Re Bank of Credit and Commerce International SA, Re; Bank of Credit and Commerce International (Overseas) Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 19 November 1993 |
| Judgment citation (vLex) | [1993] EWCA Civ J1119-8 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 November 1993 |
| Docket Number | No. CHANI 93/1251/B & CHANI 93/1252/B |
[1993] EWCA Civ J1119-8
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
(ON APPEAL FROM THE HIGH COURT)
(CHANCERY DIVISION)
(Mr. Justice Rattee)
Before: Lord Justice Dillon Lord Justice Nolan and Lord Justice Roch
No. CHANI 93/1251/B & CHANI 93/1252/B
MR. D. RICHARDS QC, MR. M. COLLINGS and MR. R. MORGAN (instructed by Messrs. Nabarro Nathanson, London) appeared on behalf of the 1st Appellant (Mahfouz).
MR. W. STUBBS QC, MR. S. SMITH and MR. I PEACOCK (instructed by Messrs. Goulden's, London) appeared on behalf of the 3rd Appellant (Kahlon).
MR. M. CRYSTAL QC and MR. R. SHELDON (instructed by Messrs. Lovell White Durrant, London) appeared on behalf of the Respondents.
Friday, 19th November 1993
DILLON L.J.:— The Court has before it appeals by the First and Third Respondents to these proceedings, Sheik Mahfouz and Mr Kahlon, against an Order of Rattee J made on the 30th July 1993. That Order provided that world-wide Mareva injunctions against Sheikh Mahfouz and Mr Kahlon, which had originally been granted ex parte by Vinelott J on the 10th December 1992, should continue in force until the trial of these proceedings or further Order in the meantime. The continuation of the Mareva injunctions is not disputed; what is in issue is the scope of the undertakings which the applicants in these proceedings should be required to give to the Court if the injunctions are thus continued. It is said for Sheikh Mahfouz and Mr Kahlon that in certain respects indicated in their notices of appeal the undertakings should, for the protection of Sheikh Mahfouz and Mr Kahlon, be more stringent than the undertakings which the Judge was prepared to accept.
When the appeals were first opened it was urged that there were two quite separate respects in which the undertakings accepted by the Judge were deficient. By the end of the hearing, however, the parties had agreed varied undertakings in respect of one of those respects, and accordingly this judgment is only directed to the other of them, which has for convenience been labelled "multiplicity of suits".
It is of course elementary that the terms of a Mareva —or other —injunction and the conditions, by way of cross-undertaking or otherwise, on which it should be granted, must be dependent on the particular circumstances of the individual case, and are matters for the discretion of the Judge. There is no single form of injunction with cross-undertakings which is universally applicable. Subject however to the special features of the individual case, there is a considerable similarity in the problems which arise in different cases, and there is virtue in having a measure of uniformity in the practice.
In Derby & Co Ltd v Weldon [1990] Ch 48 (Derby V Weldon No. 1) Nicholls L.J. said at 59A-B:-
"The jurisdiction is established, but what is still being worked out, in this fast developing area of law, is the manner in which, in practice, the court should exercise its discretionary power under this wide jurisdiction. One important matter in this regard concerns the limitations and safeguards normally appropriate to be built into restraint and disclosure orders regarding overseas assets."
In my experience, this process of working out is still continuing. Indeed that is underlined by the recent clarification by the House of Lords in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 of passages in the speech of Lord Diplock in The Siskina [1979] AC 210 which were regarded as fundamental to the jurisprudence in regard to the grant of Mareva and other injunctions.
The first special features of this case concern the nature of the proceedings and their international context.
The proceedings are brought in the Companies Court by seven individuals as applicants. They are entitled "In the Matter of" two companies —Bank of Credit and Commerce International S.A. ("B.C.C.I.") and Bank of Credit and Commerce International (Overseas) Limited ("Overseas") —but in the usual way those companies are not themselves parties to the proceedings. B.C.C.I. is a company incorporated in Luxembourg which carried on business in England and elsewhere; it had 47 offices or branches in 13 countries. Overseas is a company incorporated in the Cayman Islands; it had 63 offices or branches in 28 countries.
B.C.C.I. was ordered to be compulsorily wound up by the High Court in England on the 14th January 1992, and of the seven applicants in these proceedings the first four are accountants (of the English firm Touche Ross) who on the 14th January 1992 were appointed to be the liquidators of B.C.C.I. for the purposes of the English winding up. B.C.C.I. is also in liquidation in Luxembourg under an Order of the Luxembourg Court of the 3rd January 1992. The liquidators in Luxembourg are a further partner in Touche Ross and two Luxembourg lawyers. Technically the English winding up is ancillary to the Luxembourg winding up. The appointment of the English liquidators of B.C.C.I. by the English Court gives them no authority to act on behalf of B.C.C.I. in any jurisdiction other than England and Wales.
Overseas was ordered to be compulsorily wound up by Order of the Cayman Islands Court on the 14th January 1992. The fifth, sixth and seventh applicants in these proceedings, (who are accountants in the Canadian associate firm of Touche Ross) are the liquidators of Overseas appointed by the Cayman Islands Court.
The proceedings are also entitled "In the Matter of the Insolvency Act 1986." That is because the substantial relief claimed in the proceedings is relief under various provisions of the Insolvency Act viz:-
(a) fraudulent trading (section 213)
(b) wrongful trading (section 214)
(c) misfeasance (section 212) and
(d) transactions at an undervalue (section 238).
It is thus relief which can only be granted by a United Kingdom Court in respect of a company within the meaning of the Insolvency Act. B.C.C.I. is such a company (because although incorporated elsewhere it carried on business in this country and was registered and is being wound up here). Overseas is not, but the liquidators of Overseas, acting pursuant to Letters of Request from the Cayman Island Court, claim the same relief under section 426 of the Insolvency Act, the Cayman Islands having been designated as a "relevant country or territory" for the purposes of that section under the Cooperation of Insolvency Courts (Designation of Relevant Countries and Territories) Order 1986 S.I. 1986 No 2123.
Because of the manner in which the affairs of B.C.C.I. and Overseas were run by the managements before liquidation, a pooling agreement has been entered into and has been approved by the Courts in England, the Cayman Islands and Luxembourg, under which, broadly, the realisations by the liquidators of B.C.C.I. and Overseas, after payment of costs of liquidation and preferential claims, will form a single fund to be divided rateably among the general creditors of both companies. There are limitations to the pooling agreement, however, one of which is that certain jurisdictions are regarded as "ring-fenced" in the sense that under the local law of these jurisdictions assets of e.g. B.C.C.I. within such a jurisdiction are required to be applied in satisfaction of liabilities incurred within the jurisdiction in priority to liabilities incurred elsewhere. There are also special arrangements applicable to the United States in that under a plea agreement entered into in proceedings in the United States between the United States, acting by the Justice Department, and the People of the State of New York, acting by the District Attorney for New York County, on the one hand and B.C.C.I., Overseas, B.C.C.I's parent company B.C.C.I. Holdings (Luxembourg) S.A. ("Holdings") and certain other companies on the other hand all assets of all those companies in the United States are to be forfeited to the United States, and a fund known as "the World Wide Victims Fund" was to be established on the terms of the plea agreement.
In these circumstances it is not surprising that there is close cooperation between the British and Luxembourg liquidators of B.C.C.I., the liquidators of Overseas, the Luxembourg liquidators of Holdings, which was incorporated in Luxembourg and is in liquidation there, and the liquidators of certain other companies in the B.C.C.I. group which are not material to this judgment. Disclosure of information to such liquidators was, so far as the English Court is concerned, authorised by successive Orders of Sir Nicolas Browne-Wilkinson V.C. and Sir Donald Nicholls V.C.
It is the case of the liquidators of B.C.C.I., Overseas and Holdings that those companies are insolvent as a result of massive frauds perpetrated by senior executives of the B.C.C.I. group. Certain former executives face criminal charges, involving very large sums of money, in this country or elsewhere. So far as Sheikh Mahfouz and Mr Kahlon are concerned, the liquidators seek compensation from them in these proceedings for, as it has been put, their complicity in the fraudulent conduct of the senior executives. That complicity is said to be shown by a series of transactions as set out in the Points of Claim. It is claimed that Sheikh Mahfouz and Mr Kahlon are liable to contribute to the assets of B.C.C.I. and Overseas the total deficiency as regards creditors of those companies, or alternatively such sums as the Court thinks proper.
Sheikh Mahfouz is a national of Saudi Arabia and resident in that country. He is a director of the second respondent in these proceedings, National Commercial...
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