Before : |
W. J. Bailhache, Q.C., Deputy Bailiff, and Jurats Le Cornu and Blampied. |
IN THE MATTER OF THE THIRD REPRESENTATION OF DAVID STANDISH, JOHN MILSOM AND JEREMY OUTEN, RECEIVRS OF THE ASSETS OF MR MUKHTAR ABLYAZOV.
Advocate A. J. Dessain and Advocate E. B. Drummond for the Representors.
judgment
the deputy bailiff:
1. On 28th May, 2013, the representors applied for further relief in connection with the Court's Order on 30th November, 2011, when the Court granted the application that the receivership order of the English High Court, by which the representors were appointed as receivers of the assets of Mr Mukhtar Ablyazov ("Mr Ablyazov"), was recognised. The reasons for the Court's decision in November 2011 are reported at In the matter of the assets of Ablyazov [2012] (1) JLR 44. The Court concluded that the Royal Court has an inherent jurisdiction to recognise the appointment of receivers appointed by a foreign court provided that there is a sufficient connection between the defendant whose assets have been made the subject of a receivership order and the jurisdiction in which the order has been made. In the instant case, the Court found that Mr Ablyazov was resident in England and that that was a sufficient connection for the purposes of the application to have the appointment of the representors as receivers recognised in the Royal Court.
2. When that application was made, the receivers requested a power to require any person in Jersey to attend upon them to provide information about the assets of Mr Ablyazov, and that any person who refused to comply with a request from the receivers would be in contempt of Court. The Court however did not think it was necessary or proportionate to give the receivers that power, nor did the Court think that it was appropriate that a person refusing to comply with a request received from the receivers should be treated as being in contempt of Court. The orders made were that the relevant parts of the receivership order should not be recognised or enforceable in Jersey without further specific order, and that there was liberty to apply such that the Court could decide whether persons in Jersey holding confidential information should be forced to disclose that information, or whether there were valid grounds for them not doing so. Subject to those provisos, the receivership order was recognised. In particular (in other respects) the Court expressly recognised the appointment and powers of the receivers and authorised and permitted them to use those powers in Jersey, including:-
(i) taking steps in Jersey to recover and preserve Mr Ablyazov's property as, defined in the receivership order, and to exercise powers vested in them by the receivership order;
(ii) identifying and locating such property in Jersey and making enquiries and requests for information, documents and other materials relating to such property in the possession or control in whatever capacity of any person within Jersey.
The Royal Court subsequently ruled that "that order of the Royal Court entitles the receivers to demand information about the assets subject to the receivership order". See David Standish, John Milsom and Jeremy Outen-v-Eurasia Logistics Limited and Nautilus Trust Company Limited [2012] JRC 072 at paragraph 18(iv).
3. By the third representation, the representors brought to the attention of the Court various changes in the original receivership order. The terms of the Court's Act of 30th November, 2011, make it plain that any further order of the English High Court and/or amendment of the receivership order which had the result of the receivers being appointed as receivers of assets of which they were not presently receivers should not be recognised without any further order of the Court.
4. On 17th May, 2013, paragraph 1A of the receivership order was amended to state, insofar as the representors allege is material:-
"1A The receivers shall also be appointed as managers of ... (d) Dayen Environmental Limited (listed in Row 201 of Schedule 3A hereto), Nupto Limited (listed in Row 258 of Schedule 3B hereto), Jollafield Holdings Limited (listed in Row 198 of Schedule 3B hereto) and Eurasia Logistics Limited (listed in Row 6 of Schedule 3C hereto). The said appointment shall, upon recognition of this order in the jurisdiction of incorporation of the said companies, suspend the powers of the directors of those companies (such powers to be assumed by the receivers or persons acting on their instructions) save insofar as (i) any director thereof is authorised by the receivers in writing to exercise any of those powers...
5D The claimant is permitted, pursuant to CPR Rule 3.2(1)(a) to delay service of the May 2013 application, this order, supporting evidence and associated documentation on Mr Ablyazov (by service on his solicitors) until 4.00 p.m. on 7th June, 2013."
5. Dayen Environmental Limited, Nupto Limited and Jollafield Holdings Limited, which are incorporated in other jurisdictions, are subsidiaries are Eurasia Logistics Limited ("Eurasia"). Eurasia is a company incorporated in Jersey.
6. The application by the representors was therefore to have confirmed in this Court the amendments to the receivership order made in the English High Court on 17th May, 2013, such that the appointment and powers of the representors as managers of Eurasia be recognised.
7. When this matter was heard on 30th May, 2013, the Court sat in private but it was noted that the judgment and order, when made, would be in public.
8. At the end of the hearing on 30th May, judgment was reserved. Given the urgency of the application the decision was notified to the representors by Act of Court dated 31st May, 2013, substantially granting the prayer in the representation, with reasons to be delivered later. This judgment contains those reasons.
9. Advocate Dessain informed the Court that Eurasia is the only Jersey company within this structure, and in putting forward the application for recognition of the amendments to the English Court's Order of 17th May, he submitted that it was necessary to ensure the receivers were treated as managers of the company so that two highly valuable properties in Russia could be secured. He submitted that the appointment of a manager in English law causes the directors' powers to cease, but the mere appointment of a receiver would not do so. The appointment of a manager therefore allows positive managerial steps to be taken as opposed to conservatory actions.
10. He submitted that the appointment of a receiver and manager is part of the Court's armoury to ensure that its orders are respected. He went on to submit that in the case of Mubarik-v-Mubarak [2008] JLR 430 the Court appointed a receiver over a trust in the exercise of its inherent supervisory jurisdiction. It would, he said, be inconvenient for the receivers, who were a type of trustee, to come to Court every time the directors were about to do something the receivers thought ought not to be done, and it was better to recognise the powers of the manager in a generic way. The application was made on the basis that the Court was asked to exercise its inherent jurisdiction. It was not an application pursuant to the Companies (Jersey) Law 1991 ("the Companies Law"), but an all-encompassing power which the Court had. After all, the management of a company could be affected by an injunction granted by the Court, even one in support of proceedings in a foreign jurisdiction - see Solvalub Limited-v-Match Investments Limited [1996] JLR 361, so, in principle, why should the Court not have a power to affect management in a more general way?
11. It was contended that it was not necessary to have a domestic power to appoint receivers and managers because the Court had an inherent jurisdiction to give effect to an English Court order on the application of conflict of laws principles. It was said that if the Island legislation contained provisions which prohibited the appointment of managers, the Court would clearly have to apply them. However there is no such provision, and therefore as a matter of discretion and in the interests of comity, the amendments to the English Court order can be given effect. Advocate Dessain relied upon Rumasa SA-v-W&H Trademarks (Jersey) Limited [1985-86] JLR 308. If the Court could overcome the limitations of the Companies Law by appointing the Viscount as administrator, why should the Court not be able to give effect on conflict of laws principles to an English Court order which would achieve the same result?
12. On the basis that the Court had a discretion, it was then submitted that the facts of this case made it plain that such a discretion should be exercised in favour of the representors. Mr Ablyazov was a fugitive from justice. He broke English Court orders, and is in contempt. Extreme cases require extreme remedies.
13. There was no sign in this case of innocent third parties. We were told that the courts of other jurisdictions had been clearly working in tandem with the English High Court, as indeed has the Royal Court in the past. The Courts of the British Virgin Islands had recognised the appointment of a manager in relation to some BVI companies, and was to consider the appointment of a manager in relation to Nupto Limited in the early part of June. Similar applications would be made to the Cypriot Courts in relation to Dayen Environmental Limited and Jollafield Holdings Limited.
14. We deal first with the question as to whether, in a domestic context, the Royal Court has jurisdiction to appoint a manager who would assume the powers of the directors of the company concerned. It is noted that there are a number of statutory regimes in place by which the powers of the directors can be displaced. The Jersey Financial Services Commission can apply to the Court for the appointment of a person to manage the affairs of a company under Article 12 of the Financial Services (Jersey) Law 1998. A liquidator can be appointed in a summary winding up or a creditors' winding up under Articles 149 and 161 of the Companies Law respectively and indeed under Articles 149(2) and 163(2) of the Companies Law, the powers of the directors cease on the appointment of a liquidator save that with a creditors' winding up, the liquidation committee or the creditors may sanction their continuance. The Bankruptcy (Désastre)(Jersey) Law 1990 has the effect that where a désastre is declared, the Viscount has powers which in practice displace the powers of the directors.
15. It is true that all these are instances of where the Court does have jurisdiction in domestic terms to appoint a manager in respect of the assets of the company. At one level, it might be said that the more often there is legislation to create a statutory power in relation to the appointment of a manager, the more that must go to show that there is no inherent power to do so, or else the legislation would not be required.
16. However, it was rightly pointed out that the Royal Court has had a customary law power to appoint an administrator of property, such a person acting in a similar way to a manager. This traditionally has been done where a natural person is absent from the Island, but in Rumasa SA-v-W&H Trademarks (Jersey) Limited (supra), the customary law was developed to meet the needs of changing times and the Viscount was appointed administrator in respect of a Jersey company which had directors outside the Island.
17. Furthermore, the customary law development of the declaration of désastre shows that the Court, in an appropriate case, was prepared to assume a jurisdiction the results of which would be an active management of a bankrupt company's affairs. The development of a Mareva jurisdiction could also have the same result. A Mareva injunction could well be obtained for conservatory purposes in such a way as in effect would freeze the business of the company. The addition of the formula of liberty to apply could have the result, albeit inconvenient, of the Court acting as a quasi manager by endorsing departures from the conservatory injunction from time to time.
18. We are reluctant to reach any concluded view on these competing arguments unless it is absolutely necessary to do so although there is some strength in the argument that, outside the application of conflict of law principles, there is no domestic power to appoint a manager of a company aside from the provisions of the Companies Law which could have made provision for the appointment of managers by the Court more generally, but has not done so and express legislation to confer that jurisdiction is required.
19. We have determined that it is not necessary to resolve this question of domestic jurisdiction to appoint a manager, however, because notwithstanding the absence of that power - and we proceed on that assumption for the purposes of this case only - we take the view that the Court does have jurisdiction on the Jersey conflict of law principles to recognise the order of an appropriate foreign court to appoint a manager of a Jersey company, supplanting the powers of directors, in an appropriate case. Furthermore we note from this Court's earlier decision in In the matter of the assets of Ablyazov [2012] (1) JLR 44 that the absence of a domestic equivalent is not a bar to the recognition of a foreign appointee.
20. Our reasons for that conclusion are as follows:-
(i) Although we have not reached any concluded view as to whether there is a general power under domestic law to appoint a manager of a company, we can and do take into account the fact that the legislature has recognised circumstances when it is necessary for persons to be appointed to manage the affairs of a company and for the directors' powers to be removed. Instances of that recognition by the legislature are set out in paragraph 14 above. We also take into account the exercise of an inherent jurisdiction in Rumasa SA (supra). We are therefore entitled, when reviewing whether or not to apply the Jersey conflict of law principles (on which the Court relied in one of the earlier judgments in this case - In the matter of the assets of Ablyazov (supra) in the recognition of a power lawfully exercised by a foreign court to appoint managers), to start from the premise that the appointment of managers is a process known to Jersey law.
(ii) We accept the submission that the Court has an inherent jurisdiction to make an order for the appointment of a manager as part of the Court's armoury to ensure that its orders are complied with. In the present case the Court has recognised the appointment of the representors as receivers (see In the matter of the assets of Ablyazov (supra)) and it is right that the Court should make supplementary orders to ensure that the recognition order has effect.
(iii) In England and Wales, it appears that appointments are made pursuant to S37(1) of what is now the Senior Courts Act 1981 which provides:-
"The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the Court to be just and convenient to do so."
This power has, on the evidence of English law provided by Robert Miles QC, always been recognised as inherently including the power to appoint a manager such as in Hart-v-Emelkirk [1983] 1 WLR 1289. We do not have the same statutory provision but, in our judgment, the power to recognise the appointment of a receiver should similarly extend to the recognition of the appointment of a manager. If there is a power to do the former, as the Royal Court has found in this case, there is power, if appropriate, to do the latter.
(iv) Although we have not been addressed on it, we may have jurisdiction to recognise the appointment of the receivers as managers pursuant to Article 9 of the Judgments (Reciprocal Enforcement)(Jersey) Law 1960 ("the 1960 Law") which is in these terms:-
"(1) Subject to the provisions of this Article, a judgment to which Part 2 of this Law applies or would have applied if a sum of money had been payable thereunder, whether it can be registered or not, and whether, if it can be registered, it is registered or not, shall be recognised in any court in Jersey as conclusive between the parties thereto in all proceedings founded on the same cause of action..."
There may be points to be taken about the identity of the parties and the cause of action and for that reason we do not rely upon this provision for the purposes of this judgment. Nonetheless, the Article gives a clear steer as to how certain foreign decisions are to be treated in this Court.
21. The next question which arises is the effect of a recognition of the appointment of managers for Eurasia in circumstances where there are currently Jersey resident directors of that company. On this point, domestic legislation is obviously silent, although there are some provisions in domestic law which enable the powers of the directors to be suspended where, for example, liquidators have been appointed.
22. It would be unthinkable for the receivers to be appointed as managers over Eurasia and face the theoretical possibility of a running battle with the board of directors of that company as to who had control of its affairs. The necessary consequence of recognising the amendments to the receivership order which confer managerial powers on the receivers are that we should suspend the powers of the directors of Eurasia and order that such powers be assumed by the receivers, or persons acting on their instructions, and the directors would only have authority to continue to act if authorised by the receivers in writing to exercise any directorial powers. This is the other side of the coin. If we were not prepared to suspend the powers of the directors, it would not be right to recognise the appointment of the receivers as managers. This is an issue that goes to discretion and not jurisdiction. In all the circumstances of this case, including those mentioned in paragraph 24 below and those mentioned in previous judgments of this Court on the affairs of Mr Ablyazov, we think the recognition of the receivers as managers is the appropriate conservatory course.
23. By having the management power of Eurasia, it follows that the receivers can exercise the voting power as shareholders in the subsidiary companies of Eurasia, including Dayen Environmental Limited, Nupto Limited and Jollafield Holdings Limited. The underlying purpose of recognising in Jersey and giving effect to the English High Court Order which appoints the receivers as managers is to ensure that they are in fact in control of these subsidiary companies. Accordingly, pursuant to paragraph 5 of Schedule 4 of the receivership order, we confirm that the receivers should have the power to appoint and remove directors to Dayen Environmental Limited, Nupto Limited and Jollafield Holdings Limited in their capacity as managers of the shareholding of Eurasia in those companies.
24. We are asked to confer upon the receivers the power to register themselves or their nominees as shareholders of Dayen Environmental Limited, Nupto Limited and Jollafield Holdings Limited pursuant to paragraph 6 of Schedule 4 of the receivership order. This would remove the shareholding in the subsidiary companies from Eurasia as their parent. It may be right that such a power be exercised, but for the time being no circumstances have been put forward before us so as to justify the making of that order. The exercise of such a power would potentially assist the High Court of England and Wales as a matter of comity in the steps which it has taken to endeavour to have gathered in certain of the assets of Mr Ablyazov to meet the substantial judgments which have been given against Mr Ablyazov in proceedings in the English Courts. JSC BTA Bank ("the Bank") has already obtained judgments against Mr Ablyazov in sums exceeding US$2 billion. Mr Ablyazov is understood to have a beneficial interest in the company Eurasia, incorporated in Jersey, which holds the shares in Dayen Environmental Limited, Nupto Limited and Jollafield Holdings Limited, which companies have interests in certain Russian companies which own real estate in Russia. The Russian companies in question have been found by the English High Court to belong to Mr Ablyazov, but the existence of the receivership has not prevented improper dealings with those two companies. The legal basis for the appointment of the receivers has not changed, and notwithstanding that judgments have now been given on the merits, these proceedings have not yet moved into enforcement proceedings from conservatory proceedings. However, there may come a point at which the exercise of the receivers' powers to have themselves registered as shareholders in the Eurasia subsidiaries would have effect like enforcement. At that point one may come up against Article 8 of the 1960 Law which is in these terms:-
"No proceedings for the recovery of a sum payable under a judgment to which this part of this Law applies, other than proceedings by way of registration of the judgment, shall be entertained by any court in Jersey."
It appears to us that we need to be addressed on the effect of this Article before we allow any exercise by the receivers of the power to have themselves or their nominees registered as shareholders of Eurasia's subsidiaries. Accordingly we order that the receivers should have this power, pursuant to the english receivership order, but it is not to be exercised without further order of this Court.
25. Eurasia might be tempted to take steps to transfer assets. In order to forestall any such action, the Court confirms that the receivers have the power, pursuant to paragraphs 7,10 and 13 of Schedule 4 of the receivership order to take such steps as they think are necessary to prevent or rectify any unauthorised transfer of the shares held by Eurasia in other companies covered by the receivership order, including the bringing or defending of any legal proceedings in courts of this or any other jurisdiction (including Russia) and procuring the issue of any necessary documents from Eurasia for that or any related purpose.
26. It was important that neither Eurasia nor its board should have prior warning of the orders which were made by this Court in these proceedings, so that the orders might be given proper effect. For this reason, it was of course necessary that Eurasia and Nautilus Trust Company Limited, the corporate director of Eurasia should be served with this order. The terms of the order would take effect upon service of the relevant Act of Court. We ordered that the application would be heard in private for obvious reasons, and that judgment would be published, save that it was to be under embargo until service on Mr Ablyazov or 30th June, 2013, whichever was the earlier.
27. As is confirmed in the Act of Court of 31st May, 2013, the powers of the receivers as receivers and managers may be exercised jointly or individually, and the representors, Mr Ablyazov, Eurasia, Nautilus Trust Company Limited and any third party affected have liberty to apply in respect of the exercise by the representors or any of them as managers of Eurasia pursuant to the receiving order and this judgment.
Authorities
In the matter of the assets of Ablyazov [2012] (1) JLR 44.
David Standish, John Milsom and Jeremy Outen-v-Eurasia Logistics Limited and Nautilus Trust Company Limited [2012] JRC 072.
Mubarik-v-Mubarak [2008] JLR 430.
Companies (Jersey) Law 1991.
Solvalub Limited-v-Match Investments Limited [1996] JLR 361.
Rumasa SA-v-W&H Trademarks (Jersey) Limited [1985-86] JLR 308.
Financial Services (Jersey) Law 1998.
Bankruptcy (Désastre)(Jersey) Law 1990.
Hart-v-Emelkirk [1983] 1 WLR 1289.
Judgments (Reciprocal Enforcement)(Jersey) Law 1960.
Senior Courts Act 1981.