Tasarruf Mevduati Sigorta Fonu v Demirel and another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Lawrence Collins |
| Judgment Date | 21 December 2006 |
| Neutral Citation | [2006] EWHC 3354 (Ch) |
| Docket Number | Case No:HC05 C03744 |
| Court | Chancery Division |
| Date | 21 December 2006 |
[2006] EWHC 3354 (Ch)
Mr Justice Lawrence Collins
Case No:HC05 C03744
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Stephen Moverley Smith QC and Mr Alexander Pelling (instructed by Berwin Leighton Paisner) for the Claimant
Mr Edward Cohen (instructed by Cartier & Co) for the First Defendant
Hearing: December 5 and 6, 2006
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
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I Background
In these proceedings, the claimant is Tasarruf Mevduati Sigorta Fonu (the Savings Deposit Insurance Fund, to which I shall refer as "TMSF"). TMSF is a Turkish public legal entity established under the Bank Law 4389 of June 18, 1999 with authority to restructure and administer banks and banking institutions in Turkey whose banking licences have been revoked (normally due to their insolvency). Under Turkish law, all banks in Turkey are required to have savings deposit insurance to safeguard depositors and once the licence of the bank is revoked, TMSF repays depositors and acquires the bank's assets.
TMSF was originally an arm of BDDK (the Banking Regulation and Supervision Agency), an independent public legal entity established in 1999 under the Bank Law to supervise and regulate the Turkish banking sector. Its role and functions are broadly similar to those of the Financial Services Authority in the United Kingdom. TMSF was an arm of the BDDK until December 2003 when it became independent.
Under a law of December 2003 TMSF is entitled to receive proceeds of all proceedings issued against third parties to recover losses or properties sustained by banks whose shareholding rights have been transferred to TMSF. Under Article 3 of the Provisional Articles etc of the Bank Law 5020 of December 12, 2003, TMSF is entitled to receive the proceeds notwithstanding that the proceedings were commenced prior to the formation of TMSF.
The action in England was brought to enforce at common law three judgments entered in favour of TMSF by the Turkish courts on November 20, 2001 (2001/1461), November 26, 2001 (2001/1300) and June 11, 2002 (2002/551). The judgments were obtained in civil actions in the civil courts in Turkey against the first defendant, Yahya Murat Demirel ("Mr Demirel"). Those actions were commenced in the wake of the collapse of three Turkish banks, Bank Ekspres AS, Sümerbank AS and Egebank AS, which were taken over by TMSF.
Mr Demirel was the controller of a group of companies which owned Egebank AS. TMSF's case is that at the time of its demise Egebank AS had accumulated losses of over US$1.2 billion, that investigations subsequently revealed that some US$490 million had been misappropriated from Egebank by Mr Demirel, his family and associates, and approximately US$336 million had been misappropriated from the other banks.
On December 22, 1999, the management and supervision of Egebank AS was transferred to TMSF. Its banking licence was revoked on February 18, 2001. The operations of, and most of the shares in, Bank Ekspres AS were transferred to TMSF in 1998, and TMSF assumed management from December 12, 1998. TMSF assumed the management and operations of Sümerbank AS from December 22, 1999.
The second defendant is Merrill Lynch International Bank Ltd ("MLIB"), which was joined in order to obtain disclosure of information, which was obtained, and MLIB is no longer an effective party.
Judgment 2001/1461 in a Turkish lira sum equivalent to US$30 million ("the $30 million judgment") was in respect of a right of action of Bank Ekspres AS against Mr Demirel for damage caused by allegedly fraudulent loan transactions.
Judgment 2001/1300 in the sum of about US$2 million was in respect of certain loan agreements made between Sümerbank AS and Egebank where Mr Demirel was joint debtor and surety. Judgment 2002/551 in a Turkish lira sum equivalent to some US$2.5 million relates to further loan agreements entered into between Sümerbank AS as lender and Mr Demirel as surety. In her witness statement in answer dated September 12, 2006, Ms Dogan conceded that as at the date of commencement of this action these two judgments had not been "finalised" because they had not been properly served on Mr Demirel's lawyers. At the hearing of this application, TMSF accepted that the present action in respect of those judgments was not properly constituted. Because all of the evidence refers to all three judgments, I shall generally refer to the judgments collectively, although the proceedings are now live only as regards the $30 million judgment.
This is the hearing of an application to set aside the grant of permission to serve Mr Demirel outside the jurisdiction in relation to the claim and in relation to a worldwide freezing injunction granted in support of proceedings against him abroad.
II Application for service out of the jurisdiction
On December 6, 2005 I gave permission to TMSF to serve Mr Demirel with the proceedings out of the jurisdiction, and granted a worldwide freezing injunction against Mr Demirel, which was continued as amended on December 16, 2005 by Patten J.
The grounds of jurisdiction relied upon were: (a) CPR 6.20(9), that a claim was made to enforce a judgment; and (b) CPR 6.20(4), that a claim was made for an interim remedy under section 25(1) of the Civil Jurisdiction and Judgments Act 1982.
In the affidavit of Ms Dogan (TMSF's in-house lawyer) sworn on November 29, 2005 in support of the applications, she said that (a) the freezing injunction was sought to prevent assets held by MLIB being dissipated pending judgment in the action; (b) the declaration of assets made by Mr Demirel in the Turkish proceedings made no mention of assets which were placed with MLIB on his behalf, which suggested that he was seeking to hide his assets; and (c) there had been reports in the Turkish press of what were said to be details of Mr Demirel's assets held by Merrill Lynch, in the Cayman Islands.
She said that TMSF had left it until then to enforce the judgments in England because it was only in September 2005 that it had received evidence that Mr Demirel had assets in England; and that it appeared that Mr Demirel personally held cash accounts at Merrill Lynch, including one in London. She exhibited documents indicating that the claimant had identified a number of accounts of Mr Demirel and associated companies with Merrill Lynch, including one in London, and two accounts with Merrill Lynch, Pierce Fenner & Smith Inc in New Jersey. She exhibited documents, including a draft trust deed, an executed deed of amendment indicating that Mr Demirel had created a trust under Cayman Islands law with Merrill Lynch Bank and Trust Company (Cayman) Ltd as trustee in 1997, and some bank statements. These contained a reference to account M002– 12207, showing a balance of about US$150,000 and stating that the account was conducted through MLIB. On the basis of these documents Ms Dogan stated that it appeared that Merrill Lynch was holding assets belonging to Mr Demirel over which TMSF would be entitled to execute its judgment once obtained in England.
III Application to set aside
By a notice of application dated March 9, 2006 Mr Demirel applied pursuant to CPR Part 11 for: (a) a declaration that the court has no jurisdiction to try the claim against Mr Demirel or should not exercise any such jurisdiction; (b) an order that the claim form be set aside and/or that service of the claim form be set aside; (c) discharge of the order granting permission to serve Mr Demirel out of the jurisdiction; (d) discharge of freezing injunctions obtained by TMSF against Mr Demirel; (e) an inquiry on the cross-undertaking in damages; and (f) costs.
The grounds set out in the application are: (a) Mr Demirel has no assets within the jurisdiction, so that no judgment obtained against him in Turkey can be enforced against him within the jurisdiction; (b) it is in all the circumstances inexpedient for the court to grant any interim relief against Mr Demirel in England in aid of any judgment obtained against him in Turkey; (c) TMSF has failed to discharge the burden of proof resting upon it to show that England is clearly the proper place in which to bring a claim against Mr Demirel; and (d) in these proceedings TMSF is seeking to enforce directly or indirectly a public law or laws of Turkey.
Mr Demirel relied in particular on these matters in his evidence in support of the application: (a) he is a Turkish national and resident of Turkey and does not live and has never lived in the United Kingdom; (b) he does not have, and has at no relevant time had, any assets in England and Merrill Lynch has confirmed that it holds no assets on his behalf or on behalf of trusts of his in England and that none of the accounts identified in Ms Dogan's witness statement are English accounts.
IV The arguments
Mr Demirel
Mr Edward Cohen, for Mr Demirel, argues that it is a pre-condition of the existence of jurisdiction under CPR 6.20(9) that there be assets within the jurisdiction, and since there are no assets of Mr Demirel in England, the court has no jurisdiction. The onus is on TMSF to satisfy the court that it has a good arguable case that Mr Demirel has assets in the jurisdiction against which the judgments can be enforced.
In the light of TMSF's present case and the evidence, TMSF has shown neither a serious issue to be tried nor a good arguable case that Mr Demirel has assets within the jurisdiction. On the contrary, Mr Demirel has much the...
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