The Hon. Mr Justice
Popplewell :
Introduction
1.
On 22 and 23 March 2018 I heard applications to continue freezing orders
which I granted against the third to fifth defendants on an ex parte
application on 16 November 2017. At the conclusion of the hearing I announced
my decision that the orders would be set aside and not continued, for reasons
which were expressed very briefly due to the lateness of the hour. These are
my fuller reasons.
2.
The claimant (“BTR”) was incorporated in Bucharest, Romania
in 1993 and until 2002, when it was put into liquidation, it carried on
business as a large retail and commercial bank with operations chiefly in Romania
but including a wide network of corresponding banks in Turkey
and elsewhere. It was closely affiliated with, and majority owned by, the
Bayindir Group. The first defendant (“Mr Çörtük”)
is the owner and controller of the Bayindir Group.
3.
The second to fifth defendants are
joined to the proceedings as non cause of action defendants for the purposes of
seeking interlocutory relief from them. The second defendant (“Serkan”) is Mr
Çörtük’s son. The third defendant (“Ms
Sakarya”) is Mr Çörtük’s daughter.
She worked in Human Resources for one of her father’s companies within the
Bayindir Group. She is a Turkish citizen and lives in Turkey. The fourth defendant (“Mr Özerman”) worked closely with Mr Çörtük for the Bayindir Group from 1998. BTR describes him as Mr Çörtük’s right hand man. He is a Turkish citizen
and resident in Turkey. The fifth defendant (“Ms Gönen”) worked in the Human
Resources department within the Bayindir Group from around 1997. She is a
close family friend of Mr Çörtük.
She too is a Turkish citizen and lives in Turkey.
4.
On 16 November 2017 I granted
freezing orders against each of the five defendants together with ancillary
disclosure orders. The return date was 1 December 2017. The first and second
defendants have played no part in these proceedings. They did not appear at the
return date, when the orders were continued against them. They have failed to
comply with the disclosure provisions. Ms Sakarya, Mr Özerman and Ms Gönen
sought, and were granted, an adjournment of the return date in order to prepare
evidence to resist the continuation of the orders.
5.
The relief sought against Ms
Sakarya, Mr Özerman and Ms Gönen is ancillary to the substantive claim against Mr
Çörtük and to various proceedings seeking
to enforce that claim. The claim is based on what has been described as “the
Deposit Account Fraud”, namely that between 1998 and April 2000 Mr Çörtük caused BTR fraudulently to pledge large
deposits held by BTR with foreign banks as security for loans made to the
Bayindir Group, to a total value of about US$108 million and €14.8 million; the
Bayindir Group company then defaulted on the loans, causing the lenders to
exercise their security over BTR’s deposits. A criminal investigation was
opened against Mr Çörtük and a
number of the other directors in Romania in February 2001. BTR joined its
civil claim to the criminal proceedings seeking damages against Mr Çörtük and the other directors. On 19 April 2007
a first instance judgment awarded BTR the full amount sought. There were
appeals, ultimately to the Second Criminal Chamber of the Court of Appeal of Bucharest, which in material respects dismissed the appeal on 25 May 2012. In that
decision (“the Romanian Judgment”) the court held that Mr Çörtük had been
instrumental in perpetrating the Deposit Account Fraud which had directly led
to the insolvency and liquidation of the bank on 3 July 2002. The Court
sentenced Mr Çörtük to 13 years
imprisonment (a period subsequently reduced to 10˝ years), and held Mr Çörtük liable to pay to BTR approximately US$59.4
million and €11.3 million plus interest. That judgment debt remains
unsatisfied, save for a sum of CHF2.8 million which was recovered as a result
of criminal proceedings in Switzerland against Mr Çörtük. Following the judgment and a request by Romania, Interpol issued a red notice for Mr Çörtük’s
arrest and extradition. He has served no part of his sentence and has evaded
extradition and arrest. Mr Çörtük
and his son, Serkan, now reside in Monroe Township, New Jersey, USA.
He maintains his innocence of the Deposit Account Fraud and has alleged that
the Romanian proceedings, in which he took no part, were without jurisdiction
and a breach of his human rights.
6.
BTR filed an application for
recognition and registration for enforcement of the Romanian Judgment in this court
on 20 November 2017, shortly after the ex parte application for the
freezing orders and as foreshadowed at the hearing of that application. On 28
November 2017 Master Kay QC made such an order (“the Enforcement Order”). It
has been served on Mr Çörtük and the
period of two months within which Mr Çörtük was entitled to apply to set it
aside have passed without any such application. It is accordingly now final.
7.
The basis on which BTR says that the
freezing order relief is appropriate and necessary against Ms Sakarya, Mr
Özerman and Ms Gönen can be summarised as follows. The freezing order against Mr
Çörtük alone is unlikely to be fully
effective because he has hidden his significant assets in a complex web of
entities across multiple jurisdictions. As a convicted criminal and a fugitive
from justice he has demonstrated a propensity for dishonesty. His concealment
of his assets relies to a significant extent on the assistance of Ms Sakarya,
Mr Özerman and Ms Gönen who hold or control or manage a significant proportion
of those assets at his direction or for his benefit. They must therefore also
be restrained lest Mr Çörtük simply
use them as his agents to help him to continue to evade justice. It is said
that the freezing orders lend real and valuable support to four sets of
proceedings, namely (1) the proceedings in England pursuant to the
Enforcement Order; (2) the Romanian
liquidation proceedings; (3) proceedings in New Jersey in the bankruptcy
of Mr Çörtük; and (4) enforcement
proceedings in Switzerland. Only (1) and (2) were relied on at the ex parte
application.
The assets
8.
The application focussed on three groups of assets said to be
beneficially owned by Mr Çörtük, namely (1)
the Rowena structure, (2) the Tempus structure, and (3) in Ms Gönen’s case, a
life insurance policy.
The Rowena structure
9.
Assets within the Rowena structure are held as follows. At the head of
the structure is Rowena Ventures Limited, a BVI company. Its shares are held
by Lemania International SA, a Panamanian registered entity owned by a
corporate service provider as nominee. Those shares are held as nominee
ostensibly for Ms Sakarya. Ms Sakarya’s case is that she is the ultimate
beneficial owner of the shares in Rowena and accordingly of the assets below
Rowena in the structure. It is BTR’s case that in truth Mr Çörtük is the
beneficial owner of the shares in Rowena and the assets in the structure below
it. Rowena was placed into voluntary liquidation on 3 April 2013 and was
struck off the BVI register, but there are grounds to believe that it has made
the necessary payments for its restoration and that it has been or will be
restored.
10.
Rowena owns all the shares in Hollydale Investments Ltd, an English
company. Hollydale Investments Ltd owns all the shares in Westpoint Industries
(UK) Ltd, another English company (“Westpoint UK”). The directors of
Westpoint UK are Senton Properties Ltd which is part of Dominion, a wealth
services provider assisting Mr Çörtük; and Ms Roue of Vicena, a corporate
service provider. Serkan holds a power of attorney for Westpoint UK. Other
than a Swiss bank account which is not relied on for the purposes of this
application, Westpoint’s only known assets are its 100% shareholding in
Westpoint USA Inc (“Westpoint USA”), a company incorporated under the laws of
New Jersey USA. Westpoint USA owns three companies incorporated under the laws
of New Jersey, USA, each with Iron Bridge in its name (“the Iron Bridge
Companies”), which in turn operate a business in engineering and construction
with significant valuable assets. The location of that business and those
underlying assets was not revealed by the evidence before me, but it is
reasonable to infer that they are in whole or in part in New Jersey.
The Tempus
structure
11.
The Tempus Foundation is a Liechtenstein foundation, which, so far as
the evidence on this application is concerned, it is common ground is
ultimately beneficially owned by Mr Çörtük. The Tempus Foundation owns
(indirectly) all the shares in Teneo Holdings Ltd (“Teneo”) a company
incorporated in Malta. Mr Özerman has been, and is believed by BTR still to
be, the sole signatory of Teneo. Teneo holds all the shares in Piedmont
Investments Ltd (“Piedmont UK”) an English company. Piedmont’s directors are
Ms Roue and a corporate director registered at the same address. Piedmont UK own
99% of the shares in S.C. Piedmont Investments SRL (“Piedmont Romania”) a
Romanian company. The other 1% shareholding in Piedmont Romania is held by Mr
Özerman. Mr Özerman is a director of Piedmont
Romania. Piedmont Romania holds valuable assets in the form of land in
Bucharest, Romania. It is BTR’s case that some of that land, the Stefanesti
land, was purchased with the proceeds of another fraud which Mr Çörtük
perpetrated on BTR by procuring in August 1997 that BTR purchased a Bucharest
office block, known as the Negoiu Building from a Bayindir company for US$8.8
million which was at an overvalue of almost US$5.5 million. In support of this
allegation BTR rely upon valuation by a Mr Nistor produced subsequently and
concluding that the true value of the building at the time was a little over
US$3.3 million. This was characterised by BTR as “the Romanian Real Estate
Fraud”. On 30 September 2017 Piedmont Romania was put into suspension for
three years by a resolution of its shareholders which was signed by Mr Özerman
on his own behalf as 1% shareholder and on behalf of Piedmont UK as 99%
shareholder. BTR contends that it is susceptible to being brought out of
suspension at any time by its shareholders.
The life
insurance policy
12.
Ms Gönen purchased a life insurance policy with Credit Suisse Life
(Bermuda) Ltd in April 2011 with an initial premium of US$3.6m, paid from her
Credit Suisse account in Switzerland. The policy named Mr Çörtük as the
alternate beneficiary, and thereafter his grandchildren. Mr Çörtük took out a
policy for the same amount and at the same time in identical terms, naming Ms
Gönen as alternate beneficiary and thereafter his grandchildren. It is BTR’s
case that the policy in Ms Gönen’s name was purchased with funds that were in truth
those of Mr Çörtük and on his behalf. There was a partial redemption of
US$160,000 from the policy on 12 November 2012 and a total redemption in late
2013, resulting in all the proceeds being received by Ms Gönen into her
personal account on 8 January 2014. The US$160,000 redeemed in November 2012
was paid to Teneo. BTR’s case is that that was paid for Mr Çörtük’s benefit,
consistently with the policy having been for his benefit and with his ownership
of the Tempus structure. Ms Gönen’s case is that it was paid to Teneo for
onward payment to Piedmont Romania for the purchase of two apartments as an
investment, but not ultimately used for that purpose because the funds were
frozen in Teneo’s account as a result of which the property transaction did not
proceed.
The legal
framework
13.
Insofar as the relief against the NCAD defendants is sought in support
of the English Enforcement Order, BTR invokes Section 37 of the Senior Courts
Act 1981. Insofar as the relief sought is ancillary to foreign proceedings,
BTR invokes the jurisdiction under Section 25 of the Civil Jurisdiction and
Judgments Act 1982. So far as s. 37 is concerned, BTR must establish that the
relief sought falls within the principles governing ancillary relief against
non-parties, and that it is just and convenient to make the orders. Section 25
requires BTR to establish that it would be appropriate to grant the relief
sought if the foreign proceedings were before the English court; and that the
fact that the foreign proceedings are not before the court does not render
inexpedient to grant the relief sought.
14.
BTR must also establish in personam jurisdiction over each of the
relevant respondents. So far as s. 37 relief is concerned, BTR relies upon CPR
6B PD paragraph 3.1(3), namely that there is a serious issue to be tried in the
claim pursuant to the Enforcement Order and the respondents are necessary or
proper parties to that claim; alternatively that the gateway in paragraph
3.1(10) can be invoked insofar as the freezing orders prevent or seek to
prevent the dissipation of Mr Çörtük’s
assets which would otherwise be amenable to enforcement. So far as s. 25 relief
is concerned, BTR relies upon paragraph 3.1(5). In either case, BTR must
establish that it is just and proper to make an order for service out of the
jurisdiction, which engages questions as to whether England is the appropriate
forum.
15.
The relief which was granted in the
freezing orders of 16 November 2017, and which BTR seeks to be continued on
this application, identified two categories of assets:
(1)
“Received Assets”, which were defined as “any which the relevant
respondent received from, or in which [he/she] has acquired a direct or
indirect interest from, Mr Çörtük, and
which [he/she] holds for Mr Çörtük
directly or indirectly whether as agent, nominee, trustee or otherwise, which
is within England and Wales [up to a stated value].” Assets are Received Assets
“whether or not they are in the respondent’s own name and whether they are
solely or jointly owned and whether the respondent is interested in them
legally, beneficially or otherwise. For the purpose of the order the Received
Assets include any assets [he/she] has received or acquired from Mr Çörtük which jointly with or for the benefit of Mr
Çörtük [he/she] has the power, directly or
indirectly, to dispose of or deal with as if it were [her/his] own. The
respondent is to be regarded as having such power if a third party holds or
controls the asset in accordance with [his/her] direct or indirect
instructions.” The orders restrained any dealing with Received Assets.
(2)
“KC Assets”, which were defined as
“assets which the respondent knows or believes to be assets of Mr Çörtük whether or not in his own name and whether
or not solely or jointly owned and whether or not Mr Çörtük is interested in them legally,
beneficially or otherwise.” The KC Assets were further defined as including
assets which to the best of the respondents’ knowledge or belief Mr Çörtük has the power, directly or indirectly, to
dispose or deal with as if it were his own. Mr Çörtük is to be regarded as having such power if a third party holds or
controls the asset in accordance with his direct or indirect instructions.”
The orders restrained the respondents from procuring or assisting in dealing
with assets known or believed to be KC Assets.
16.
As well as these general definitions, in each case the orders identified
particular assets as constituting Received Assets and KC Assets, the detail for
the former differing for different respondents, and with some overlap. In the
case of Ms Sakarya and Mr Özerman, the identified Received Assets included
assets in the Rowena and Tempus structures, including the shares in Westpoint
UK and Piedmont UK respectively. It was these shareholdings which Mr Riches
for BTR placed in the forefront of his submissions as providing the necessary
jurisdictional link with England justifying the English Court granting the
ancillary relief. In the case of Ms Gönen the identification was limited to
the proceeds of the life insurance policy.
17.
In relation to the Received Assets, BTR invokes the well know Chabra
jurisdiction to support the orders. Those principles have been considered in a
number of authorities, most recently Algosaibi v Saad Investments Co Ltd
(CICA 1 of 2010), Linsen International Ltd v Humpuss Sea Transport PTE
Ltd [2011] 2 Lloyd’s Report 663, Parbulk II AS v PT Humpuss
Intermoda Transportasi TBK (The Mahakan) [2012] 2 All ER Comm 513. I
endeavoured to summarise the principles in paragraph 7 of my judgment in PJSC
v A Bank of Maksimov [2013] EWHC 422 (Comm) which was cited with
approval by Tomlinson LJ in Lakatamia v Nobu Su [2014] EWCA Civ 636 at [32]. The principles permit relief where a non cause of action
defendant (“NCAD”) holds assets which would arguably be amenable to execution
of a judgment against the cause of action defendant (“CAD”). A NCAD “holds”
such assets by having legal control over such assets, or at least de facto
independent control, including a discretionary power of disposition.
18.
It is to be noted that this principle is not sufficient to support the
relief in respect of the KC Assets, insofar as they are unidentified, or do not
overlap with the identified Received Assets, or where they overlap but no good
arguable case is made out of the element of control. The justification
advanced for wider relief in relation to the KC Assets is that these
respondents have been closely “mixed up in” assisting Mr Çörtük in dealing with the assets in the
past, and that unless restrained there is a real risk that they will continue
to do so and thereby to assist him to breach the freezing order against him and
to hide and dissipate his assets to defeat enforcement of the Romanian
Judgment. At the ex parte hearing there was no identification of this
distinction, the focus being on the control exercised by the NCAD defendants
over various assets. In BTR’s skeleton argument for the inter partes
hearing, it was asserted that this was part of the Chabra jurisdiction
which was well established wherever the NCAD has been “involved in” the CAD’s
efforts to move his assets around the world or is himself “caught up in” the
CAD’s efforts to frustrate enforcement. In oral argument, Mr Riches submitted
that such jurisdiction existed, albeit at “the outer limits”, and was supported
by a dictum of Gloster J, as she then was, in The Mahakan at
paragraph [56], but was better characterised as a separate aspect of the
jurisdiction under s. 37 than as part of the recognised Chabra
jurisdiction.
19.
I am inclined to think that section 37, which is in very wide terms,
would permit ancillary relief against a person mixed up in the affairs of a CAD
to restrain that person from doing acts which would assist the CAD to deal with
assets in a way which would defeat the freezing order against the CAD, in an
appropriate case where such relief was necessary to render the primary relief
against the CAD effective. It might arise, for example where a secretary was
habitually used to carry out the CAD’s disposition instructions. The basis on
which the court has regularly made ancillary orders, including those which fall
squarely within the Chabra jurisdiction, is so as to render an order
against a CAD effective. However, the fact that Mr Riches was not able to
point to any reported decision in which relief was granted on this basis
suggests that it will be a rare case in which it is justified by the particular
circumstances of an individual case. This may be, as Mr Leabeater submitted,
because in the case of a domestic respondent, sufficient protection is given by
serving notice on the NCAD of the freezing order against the CAD; and in a case
where the NCAD is abroad and merely “mixed up in” the affairs of the CAD
without exercising control over disposition, the restrictions on the
extraterritorial reach of orders will usually preclude the exercise of any such
jurisdiction (e.g. in relation to foreign bank branches). Moreover, if a party
is threatening to assist a CAD to breach a freezing order, the appropriate
course may be to allege a threatened tort (e.g. conspiracy to injure by
unlawful means) and to seek quia timet relief against that party as a
CAD.
20.
Where relief is sought involving respondents and/or assets which are not
within the jurisdiction, whether under s. 37 SCA 1981 or s. 25 CJJA 1982,
careful consideration needs to be given to the proper scope of any involvement
of the English court. The relevant principles have been considered in a number
of cases, notably Credit Suisse Fides Trust SA v Cuoghi [1998]
QB 818, Motorola Credit Corporation v Uzan and others (No. 2)
[2004] 1 WLR 113; Banque Nationale de Comercio Exterior SNC v Empresa de
Telecommunicacions de Cuba SA (British Telecommunications PLC intervening)
[2008] 1 WLR 1836, which in turn refer to the decision of the European Court of
Justice in Van Uden Maritime BV v Kommanditgesellschaft in Firma Deco
Line (case C/391/95) [1999] QB 1225. In ICICI Bank UK plc v
Diminco NV [2014] EWHC 3124 (Comm), [2014] 2 CLC 647 I endeavoured to
express the principles which were to be derived from those authorities in the
following terms:
“27. Drawing the strands together, I derive the following
principles as applicable when the court is asked to grant a freezing order in
support of foreign proceedings under Section 25.
(1) It
will rarely be appropriate to exercise jurisdiction to grant a freezing order
where a defendant has no assets here and owes no allegiance to the English
court by the existence of in personam jurisdiction over him, whether by
way of domicile or residence or for some other reason. Protective measures
should normally be left to the courts where the assets are to be found or where
the defendant resides or is for some other reason subject to in personam jurisdiction.
(2) Where
there is reason to believe that the defendant has assets within the
jurisdiction, the English court will often be the appropriate court to grant
protective measures by way of a domestic freezing order over such assets, and
that is so whether or not the defendant is resident within the jurisdiction or
for some other reason is someone over whom the English court would assume in
personam jurisdiction.
(3) Where
the defendant is resident within the jurisdiction, or is someone over whom the
court has in personam jurisdiction for some other reason, a worldwide
freezing order may be granted applying the discretionary considerations which
were explained in the Cuoghi, Motorola and Banque Nationale
cases.
(4) Where
the defendant is neither resident within the jurisdiction nor someone over whom
the court has or would assume in personam jurisdiction for some other
reason, the court will only grant a freezing order extending to foreign assets
in exceptional circumstances. It is likely to be necessary for the applicant to
establish at least three things:
(a) that
there is a real connecting link between the subject matter of the measure
sought and the territorial jurisdiction of the English court in the sense
referred to in Van Uden;
(b) that
the case is one where it is appropriate within the limits of comity for the
English court to act as an international policeman in relation to assets
abroad; and that will not be appropriate unless it is practical for an order to
be made and unless the order can be enforced in practice if it is disobeyed;
the court will not make an order even within the limits of comity if there is
no effective sanction which it could apply if the order were disobeyed, as will
often be the case if the defendant has no presence within the jurisdiction and
is not subject to the in personam of the English court;
(c) it
is just and expedient to grant worldwide relief, taking into account the
discretionary factors identified at paragraph 115 of the Motorola
case. They are (i) whether the making of the order will interfere with the
management of the case in the primary court, e.g. where the order is
inconsistent with an order in the primary court or overlaps with it; (ii)
whether it is the policy in the primary jurisdiction not itself to make to make
worldwide freezing/disclosure orders; (iii) whether there is a danger that the
orders made will give rise to disharmony or confusion and/or risk of
conflicting, inconsistent or overlapping orders in other jurisdictions, in
particular the courts of the state where the person enjoined resides or where
the assets affected are located; (iv) whether at the time the order is sought
there is likely to be a potential conflict as to jurisdiction rendering it
inappropriate and inexpedient to make a worldwide order; and (v) whether in a
case where jurisdiction is resisted and disobedience may be expected the court
will be making an order which it cannot enforce.”
The Proceedings
21.
It is necessary to describe in a little detail the course of proceedings
in relation to BTR’s claims here and abroad.
The Enforcement
Order
22.
Master Kay QC made the Enforcement Order on 28 November 2017. At the ex
parte hearing before me on 16 November 2017, BTR stated that enforcement
was to be applied for pursuant to Council Regulation (EC) No. 44/2001 of 22
December 2000 on jurisdiction and the recognition of enforcement of judgments
in civil and commercial matters (“the Brussels I Regulation”). That was the
basis on which the enforcement order was subsequently applied for and granted.
The applicability of the Brussels I Regulation was supported on both occasions
by the following analysis. The Brussels I Regulation applied by virtue of
Article 66(2) of Regulation (EU) 1215/2012 (“Brussels Recast”) which provides
that the Brussels I Regulation continues to apply to judgments given in
proceedings instituted before 10 January 2015 which fall within its scope.
Article 66 of the Brussels I Regulation applies its provisions to enforcement
of proceedings commenced before it came into force in the circumstances
identified in sub paragraphs (a) and (b). Article 66(2)(a) was inapplicable
because Romania had not acceded to the Brussels Convention. Accordingly,
Article 66(2)(b) applied, which required jurisdiction in Romania to have been
founded upon rules which accorded with those provided for in Chapter II.
Jurisdiction was founded in Romania in accordance with Article 5(4) of Chapter
II of the Brussels I Regulation because Mr Çörtük
was domiciled in a Member State, namely Romania.
23.
BTR subsequently notified Master Kay QC and the Commercial Court, that
that basis might not be correct, because it was based on an assumption, rather
than any firm evidence, that Mr Çörtük was
domiciled in Romania at the time. The evidence of Ms Saita, the representative
of the corporate liquidator of BTR, is that BTR simply does not know one way or
the other whether that is the case given Mr Çörtük’s movements. However, if he was not domiciled in Romania at the
time, nevertheless the enforcement proceeding came within Article 66(2)(b)
because jurisdiction was assumed under Article 4 of Chapter II, namely a
jurisdiction determined by the law of the Member State, Romanian domestic law
establishing a right to exercise jurisdiction over Mr Çörtük by virtue of a combination of Article 30
of the former Romanian Criminal Procedural Code and Article 14 of the current
Romanian Criminal Procedural Code. On the application before me it was not
contested that this formed an adequate jurisdictional basis for the Enforcement
Order, which still arose under Article 66(2)(b) of the Brussels I Regulation.
However, this was said to involve a breach of the duty of full and frank
disclosure on the ex parte application.
The Swiss Proceedings
24.
Criminal proceedings were commenced in Switzerland on 13 February 2013
following an anti money laundering investigation in respect of Mr Çörtük. In support of those criminal proceedings
the Attorney General of Geneva froze assets of Mr Çörtük and Teneo. BTR obtained recognition in Switzerland of its insolvency and filed for
enforcement of the Romanian Judgment in Switzerland. It was joined to the
criminal proceedings and itself filed for attachment of the frozen assets. The
criminal and civil proceedings were based upon the allegation by BTR of Mr
Çörtük’s involvement in the Romanian Real
Estate Fraud, i.e. that relating to the sale at an alleged overvalue of the
Negoiu Building in 1997. The criminal money laundering proceedings, and BTR’s
civil claim which was joined to it in relation to the Romanian Real Estate
Fraud, were settled by the way of a confidential settlement agreement by all
the relevant parties, being Mr Çörtük,
Rowena, Tempus, Teneo and the Attorney General of Geneva. The confidential
settlement agreement dated 4th November 2016 (“the CSA”) provided
that the CHF2.8 million which was frozen should be forfeited to BTR. The CSA
provided in terms that Mr Çörtük’s
consent to the settlement and forfeiture of the assets was given without
accepting or assuming any criminal or civil responsibility in relation to the
allegations against him or the validity of the Romanian Judgment. Clause 5 of
the CSA was a confidentiality clause which provided in relevant parts:
“Save to the extent required by law, applicable regulation…,
the Parties agree to keep confidential the existence and terms of this
Agreement, as well as the negotiations leading to it and any correspondence or
other documents recording such negotiations (“the Confidential Information”).
No other disclosure of Confidential Information shall be made without the prior
written consent of the other Parties, such consent not be unreasonably
withheld.”
25.
Although the CSA brought to an end the criminal proceedings, and the
civil claim within it in relation to the Romanian Real Estate Fraud, BTR’s
claim to enforce the Romanian Judgment in Switzerland remains ongoing. On 2
March 2017 BTR obtained an attachment of the shares of Teneo, Rowena and Tempus
on the basis that they were assets beneficially owned by Mr Çörtük.
New Jersey Proceedings
26.
BTR commenced proceedings against Mr Çörtük,
Ms Sakarya and Westpoint UK in the US District Court of the District of
New Jersey by a Complaint dated 11 September 2017 (“the New Jersey Civil
Claim”). BTR sought two heads of relief. The
first was a declaration that Westpoint UK was Mr Çörtük’s alter ego, a sham and a façade, and that its independent legal
personality should be disregarded. The declaratory judgment sought,
categorised as “Reverse Piercing Westpoint UK”, was that Westpoint UK’s
separate existence should be disregarded, Mr Çörtük and Westpoint UK should be treated as one and the same, and,
that as a consequence, Westpoint UK’s property should be subject to execution
by BTR through the liquidator Ms Saita. The prayer for relief was as follows:
“…a declaration that [Westpoint UK] is an alter ego of Kamuran
Çörtük and, therefore, that all assets titled in the name of [Westpoint UK],
which are subject to the jurisdiction of this Court, (including, but not
limited to) Westpoint UK’s ownership interests in [the Iron Bridge Companies],
are subject to execution by [Ms Saita] in the same manner as if such assets
were titled in the name of Kamuran Çörtük individually.”
27.
The second head of relief related to
a specific property, namely 5 Spy Glass Court in Monroe Township, New Jersey
(“Spy Glass Court”), which was in Ms Sakarya’s name. Spy Glass Court was
transferred on 15 June 2015 to Ms Sakarya by Westpoint UK for US$1. This was
characterised as a fraudulent transfer which BTR sought to “unwind”. The
prayer for relief sought the avoidance of the transfer, an injunction against
further disposition of the property or proceeds of any sale thereof by Ms
Sakarya and/or Westpoint UK and a money judgment against Mr Çörtük and Ms Sakarya in an amount equal to sale
price of the property if the sale had taken place. By a Notice of Lis Pendens filed on 12 September
2017, BTR sought to prevent any sale of the property pending resolution of the
New Jersey Civil Claim. Shortly prior to the ex parte hearing before
me, the parties agreed that the property could be sold and the proceeds held in
escrow, and an order to that effect was made on 15 November 2017.
28.
On 29
November 2017, Mr Çörtük filed for
voluntary Chapter 7 bankruptcy in the US Bankruptcy Court in New Jersey,
apparently in response to the service of my freezing order on him. Upon the
bankruptcy, an automatic stay was imposed on all proceedings against Mr Çörtük. This included the New Jersey Civil
Complaint, which was transferred into the bankruptcy proceedings. BTR sought
relief from the stay so as to be permitted to continue the English enforcement
proceedings and the current proceedings for freezing order relief against Mr
Çörtük and the non cause of action
defendants, together with the Swiss enforcement proceedings. Mr Çörtük’s trustee in bankruptcy supported the
lifting of the stay for those purposes, which was granted by Judge Grenville,
the Bankruptcy Judge, in a judgment of 13 February 2018. In its motion seeking
the lifting of the stay, BTR told the bankruptcy court that the freezing order
proceedings in England extended to Spy Glass Court. That was not accurate. My
ex parte orders specifically carved out Spy Glass Court from the scope
of relief, on the basis that BTR’s position was adequately protected by the
order of the New Jersey Court in the New Jersey Civil Claim, or at least that
there was no evidence before me that such order did not provide adequate
protection.
The Issues
29.
Ms Sakarya, Mr Özerman and Ms Gönen submit that there were material
misrepresentations and non-disclosure in applying ex parte for the
orders against them, such that my order should be discharged and no further
relief should be granted against them. The alleged
misrepresentations/non-disclosures comprise the following:
(1)
the characterisation of the New Jersey Civil Claim and the failure to
identify and make clear that it was concerned with a declaration that all
Westpoint UK’s assets were in truth those of Mr Çörtük and amenable to
enforcement in New Jersey, including the assets of Westpoint US and the Iron
Bridge companies; and that such proceedings involved an allegation that
Westpoint UK’s separate corporate personality should be ignored;
(2)
the continued existence of enforcement proceedings in Switzerland;
(3)
the nature and terms of the settlement in the Swiss proceedings;
(4)
the weaknesses in the Romanian Real Estate Fraud allegation;
(5)
evidence casting doubt on whether Ms Gönen’s life insurance policy was
purchased with Mr Çörtük’s beneficially owned assets;
(6)
the erroneous basis advanced for jurisdiction to make the Enforcement
Order under the Brussels I Regulation.
30.
Mr Özerman and Ms Sakarya further argue
that there is no evidence that they hold or control assets in a manner which
brings them within the Chabra jurisdiction. Each of the respondents
further argues that it is not just and convenient, and is inexpedient, to grant
relief for a number of reasons, including that it would serve no useful
purpose; none of the assets, nor the defendants, are within the jurisdiction;
the only connection with this jurisdiction is Westpoint UK and Piedmont UK in
the two relevant assets structures as intermediate holding companies; the
underlying assets in the structures are abroad; and in any event the question
whether the shares in Westpoint UK and the underlying assets within that
structure comprise the assets of Mr Çörtük and should be available to
enforcement of the Romanian judgment are already in issue in the New Jersey
claim and there is no evidence that the New Jersey courts (now the Bankruptcy
Court) would not have the equivalent or at least sufficient powers to protect
BTR’s position.
Full and frank
disclosure
The New Jersey
Civil Complaint
31.
The way in the which the New Jersey Civil Claim was presented to the
court was misleading and unsatisfactory in the following respects:
(1)
In Ms Saita’s first affidavit in support of the application she described
the proceedings in the following terms:
“On 11 September 2017 BTR commenced fraudulent transfer
proceedings against Mr Çörtük, Ms Sakarya
and Westpoint UK before the United States District Court district of New Jersey,
captioned civil action number 3:17-cv-06949-FLW-LHG (“Fraudulent Transfer
Proceedings”) in relation to the sale of Spyglass Court in by Westpoint UK
to Ms Sakarya in 2012 for USD1 (as discussed further in Section 1 below). On 12
September 2017 BTR filed a lis pendens notice against Spy Glass Court to
prevent the onward sale Ms Sakarya was seeking to effect [MS1 pp.970 – 971].
The Fraudulent Transfer Proceedings are ongoing and recent developments are set
out at footnote 42 below.”
Footnote 42
simply dealt with the subsequent order in relation to the sale of that
property.
This was
seriously misleading. Its description of the proceedings as being simply in
relation to the sale of Spy Glass Court was inaccurate. The impression that the
proceedings were confined to such property was reinforced by characterising and
defining the proceedings as fraudulent transfer proceedings.
(2)
At paragraph 188(e) Ms Saita was addressing why England was the
appropriate place in which to obtain the relief which was being sought. She
said “there will be no conflict with any freezing or other orders elsewhere.
The applicant has spent the last year obtaining disclosure from corporate
service providers which have shown a nexus of interests of Mr Çörtük in
England. It is now therefore in England that the present steps are being
taken. There are no similar steps being taken elsewhere. The Swiss Criminal
Proceedings have concluded. The New Jersey proceedings concern the transfer of
Spy Glass Court and provide some limited protection as regarding the proceeds
of sale of that property, if it is sold at a true market value;”
This was
misleading, not only because it again suggested that the New Jersey proceedings
were limited to questions concerning the transfer of Spy Glass Court, but also
because it averred there were no similar steps being taken in New Jersey to
those which were being taken in England; whereas the true position was that in
the New Jersey Civil Claim BTR was seeking to assert an entitlement to enforce
against the underlying assets within the Rowena structure through Westpoint UK,
which overlapped with the very enforcement which BTR was seeking achieve by the
Enforcement Order in England as the substantive proceedings which were said to
justify the ex parte relief.
(3)
Mr Saita did not exhibit the Complaint to her affidavit, notwithstanding
that she exhibited hundreds of pages of other documentation.
(4)
In the skeleton argument for the ex parte hearing the
misleading impression was maintained and not corrected. In paragraph 59 the
proceedings were simply referred to as “proceedings in New Jersey in which BTR
alleges that the transfer of the property by Westpoint UK to Ms Sakarya in 2015
was at an undervalue”. This true but incomplete description of the New Jersey
proceedings again reinforced the impression that they were solely concerned
with the Spy Glass Court property.
(5)
At the ex parte hearing Mr Riches said at one stage that because
the proceedings sought to set aside the transfer, there was a good arguable
case that the property was or ought to be property of Westpoint UK and that
accordingly the New Jersey proceedings did not necessarily mean that Westpoint
UK did not hold a cause of action in this country in relation to Spy Glass
Court. In that context he said:
“As I understand it there are actually alter ego proceedings,
as is often the case in US proceedings, there is a pleading piercing the veil,
as I understand it, whereas under section [423] it would not be a necessary
part of the case.”
However this did not alert me
to the fact that the proceedings were concerned with anything wider than Spy
Glass Court or the true nature of the proceedings, not least because the point
was addressed as to whether Westpoint UK still had “an interest in this asset”,
i.e. 5 Spy Glass Court. That reference did not alert me, and was quite
insufficient to alert me, to the true nature of the New Jersey Civil Claim.
(6)
I was further misled later in the hearing when Mr Riches was dealing
with the connecting links between the relief sought and England. He stated
that that “this is the only place at the moment where the judgment is being
enforced because you will have seen that there are certain limitations on the
ability to enforce in Romania, in particular the fact the court can only
enforce against assets in the name of the individual… There are no other
substantive proceedings on foot. There are ancillary proceedings recognising
the bankruptcy but they are not going to obtain the relief that is going to be
sought. It is only England that is at present a place where the substantive
enforcement of the judgment is going on.” This was not true. In the New
Jersey Civil Claim BTR was seeking to enforce the Romanian Judgment against Mr Çörtük
by seeking a declaration that the assets in New Jersey below Westpoint UK
within the Rowena structure were in truth Mr Çörtük’s and amenable to execution
of the judgment in that jurisdiction.
(7)
This misleading impression was not corrected in the course of a further
submission shortly afterwards that:
“This [i.e. the ancillary relief being sought] is not
something for any of the other ancillary proceedings ongoing in New Jersey and
Florida are going to be giving – I should correct myself on that, they may be
able to help but it is the English court which has the clear priority
jurisdiction, given that it already has substantive jurisdiction over the
enforcement of the judgment and over English companies.”
This again was misleading given
that substantive jurisdiction over the enforcement of the judgment was asserted
in the New Jersey Civil Claim, and over one of the two relevant English
companies, Westpoint UK.
32.
BTR was in serious breach in its duties to
the court in relation to these New Jersey proceedings. It made positive
misrepresentations as to their nature and scope, as well as failing by its
omissions to give a fair picture to the court. The nature of those
proceedings, and in particular the first of the two aspects of the relief
sought, were highly material to the issues which this court had to consider on
the ex parte application. A central
part of the claim in the New Jersey proceedings was that the Rowena
structure, or at least Westpoint UK, was to be treated as part of the assets of
Mr Çörtük so as to be available to
execution of the Romanian Judgment. That was material to the relief which was
being sought from the English court for two reasons. First, in considering
whether it was just and convenient, or not inexpedient, to grant relief under
Section 37 and Section 25 respectively, the court needed to consider the extent
to which relief was being sought and/or was available in other jurisdictions. The
fact that equivalent substantive relief to enforce against the assets of
Westpoint UK, by treating the assets of Westpoint UK as the assets of Mr Çörtük,
was being sought from the New Jersey court immediately gives rise to a question
as to whether that court is the appropriate court for the purposes of granting
ancillary relief of the type sought from the English court and whether it has
the power to do so. There is no evidence before me now that it does not have
that power, and at the ex parte stage that question was not addressed
because the nature of those proceedings was misrepresented. This was all the
more culpable given that it was apparent from my interventions during the
course of the ex parte hearing in relation to Spy Glass Court that I
regarded such questions as being material, and ultimately as the reason why Spy
Glass Court was specifically excluded from the order granted. Secondly the
English character of Westpoint UK was one of the lynchpins relied upon
by BTR as justifying the English court assuming jurisdiction to grant relief,
the relevant relief being that a receiver would be appointed over the shares in
Westpoint UK Limited so as to take control of the assets within the Rowena
structure held by Westpoint UK and its subsidiaries. The separate corporate
personality of Westpoint UK was an essential ingredient of that lynchpin. The
allegation in the New Jersey Civil Claim was that the separate corporate
personality of Westpoint UK should be disregarded as a sham, so as to treat the
underlying assets of the Iron Bridge companies of those of Mr Çörtük. The stance in the New Jersey Civil Claim
was inconsistent with an important part of the justification for the relief
being sought before the English court, where BTR was keen to emphasise (e.g. at
paragraph 74 of its skeleton) that its arguments did not challenge the
separate corporate personality of the entities in the Rowena structure.
33.
The materiality of the non-disclosure lies not merely in the fact that
inconsistent arguments were being advanced in the two different jurisdictions,
but importantly that the New Jersey basis of claim seriously undermined the
basis for seeking relief in England which was that Westpoint UK provided a
critical jurisdictional link, and that the substantive enforcement which the
orders would assist was appointment of a receiver over its shares so as to
permit enforcement against the underlying assets in the structure, and England
was the only jurisdiction where such substantive enforcement was being sought.
34.
I am driven by a number of factors to
conclude that BTR’s conduct in this respect was deliberate:
(1)
The allegations of non-disclosure were advanced by these respondents in
correspondence, evidence and argument, giving BTR a full opportunity to explain
how the conduct complained of had come about. BTR provided no explanation in
any witness statement. Instead in its skeleton argument prior to the hearing,
BTR was dismissive of there having been any non-disclosure at all, and at the
hearing Mr Riches dealt with the matter by suggesting that only in one or two
respects would they “put their hands up”. The absence of any explanation makes
it impossible to identify where the fault lies. But it gives rise to a strong
inference that there is no innocent explanation which can be put forward. The
very least that can be said is that no innocent explanation has been put
forward, and if an applicant who is guilty of non-disclosure wishes the court
to treat it as innocent, it is incumbent upon it to explain how it came about.
(2)
There were repeated misrepresentations of the position, which it would
be difficult to explain by a single slip or mistake in the use of language.
(3)
The critical omission formed the subject matter of much of the Complaint
and the primary relief being sought. It cannot have been overlooked by
accident. Moreover the language used to define the proceedings as “fraudulent
transfer proceedings” must have been consciously chosen and was itself such as
to perpetrate the misleading impression.
(4)
The failure by Ms Saita to exhibit or refer to the Complaint is unlikely
to have been an oversight, given the diligence with which she referred to and
exhibited a very large number of other documents,
many of far less relevance, when swearing her affidavit. Mr Riches submitted
in reply that the position was “complex” and “moving fast”. This is not
accurate. Given the time which was available, and obviously used, to prepare
the application, this was not a case in which any lapse is explicable by any
urgency in coming to court.
(5)
The conclusion that BTR’s conduct was deliberate is reinforced by the
misleading of the New Jersey Bankruptcy Court when seeking to lift the
automatic stay so as to permit the English freezing order proceedings to
continue, which involved wrongly suggesting that the English proceedings
extended to 5 Spy Glass Court. That misrepresentation is also unexplained, and
is of a piece with a general policy of failing to be frank with courts about
the full extent of the scope of proceedings elsewhere.
(6)
Moreover the presentation of the evidence in relation to the New Jersey
Civil Claim is not the only aspect of the ex parte application in which
BTR misled the court: see below.
Swiss substantive
enforcement proceedings
35.
At the ex parte hearing the only
foreign proceedings by reference to which relief was said to be justified under
s. 25 were the Romanian insolvency proceedings. At the return date hearing
relief was said to be justified by, amongst other things, the continued
proceedings in Switzerland to enforce the Romanian Judgment. Yet at the ex
parte hearing Mr Riches said that there were no other substantive
proceedings abroad: “It is only England that is at present a place where the
substantive enforcement of the judgment is going on”. That was untrue and
constitutes another serious breach of the duty of full and frank disclosure.
The absence of any substantive enforcement proceedings abroad was the
foundation for asking the English Court to take “clear priority jurisdiction”
so as to justify the relief being sought. This breach has not been explained
and I am unable to say where the fault lies, but accordingly I have no basis
for treating it as other than deliberate.
The Swiss
settlement
36.
In her affidavit, Ms Saita misrepresented the position in relation to
the Swiss settlement. At paragraph 87 she said:
“In late 2016 the Swiss prosecutor forfeited the funds held
by Teneo, Credit Suisse Life (Bermuda) Ltd, Rowena and Tempus as being proceeds
of crimes and attributed the funds to BTR. BTR received a net amount of CHF2.8
million…”
37.
This was not true: the Swiss prosecutor had
not forfeited the funds as being proceeds of crime. The true position, as set
out in the CSA, was that there was a consensual agreement between the Swiss
prosecutor, Mr Çörtük, BTR, and the other
companies and entities, which was expressly on the basis that it was without any
finding or admission as to whether those funds were the proceeds of crime, with
Mr Çörtük maintaining his innocence
both in relation to the subject matter of the Romanian Judgment, and in
relation to the alleged Romanian Real Estate Fraud which formed the subject
matter of the criminal and civil proceedings which were being terminated. This
misrepresentation was material because it gave the impression, as must have
been intended, that the Swiss prosecutor had treated funds held by Teneo,
Rowena and Tempus as proceeds of crime by Mr Çörtük, and moreover as being amenable to execution in BTR’s claim
against Mr Çörtük notwithstanding
that they had been held by those entities. The impression given was that this
was a decision of the Swiss prosecutor on the merits of the position, whereas
in fact it was a consensual arrangement involving no such judgment by the Swiss
prosecutor and with Mr Çörtük making
no admissions and reserving his position.
38.
Mr Riches submitted that because of
the confidentiality provision in the CSA it was not open to BTR to refer even
to the existence of the settlement agreement, let alone its contents. This
provides no answer for two reasons. First, if it was necessary to refer to the
Swiss proceedings and to the manner in which the CHF2.8 million had come to be
obtained and applied against the Romanian Judgment, as it clearly was, there
arose a duty of full and frank disclosure in relation to that aspect of the
history. BTR came under a legal obligation to make such disclosure, which
involved disclosing the existence and the nature of the CSA. Accordingly,
Clause 5.1 did not form any impediment because disclosure was required by law.
Secondly, and in any event, the terms in which Ms Saita referred to the Swiss
criminal and associated civil proceedings coming to an end was positively
misleading and incorrect. No restraint on referring to the existence of the
settlement agreement, had it existed, would have justified misleading the court
in that way.
39.
Although Mr Riches advanced this by
way of submission as an excuse for failing to refer to the CSA, it was not put
forward in BTR’s evidence as an explanation as to why it had in fact failed to
do so. Nor was there any explanation as to why Ms Saita positively
misrepresented the position. BTR had ample opportunity to do so having been
alerted to this aspect of the non-disclosure complaint in correspondence,
evidence and argument from the defendants. I am, again, unable to conclude
that this breach of the duty of disclosure was other than deliberate. It was
intended to give the impression, which it in fact gave, that the Swiss
authorities also took the view that the assets within the Rowena and Tempus
structure were in truth the assets of Mr Çörtük, that Mr Çörtük was
thought by the Swiss prosecuting authorities to be guilty of the Romanian Real
Estate Fraud by reference to the merits of the allegations, and that Mr Çörtük’s dishonesty and use of those structures
to hide his funds gained further support from the way the Swiss prosecutor had
dealt with the proceedings. That was a false and misleading impression. Mr
Riches submitted that the Romanian Real Estate Fraud was not a necessary part
of the basis for any of the relief being sought: the Enforcement Order was to
enforce the Romanian Judgment, which was in turn based solely on the Deposit
Account Fraud; the Romanian Real Estate Fraud formed the background to the
claim that the Stefanesti land held by Piedmont Romania was in truth Mr Çörtük’s, but whether it was acquired with funds
which were the result of a fraud or an honest transaction made no difference to
that position. Those submissions missed the point. The misleading impression
extended to the question whether assets held by the Rowena and Tempus structure
were in truth the assets of Mr Çörtük.
Moreover, the Romanian Real Estate Fraud was advanced by Ms Saita in her
affidavit, and in the argument at the ex parte stage, as a fraudulent
aspect of Mr Çörtük’s behaviour
supporting the need to provide relief in respect of hiding and dissipating his
assets. Even if it had only been a matter of “prejudice”, that would not
excuse a breach of duty. As Dillon LJ stated in Lloyds Bowmaker Ltd v
Britannia Arrow plc [1988] 1 WLR 1337 at page 1348F:
“The applicant owes a duty of fullest and frankest
disclosure: if he puts in matters of prejudice he must put them in as fully as
is necessary to be fair. He cannot pile on the prejudice and then when it is
pointed out that he has told only half of the story and has left out matters
which give a quite different complexion, say “Oh, well, it is not material. It
is only prejudice, and so, on a strict analysis of the pleadings, does not have
to be regarded.””
The Romanian Real Estate Fraud allegation
40.
This complaint of failure to make full and frank disclosure rests on a
failure to draw to the court’s attention two aspects of the weakness in the
case that the office block was sold to BTR at an overvalue of US$5.5 million.
The first is that it was based on the valuation report of a Mr Nistor, who used
an extraordinary valuation method based on construction costs many years after
the event, and did not purport to value the property by reference to
contemporary market sales; and who, moreover, has subsequently been convicted
of making fraudulent valuations. Mr Nistor’s report was exhibited to Ms
Saita’s affidavit, which referred to it as supporting the allegation, but the
basis of valuation was not identified in the affidavit and the contents of the
report were not drawn to my attention. The second aspect of the complaint is
that the overvalue question was at the heart of the Swiss criminal
investigation, but the Geneva Criminal Appeals Chamber expressed doubts whether
the sale was at an overvalue in a judgment of 27 May 2015. The judgment was
exhibited to Ms Saita’s affidavit in support of the application, but this
aspect was not referred to by her and I was not taken to the relevant part of
the judgment in the exhibit.
41.
I do not think that any legitimate criticism can be made in respect of
Mr Nistor’s conviction. Ms Saita has explained that she was unaware of it, and
it cannot fairly be said that she was at fault in having failed to discover
it. However the failure to explain the valuation methodology and draw
attention to the relevant part of the report is a breach of the duty of full
and frank disclosure. The report was dated 1 September 2014, over 16 years after
the sale. What Mr Nistor did was to use a “replacement value method” which
took an initial construction cost from catalogues as those for various aspects
per square metre for building construction, electrical systems, heating
systems, plumbing systems etc, applying uplifts for the increases in such costs
according to other published data, and then applying an apparently arbitrary
30% figure for depreciation. To this was then applied an uplift of 364% to
determine market value by seemingly arbitrary figures to reflect amenity
considerations, including, for example “location in the central area of the
capital 200%”, “for the location on a quiet street 15%”, “for the use of the
building as commercial space/offices 100%” and so on. Had this been drawn to
the court’s attention, it would have raised serious doubts whether the report
was sufficient to support the allegation that the transfer to BTR was at a
fraudulent overvalue. Such a case would have been further undermined by the
Geneva Judgment, drawing attention as it did to other evidence of relevance,
such as that the minority shareholder in BTR had never complained of or
questioned the transaction.
42.
Mr Riches’ response was that there was other evidence supporting the
allegation of overvaluation. But this is no answer when the duty is to draw
attention to any contrary arguments which may reasonably be anticipated: the
duty arises because the defendant is not present, and for that very reason
requires the applicant to draw attention to such points as it can anticipate
might be made by a defendant were he present or represented. The weaknesses in
the Nistor valuation, and what the Swiss Court said about the overvaluation
allegation evidence fall squarely within that category. It is true, as Mr
Riches submitted, that the Romanian Real Estate Fraud was not a critical
ingredient of the basis for relief being sought from the court; it was however
relied on both in Ms Saita’s affidavit and the skeleton argument in support of
the ex parte application, and even if no more than “prejudice”, required
a fair presentation.
Evidence in
relation to whether Ms Gönen’s life insurance policy was purchased with Mr Çörtük’s
beneficially owned assets
43.
The main complaint under this head was a failure to draw the court’s
attention to the fact that the Swiss prosecutor had said that it had no
concerns about Ms Gönen redeeming the policy in December 2013 and that Credit
Suisse had itself had applied its mind carefully to whether there was any cause
for regulatory concern as to the source of the funds which Ms Gönen had used to
purchase the life insurance policy and had concluded that it did not. That was
apparent from an entry on the first page of a two-page document produced by
Credit Suisse. That entry and its contents were not referred to in Ms Saita’s
affidavit and the relevant page was not exhibited. That was a significant
breach of the duty of full and frank disclosure. It was known that Ms Gönen
asserted that the source of funds for the policy were her own, not Mr Çörtük’s
and this was plainly material to that question and should have been disclosed.
There has been no explanation for the failure to do so, and Mr Riches did not
even address the point in argument. The inference that the suppression of the
document was deliberate is reinforced by the fact that second page was
exhibited to Ms Saita’s affidavit, suggesting a deliberate decision to withhold
the first page containing the relevant entry.
The erroneous
basis for jurisdiction under the Brussels Recast Regulation to make the
Enforcement Order.
44.
This error has been explained, and was brought to the court’s attention
by BTR’s legal advisers on 31 January 2018. It is at the lower end of the
scale of culpability, and is in the event irrelevant because the basis for
jurisdiction asserted was justified, albeit by reference to a different Article
of Chapter II of the Brussels I Regulation. I do not regard it as significant
to my conclusion on the duty of full and frank disclosure.
Conclusion on
breaches of the duty of full and frank disclosure
45.
The importance of the duty of disclosure has often been emphasised. It
is the necessary corollary of the court being prepared to depart from the
principle that it will hear both sides before reaching a decision, which is a
basic principle of fairness. Derogation from that basic principle is an
exceptional course adopted in cases of extreme urgency or the need for
secrecy. If the court is to adopt that procedure where justice so requires, it
must be able to rely on the party who appears alone to present the evidence and
argument in a way which is not merely designed to promote its own interests,
but in a fair and even-handed manner, drawing attention to evidence and
arguments which it can reasonably anticipate the absent party would wish to
make. It is a duty owed to the court which exists in order to ensure the
integrity of the court’s process. The sanction available to the court to
preserve that integrity is not only to deprive the applicant of any advantage
gained by the order, but also to refuse to renew it. In that respect it is
penal, and applies notwithstanding that even had full and fair disclosure been
made the court would have made the order. The sanction operates not only to
punish the applicant for the abuse of process, but also, as Christopher Clarke
J observed in Re OJSC ANK Yugraneft v Sibir Energy PLC [2010]
BCCC 475 at [104], to ensure that others are deterred from such conduct in the
future. Such is the importance of the duty that in the event of any
substantial breach the court inclines strongly towards setting aside the order
and not renewing it, even where the breach is innocent. Where the breach is
deliberate, the conscious abuse of the court’s process will almost always make
it appropriate to impose the sanction.
46.
That is the appropriate sanction in this case. The breaches of full and
frank disclosure must be considered cumulatively. They are substantial and
serious. In the significant respects I have identified they must be treated as
deliberate. They justify imposing the sanction irrespective of the merits of
BTR’s claim for relief against these respondents. This is not one of those
rare cases where the merits of the application are overwhelming and justice
cries out for the continuation of the freezing relief. On the contrary, BTR’s
case for relief faces very considerable hurdles, to put it at its lowest. The
respondents are not within the jurisdiction and nor are the assets, save for
the shares in Westpoint UK (and Hollydale) and Piedmont UK; those are merely
intermediate holding companies in structures with foreign entities both above
and beneath them; it is the New Jersey and Romanian companies respectively who
are holding the underlying assets against which any enforcement is in practice
to take place; the Rowena structure assets are the subject matter of the New
Jersey Bankruptcy and Civil Claim proceedings, to which BTR and Ms Sakarya are
parties; the relief sought from this court may be available in whole or part
from the New Jersey court (BTR has adduced no evidence that it is not); in Ms
Gönen’s case there is no connection to this country; and the legal basis for
the relief in respect of KC Assets which are not Received Assets is novel. It
is not necessary, however, to determine whether in the absence of
non-disclosure, continuation of the orders or some part of them would have been
justified. The non-disclosure requires the orders to be set aside and not to
be continued.
