge to be $US 44,000. To date no charge has been executed or registered in favour of the claimant.
The application to Lindblom J for the world wide freezing order was made on 31 October 2012. It was advanced on the basis that, during the due diligence process, the Crossicks made fraudulent representations which induced the claimant to enter the loan agreement. The application was supported by evidence from Mr Chandler; Ana Jauregui, a qualified Argentinean lawyer and former director of VDU, who subsequently resigned and is in dispute with the Crossicks; Lee Pattenden, who was engaged by the claimant to carry out due diligence before any loan was entered into; and German Savastano, the claimant's Argentinean lawyer. In the course of the hearing the judge pressed the claimant's counsel on a number of aspects of the application but ultimately granted it. On 23 November 2012 there was an application to vary the order, to enable US$125,000 to be paid in relation to a potential funder of the project. Stadlen J refused the variation and in the course of his judgment raised concerns about its bona fides.
The principles governing the grant of a freezing order under section 37 of Senior Courts Act 1981 and CPR 25.1(f) are well known. It is a discretionary remedy that the court may grant where it is just and convenient to do so. First, there must be a good arguable case on the merits of the substantive claim, in other words, "a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50 per cent chance of success": Lakatamia Shipping Company Limited v Nobu SU Limited [2012] EWCA Civ 1195, per Longmore LJ at [19] and [25]–[28]; Ninemia Maritime Corporation v Trave Schiffahrtgesellschaft MBH und Co KG (The Niedersachsen) [1983] 2 Lloyd's Rep 600, per Mustill J, at 603, 605; [1983] 2 Lloyd's Rep 600, 613–614. When applying this test, the court should not attempt to try the issues but takes into account the apparent strength or weakness of the respective cases to decide whether the claimant's case, on the merits, is sufficiently strong to reach the threshold. That includes assessing the apparent plausibility of statements in the affidavits: Steven Gee QC, Commercial Injunctions (5th ed. 2004), at paragraphs 12.023 and 12.024.
Secondly, a defendant has to have assets within the jurisdiction or, if there are no or insufficient assets within the jurisdiction, assets outside. Thirdly, for a freezing injunction to be justified there must be a real risk of the dissipation of assets such that there is a real risk of a judgment in the claimant's favour going unsatisfied if the injunction is not granted: Derby v Weldon [1990] 1 Ch 48 at 57D-E. There is no need for a claimant to show an intention to dissipate assets, nor dishonesty or fraud. Where there is a good arguable case of dishonesty or fraud the risk of dissipation may speak for itself. The conduct giving rise to a real risk of dissipation must not be capable of justification: Ketchum International v Group Public Relations Holdings [1997] 1 WLR 4, per Stuart Smith LJ at 10: White Book, 2012, v.2, 15–69.
INJUNCTION AGAINST VDU
It is common ground that the claimant has not been repaid capital and interest pursuant to the loan agreement. An explanation the Crossicks give is that, along with other such developments, this one has been adversely affected by the world-wide economic recession. Moreover, the claimant remains unsecured, despite clause 9 of the loan agreement. In his evidence Mr Crossick asserts a readiness to grant the claimant security. He says that VDU has retained 55 percent of the land unencumbered for the claimant and that new investors have no rights over a share of the site greater than 45 percent. In a series of emailed updates to investors in VDU late last year and early this year, Mr Crossick explained the interest of a potential funder in carrying the project forward. With regard to a change in December 2011 in Argentinean legislation regarding the foreign ownership of land, one of the updates read: "The good news is that our land is already owned by foreigners. Therefore, as we are expecting to transfer (in part) ownership [of the land] from one set of foreigners (us) to a new foreigner (the funder) we expect this to be do-able."
In a spread sheet he has produced with his evidence Mr Crossick has detailed how much land at the site has been allocated to investors and the names and amount of land allocated to each. Only 65,003 square meters of 3,108,863 square meters is still available. Thus it appears that almost the full 45 percent of the land Mr Crossick mentions as not reserved for the claimant has been allocated to investors. On one interpretation it would appear that the allocated land constitutes most of the habitable land. There is no direct evidence of what allocation entails. However, among the names of those on the list of investors to whom land has been allocated is Ian Brown. In a witness statement Mr Brown explains how he paid £136,607 and was allocated so many square metres of land on the site. (His investment in a Romanian development of the Crossicks was also rolled over into VDU). He exhibits the offer letters he received from VDU in 2008 and subsequent documentation. It is not my task to suggest a legal interpretation of their effect. Suffice is to say that they purport to confer on Mr Brown an option to be paid out or otherwise to acquire "domain title" over an unidentified plot of land on the site.
There is no evidence about what VDU has raised from investors and little about how it has been spent. Mr Chandler's evidence is that Mr Crossick told him in November...
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