Vendort Traders Inc. v Evrostroy Grupp LLC (British Virgin Islands)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Sumption |
| Judgment Date | 13 June 2016 |
| Neutral Citation | [2016] UKPC 15 |
| Date | 13 June 2016 |
| Docket Number | Appeal No 0108 of 2014 |
| Court | Privy Council |
[2016] UKPC 15
Lord Mance
Lord Kerr
Lord Sumption
Lord Carnwath
Lord Hodge
Appeal No 0108 of 2014
From the Court of Appeal of the Eastern Caribbean
Supreme Court (British Virgin Islands)
Privy Council
Appellant
Marcus Staff
Jeremy Child
(Instructed by Blake Morgan LLP)
Respondent
(Not participating)
The combined effect of sections 8 and 155 of the Insolvency Act 2003 of the British Virgin Islands is that a company is deemed to be insolvent and liable to be wound up if a statutory demand for a debt is made upon it and the demand is neither set aside by the court nor complied with within 21 days of its service upon the debtor. The grounds on which a statutory demand may be set aside by the court are identified in section 157 of the Act. One of them is that there is a "substantial dispute as to whether … the debt … is owing or due". The test for whether there is a "substantial dispute" is not in doubt. It is the same as the test for summary judgment, namely whether the debtor can raise a triable issue on the point.
The appellant Vendort Traders Inc is a company incorporated in the British Virgin Islands. On 24 May 2012 the respondent, Evrostroy Grupp LLC served a statutory demand on it in respect of a debt said to be due under a final award made on 1 November 2011 in an arbitration under the rules of the London Court of International Arbitration. This appeal arises out of Vendort's application to set it aside. The application was dismissed by Bannister J (Ag), and his judgment was upheld by the Court of Appeal. On this appeal, the Board has not heard submissions on behalf of the respondent. It elected not to lodge a printed case or appear at the hearing, and must be taken to rely on the reasoning of the courts below. In the Board's opinion, that reasoning was correct. In view of the concurrence of opinion, the relevant points can be made quite shortly.
The arbitration concerned a Share Purchase Agreement dated 25 May 2006 under which Vendort agreed to buy from Evrostroy 834,693 shares in a Russian company called ISKOG JSC for 44,672,769.36 Russian Roubles. The shares were duly transferred to Evrostroy in July 2006, but only 15,183,713 Roubles of the purchase price was ever paid. In the arbitration, Evrostroy claimed the balance of the price. It is important to note that the validity of the Share Purchase Agreement was not impugned in the arbitration proceedings and is not impugned now. Nor has there been any attempt to rescind it. Indeed, Vendort relies on the agreement to support its right to the shares, some of which it has disposed of.
Before the arbitrator, Vendort ran two defences.
One defence, as recorded in the award, was that the Share Purchase Agreement was tainted by illegality and unenforceable on account of the fraud of a Mr Kozlov. It was said that after the Share Purchase Agreement had been signed and the ISKOG shares transferred to Vendort, he was involved in a number of dishonest dealings in the shares. In summary, Evrostroy purported to assign its claim to the balance of the price to an English company called Crompton Solutions Ltd, and Vendort then purported to transfer its shares to Crompton in satisfaction of that claim. Mr Kozlov had been prosecuted in Russia for his involvement in these dealings and convicted. After the arbitrator had issued his award, the conviction was set aside on appeal, but he was then convicted at a retrial and on this occasion the conviction was upheld. The arbitrator was of course unaware of these later developments, but he rejected the argument based on the original conviction on the ground (i) that there was no evidence that Vendort knew of any fraud of Mr Kozlov, and (ii) that in any event the alleged fraud served only to demonstrate the disreputable character of Mr Kozlov's business...
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