Deutsche Bank AG v Sebastian Holdings Inc. and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Andrew Baker |
| Judgment Date | 13 December 2017 |
| Neutral Citation | [2017] EWHC 3265 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 13 December 2017 |
| Docket Number | Case No: CL-2009-000709 |
[2017] EWHC 3265 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice (Rolls Building)
7 Rolls Buildings, Fetter Lane, London EC4A 1NL
Mr Justice Andrew Baker
Case No: CL-2009-000709
David Foxton QC and Andrew Lodder (instructed by Freshfields Bruckhaus Deringer LLP) for the Claimant
Simon Davenport QC and Tom Poole (instructed by Archerfield Partners LLP) for the First Defendant
Tim Penny QC and James Goodwin (instructed by Stephenson Harwood LLP) for the Receivers of certain assets of the First Defendant (appointed by Order of Popplewell J herein dated 17 February 2017)
Hearing date: 4 December 2017
Judgment Approved
Introduction
The First Defendant ('SHI'), a company registered in the Turks and Caicos Islands ('the TCI'), was the personal investment vehicle of the Second Defendant ('Mr Vik'). After a 45-day trial, on 8 November 2013 Cooke J gave judgment for the Claimant ('Deutsche Bank') against SHI. The judgment sum was c. US$243 million. There was an order for a payment of c.£34.5 million on account of costs. Cooke J dismissed SHI's counterclaims. Deutsche Bank later obtained a non-party costs order against Mr Vik under s.51 of the Senior Courts Act 1981 requiring him to pay sums owed by SHI to Deutsche Bank in respect of costs. As a result, there has been some recovery by Deutsche Bank in respect of costs, but not yet in respect of the substantive judgment debt. With interest, that debt now exceeds US$320 million.
By Order dated 17 February 2017 ('the Receivership Order'), on the application of Deutsche Bank ex parte, Popplewell J appointed Shane Crooks and Malcolm Cohen of BDO LLP ('the Receivers') joint receivers of certain assets of SHI's, defined in the Order as the 'Receivership Interests'. They are, in summary, SHI's interests in, or its causes of action relating to, two private equity funds organised as limited partnerships registered in this jurisdiction that have been referred to as 'Reiten VI' and 'Reiten VII' (together, the 'Reiten Funds'). SHI's interests in the Reiten Funds were purportedly transferred to Sarek Holdings Ltd ('Sarek'), a TCI company said to have been closely connected to Mr Vik but said now to be owned and controlled by Per Johansson, a business associate or former associate of Mr Vik's.
On 4 December 2017, four applications were listed for hearing before me. I determined all of the applications, giving a brief indication of my reasons on the day, with more detailed reasons to follow in writing. These are my more detailed reasons. At the hearing, Deutsche Bank, SHI and the Receivers all appeared, each represented by leading and junior counsel. Mr Vik was not party to any of the applications and did not apply to be joined or to intervene. He did, however, instruct his solicitors (Brecher LLP) to write to the court with submissions in relation to the Receivers' Application (as I define it below) and to attend the hearing, both of which they did.
The applications before me were the following:
i) SHI's application pursuant to an Application Notice dated 8 May 2017 for an order setting aside or staying the Receivership Order ('the Challenge').
ii) Deutsche Bank's contingent application, pursuant to an Application Notice dated 19 June 2017, for an order that SHI disclose the identity of any individual or entity funding the Challenge, with a view to an application for a non-party costs order ('the Funding Application'). The Funding Application was contingent upon a costs order being made in favour of Deutsche Bank in respect of the Challenge.
iii) An application by the Receivers, pursuant to an Application Notice dated 24 November 2017, for a variation of the Receivership Order to assist them in relation to an issue that has arisen in the TCI, as I shall describe below ('the Receivers' Application').
iv) An application by SHI, pursuant to an Application Notice dated 29 November 2017, for an adjournment of those three applications to a date not before 8 March 2018, because of illness on the part of Hans Eirik Olav, said now to be the ultimate beneficial owner of SHI ('the Adjournment Application').
At the hearing, I dismissed the Adjournment Application and the Challenge, with costs orders against SHI in favour of Deutsche Bank and the Receivers, I granted the Funding Application and I gave directions for the determination of the Receivers' Application.
The Adjournment Application
It was common ground that useful guidance on the approach to be adopted when faced with a late application for an adjournment on medical grounds is to be found in Decker v Hopcraft [2015] EWHC 1170 (QB), per Warby J at [21]–[30] and Levy v Ellis-Carr [2012] EWHC 63 (Ch), per Norris J at [32]–[36]. Of particular relevance to the present case are Warby J's observations in the former at [28]: whether ill health will affect a litigant's ability to participate effectively (or at all) at a hearing depends not only on the nature and consequences of the ill health " but also, and perhaps critically, on the nature of the hearing: the nature of the issues before the court, and what role the party concerned is called on to undertake. If the issues are straightforward and their merits have already been debated in correspondence, or on previous occasions, or both, there may be little more that can usefully be said. If the issues are more complex but the party concerned is capable, financially and otherwise, of instructing legal representatives in his or her place and of giving them adequate instructions their own ill-health may be of little or no consequence."
That guidance, and Warby J's observations in particular, fell to be applied in this case not to a litigant in person the advancement of whose cause requires their appearance in court to advance it, but to a corporate litigant represented by able and experienced solicitors instructing leading and junior counsel. Mr Olav, even if he is the ultimate beneficial owner of SHI, did not need to do anything to ensure that the Challenge was properly advanced or that SHI's interests were properly represented in response to the Funding Application and the Receivers' Application. To see how that is so, I need to set out the history of the Challenge in a little more detail.
The Challenge was launched by Charles Russell Speechlys LLP ('CRS'), then SHI's solicitors, by Application Notice dated 8 May 2017. The asserted basis for the Challenge was that (a) there was material non-disclosure in obtaining the Receivership Order because (so it was said) Popplewell J was not told about the effect of a '2012 Agreement' or certain proceedings in New York concerning it, or in the alternative (b) the receivership should be stayed because the 2012 Agreement transferred the Receivership Interests to VBI Corporation ('VBI'), a family company thought to be majority owned and controlled by Mr Vik's father.
The 2012 Agreement is a document dated " as of September 26, 2012" that purports to be, or to record, a contract for the sale of assets by SHI to VBI for NOK 300 million. In the New York proceedings, brought by Deutsche Bank against Mr Vik, Mr Vik's father, VBI and SHI and commenced in April 2016, Deutsche Bank hope to establish, as an interested creditor of SHI, that the 2012 Agreement was not effective to divest SHI of assets (including the Receivership Interests). At the time the Receivership Order was sought and made, those proceedings had been commenced but the jurisdiction of the New York courts had not been established. As things now stand, the New York proceedings have been dismissed for want of jurisdiction and Deutsche Bank has an appeal pending against that dismissal.
Mr Olav had no evidence to give in relation to the Challenge. He did not provide a witness statement to support it; nor was he even mentioned in the witness statement that was served. That was the 9 th Witness Statement of Mr Johansson dated 8 May 2017. Mr Johansson has had carriage of the Challenge throughout, acting as a 'litigation consultant' to SHI.
Deutsche Bank responded to the Challenge by the 16 th Witness Statement dated 19 June 2017 of Thomas Snelling of their solicitors, Freshfields Bruckhaus Deringer LLP ('Freshfields'; 'Snelling 16'). By letter dated 29 June 2017, CRS sought from Freshfields a 21-day extension, to 24 July 2017, for service of any evidence from SHI in reply, saying " We continue to prepare SHI's evidence, with a view to serving it as swiftly as possible. An extension is, however, required given the volume of yourclient's evidence, and the continued effect of this firm's having been instructed only recently …". There was neither evidence nor reason to suppose that anyone other than Mr Johansson had been liaising with CRS. According to Mr Johansson's 10 th Witness Statement ('Johansson 10'), served in support of the Adjournment Application, he did not even discuss Snelling 16 with Mr Olav when it arrived or at any time in the 4 1/2 months thereafter, before Mr Olav's illness in early November. Mr Davenport QC confirmed that the Adjournment Application was not put on the basis that Mr Olav's personal input on any matter of fact was required to pursue the Challenge to a conclusion. By reply on 30 June 2017, Freshfields offered to agree instead a 14-day extension, to 17 July 2017. CRS accepted that offer by letter dated 3 July 2017 and notified the court of that agreed deadline.
In the event, SHI did not file or serve any reply evidence. CRS ceased acting for SHI on 14 July 2017, the working day before reply evidence (if any) was due, although that was formalised only a little later, by Order of Leggatt J dated...
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