Cruz City 1 Mauritius Holdings v Unitech Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Field |
| Judgment Date | 23 May 2013 |
| Neutral Citation | [2013] EWHC 1323 (Comm) |
| Docket Number | 2013 Folio No. 171 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 23 May 2013 |
[2013] EWHC 1323 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
AND IN ARBITRATION CLAIMS UNDER THE
Rolls Building
Fetter Lane
London EC4A 1NL
Mr Justice Field
2013 Folio No. 171
David Wolfson QC and Nehali Shah (instructed by White & Case LLP) for the Claimant
Jonathan Hirst QC and Craig Morrison (instructed by Skadden, Arps, Slate, & Flom (UK) LLP) for the Defendants
Hearing date: 10 May 2013
Approved Judgment
Introduction
This is an application under s. 37(1) 1 of the Senior Courts Act 1981 ("the 1981 Act") for an order compelling the Defendants to provide disclosure verified by an affidavit of a proper officer of all their assets worldwide. In the case of the 1 st and 2 nd Defendants, the proposed order is limited to assets exceeding US$ 1 million in value.
The order is sought in aid of execution to enforce a Partial Award and a Final Award made in LCIA Arbitration proceedings, namely: Partial Award No. 2 (against the 1 st and 2 nd Defendants) and Final Award No. 3 (against the 3 rd Defendant). A third award, Partial Award No. 1 (made against the 2 nd and 3 rd Defendants) was the subject of a successful jurisdictional challenge before Andrew Smith J and is not sought to be enforced. A jurisdictional challenge to Partial Award No. 2 failed.
The arbitrations concerned a joint venture arrangement (the "Santacruz Project") between the Claimant and the Defendants for the commercial development, management and operation of certain land in Mumbai. In order to facilitate the parties' investments in the Santacruz Project, an SPV, Kerrush Investments Limited ("Kerrush"), was incorporated which at the outset of the Santacruz Project was owned 50% by the Claimant and 50% by the 3 rd Defendant. The disputes arose out of a Shareholders' Agreement entered into between, inter alios, the Claimant, the 3 rd Defendant and Kerrush on 6 June 2008 (the "Shareholders' Agreement") and a Keepwell Agreement between the Claimant, and the 1 st and 2 nd Defendants, under which the 1 st Defendant agreed to maintain the solvency of the 2 nd Defendant.
In Partial Award No. 2 ("Award 2") the Tribunal ordered, inter alia, that the 1 st and 2 nd Defendants must pay to the Claimant US$298,382,949.34 for all of the Claimant's shares in Kerrush with interest at 8% p.a., compounded quarterly, from the date of the award until payment. In Final Award No. 3 ("Award 3") the 3 rd Defendant was ordered, inter alia, to pay the Claimant US$2,900,000 in respect of its legal fees and other costs and expenses with interest at 8% p.a. compounded quarterly from the date of the award until payment.
The Defendants have paid nothing towards satisfying Awards 2 and 3.
At the end of January 2013 Cooke J made orders under s.66(1) of the Arbitration Act 1996 Act ("the 1996 Act") permitting the Claimant to enforce Awards 2 and 3 in the same manner as judgments or orders of the court. Cooke J also permitted service of the underlying enforcement applications to be made on Skadden, Arps, Slate, Meagher & Flom ("Skadden"), the solicitors who had acted for all the Defendants in the arbitrations and for all the Defendants in the jurisdictional challenges to Awards 1 and 2.
The Arbitration Claim Form was issued on 5 February 2013. It was stamped "not for service out of the jurisdiction" and, by order dated 8 February 2013, Cooke J permitted service on Skadden of the Claim Form and the affidavit in support of the
application for the disclosure of assets. On the same date, the Claim Form and the affidavit were served by hand on Skadden but the Acknowledgement of Service Form was mistakenly excluded from the documents served at this time.On 19 March 2013 copies of the Claimant's further evidence and skeleton argument in respect of the instant application were served at the offices of Skadden pursuant to an order of Andrew Smith J of even date permitting service of these documents in this manner.
In support of the application for disclosure of assets worldwide, Mr Wolfson QC placed substantial reliance on Maclaine Watson & Co Ltd v International Tin Council (No 2) [1989] 1 Ch 286 and The Naftilos [1995] 1 WLR 29 In Maclaine Watson the claimant sought an injunction against the ITC compelling disclosure of its assets worldwide in aid of enforcing an arbitral award that had been converted into a judgement for £6 million odd. At first instance, Millett J held that RSC Order 48 (that gave the court power to order an officer of a corporate judgement debtor to be orally examined on the debtor's assets) could not be invoked against the ITC because it was an unincorporated association. However, he found that the court had jurisdiction under s. 37 of (1) the Supreme Court Act 1981 to make the order sought and granted an injunction compelling disclosure of the ITC's assets worldwide. In upholding Millett J's decision, the Court of Appeal (per Kerr LJ who delivered the judgement of the court) expressly approved the following two passages in Millett J's judgement.
It is now clearly established that the court has jurisdiction under section 37 (1) to grant a Mareva injunction before trial in order to restrain a defendant from removing from the jurisdiction so much of its assets as may be needed to meet the plaintiff's pending claim. The object is to prevent a defendant from frustrating the judgment of the court by removing assets from the jurisdiction or concealing them within it and so rendering execution ineffective. In A.J. Bekhor & Co Ltd v. Bilton [1981] Q.B. 923 the Court of Appeal held that the court had power under section 37 (1) to make all such ancillary orders, including an order for discovery, as appeared to the court to be just and convenient in order to ensure that the exercise of the Mareva injunction was effective to achieve its purpose.
A Mareva injunction can also be granted after final judgment in aid of execution to preserve a judgment debtor's assets until execution can be levied on them: see Orwell Steel (Erection and Fabrication) Ltd. V Asphalt and Tarmac (U.K.) Ltd. [1984] 1 W.LR. 1097 and Stewart chartering Ltd. V C. & O. Managements S.A. (Practice Note) [1980] 1 W.L.R. 460. In such a case there is normally no need to support the Mareva injunction with an order for discovery, since resort can be had to Order 48.
In this case the applicants rightly do not seek a Mareva injunction. There is no reason to believe that the I.T.C. will remove its assets from the jurisdiction in order to defeat execution. The applicants seek only an order for discovery in aid of execution, the procedure of Order 48 being unavailable. The I.T.C. contend that there is no jurisdiction to make such an order in the absence of a Mareva injunction. It is, however, fallacious to reason from the fact that an order for discovery can be made as ancillary to a Mareva injunction to the conclusion that it cannot be made except as ancillary to such an injunction. The source of the jurisdiction is the same, and so is the ground for exercising it, viz. that it appears to the court to be just and convenient to do so… [At p.1716]
In the present case the order sought may properly be said to be sought in aid of or for the purpose of implementing the judgment previously obtained by the applicants. It is, within proper limits, the policy of these courts to prevent a defendant from removing its assets from the jurisdiction or concealing them within it, so as to deny a successful plaintiff the fruits of his judgment. This is the policy which underlies the Mareva jurisdiction, before and after judgment, pre-trial discovery of assets in aid of the Mareva jurisdiction and Order 48. That policy can only be given effect if a defendant can be ordered when necessary to provide information about the nature and whereabouts of its assets. It can only be given effect in the present case if the court has power to make the order sought. Although Order 48 is not available, the underlying policy of that Order would be forwarded, not frustrated, by the order. There is no doubt that it is just and convenient to make it. No ground has been put forward why I should exercise my discretion against making the order, and I can see none. [At p.1717]
At p.303 D-G, Kerr LJ said:
The plaintiffs have an order of the court against the I.T.C. to pay the plaintiffs the amount of their judgment. The I.T.C.'s failure to do so is a failure to comply with an order of the court and a breach of an obligation owed to the plaintiffs. As Ralph Gibson L.J. pointed out in the course of the argument, it matters little whether one speaks of an invasion of a plaintiff's right or of a breach of an obligation owed to a plaintiff. The court's statutory power to grant an injunction if it appears just and convenient to do so, in this case in mandatory form, is not excluded by any authority. Secondly, there is the authority of this court in A.J. Bekhor & Co. Ltd. v. Bilton [1981] Q.B. 923 and other cases that there is an inherent power under what is now section 37(1) to make any ancillary order, including an order for discovery, to ensure the effectiveness of any other order made by the court. This applies in the unusual circumstances of the present case. Since the alternative means of appointing a receiver or of making an order under Order 48 are unavailable, the order for disclosure is necessary to render the plaintiffs' judgment against the I.T.C. effective.
Citing Interpool Ltd v Galani [1988] 738, the Court of Appeal...
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