Deutsche Bank AG v Sebastian Holdings Inc.
| Jurisdiction | England & Wales |
| Judge | Lord Justice Males,Lady Justice Andrews,Lord Justice Nugee |
| Judgment Date | 24 February 2023 |
| Neutral Citation | [2023] EWCA Civ 191 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2022-001542, CA-2022-001552, CA-2022-001552-C, CA-2022-001542-C & CA-2022-001542-A |
[2023] EWCA Civ 191
Lord Justice Males
Lady Justice Andrews
and
Lord Justice Nugee
Case No: CA-2022-001542, CA-2022-001552, CA-2022-001552-C, CA-2022-001542-C & CA-2022-001542-A
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
BUSINESS & PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mrs Justice Moulder
[2022] EWHC 1599 (Comm) & [2022] EWHC 2057 (Comm)
Royal Courts of Justice
Strand, London, WC2A 2LL
Duncan Matthews KC, Rupert Hamilton & James Gardner (instructed by Brecher LLP) for the Appellant
Sonia Tolaney KC, James MacDonald KC & Andrew McLeod (instructed by Freshfields Bruckhaus Deringer) for the Respondent
Hearing dates: 7, 8 & 9 February 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on 24 February 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
On 24 th June 2022, following an 11 day trial, Mrs Justice Moulder found that the appellant, Mr Alexander Vik, was guilty of contempt of court in two respects. These were that (1) he had deliberately given false evidence at a hearing which he had been ordered to attend pursuant to CPR 71 in order to provide information as to the means of the defendant, Sebastian Holdings Inc (“SHI”); and (2) he had deliberately failed to produce documents which he had been ordered to produce. I shall refer to the order made by the judge which records these findings as “the Contempt Order”.
On 15 th July 2022, after a further one day hearing, Mrs Justice Moulder ordered that Mr Vik be committed to prison for a period of 20 months, that period being suspended until six months from the final determination of any appeal, on condition that Mr Vik complies with terms as to attendance at court for further examination and provision of specified documents in SHI's control. I shall refer to this order as “the Committal Order”.
Mr Vik now appeals, contending that the findings of contempt were wrongly made and that in any event the sentence imposed was too severe. He has a right of appeal from the Committal Order, pursuant to section 13 of the Administration of Justice Act 1960, but a question arises whether he needs permission to appeal from the Contempt Order. However, as the parties had been proceeding on the basis that Mr Vik has a right of appeal from both orders, and as the question whether permission is needed arose only at a late stage when both parties were fully prepared for the appeal, it was convenient to hear the appeal without ruling on this question, while inviting argument on whether permission is needed. We are grateful for the parties' submissions, which have given us an opportunity to clarify the position.
Background
This is the latest round in complex proceedings which have now been under way for some 13 years. The following account is no more than a summary, but suffices for the purpose of this appeal.
SHI is a Turks & Caicos Islands offshore SPV which, at any rate until July 2015, was 100% owned and controlled by Mr Vik, a highly educated Monaco-domiciled ultra-high net worth individual with a background in and sophisticated understanding of financial markets and investments.
In 2009 the respondent, Deutsche Bank AG (“the Bank”), commenced an action in the Commercial Court against SHI for approximately US $250 million arising out of loss-making derivatives trading which SHI had carried out through the Bank. It is the Bank's case that Mr Vik became aware of SHI's liability to the Bank in October 2008 and, as a result, started to strip SHI of its assets in order to make it judgment proof. It is not disputed that very substantial transfers of assets were made by SHI, including US $730 million transferred in October 2008 to a company called C.M. Beatrice Inc (“Beatrice”), which was also owned and controlled by Mr Vik. Later in the same month, Mr Vik settled the shares in Beatrice into a trust, the CSCSNE Trust (“the Trust”: the initials are those of his children). Mr Vik denies that this was asset stripping, contending that the assets transferred into the Trust were intended to be an inheritance for his children and that sufficient assets remained in SHI to meet its potential liability to the Bank.
The trial of the action, which lasted 14 weeks, took place before Mr Justice Cooke in 2013, with judgment given on 8 th November 2013 ( [2013] EWHC 3463 (Comm)). Mr Justice Cooke found in favour of the Bank and gave judgment for US $243 million, together with an award of 85% of the Bank's costs to be assessed on the indemnity basis and an order for an interim payment of approximately £34.5 million. He dismissed a counterclaim for some US $8 billion advanced by SHI, finding that it had been brought in bad faith and was based on documents which had been fabricated by Mr Vik and his assistant Mr Per Johansson. In the course of his judgment, Mr Justice Cooke made damning findings about SHI's conduct of the proceedings and the credibility of Mr Vik.
The Bank then applied for a non-party costs order against Mr Vik, contending that he was personally responsible for SHI's dishonest conduct of the proceedings and that he had caused SHI to defend them and to bring its counterclaim for his sole benefit. It applied also for an order that SHI's appeal be made subject to conditions. Both applications were successful. Mr Vik paid the interim payment, but SHI's appeal was struck out as a result of its failure to pay the judgment sum into court as ordered by the Court of Appeal.
The Bank has made strenuous efforts to enforce the judgment in various jurisdictions, but so far with only limited success. The judgment debt, together with interest, now stands at over US $330 million.
One of the jurisdictions in which the Bank sought to enforce its judgment was Connecticut. The Bank brought proceedings seeking to pierce SHI's corporate veil and hold Mr Vik personally liable for the English judgment. This attempt failed. The Connecticut court held that the Bank had not established that, in transferring assets away from SHI, Mr Vik had acted with specific intent to deprive SHI of its ability to satisfy margin calls to the Bank. However, the Connecticut action was not an unqualified success for Mr Vik, as on some points his evidence to the Connecticut court was rejected as untrue.
The examination of Mr Vik under CPR 71
In July 2015 Mr Justice Teare made an order pursuant to CPR 71.2 against Mr Vik in his capacity as a director of SHI (the “Part 71 Order”). In summary, this order required Mr Vik to produce all documents in SHI's control relating to SHI's means of paying the judgment debt and to attend an examination before a judge to provide information about SHI's means and any other information needed to enforce the judgment. Within days of being served with the Part 71 Order, Mr Vik resigned as a director of SHI.
Mr Vik's jurisdictional challenge to the Part 71 Order was unsuccessful. On 14 th October 2015 he disclosed 26 files of hard copy documents, principally bank statements, but no electronic documents. This was followed by further disclosure on 9 th and 10 th December 2015. On 27 th November 2015 the Bank's solicitors provided a list of the topics intended to be covered at the examination.
Mr Vik's oral examination then took place on 11 th December 2015 before Mr Justice Cooke. He was examined for one day by Ms Sonia Tolaney QC, counsel for the Bank. The parties have referred to this as “the XX Hearing” but I shall call it “the Part 71 hearing”. One of the topics about which Mr Vik was asked, which was included within the list of topics provided in advance of the hearing, concerned the whereabouts of the US $730 million transferred from SHI to Beatrice and the Trust. Mr Vik's evidence was that he did not know what assets Beatrice or the Trust had, either in August 2015 (the date when he had resigned as Protector of the Trust) or in December 2015 (the date of the hearing). The Bank's case is that this evidence was deliberately untrue.
Another topic on the Bank's list about which Mr Vik was examined concerned SHI's interest in a biotechnology fund called Devon Park (“the Devon Park Interest”). In August 2014 SHI had assigned this interest to a recently incorporated off-the-shelf Panamanian corporation, Universal Logistics Matters SA (“Universal”), for no consideration. The administrative details of the transfer were dealt with by Mr Johansson, but Mr Vik was copied on communications relating to it and signed the transaction documents on behalf of SHI. Mr Vik's evidence was that the Devon Park Interest had been sold by SHI to a company called VBI Corporation (“VBI”) which was owned by his father, Mr Erik Vik, pursuant to a Norwegian law Sale Agreement dated “as of September 26 2012” (“the 2012 Sale Agreement”). He said that following the sale, SHI held the Devon Park Interest on trust for VBI until 2014, when it was assigned by SHI to a third party (i.e. Universal) pursuant to an oral instruction given by VBI. Mr Vik said also that he had no connection with Universal and no ongoing involvement in SHI's affairs. The Bank's case is that this evidence was also deliberately untrue.
Another topic concerned a shareholding in a German hotel company, IFA Hotels & Touristik AG (“IFA”). SHI had lent or purported to lend these shares (“the IFA Shares”) to Vik Beteiligung & Verwaltung GmbH (“Vik Beteiligung”), a company 50% owned by Mr Vik, in October 2008. However, following Vik Beteiligung's liquidation in July 2013, the IFA Shares were transferred into Mr Vik's personal ownership. In May 2014 they were assigned to Universal, apparently for no consideration. Mr Vik's evidence was that...
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