Transworld Payment Solutions U.K. Ltd ((in Liquidation)) v First Curaçao International Bank N.v
| Jurisdiction | England & Wales |
| Judge | Mr Justice Freedman |
| Judgment Date | 31 October 2022 |
| Neutral Citation | [2022] EWHC 2742 (Ch) |
| Docket Number | Case No: BL-2020-001543 |
| Court | Chancery Division |
| Year | 2022 |
[2022] EWHC 2742 (Ch)
Mr Justice Freedman
Case No: BL-2020-001543
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
The Rolls Building
Fetter Lane,
London EC4A 1NL
Christopher Parker KC, Caley Wright and Charles King (instructed by Gowling WLG (UK) LLP) for the Claimant/Respondents
Andrew Scott KC and Barnaby Lowe (instructed by Jones Day) for the First Applicant/First Defendant
Tom Smith KC and Paul Fradley (instructed by Quinn Emmanuel Urquhart & Sullivan UK LLP) for the Second Applicant/Second Defendant
Hearing dates: 28 and 29 April 2022
Further letters and written submissions up to 20 May 2022
Approved Judgment
This judgment was handed down remotely at 4.00pm on 31 October 2022 by circulation to the parties or their representatives by e-mail and by release to the National Archives
I Introduction
There are before the Court applications in respect of the proceedings in this Court. The proceedings in this court, the Court of England and Wales, will be called “the EWHC Proceedings”. There are related proceedings commenced in Curaçao which will be called the “Curaçao Proceedings”. The applications are by:
(1) The First Defendant (“FCIB”): (i) to set aside an order granting permission to serve out of the jurisdiction all claims in these proceedings on it; (ii) save for the claim for having allegedly caused or allowed the First Claimant (“TWPS”) to participate knowingly in the fraudulent trading (the section 213 Claims below referred to) in respect of which this Court has jurisdiction pending the determination of the Curaçao Proceedings; and
(2) The Second Defendant (“Mr Deuss”), a stay of these proceedings pending determination of the Curaçao Proceedings.
The Claimants' case is that the EWHC Proceedings arise out of an alleged “Missing Trader Intra-Community fraud” or “VAT carousel fraud”, carried out in England and Wales, by English and Welsh companies (referred to as a shorthand only as “English companies”) to defraud HMRC of substantial amounts of VAT. The fraud was facilitated by FCIB, which provided banking services to the companies involved in the fraud (described in these proceedings as the “MTIC Companies”, referring to Missing Trader Intra-Community, used to refer to companies participating in such a fraud) and by TWPS, which was responsible for onboarding new clients to FCIB. The allegation is that TWPS, FCIB and Mr Deuss dishonestly assisted in a UK tax fraud and knowingly participated in the fraudulent trading of UK companies.
A letter before action (“the Original LBA”) was sent by Blake Morgan on behalf of the Claimants to the Defendants on 5 February 2016 on behalf of the Second Claimant (“Mr Hunt”) as liquidator of TWPS threatening proceedings in the EWHC. There then ensued on 9 March 2016 proceedings in Curaçao. FCIB issued a petition in the Court of First Instance in Curaçao against 96 defendants, including Mr Hunt in his personal capacity and as liquidator of a number of companies (but not as liquidator of TWPS). On 22 June 2016, FCIB subsequently initiated additional proceedings against Mr Hunt in his capacity as liquidator of TWPS. In the Curaçao Proceedings, there were sought negative declarations relating to the threatened EWHC Proceedings.
In the course of the last 6 years, there have been numerous hearings in the Curaçao Proceedings at all levels up to the Supreme Court of the Netherlands.
The EWHC claims were filed on 21 September 2020 in the form of a part 7 claim form and an Insolvency Act Application Notice which were consolidated and the subject of an order to be managed and heard together. On 28 April 2021 Mr Lance Ashworth QC sitting as a Deputy Judge of the High Court granted permission without notice (the “Permission Order”) for the claims to be served out of the jurisdiction.
The Claimants submit that the fraud claims only arise for decision in the EWHC Proceedings or that it is only in the EWHC that the full scope thereof can be determined. They claim that the EWHC is clearly the appropriate forum for the Claimants' claims. They also submit that the EWHC Proceedings are clearly the appropriate forum by reference to the following:
(1) The location of the torts;
(2) The applicable law; and
(3) The location of witnesses and (to the extent relevant) documents.
The Claimants also submit that some claims can only be litigated in EWHC and in particular:
(1) The claims under section 213 of the Insolvency Act 1986 (the “section 213 Claims” and “IA 1986”) can only be litigated in EWHC (which the Defendants accept);
(2) Only in these proceedings is Mr Deuss a party;
(3) Only in these proceedings can the extent of the Defendants' liability be determined (which the Court will need to do if the claims were not compromised by the IP Settlement Agreements as defined below); and
(4) Properly analysed, the scope of the Curaçao Proceedings is narrow and presents no barrier to the continuation of the EWHC Proceedings.
The Defendants submit that the Curaçao court is presently seised as to the issue as to whether the companies were effectively parties to a number of settlement agreements entered into in or around February 2015 (the “IP Settlement Agreements”), and the effect of the same. The IP Settlement Agreements are subject to Curaçao law and contain a Curaçao jurisdiction clause (which is not exclusive). They also submit that the fraud claims will be determined as part of the applications for negative declarations in the Curaçao Proceedings. The Claimants dispute that the fraud claims or the full scope of the fraud claims will be determined in the Curaçao Proceedings.
FCIB seeks to set aside the permission granted at the without notice stage on the grounds that the Assigned section 213 Claim referred to below is unsustainable in law and that England and Wales is not the proper forum for the Contribution Act and Dishonest Assistant Claim referred to below. FCIB submits that Curaçao, where the Curaçao Proceedings were already on foot, is the appropriate forum and/or that the Claimants are unable to show that EWHC is clearly the appropriate forum. Insofar as the section 213 Claim or other claims remain in England, these should be stayed on case management grounds pending the outcome of the Curaçao Proceedings.
II Summary of the claims against the Defendants
The Claimants say that TWPS participated in a VAT carousel fraud in the UK by facilitating the use of FCIB by marketing FCIB's services to companies which were being used for a fraud and onboarding such companies as account holders with FCIB. TWPS, FCIB and Mr Deuss thereby facilitated the fraud.
Companies which were clients of FCIB, onboarded by TWPS, were used to commit fraud, as a result of which HMRC was deprived of large amounts of VAT. In consequence of being left with undischarged VAT liabilities, those companies have made claims against TWPS which by these proceedings TWPS seeks to pass on to FCIB and Mr Deuss. TWPS also makes claims against FCIB and/or Mr Deuss in these proceedings as the assignees of those companies.
The Claimants allege that Mr Deuss directed FCIB and TWPS in these activities, exercising strategic control over both entities. He gave instructions to TWPS' marketers in respect of the marketing of FCIB's banking and financial services. It was Mr Deuss, and not the de jure directors, to whom Mr Vallerey, the company president, reported. TWPS also claims directly against Mr Deuss.
The Claimants' claims comprise:
(1) The section 213 Claims. These fall into two categories:
(1) Claims by TWPS and Mr Hunt against Mr Deuss and FCIB for a contribution to TWPS' assets on account of their participation in TWPS' fraudulent trading; and
(2) Claims by the MTIC Companies themselves against Mr Deuss and FCIB for participation in their fraudulent trading. These claims have been assigned to TWPS (the “Assigned section 213 Claims”);
(2) Claims by TWPS for a contribution to losses under s.1 of the Civil Liability (Contribution) Act 1978 (the “Contribution Claims”). The Contribution Claims comprise claims by TWPS for a contribution from each of Mr Deuss and FCIB to TWPS' liabilities to the MTIC Companies which arise under claims in dishonest assistance;
(3) Claims by TWPS against Mr Deuss for breach of his fiduciary duties to TWPS, in causing TWPS itself to trade fraudulently and to participate in or facilitate the fraudulent trading of the MTIC Companies (the “Breach of Fiduciary Duty Claims”); and
(4) Claims by TWPS, as assignees of the MTIC Companies, in dishonest assistance against FCIB and Mr Deuss (the “Dishonest Assistance Claims”). FCIB and Mr Deuss assisted the directors of the MTIC Companies in breaching their fiduciary duties in causing the companies to participate in MTIC fraud.
The Defendants' challenge to the proceedings is, primarily, about whether this jurisdiction is the appropriate forum for the claims that the Claimants have brought; FCIB also submits that the Assigned section 213 Claims are unsustainable in law. The challenge is not about whether the factual allegations are arguable or whether the claims fell within the gateways relied upon for the grant of permission to serve the claims out of the jurisdiction.
III Background
FCIB is a bank incorporated in Curaçao, in the Kingdom of the Netherlands (formerly, the Netherlands Antilles). The Claimants claim that FCIB was so incorporated to take advantage of the reduced regulatory burden of being an...
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