Deutsche Bank AG v Sebastian Holdings, Inc.
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Moulder |
| Judgment Date | 24 June 2022 |
| Neutral Citation | [2022] EWHC 1599 (Comm) |
| Docket Number | Case No: CL-2009-000709 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 1599 (Comm)
Mrs Justice Moulder
Case No: CL-2009-000709
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
7 Rolls Building
Fetter Lane, London, EC4A 1NL
Sonia Tolaney QC and James MacDonald QC (instructed by Freshfields Bruckhaus Deringer LLP) for Deutsche Bank AG
Duncan Matthews QC, Tony Beswetherick QC and Andrew Feld (instructed by Brecher LLP) for Mr Vik
Hearing dates: 3–5, 9–13, 17–19 May 2022
Approved Judgment
THE HONOURABLE Mrs Justice Moulder
Introduction
This is the reserved judgment on the application made on 7 May 2019 by Deutsche Bank AG (the “Bank” or “DBAG”) to commit Mr Alexander Vik for contempt (as amended, the “Committal Application”) in respect of alleged breaches of an order of the Court in 2015. The alleged breaches are in essence, firstly that Mr Vik deliberately gave false evidence in response to certain questions at a Part 71 means hearing on 11 December 2015 (the “XX Hearing”) and secondly that Mr Vik has failed to produce documents as required by the order.
Evidence
In support of the Committal Application the court has two affidavits of Mr Andrew Hart of Freshfields Bruckhaus Deringer LLP (“Freshfields”), acting for the Bank, dated 7 May 2019 (the “First Affidavit”) and 27 May 2021 (the “Third Affidavit”) with certain additional documents which were not exhibited to Mr Hart's affidavits being introduced by way of a further affidavit from Mr Christopher Robinson of Freshfields dated 17 December 2021.
Mr Hart was cross examined on his evidence.
On 29 July 2021, Mr Vik served an affidavit (the “Affidavit”) setting out his evidence in response to the Committal Application. As he was entitled to do, Mr Vik waited until the close of the Bank's case before indicating that he intended to rely on the Affidavit and to submit to cross examination.
Mr Vik was cross examined over four days before this Court over video link from France.
Submissions
The Court has received and reviewed lengthy oral and written submissions for both the Bank and Mr Vik. In preparing this judgment the Court has also had the benefit of the daily transcripts of the hearing before this Court. In this judgment the Court addresses only those matters which it regards as necessary or desirable to address in order to determine the alleged breaches. The failure to address a specific submission expressly in the judgment should not however be taken to be a failure to consider a relevant submission.
Background
Sebastian Holdings, Inc. (“SHI”) is a Turks & Caicos Islands offshore SPV which, (until July 2015), was 100% owned and controlled by Mr Vik, described by the parties as a Monaco-domiciled ultra-high net worth individual.
In 2009, DBAG commenced proceedings against SHI in this jurisdiction for approximately US$250m and SHI counterclaimed for approximately US$8billion. The subject matter of the claim essentially was (ultimately loss-making) FX, equities and other trading which SHI carried out with and through DBAG.
Following a 14-week trial in 2013 before Cooke J, judgment (“the Judgment”) was given on 8 November 2013 ( [2013] EWHC 3463 (Comm)) in favour of DBAG and Cooke J made a US$243m order (the “Judgment Order”) in favour of DBAG against SHI, which was to be paid to DBAG by 22 November 2013 (the “Judgment Debt”). Cooke J also awarded DBAG 85% of its costs to be assessed on the indemnity basis and ordered SHI to make an interim payment on account of costs of approximately £34.5m by 22 November 2013.
Following the Judgment Order, the Bank applied for a non-party costs order against Mr Vik (on the grounds, inter alia, that he was personally responsible for SHI's dishonest conduct of the English Proceedings and that he had caused SHI to defend the proceedings and bring its counterclaim for his sole benefit) (the “Non-Party Costs Proceedings”). The Bank also applied for an order that SHI's appeal against the Judgment Order be made subject to conditions (the “Conditions Application”). Both applications were successful. [First affidavit of Mr Hart]
Following DBAG's successful application for a non-party costs order against Mr Vik, Mr Vik paid the Interim Payment.
SHI has not paid DBAG the Judgment Debt and the Judgment Debt as at 1 January 2022 totalled approximately US$329m including interest. [Agreed Case Summary]
DBAG made a without notice application on 20 July 2015 seeking an order pursuant to CPR 71.2 against Mr Vik in his capacity as a (then) director of SHI.
In July 2015, Teare J made an order under CPR 71 (the “ CPR 71 Order”). In summary, the CPR 71 Order required Mr Vik, in his capacity as (then) director of SHI:
i) To produce, by 14 October 2015, “ all documents in [SHI's] control which relate to [SHI's] means of paying the amount due under the [Judgment] and the [Judgment Order]”, including certain specific categories of documents listed in a non-exhaustive Schedule to the CPR 71 Order; and
ii) To attend an examination before a judge on 28 October 2015 “ to provide information about the judgment debtor's means and any other information needed to enforce the judgment or order”.
On 24 August 2015, Mr Vik made an application to vary and/or strike out the CPR 71 Order. On 7 October 2015, Cooke J handed down judgment substantially upholding the CPR 71 Order but providing that the date for Mr Vik's cross-examination should be put back to 11 December 2015.
On 14 October 2015, Mr Vik disclosed certain hard copy documents pursuant to the CPR 71 Order. Mr Vik provided further disclosure on 9 December 2015 and 10 December 2015. [Agreed Case Summary]
Freshfields wrote to Cooke Young & Keidan LLP, solicitors then acting for Mr Vik, on 27 November 2015 enclosing a list of the topics that DBAG intended to cover at the XX Hearing.
Mr Vik's oral examination under CPR 71 took place over the course of one day on 11 December 2015 before Cooke J.
Proceedings were brought by DBAG in Connecticut (the “Connecticut Proceedings”) seeking a declaratory judgment to pierce SHI's corporate veil to hold Mr Vik liable for the English Judgment and enforcement of the English judgment against Mr Vik. In its judgment handed down on 7 September 2021 (the “Connecticut Judgment”) the Connecticut court dismissed DBAG's claim. The Connecticut court stated that the Bank had not established that Mr Vik acted with specific intent to deprive the Bank of its ability to satisfy the margin calls to the Bank.
Committal Application
By its Amended Application dated 17 December 2021 (the “Application Notice”) the Bank seeks an order pursuant to CPR 81 that for his contempt Mr Vik be committed to prison for a period of six months and the execution of the Warrant of Committal be suspended for a period of six months on condition that Mr Vik complies with the terms set out in the order.
The Bank alleges that Mr Vik has been guilty of contempt of Court in failing to comply with paragraphs 1 and 2 of the CPR 71 Order.
The specific acts of contempt alleged by DBAG are summarised in the body of the Application Notice.
Firstly, in relation to the alleged failure to provide information, it is alleged that:
“Mr Vik failed to comply with paragraph 1 of the Teare J Order in that, at the hearing before Cooke J on 11 December 2015, he deliberately failed to “provide information about [SHI's] means” and/or “any other information needed to enforce the [Judgment Order]”.
In particular, Mr Vik intentionally failed to provide truthful and/or complete information regarding his knowledge in relation to:
(i) the funds and assets of C.M. Beatrice, Inc. (“Beatrice”), a company which received assets of significant value transferred out of SHI, and the CSCSNE Trust, to which the shares in Beatrice were transferred;
(ii) SHI's interest in Devon Park Bioventures L.P. (the “Devon Park Interest”); and
(iii) the alleged sale of SHI's interest in IFA Hotels & Touristik AG (the “IFA Shares”) to VBI Corporation (“VBI”) in 2012.”
Secondly, in relation to the alleged failure to produce documents it is alleged that:
“Mr Vik failed to comply with paragraph 2 of the Teare J Order in that he deliberately did not, by 14 October 2015, “produce …all documents in [SHI's] control which relate to [SHI's] means of paying the amount due under the [Judgment] and the [Judgment Order]” in that Mr Vik either deliberately took steps to put documents beyond his control, or chose not to produce documents within his and/or SHI's control, that were required to be produced by the Teare J Order. In particular, Mr Vik failed to:
(i) produce electronic documents responsive to paragraph 2 of the Teare J Order, in particular electronic documents:
(A) relating to the Devon Park Interest;
(B) relating to the IFA Shares; and
(C) relating to SHI's interests in (i) Carlyle Europe Partners II, L.P., Carlyle Europe Partners III, L.P., Carlyle AZ Partners I, L.P, Carlyle AZ Partners II, L.P and Carlyle Ensus Partners, L.P and (ii) Reiten & Co Capital Partners VI LP and Reiten & Co Capital Partners VII LP (together, the “Partnership Interests”); and
(ii) produce documents held by third parties” [Reamended Application Notice]
The body of the Application Notice stated that:
“The specific grounds of contempt on which DBAG relies are further particularised in the Schedule to this Application Notice.”
The further particulars are considered below in the context of the specific allegations.
Relevant law
The law was largely common ground.
As summarised by the Court of Appeal in Navigator Equities v Deripaska [2021] EWCA Civ 1799 at [79] (Carr LJ):
“Contempts of...
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