Deutsche Bank AG v (1) Sebastian Holdings Inc. (2) Alexander Vik (Defendant for costs purposes only/applicant)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cooke |
| Judgment Date | 07 October 2015 |
| Neutral Citation | [2015] EWHC 2773 (QB) |
| Docket Number | Case No: CL-2009-000709 |
| Court | Queen's Bench Division |
| Date | 07 October 2015 |
[2015] EWHC 2773 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Cooke
Case No: CL-2009-000709
Miss S. Tolaney QC and Mr J. MacDonald (instructed by Freshfields Bruckhaus Deringer LLP) for the respondent
Mr S. Cogley QC and Mr T. Marland (instructed by Cooke, Young and Keidan LLP) for the applicant
Hearing date: 30th September 2015
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
This is Mr Vik's application to set aside or vary the order of Teare J made without notice on 20th July 2015. The order provided for Mr Vik to attend on 28th October 2015 to be examined pursuant to CPR Part 71 in his capacity as an officer of the defendant (SHI) and for him to produce documentation as set out in the order on a date two weeks prior to the hearing, namely 14th October 2015.
The order is challenged on five grounds, each of which, it is suggested, should lead to the order being set aside. Alternatively Mr Vik contends that the order be varied with regard to the timing for compliance with it in the light of proceedings in the USA and in the Court of Appeal here. In the United States there is a trial scheduled in Connecticut for two weeks beginning on 10th November 2015 whilst there is an appeal against the Non-Party Costs Order made against Mr Vik which is scheduled to be heard in the Court of Appeal in this country on 3rd November with an accompanying application for the admission of new evidence.
The five grounds upon which it is contended that the order should be set aside are as follows:
i) the Order is unjustified and exorbitant and Part 71 jurisdiction was not properly engaged because of the absence of any exceptional circumstances.
ii) The Order was sought and obtained for a collateral purpose, namely to obtain documents which have been refused in the Connecticut proceedings and to have a "dry run" at cross-examination of Mr Vik prior to the Connecticut proceedings.
iii) The proposed examination serves no useful purpose.
iv) The documents sought are not properly the subject of an enquiry within CPR Part 71.
v) The Order would not have been made if there had been full and frank disclosure to Teare J.
On 8th November 2013 I found SHI liable to pay DBAG some $243 million following a lengthy trial. I also ordered SHI to pay 85% of DBAG's costs on an indemnity basis and ordered an interim payment on account of £34 million. Subsequently I made a Non-Party Costs Order against Mr Vik personally in respect of those costs on 24th June 2014. I have knowledge of the background to the application made by DBAG for examination of Mr Vik in relation to the assets of SHI, of which he was the sole shareholder and director at the relevant time, because at the time of the trial there was evidence relating to its assets and his attempts to impede the recoverability by DBAG of sums due to it.
I can see nothing in any of the grounds which are put forward which would justify setting aside the order for the reasons which appear hereafter.
The background facts
The key element to many of the disputed issues before me appears to lie in the facts recited at section 33(a) of my judgment of 8th November 2013.
i) I held at paragraph 1435 ff. that Mr Vik had arranged for funds of approximately $896 million to be transferred out of SHI to himself or to companies associated with him or his family. Additionally, shares worth $92 million approximately in Confirmit were transferred to him. Thus nearly $1 billion worth of assets were transferred in the course of a week or so at a time when DBAG was seeking to recover sums owed to it by SHI.
ii) I also held at paragraph 1439 that SHI had given inadequate disclosure of its financial position and that Mr Vik had lied in a disclosure statement and that his explanations for the transfers to which I have already referred were not credible. I found that Mr Vik treated SHI's assets as if they were his own and transferred them in order to render access to them more difficult.
iii) At paragraph 1461 I concluded that all the funds transferred were available to SHI prior to transfer and that Mr Vik, at a moment's notice, could procure the transfer of the funds back to SHI if he chose to do so. I found that there was no good bona fide commercial reason for the transfers (see also paragraph 1464 and paragraphs 66–68 of the Non-Party Costs judgment).
I also declined to grant a stay of execution of the judgment pending any application for permission to appeal on the basis that SHI was in a position to pay the sums awarded because of the funds that were available to it — namely the $896 million transferred at the direction of Mr Vik in October 2008.
When the matter came before the Court of Appeal on an application relating to permission to appeal, Tomlinson LJ said the following at paragraphs 25–26:
"25. … I approach this application on the basis that, as the judge himself put it at paragraph 1455 of his judgment, the transfers out of SHI were done both with a view to depleting SHI's assets and with a view to making it more difficult for DB to seek recovery, should it need to do so. In short, SHI has sought to dissipate its assets in order to avoid paying a judgment which it knew DB would have to seek. There was, as the judge found, "a strong element of impropriety in making those transfers".
26. I have already indicated that I accept it as inherent or implicit in the judge's findings that, as at October 2008, SHI had the right to recover its funds. It has not been asserted that the ability to recover the funds has been lost in consequence of subsequent transactions in the ordinary course of business. It follows that if circumstances have changed such that SHI no longer has the right to recover its funds, that can only be because it has carried out further acts of impropriety with a view to avoidance of payment of the judgment which it anticipated would be rendered against it. I can give little weight to VBI's protestation that "under no circumstances will it return money transferred to it by SHI." Beatrice has not replied directly to SHI's letter of 24 January 2014 quoted above. It has however made clear in litigation in New York that it opposes return of the funds. That is hardly surprising."
He went on to say at paragraph 36 that:
"It is right to point out that Mr Vik gave no guarantee for the liabilities of SHI to DB, and that is a point which he is entitled to stress and does stress. However there is no evidence to suggest that Mr Vik is not still the sole owner and director of SHI as he was in 2008. SHI apparently observed no corporate formalities. Given the judge's findings as to the manner in which Mr Vik treated SHI and its assets as his own, it is difficult to think that there can be a more appropriate case in which to take into account that he could, if minded to do so, pay the judgment debt. However, it is not in my judgment necessary to go that far. On the basis on which I approach the case SHI could itself pay the judgment debt into court if Mr Vik chose to procure it to do so. That does not involve Mr Vik funding SHI or paying the judgment debt on its behalf. It involves Mr Vik taking steps to restore to SHI what are rightfully its assets."
Additionally, as appears from other evidence, including the tenth and twelfth witness statements of Mr Hart:
i) SHI disposed of interests in various private equity investments between December 2008 and April 2011 but nothing is known as to the consideration received for such disposals or the whereabouts of such receipts.
ii) SHI claims to have disposed of all its remaining assets pursuant to a Sale Agreement "as of 26th September 2012" which had, as I said in the Non-Party Costs judgment, a number of unusual features and did not specify the assets sold. The identity of the purchaser was not disclosed and the documents gave rise to justified suspicions on the part of DBAG.
The whole history of the proceedings against SHI, Mr Vik's creature company, as set out in the previous judgments I have given, reveals attempts by Mr Vik and Mr Johansson to avoid liability, to deceive the court and to conceal the true state of SHI's financial affairs.
There is thus, as DBAG submits, on my findings and those of the Court of Appeal, a basis for saying that SHI has assets which could be used to satisfy the judgment against it, although the location of any such assets is currently unknown. These are the very circumstances for which CPR 71.2 was designed.
I should add that, following the service of the order made by Teare J under CPR 71 on Mr Vik on 21st July, the evidence from his current solicitor is that on 28th July 2015 he sold his shares in SHI to a company called Rand AS and ceased to a director the same day. Rand AS had been a director since 2nd April 2015. From other evidence before the Court it appears that Rand AS was controlled by Hans Eirik Olav, a friend and business associate of Mr Vik who was until June 2015 the chairman of Confirmit and who also had been an officer of other companies associated with Mr Vik. No details of this disposal of the shares have been given by Mr Vik but in a witness statement adduced for the purposes of the Non-Party Costs Order appeal, Mr Vik stated on 23rd September that Mr Olav had fallen ill and resigned from Rand AS and that he, Mr Vik had no current association with Rand AS or Mr Olav. Mr Vik said that he now has no control over SHI's documents.
DBAG contends that...
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