Ras Al Khaimah Investment Authority & Ors v Bestfort Development Llp & Ors, Court of Appeal - Civil Division, July 19, 2017, [2017] EWCA Civ 1014

Resolution Date:July 19, 2017
Issuing Organization:Civil Division
Actores:Ras Al Khaimah Investment Authority & Ors v Bestfort Development Llp & Ors
 
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Case No: A3/2015/4051

Neutral Citation Number: [2017] EWCA Civ 1014

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT

CHANCERY DIVISION

IN THE MATTER OF AN APPLICATION UNDER SECTION 25 OF THE CIVIL JURISDICTION AND JUDGMENTS ACT 1982

THE HONOURABLE MRS JUSTICE ROSE DBE

[2015] EWHC 3383 (Ch)

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 19/07/2017

Before:

THE RIGHT THE HONOURABLE LORD JUSTICE LONGMORE

THE RIGHT HONOURABLE LORD JUSTICE HENDERSON

and

THE RIGHT HONOURABLE SIR PATRICK ELIAS

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Between:

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Mr Richard Millett QC & Mr Andrew Holden (instructed by Stewarts Law LLP) for the Applicants

Mr Philip Marshall QC & Miss Ruth Den Besten (instructed by Peters & Peters LLP) for the Respondents

Hearing dates: 20th & 21st June 2017

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JudgmentLord Justice Longmore:

Introduction

1. Ever since the Pertamina ([1978] QB 644) and Ninemia ([1983] 1 WLR 1412) cases, an applicant for a freezing injunction must show a good arguable case that he has a good claim and a good arguable case that there is a risk that the defendant will dissipate his assets. The test for showing that a defendant in fact has assets that will be caught by the order is somewhat less certain. The main question of law raised by this appeal is whether an applicant for a worldwide freezing order has to show that (1) it is likely that a defendant has assets that will be caught by the order or (2) a good arguable case that a defendant has such assets or (3) grounds for believing that a defendant has (or is likely to have) such assets or (4) merely that the defendant is wealthy and must therefore have assets somewhere.

2. The six applicants for the freezing injunction in this case are entities forming part of the arrangements for investing the sovereign wealth of the state of Ras Al Khaimah, one of seven Emirates forming the United Arab Emirates (``the UAE''). The first three applicants are based in Ras Al Khaimah and the 4th, 5th and 6th applicants were incorporated for the purpose of taking part in the various investments in the Republic of Georgia which give rise to this appeal. The applicants seek relief, ancillary to foreign proceedings, including the grant of freezing orders and the appointment of receivers over the assets of the 14 respondents which are all LLPs registered in England and Wales and said to be connected with a Mr Gela Mikadze. Mr Mikadze is a Georgian national, a lawyer and businessman, who was a director of the 4th, 5th and 6th applicants between about 2008 and 2013. He also held senior management positions with those applicants.

3. The relief is sought pursuant to s25 of the Civil Jurisdiction and Judgments Act 1982 (``the CJJA'') in support of claims issued by the applicants in the Republic of Georgia and in the UAE. They ask the court to freeze each of the respondent's assets up to a value of $42,561,555. No freezing order or relief is sought against Mr Mikadze because he is not present in this jurisdiction and, so far as the applicants are aware, he has no assets here apart from his interest in some or all of the respondent LLPs. The Part 8 claim in this jurisdiction was issued on 1st May 2015 and served on 1st June 2015. An order was made by Mr Richard Spearman QC, sitting as a Deputy High Court Judge of the Chancery Division, on 18th June 2015 adjourning the application on the basis of certain undertakings given by some of the respondents and setting a timetable for serving evidence. The main evidence in support of the application was given in an affidavit and a witness statement of Caroline Black and in witness statements of David Hughes, both of them partners in Dechert LLP, the solicitors acting for the applicants. Evidence opposing the application was given in a witness statement from Mr Mikadze and also in statements from Mr Clayman an associate solicitor in Peters & Peters Solicitors LLP acting for Mr Mikadze. Mr Mikadze says he is authorised to give evidence on behalf of all the respondents except for the 7th respondent (``Hornberg'') and the 9th respondent (``Raystar''), but we understand that these respondents have been duly served and will, therefore, be bound by any order made by this court.

4. The respondents divide into 2 groups. One group comprises the 1st, 3rd, 5th and 9th respondents (Bestfort, Bellcrown, Tecberg and Raystar). They are defendants to some of the claims brought by the applicants in Georgia or the UAE. The other respondents are not parties to any claim. Injunctive relief is sought against them on the basis that they are beneficially owned by Mr Mikadze and that their assets would be available to satisfy any judgment awarded against Mr Mikadze in those countries. As regards those respondents, the applicants rely on the Chabra jurisdiction named after the decision of Mummery J in TSB Private Bank International v Chabra [1992] 1 WLR 231. The applicants also seek relief under the Chabra jurisdiction against the respondents which are also defendants in the foreign proceedings on the basis also that their assets are beneficially owned by Mr Mikadze. The sum proposed to be frozen is thus the totality of the sums claimed against Mr Mikadze regardless of whether the respondents are defendants to any proceedings or not.

Background

5. I gratefully adopt (and summarise) the judge's description of the background to the proceedings. In 2006 the rulers of Ras Al Khaimah decided to take up investment opportunities in Georgia when Georgia embarked on an ambitious programme of privatisation. The ruling family of Ras Al Khaimah put a Dr Khater Massaad in charge of these plans. Dr Massaad was a close friend and confidant of at least some of the members of the ruling family and had their full confidence and trust. He was Chief Executive Officer of the 1st applicant (``RAKIA''), Chairman of the 3rd applicant and Ras Al Khaimah's most prominent economic representative. It is said that he was given the widest possible powers to pursue investments without apparently needing to have recourse to the ruling family for authorisation. He was also given the power to appoint whomever he considered fit to assist him to achieve the state's objectives.

6. Dr Massaad made contact with Mr Mikadze and, after a period during which the two men got to know each other well, Mr Mikadze was invited by Dr Massaad to become Ras Al Khaimah's partner in developing investment opportunities in Georgia. The applicants assert that thereafter both Dr Massaad and Mr Mikadze abused the trust that had been placed in them and acted in serious breach of the fiduciary duties that they owed to the Ras Al Khaimah entities of which they were in charge. The applicants allege that Mr Mikadze diverted monies to his personal bank accounts and caused the Ras Al Khaimah companies for which he was supposed to be working to enter into lucrative contracts with contractors which were in fact his creatures and which did not in fact provide services in return for the substantial remuneration paid.

7. The claim and all allegations of wrongdoing are vigorously disputed by Mr Mikadze. He says that there are entirely proper explanations for all the transactions which are impugned. In his witness statement he explains in some detail the work he has done in relation to various projects. His case is that he had every reason to think that Dr Massaad continued to have the confidence and trust of the ruling family and that he assumed that Dr Massaad was discussing with them such details of the projects as he thought they would want to know. Mr Mikadze describes the substantial amount of work he put into the various projects he undertook for the Ras Al Khaimah companies, the problems he encountered and his ingenuity and determination in overcoming those obstacles to make the projects successful. The remuneration he received was agreed between him and Dr Massaad and was commensurate with his efforts. Where the contractors used on the projects were his vehicles, then this was fully disclosed to Dr Massaad and the Ras Al Khaimah entities and those contractors did indeed provide the services that helped make the various projects successful.

8. Mr Mikadze describes how the situation changed in October 2010 when Sheikh Saud, who had been the member of the ruling family most in charge of the Georgian investment projects, became Emir. The new Emir was less interested in investing outside the UAE and there was a ``new focus'', resulting in instructions to Dr Massaad to divest the sovereign wealth fund of its foreign holdings. Further, Mr Mikadze says that once the new Emir was in place, there was a political move to oust and discredit Dr Massaad. Mr Mikadze believes that the ``ousting'' of Dr Massaad was at the behest of Sheikh Saud's son who became Crown Prince in December 2010 and wanted to take Dr Massaad's place as the Emir's right-hand man. Control of RAKIA was then taken over by members of the Emir's family. As well as discrediting Dr Massaad, the Ras Al Khaimah ruling family attacked Mr Mikadze, in particular by instigating a criminal prosecution against him in Georgia. Mr Mikadze believes that both the civil claims against him and this application are politically motivated and are aimed at clawing back some of the money that he was properly paid for his work.

9. The judge described four projects which have given rise to particular claims. I will refer to two of them.

10. The Tbilisi Mall. Mr Mikadze's evidence is that this was the first project he worked on with Dr Massaad. His initial role was as General Director of the 4th applicant, Rakeen Development. The Tbilisi shopping mall (``the Mall'') was constructed from scratch on a greenfield site that Mr Mikadze identified. He negotiated the purchase of the site for $7.2 million in October...

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