Mr Carl A Sax v Mr Lev Tchernoy
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hamblen |
| Judgment Date | 26 March 2014 |
| Neutral Citation | [2014] EWHC 795 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 26 March 2014 |
| Docket Number | Case No: 2012-755 |
[2014] EWHC 795 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL
Mr Justice Hamblen
Case No: 2012-755
Simon Bryan QC and David Davies (instructed by Hausfeld LLP) for the Claimant
Clive Freedman QC and David Lascelles (instructed by Mischon De Reya) for the Defendant
Hearing dates: 24 and 25 February 2014
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
The Defendant ("Mr Tchernoy") applies to set aside the service of proceedings on him out of the jurisdiction made pursuant to the order of Andrew Smith J dated 20 August 2012.
The jurisdictional gateway relied upon by the Claimant ("Mr Sax") is that his claims are in respect of a contract governed by English law ( CPR 6BPD.3 para.3). The alleged contract is a signed Memorandum of Understanding dated "as of" 11 April 2008 but signed in late May/early June 2008 ("the MOU"). The parties to the MOU were Mr Tchernoy, Mr Sax and a businessman called Mr Sergey Soukholinski-Mestetchkin ("Mr S-M").
Mr Tchernoy challenges jurisdiction on the grounds that Mr Sax cannot establish:
(1) a good arguable case (i) that there was a contract and (ii) that any such contract was governed by English law;
(2) a serious issue to be tried in respect of the claim for breach of contract and in respect of the damages claimed;
(3) that England is clearly and distinctly the appropriate forum for the trial.
Mr Tchernoy further contends that service of proceedings should be set aside for failing to provide full and frank disclosure.
The hearing took place over two days. The evidence comprised three witness statements from Mr Sax and four witness statements from his solicitor, Mr Maton; two witness statements from Mr Tchernoy and three witness statements from his solicitor, Mr Gerstein, and a witness statement from Mr S-M, which supported Mr Tchernoy's case. There was also Russian law expert evidence, although this does not need to be addressed. There were extensive documentary exhibits to the witness statements and lengthy skeleton arguments from both sides.
Factual background
Mr Sax is an American citizen and businessman. He was formerly Senior Vice President and General Counsel of Atlantic Coast Airlines United Express, a United Airlines commuter carrier. At the time of the MOU he was chairman of a Gibraltar company called Strategic Partners Group Limited ("Strategic Partners") and was based in Florida, USA. He is currently involved with a company called Partners Capital Group S.r.L., a privately held Italian company, created to develop hotels and resorts in Italy and is now living in Italy.
Mr Tchernoy is a Russian businessman. He and his brother, Michael Tchernoy, became very wealthy in the 1990s in the Russian aluminium business founding, along with UK metal traders David and Simon Reuben, the Trans-World Group, which produced aluminium in Russia and sold it in Western markets. He has dual Israeli/Russian citizenship and (as is accepted for the purpose of this application) at the material time he was resident in Russia.
Mr S-M is a Russian businessman and a qualified Russian lawyer. Like Mr Tchernoy, he is a dual Israeli/Russian citizen. According to his witness statement, he has a range of business interests, largely focussed on Russian property development. He knew Mr Sax and Mr Tchernoy for many years prior to the MOU, having worked on business in Russia with each of them. At the material time he was a director of Strategic Partners.
Strategic Partners had been seeking for some time to acquire a site at Porto Conte Bay near Alghero in Sardinia, Italy ("the Property"). The Property consists of an estate of approximately 269 hectares and features a large abandoned villa known as "Villa Mugoni". This villa, which is now in a state of disrepair, is the former home of a prominent Italian politician from the 1930s/40s.
The Property was owned by two Italian companies, namely Societa Immobiliare per il Turismo Economicosardo S.p.A. ("S.I.T.E.") and Costa del Corallo S.p.A. ("C.D.C."). These companies were represented in the negotiations for the sale of the property by Mr Edward Baroudi ("Mr Baroudi"), who was the 50% shareholder in the Luxembourg parent company of SITE and CDC (Capinvest International SA or "Capinvest") with the remaining 50% of the shares held by Mr Baroudi's brothers.
The proposed project for the acquisition of the Property was first mentioned to Mr Tchernoy by Mr S-M in the middle of 2007, Mr S-M having been introduced to the proposed project by Mr Sax. The proposal was to acquire the Property and develop it into two hotels and villas.
In the summer of 2007 Mr Sax and Mr S-M had a series of meetings with Mr Baroudi to discuss terms for the potential acquisition of the Property. Mr S-M had identified Mr Tchernoy as a potential financial backer of the project.
A number of documents were produced by Mr Sax providing details of the project and its potential profitability. There were, for example, a series of documents entitled "Offering Circulars" which described the project in some detail and provided financial information. Mr Sax said that he provided these to Mr S-M on the understanding that they would be passed to Mr Tchernoy. Mr Tchernoy denied receiving them but he must have had some knowledge of the project and its potential profitability in order to agree to become involved.
In his evidence Mr Sax explained that the commercial rationale for the acquisition was that it was believed that the investors would be in a position to expedite the process of obtaining planning permission from the Commune of Alghero in relation to the development of the Property. The mere issuance of this planning permission should have substantially increased the value of the land. Mr Baroudi was not himself in a good position to obtain this planning permission because he had fallen out with the local authorities over a previously abandoned attempt to develop the land and his previous construction of an adjacent hotel, which the authorities considered an eyesore. Mr Sax also had a lien over the land, held through Strategic Partners, and this accordingly put him in a good position to reach agreement with the Baroudi brothers.
By March 2008 a number of steps were being taken to put in place the structure for the project to move forward.
On 3 March 2008, Mr Sax met with Mr Alexander Milon and Mr Andrey Zykov at Keiser Beratung's offices on Regent Street, London. There is an evidential dispute in relation to their precise role, but the parties agree that Mr Milon and Mr Zykov were instructed by Mr Tchernoy to deal with the mechanical aspects of the project, such as formation of companies, preparation of documentation etc.
The parties intended to hold their respective interests in the project through shareholdings in a British Virgin Islands holding company. Mr Zykov acquired a BVI company for this purpose in early March called Meridian Development Asset Limited ("Meridian BVI"). From 1 March 2008 expenses in relation to the project were incurred and paid on Mr Tchernoy's behalf. This led to the Aquarius Loan agreement (dated as of 1 March 1988 but entered into on 10 April 2008) between Mr Tchernoy's company Aquarius and Meridian BVI.
Meridian BVI opened a London bank account with the London branch of Bank Hapoalim B.M. and the correspondence address for the company was the Regent Street office from which Mr Milon and Mr Zykov were working on the transaction. The signatories to the account were Mr Milon, Mr Zykov and a Ms Ershova.
London solicitors, CKFT, were instructed for the purposes of drawing up transactional documentation. It is common ground that the instruction was a joint instruction by all three prospective shareholders in Meridian BVI, Mr Sax, Mr S-M and Mr Tchernoy.
On 9 March 2008 Mr Sax emailed Mr S-M stating that he wanted to establish a "tentative closing date…so that our associate professionals can work towards a date certain (even if it is tentative)". Mr S-M replied on 11 March 2008 stating that: "unless we clearly understand the deal between us and not earlier that we will be able to establish the possible closing date. As you've seen lawyers have risen (sic) certain questions to answer regarding the entire relationship and partnership development matters, which I would like you to make the first comments."
On 18 March 2008 CKFT circulated a number of draft agreements, including a draft shareholders' agreement, a draft inducement agreement, a draft consulting agreement, a draft escrow agreement, a draft agreement for conveyance, a draft loan agreement between Mr Tchernoy and Meridian BVI and a draft security agreement.
At this stage the draft shareholders' agreement contained detailed provisions addressing, amongst other things, matters requiring the consent of the shareholders (cl.5), quorum (cl.7), pre-emption rights (cl.8) and governing law and jurisdiction (cl.18 – English law).
By clause 3.1 it was agreed that Meridian BVI or its Italian subsidiary would enter into various agreements relating to the purchase of the Property. At this stage they were an inducement agreement (with Capinvest and the Baroudi brothers), an escrow agreement (with Capinvest and the Baroudi brothers) and a consultancy agreement (with Mr Baroudi). The purchase structure contemplated at that stage involved the purchase of the Property by payment from the Italian subsidiary company to the sellers of €4 million with payment of €16 million to the Baroudis...
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