Douglas Riegels et al. v Charles Peterson et al.

1
BRITISH VIRGIN ISLANDS
THE EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
(CIVIL)
BVIHCV2019/0113
BETWEEN
[1] DOUGLAS RIEGELS
[2] TREFOR GRANT
Claimants/Applicants
and
[1] CHARLES PETERSON
[2] GLOBAL WATER ASSOCIATES LIMITED
Defendants/Respondents
Appearances:
Mr. Peter Ferrer with him Ms. Marcia McFarlane for the Applicants
Mr. Adrian Francis with him Ms. Akesha Adonis for the Respondents
————————————————————–
2021: March 23
August 6
—————————————————————
Application for Freezing Order and Order for Disclosure of Information – Application framed
as an American Cyanamid Application – Freezing order sought not related to propriety rights
but grounded in a claim for damages for breach of contract – Second Respondent being a
special purpose vehicle without any or any substantial assets expected to benefit from a
settlement sum – Applicants’ underlying claim presenting an arguable case – dispute as to
whether or not Applicants entitled to a portion of the settlement sum – First Respondent not
ordinarily resident in the jurisdiction – Second Respondent not actively trading –
Respondents refusal to provide any undertaking – Real Risk of dissipation – In the interests
of Justice to grant freezing Order and Order for Disclosure.
DECISION
[1] RAMDHANI J. (Ag.) This began as ex parte application made pursuant to Part 17
of the Eastern Caribbean Supreme Court Civil Procedure Rules (CPR), section 24
of the West Indies Associated States Act, and or the inherent jurisdiction of the Court
2
for primarily two orders, one being a freezing order and for the disclosure of certain
information. The application was heard inter partes with the result being the
application for a freezing order is refused but that the order for disclosure is granted
in the terms set out in this decision.
[2] The application was framed on paper as an American Cyanamid application. It
contends that there is a serious issue to be tried and that balance of convenience
favours the grant of the orders. The main contention is that the Respondents were
likely to remove from the jurisdiction, money which they were about to collect from
the government as part of a settlement, so thereby thwarting the enforcement of any
judgment which the Applicants might obtain in pending proceedings. The Applicants’
claim is that they are entitled to at least 60% of the settlement sum less any legal
fees which would be incurred by the Respondents in securing the settlement.
The Underlying Dispute Between the Parties.
[3] The underlying claim was filed on 23 April 2020 by the Applicants, for damages
arising out of allegations that the Respondents’ have breached an oral agreement
(the Agreement) between the Parties.
[4] The claim is grounded in events1 which began in late 2011 and early 2012 when Mr.
Peterson, the First Respondent entered into discussions with Mr. Riegels, the First
Applicant regarding the provision of funding for litigation between Global Water and
the Government of the Virgin Islands (the “Government”). The litigation in question
was in respect of various breaches by the Government of two agreements both
dated 19 September 2006; one for the design and build of a sewage treatment plant
and the other for its management, operation and maintenance (together the
“Government Contracts”).
1 The undisputed aspects of the narrative is adopted from the Applicants’ case.
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[5] Through various discussions, the First Applicant and the First Respondent agreed
that: The Applicants would lobby the Government on behalf of Second Respondent
with the objective of persuading it either to honour the Government Contracts or to
agree to the payment of compensation on terms acceptable to the First Respondent
(in his capacity as director of the Company).
[6] In the event, the first objective was not achieved within a reasonable time the
Applicants would lobby the Government on behalf of the Company with the
alternative objective of persuading it to enter into new contracts with the Company,
on terms wider in scope and financially more advantageous to Global Water than
under the Government Contracts; the precise terms of which would be acceptable
to, and agreed by Mr. Peterson (acting for and behalf of Global Water).
[7] If the Applicants were unable to achieve either objective within a reasonable time,
and in any event sufficiently in advance of the expiration of the limitation period to
enable a claim for breach of the Government Contracts to be brought in a
considered and orderly fashion, the Applicants would personally provide Second
Respondent with necessary funding for it to bring such proceedings.
[8] The Applicants would be responsible for the time spent, and all costs and expenses
incurred, by them in furtherance of the said objectives. In consideration of the above,
the Applicants would acquire all of the Company’s Class B Preference Shares,
either directly or through some other nominated entity.
[9] The parties parted company in 2013, each claiming that the other had broken the
oral agreement. The short of it was that in June 2013, the Respondents, contending
that the Applicants had refused to fund the litigation, moved on to arbitration
proceedings against the government and funded these proceedings themselves.
[10] The arbitration was successful against the Government, and several appeals later,
on the 13th July 2020, the Privy Council allowed the Second Respondent’s appeal
and referred the matter back to arbitration for an assessment of damages. The
matter is currently before the arbitrators and a decision on the quantum of damages
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due to the Second Respondent is expected. The Applicants say this is likely to be
soon.
[11] On 23 April 2020, the Applicants issued their claim for damages for breach of the
Oral Agreement, damages for loss of chance amounting to 60% of the anticipated
net profits arising from the Government Contracts or alternatively 60% of the value
of any award made in favour of the Company or alternatively compensation on a
quantum meruit basis.
[12] The crux of the Applicants’ narrative is that they fulfilled their obligations under the
oral agreement and are therefore entitled to damages for an alleged breach of the
oral agreement by the Respondents.
[13] On 6 November 2020 and on 3 March 2021, the Applicants sought an undertaking
from Mr. Peterson in respect of the proceeds of settlement. That undertaking was
refused on the basis the Claimants are not entitled to the relief sought or otherwise
to interfere with Global Water’s freedom of action.
[14] This refusal and other circumstances set out in the application, led to the present
application which sought interim relief. The Applicants effectively seek orders (1) to
compel the Respondents to produce information on any settlement discussions with
the Government and details of any payments made, and (2) to prevent the
Respondents from disposing of, dealing with or diminishing the value of their assets
in or outside the Virgin Islands up to the value of 60% of any settlement received by
the Respondents from the Government.
[15] There has been quite a lot of submissions made by the applicant that American
Cyanamid principles are relevant to the court’s functions. These were met by equally
forceful submissions by the respondent that the American Cyanamid principles were
not applicable. The Court is satisfied that on this point, the Respondents are right
and the Applicants would have to show more than what is required by the American
Cyanamid principles to get the orders sought. The authorities have made it clear
that the American Cyanamid principles and the test for the grant of an injunction
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applicable to proprietary claims to enforce a legal or equitable right and are not
applicable to a monetary claim or a claim for an account, where only freezing
injunction may be granted. Madoff Securities International Ltd and another v
Raven and others [2012] 2 All ER (Comm) 634
[16] Notwithstanding, the Applicants contended that on the evidence before the court
demonstrated, even if they were wrong on American Cyanamid principles, there was
sufficient material before the court to justify the grant of the orders sought.
[17] I have considered the Application, the evidence in support and in opposition, the
written and oral arguments of the parties and do agree it would be proper to make
the orders sought in this case.
A Freezing Order
[18] The court’s jurisdiction to grant a freezing order is grounded in section 24(1) of the
West Indies Associated Supreme Court (Virgin Islands) Act. This section provides
as follows: –
“24. (1) A mandamus or an injunction may be granted or a receiver
appointed by an interlocutory order of the High Court or of a judge thereof
in all cases in which it appears to the Court or Judge to be just or convenient
that the order should be made and any such order may be made either
unconditionally or upon such terms and conditions as the court or judge
thinks just”.
[19] CPR 2000 Part 17.1(1)(j) brings this provision to life by empowering the court to
grant an interim freezing order to restrain a party from dealing with any assets
whether or not located in the jurisdiction as well as restraining its removal from the
jurisdiction. The court will engage this discretion to restrain the removal of assets
from the jurisdiction where there is a real risk that a party may dissipate or remove
his assets from the jurisdiction. The discretion is exercised to ensure that assets will
be available to satisfy any judgment which may be granted against that party.
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[20] In this jurisdiction, the principles are well settled on an application for the grant of a
freezing order, where the underlying claim is a monetary claim for a breach of
contract. The applicant would have to show: (a) that there was a good arguable case
on the merits; (b) that there is a real risk that there will be an unjustified dissipation
of the Defendant’s assets (wherever located) before judgment can be enforced; and
(3) That the respondent will be adequately protected by the applicant’s cross
undertaking in damages. See the cases of Rybolovleva v Rybolovleva (BVIHOV
2008/0403), per Foster J at [24]; Irish Response Limited v Direct Beauty
Products Limited [2011] EWHC 37 (QB).
[21] I have noted that in this case the ‘assets’ would be the settlement sum if any, which
have not yet been realized. I see no reason why a freezing order would not be
available against future assets in circumstances which exists in the present case.
[22] In the exercise of the discretion to grant a freezing order, the court should have
regard to the relevance of any delay in making the application.
[23] I turn to the first matter which must be shown, that is, a good arguable case.
Good Arguable Case
[24] What is a good arguable case? It is any different from a ‘serious issue to be tried’?
[25] In the Madoff case, the Commercial court made reference to Ninemia Maritime
Corp v Trave Schiffahrtsgesellschaft mbH & Co KG, The Niedersachsen [1984]
1 All ER 398 where at 404 Mustill J (as he then was) described a good arguable
case for these purposes as one ‘which is more than barely capable of serious
argument, and yet not necessarily one which the judge believes to have a better
than 50% chance of success’. The Commercial Court stated: “It can immediately be
seen that this either is the same test as ‘serious issue to be tried’ for the purpose of
resisting a strike out application or, if there is any difference between the two tests,
it is an imperceptible one.”
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[26] In a reminder that the burden was on the applicant to present evidence on the
relevant questions, Kerr LJ giving the judgment of the Court of Appeal in Ninemia
Maritime Corporation v. Trave Schiffahrtgesellschaft m.b.H. und Co. KG (“The
Niedersachsen”) [1983] 1 WLR 1412 at page 1417E –F:
“It follows that the evidence, including the evidence on the second question
posed by the judge to which we turn in a moment, must be looked at as a
whole. A “good arguable case” is no doubt the minimum which the plaintiff
must show in order to cross what the judge rightly described as the
“threshold” for the exercise of the jurisdiction. But at the end of the day the
court must consider the evidence as a whole in deciding whether or not to
exercise this statutory jurisdiction.”
[27] In this case, the Respondents have been rather tongue-in-cheek about whether they
accept that there is a real arguable case. In the written submission, they state, ‘the
Defendants do not seek to argue on this application that the Claimants do not have
a good arguable case. This is because it is not necessary to do so, as the application
is demonstrably misconceived..’
[28] Whether they were prepared to make a clear concession or not, this Court considers
that there is indeed a real arguable case on the merits. It is whether there the
Respondents are in breach of the oral agreement. In this case, both sides appear
agreed on many of the terms of the oral agreement and it seems that issues of fact
which remain include whether the Applicants have acted unreasonably and whether
they failed to respond within a reasonable time as to whether they would fund the
litigation.
[29] I turn to the next matter with regards to which the Applicants must satisfy the court.
Real Risk of Dissipation
[30] An application for the freezing order, will in most cases, turn on this issue as the first
limb is usually present.
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[31] In Madoff Securities Ltd., Flaux J noted that an applicant must be able to satisfy the
court that2:
‘(i) there is a real risk that a judgment or award will go unsatisfied, in the
sense of a real risk that, unless restrained by injunction, the defendant will
dissipate or dispose of his assets other than in the ordinary course of
business: see Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH
und Co KG, The Niedersachsen [[1984] 1 All ER 398] per Mustill J as
interpreted by Christopher Clarke J in TTMI Ltd of England v ASM Shipping
Ltd of India [2005] EWHC 2666 (Comm) at [24]–[27], [2006] 1 Lloyd’s Rep
401 at [24]–[27] or
(ii) that unless the defendant is restrained by injunction, assets are likely to
be dealt with in such a way as to make enforcement of any award or
judgment more difficult, unless those dealings can be justified for normal
and proper business purposes: Stronghold Insurance Co Ltd v Overseas
Union Insurance Ltd [1996] LRLR 13 at 18–19 per Potter J and Motorola
Credit Corp v Uzan (No 2) [2003] EWCA Civ 752 at [142]–[146], [2004] 1
WLR 113 at [142]–[146]…’
[32] Whilst an applicant may in many cases be able to rely on the underlying dispute
(grounded in pleadings which may be already filed) to demonstrate that there is a
good arguable case, the applicant must present relevant evidence on this point to
meet this threshold.
[33] In making this point, the Ontario Court of Appeal in Chitel v Rothbard (1983), 39
O.R. (2d) 513, referred to the judgment of Lord Denning in Third Chandris
Shipping Corp v Unimare [1979] Q.B. 645 and stated:
2 The Court is grateful for Mr. Francis’s summary of the legal principles and adopts it.
9
“Turning finally to item (iv) of Lord Denning’s guidelines – the risk of removal
of these assets before judgment – once again the material must be
persuasive to the court. The applicant must persuade the court by his
material that the defendant is removing or there is a real risk that he is about
to remove his assets from the jurisdiction to avoid the possibility of a
judgment, or that the defendant is otherwise dissipating or disposing of his
assets, in a manner clearly distinct from his usual or ordinary course of
business of living, so as to render the possibility of future tracing of the
assets remote, if not impossible in fact or in law.”
[34] The evidence which is to be presented to the Court must be ‘solid evidence’ to meet
the required standard of proof to show a real risk of dissipation.
[35] In the unreported decision of Yukos CIS Investments Limited and Anor v Yukos
Hydrocarbons Investments Limited and Ors, as part of his dissenting judgment,
Justice of Appeal Redhead of the BVI Court of Appeal addressed the required
standard of proof an applicant must meet: that there must be “solid evidence” of a
risk of dissipation ([35]-36]); and that the court is not concerned with the probabilities
of what will happen but with whether there is evidence establishing a real risk that
assets may be dissipated ([44]). Enercon GmbH and another v Enercon (India)
Ltd [2012] EWHC 689 (Comm) 2011
[36] In Thane Investments Ltd and ors v Tomlinson and Ors, at [21] the English Court
of Appeal held that unsupported statements, suspicions or expressions of fear have
little weight in establishing risk of dissipation.
[37] In the more recent English case of Mobil Cerro Negro Ltd v Petroleos de
Venezuela SAB the Commercial Court held at [41]-[42] that there must be a risk
that the asset will be used otherwise than for a normal and commercial purpose.
[38] Every defendant can dissipate assets. There is always a possibility of such being
done for reasonable and justifiable purposes. Not every risk of a judgment being
unsatisfied would justify the grant of the order.
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[39] A useful list of a number of considerations or factors which may be relevant to a
finding that there is a real risk of dissipation were identified in Sir Peter Pain in
O’Regan v. Iambic Productions Ltd. (1989) 139 NLJ 1378 and are set out at
paragraph 12.039 of Gee’s Commercial Injunctions, 5th edn. These are:
“(1) The nature of the assets which are to be the subject of the proposed
injunction, and the ease or difficulty with which they could be disposed of or
dissipated. The claimant may find it easier to establish the risk of dissipation
of a bank account, or of moveable chattels, than the risk that the defendant
will dispose of real estate, e.g. his house or office. Nevertheless, in
appropriate cases Mareva injunctions can be, and have been, granted
where the defendant’s only known asset within the jurisdiction is his house
(e.g. if he has put it up for sale and has evinced an intention to go and live
abroad).
(2) The nature and financial standing of the defendant’s business: see Lord
Denning’s remarks about certain types of offshore company in Third
Chandris Shipping Corporation v. Unimarine, and Lawton L.J. , and Siporex
Trade SA v. Comdel Commodities Ltd. Contrast, however, The
Niedersachsen: even a “one-ship” company incorporated in Panama or
Liberia may be a subsidiary of a substantial company incorporated
elsewhere, and would be likely to honour its debts.
(3) The length of time the defendant has been in business. Stronger
evidence of potential dissipation will be needed where the defendant is a
long-established company with a reasonable market reputation than where
little or nothing is known or can be ascertained about it.
(4) The domicile or residence of the defendant. At one time, Mareva
injunctions were granted to prevent only foreign defendants from removing
their assets from the jurisdiction to defeat a judgment or arbitration award.
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While the jurisdiction has widened to include domestic defendants, the court
will be less ready to infer that a defendant who is based in England, and
has a home or established business here, will remove or dissipate his
assets. On the other hand, if the defendant company, though English, is
controlled by an offshore company of the kind described by Lord Denning
in Third Chandris Shipping Corporation v. Unimarine, the inference that
there is a real risk that a judgment or award may go unsatisfied may be
more readily drawn.
(5) If the defendant is a foreign company, partnership, or trader, the country
in which it has been registered or has its main business address, and the
availability or non-availability of any machinery for reciprocal enforcement
of English judgments or arbitration awards in that country. If such machinery
does exist, the length of time it would take to implement it may be an
important factor.
(6) The defendant’s past or existing credit record. A history of default in
honouring other debts may be a powerful factor in the claimant’s favour –
on the other hand, persistent default in honouring debts, if it occurs in a
period shortly before the claimant commences his action, may signify
nothing more than the fact that the defendant has fallen on hard times and
has cash-flow difficulties, or is about to become insolvent. The possibility of
insolvency does not justify the granting of Mareva relief. As a factor it may
weigh against it, on the grounds that an injunction would be oppressive
because it might deprive the defendant of a last opportunity to put his
business affairs in good order again. The fact that a Mareva injunction has
been granted over the defendant’s assets may well discourage a bank or
other company from lending him money or otherwise coming to his aid.
(7) Any intention expressed by the defendant about future dealings with his
English assets, or assets outside the jurisdiction.
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(8) Connections between a defendant company and other companies which
have defaulted on arbitration awards or judgments. If the defendant
company is the subsidiary of a foreign company which has allowed other
subsidiaries to default on awards or judgments, or go into liquidation owing
large sums of money to trade creditors, this may be a powerful factor in
favour of granting an injunction.
(9) The defendant’s behaviour in response to the claimant’s claims: a
pattern of evasiveness, or unwillingness to participate in the litigation or
arbitration, or raising thin defences after admitting liability, or total silence,
may be factors which assist the claimant.”
[40] Mr. Ferrer’s oral and written arguments largely centered on the American
Cyanamid’s principles, and he urged that the balance of convenience favoured the
grant of the injunction. In his submissions he argued that on those matters
considered in the balance, as far as a risk of dissipation of assets is concerned,
‘there are several factors pointing to such a risk.
The Respondent’s conduct in dealings between the Parties
[41] In this regard, Mr. Ferrer for the Applicants submits that ‘the First Respondent, by
his conduct with the Oral Agreement and in these proceedings has sparked concern
that he is prone to dishonour his word and will do his utmost to thwart [the
Applicants’] justifiable claims.’ Reference was also made to the First Respondent’s
conduct related to the mediation process.
[42] Mr. Francis for the Respondents response was that a real risk could not be grounded
on ‘the Defendants’ alleged breach of contract because ‘[a]n allegation of breach of
contract does not suffice to establish a risk of unjustified dissipation. If it did, a
freezing order would be obtained automatically in every breach of contract case.’
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[43] So too, Mr. Francis argued ‘[t]he Defendants’ refusal to settle by mediation could
not be relied on to ground a finding of a real risk of dissipation as the Applicants
‘may not refer to, let alone rely on, without prejudice communications for the purpose
of establishing a risk of unjustifiable dissipation or indeed for any purpose. In any
event, a refusal to settle proceedings is incapable of giving rise to an adverse
inference of a risk of unjustified dissipation. Otherwise, a freezing order once again,
be obtained automatically in every case once a without prejudice offer is refused.
[44] As far as this Court is concerned, I do not see how any of the underlying alleged
conduct of the first respondent rises to support any view that he is prone to not
keeping his word. These ground the breach of contract claim and are merely
allegations at this stage. If I were to accept this argument it would mean that this
Court would have accepted the underlying allegations as facts. There is nothing
here which the First Respondent concedes which can be used to justify a finding
that he is likely to take actions to thwart enforcement.
Shell Company and No Ties to the Jurisdiction:
[45] The Applicants have also relied on the fact that the First Respondent is not ordinarily
resident within the BVI and is not known to have any, or sufficient, assets in the
jurisdiction of the Court, capable of satisfying the Breach of Contract Claim.
[46] Reliance has also been placed on the Second Respondent being simply a shell
company which was formed solely for the purpose of receiving the Government
Contracts. The sole asset of the Second Respondent is its entitlement to any award
to be paid by the Government to the Respondents arising from the breach of the
Government Contracts.
[47] Mr. Francis for the Respondents submitted that Global Water being a special
purpose or shell company and the settlement proceeds being its only assets meant
nothing as ‘there is no automatic right to a freezing order against any type of
company, including a company with a single asset or only cash assets. These facts
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are incapable of giving rise to an adverse inference of a risk of unjustifiable
dissipation.
[48] I note paragraph 1 of the first respondent’s witness statement in which he states:
“I am a director of the second respondent (the “Company” or “Global
Water”). I am a resident of the United States and the British Virgin Islands.
I have done business in the BVI for over 23 years and I also have a
residence at Sabbath Hill, Tortola, BVI. I am in the business of supplying
water and sewage services to the Territory. I have a number of businesses,
which include the provision of sewage equipment and water in various
locations on island.”
[49] A court has to approach this matter in a practical manner. This is no clear denial by
the Respondents that the Second Respondent was established as a special
purpose vehicle to secure the government contract. This is a company that is not
trading and has no day-to-day operations. It has no assets and it is now simply
engaged in resolving the dispute with the government to receive its settlement sum.
This is one of the factors which have been identified in Gee as being important. I
consider that it is a significant matter in this case.
[50] As far as the First Respondent is concerned, I am of the view that he can dispose
of his residential property fairly easily, especially where he maintains homes in
several jurisdictions. The fact that the First Respondent has been doing business in
the BVI for the last 23 years does not change this view in this case. The first
Respondent and his wife are ordinarily resident outside of the BVI. The first and
second factors set out in Gee (quoted above) rings here.
[51] These matters, when considered against the refusal to give the undertaking, give
rise to a real risk.
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Refusal to give Undertaking
[52] The Applicants say that following the recent the Privy Council ruling, they became
aware of the Government’s interest in settling the Respondents’ claim and that by
letter dated the 6th November 2020, their legal practitioners wrote to the
Respondents’ legal practitioners seeking an undertaking in the following terms:
“We refer to the recent favourable Privy Council judgment, Global Water
Associates Limited v Attorney General of the Virgin Islands. The Privy
Council has determined that your client (Global Water) is entitled to
damages for loss of profit arising from a breach of contract (the Breach of
Contract Claim) by the Government of the British Virgin Islands (BVI
Government).
We understand that consequent on the Privy Council’s judgment, the BVI
Government would like to negotiate a settlement regarding the quantum of
damages payable to Global Water. As you are no doubt aware, our clients
claim a 60 per cent interest in any damages paid to Global Water resulting
from its Breach of Contract Claim against the BVI Government.
If there should be negotiations, or indeed a settlement between Global
Water and the BVI Government, pending the hearing of our clients’ Claim,
our clients are concerned to ensure that the proceeds of any settlement are
not dissipated by Global Water and/or Mr. Peterson but are preserved
pending the outcome of our claim.
In the circumstances, our clients seek an undertaking from your client that
Global Water will pay into and hold at least 60 percent of the proceeds of
any settlement, less an appropriate proportion of Global Water’s legal fees,
into a segregated fund (the Fund) and that Global Water, whether by itself,
officers, agents and/or servants, will not in any way deal with or diminish
the Fund until the determination of our claim, including any appeal.
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We look forward to your response on or before 16 November 2020 by 4pm.”
[53] The Respondents responded by letter dated the 23rd November 2020 in the
following terms:
“Firstly, we note that you stated the BVI Government would like to negotiate
a settlement; we would be interested to know the source of that information
not least because at the moment the BVI Government has failed to engage
in any settlement discussions and have given no indication that they are
willing to do so.
It follows that even if there was an intention on the part of Global Water or
Mr. Peterson to dissipate settlement proceeds there is no possibility of it for
the foreseeable future. We do think therefore that the alleged concerns
expressed have no basis and are not genuine.
Secondly, your letter provides no basis for your clients’ alleged concern that
the proceeds of any alleged settlement will be dissipated by Global Water
or Mr. Peterson. Your letter appears to us to be a transparent attempt to put
pressure on our clients. Our clients are not in these circumstances prepared
to submit to this strategy and will not be offering any undertakings.
Lastly, we note that your clients have not sought to progress these
proceedings and have shown no indication of a willingness to do so. We
infer from that a reluctance to take this matter to trial.
For all of those reasons there is no question of our clients offering an
undertaking.”
[54] Mr. Francis response was that the Applicants could not show such a risk ‘merely by
referring to ‘the Defendants’ refusal to offer an undertaking in relation to the
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settlement proceeds. Learned Counsel submitted that this is because ‘the
Defendants are under no obligation to limit their freedom of action over the
settlement monies, once received, their refusal to offer an undertaking is within their
rights and incapable of giving rise to an adverse inference of an intention to dissipate
assets unjustifiably. If it were otherwise, a claimant would never have the burden of
establishing a risk of unjustified dissipation and freezing relief would be obtained
automatically in every case, in the form of either an undertaking or an injunction.’
[55] It appears that the Respondents’ stance in this case is that the Applicants do not
have any viable chance of succeeding on their claim so much so that it would seem
that they would hardly consider an undertaking.
[56] In my view, in certain circumstances a refusal to give an undertaking may give to
rise to a risk that a party may seek to thwart enforcement of a future judgment. In
this regard I note Redhead JA own views on a party’s refusal to give an undertaking
in Yukos’ case when he said at paragraph 33:
“The Respondents in evidence have said that they would not transfer wealth
or diminish the initial value of their assets pending the final determination of
the question of ownership. But yet they refused to give the undertaking. On
the one hand they said that there is no intention on the part of the
Respondents to dissipate so there is no need to give an undertaking. On
the other hand, learned counsel for the appellants contended that in light of
what the Respondents say, if true, it is difficult to understand why they would
refuse to give the undertaking. I agree with the contention of learned
counsel for the appellants.”
[57] Additionally, the undisputed affidavit evidence of Douglas Reigels is to be noted,
when he said:
“Following the decision of the Privy Council, I have received enquiries from
the Ministry of Natural Resources and Labour asking if I am willing to meet
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with Ministers of Government to discuss a settlement of the Second
Respondent’s claim to which I have responded that I am no longer involved
with the Second Respondent, and I directed the Ministry to the First
Respondent. I am no longer receiving any such enquiries from which I
deduce that Government has now made direct contact with the First
Respondent.”
[58] The Government has made contact with the Applicants on this issue. There is likely
to be a similar attempt to make contact with the Respondents; that’s a viable
likelihood.
[59] This is a case where the Respondents have not indicated that there are sufficient
assets in the jurisdiction to meet any possible judgment and where the underlying
claim may or may not result in the Applicants being entitled to a portion of the future
settlement sum. This is also a case where the Second Respondent is not an actively
trading company. In these circumstances one would expect that reasonable
commercial men should be willing to give a suitable undertaking. I consider that
having regards to the other matters, there is solid evidence of a real risk existing in
this case that the settlement sum when obtained would be either moved out of the
jurisdiction or dissipated to thwart the enforcement of any judgment which may be
obtained by the Applicants.
[60] As a consequence, I have considered that this is a fitting case in which I can exercise
my discretion. In particular, I have considered whether the grant of this order will
cause the prejudice to the Respondents.
Lack of Prejudice to the Respondents
[61] On this matter, Mr. Ferrer submitted that ‘[t]he Second Respondent is not a trading
entity and is therefore has no business operations that will be impacted by the
injunction. The injunction will compel the Respondents to provide information and to
refrain from depleting 60% of any payments received from the Government pending
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a determination on the Applicants’ claim. There is no damage or prejudice to be
suffered by the Respondents by reason of the injunction.
[62] Mr. Francis for the Respondents submitted that ‘[t]he burden is on the [Applicants]
to establish grounds for the Court to interfere with the [Respondents’] freedom of
action, by proving a risk of unjustified dissipation. The [Applicants] have no prima
facie right to a freezing order absent harm caused thereby and the [Respondents]
carry no burden of proof of such harm.’
[63] It has not been suggested that the Second Respondent is carrying on business. I
agree that it appears that it is simply awaiting its payment from the government. On
the other side, there is this claim pending with the Applicants contending that they
should be paid for their services out of this money.
[64] In all of the circumstances, I do believe it is in the interests of justice to grant the
injunction sought.
An Order for Disclosure of Information
[65] The Applicants are also seeking an order for disclosure. They ask that the
Respondents be compelled to disclose to the Applicants legal representatives the
information related to any settlement agreement which may be concluded with the
Government and is asking to be notified of the sum of such settlement.
[66] The Court’s power to grant such an order is found in CPR Part 17.1(1) (e) which
provides that:
“The Court may grant interim remedies including –
(a) …(d)…
(e) an order directing a party to provide information about the location of
relevant property or assets or to provide information about relevant property
or assets which are may the subject of an application for a freezing order.”
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[67] For the reasons given earlier, I am of the view that: (1) the nature of the assets of
the company, (2) the fact of that first respondent is not ordinarily resident in the
jurisdiction, (3) the company is essentially a shell company which was set up for the
work which would have arisen from the government contract, and in a limited way,
(4) the current stance being taken by the applicant relating to a refusal to provide
information, altogether supports the Applicants’ case for an injunction. These
matters, to my mind, give rise to a real risk that any settlement sum paid to the
Respondents may be removed from the jurisdiction or dissipated and any judgment
granted may be frustrated.
[68] In the circumstances, I do consider that there is a proper basis, and it is in the
interests of justice to grant both the injunction and the order for information which
are being sought.
[69] The Order of the Court shall be as follows:
The Respondents shall:
(1) Disclose to the Applicants’ legal representative the following:
(i) details of any concluded settlement agreement (Settlement
Agreement) entered into with the Government of the Virgin
Islands (the Government) arising from an arbitration between
the Government and the second respondent conducted by an
arbitration tribunal consisting of Dennis Barrow S.C. and E.
Anthony Ross Q.C. which made an award on the 18th August
2014 which award was subsequently the subject of appeals to
the high court (commercial division)in BVI HC (Com) 2014/115,
the Court of Appeal in BVI HC MAP 2016/0007, and the Judicial
Committee of the Privy Council in Appeal No. 0107 of 2018
[2020] UKPC 18, in relation to damages payable to the Second
Respondent for the breach by the Government of certain
contracts.
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(ii) The total amount of any settlement sum (however payable)
agreed between the Government and the Second Respondent
as damages for breach of contract by the Government (the
Settlement Sum); and
(iii) Details of the account to which payment of the Settlement Sum
will be made and the expected payment date.
(2) Upon concluding any Settlement Agreement, the Respondents shall be
restrained, until the return date or further order of the Court, from:
(i) accepting payment of any Settlement Sum in excess of 40%
thereof outside the jurisdiction of this Court;
(ii) removing from the British Virgin Islands (BVI) or in any way
disposing of, dealing with or diminishing the value of their
assets which are in the BVI up to the value of 60% of the
Settlement Sum;
(iii) transferring, disposing of, pledging, charging, diminishing the
value of, encumbering, granting an option over or dealing with
any of its assets, whether located within or outside of the BVI,
up to the value of 60% of the Settlement Sum;
(iv) licensing or otherwise permitting any third party to use,
transfer, dispose of, pledge, charge, diminish the value of, or
deal with any of its assets, whether located within or outside of
the British Virgin Islands, up to the value of 60% of the
Settlement Sum; and
(v) in any way disposing of, dealing with or diminishing the value
of any assets whether they are in or outside the BVI up to the
same value.
[70] The Court accepts the Applicants’ undertaking in damages and it is an order of this
Court that if the Court were to later find that this order has caused loss to the
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Respondents and decides that the Respondents should be compensated for that
loss, the Applicants shall comply with any order the court may make.
[71] Anyone notified of this order will be given a copy of it by the Applicants’ legal
representatives.
[72] If this order ceases to have effect, the Applicants will immediately take all
reasonable steps to inform, in writing, anyone to whom it has given notice of this
order, or who it has reasonable grounds for supposing may act upon this Order, that
it has ceased to have effect.
[73] The Applicants will not, without the permission of the Court, seek to enforce this
order in any country outside the BVI. Notwithstanding, the terms of this order will
affect the following persons in a country or state outside the jurisdiction of this Court:
(a) The Respondents or their agents appointed by power of attorney or in
the case of the Second Respondent any of its officers;
(b) Any person who:
(i) is subject to the jurisdiction of this court;
(ii) has been given written notice of this order at it, her or his
residence or place of business within the jurisdiction of this
Court; and
(iii) is able to prevent acts or omissions outside the jurisdiction of
this Court which constitute or assist in a breach of the terms of
this order; and any other person, only to the extent that this
order is declared enforceable by or is enforced by a Court in
that country or state.
[74] Anyone who has notice of this order and who fails to comply with this order or to
encourage, participate or direct a breach of this order, whether personally or through
any agency, shall be in contempt of court and liable for consequences, including but
not limited to imprisonment.
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[75] Costs to be assessed if not agreed.
[76] Before leaving this matter, the Court will direct that the underlying claim be listed for
case management as soon as possible and that an early trial date be fixed in this
matter.
[77] Finally, the Court is grateful for the assistance of counsel on both sides and for the
patience of the parties.
Darshan Ramdhani
High Court Judge (Ag.)
By the Court
Registrar