Action No. CL-44/2017
IN THE SUPREME COURT OF
THE TURKS AND CAICOS ISLANDS
SEBASTIAN HOLDINGS INC.
(acting by Shane Crooks and Malcolm Cohen as joint receivers)
- and -
(1) SAREK HOLDINGS LTD.
(2) ALEXANDER VIK
(3) PER JOHANSSON
(4) OTTO INC.
(5) REITEN & CO CAPITAL PARTNERS VI, GP LIMITED
(6) REITEN & CO CAPITAL PARTNERS VII, GP LIMITED
Mr. Stephen Wilson QC for the Plaintiff by Skype with the leave of the Court
Also present, Ms Claire McAvinchey of Graham Thompson
Heard on the 3 May 2017
RULING ON APPLICATION FOR LEAVE TO SERVE OUT
1. Sebastian Holdings Inc., ("Sebastian") is a Turks and Caicos Islands company which used to conduct inter alia, foreign currency trading through Deutchebank AG ("the Bank"). In 2009, proceedings were brought by the Bank to recover c.$250,000,000 in losses that it incurred through Sebastian's trading activity. The proceedings were determined in the Bank's favour and the judgment debt was ordered to be paid by 22 November 2013.
2. In an attempt to enforce the judgment, the Bank caused joint receivers of certain interests of Sebastian to be appointed by way of equitable execution of a judgment debt pursuant to an Order of the English Court. The Plaintiff in these proceedings is Sebastian acting by its Receivers who, pursuant to the Receivership Order, are empowered to bring claims in any jurisdiction in relation to certain 'Receivership Interests'.
3. Among the valuable assets held by Sebastian which should have been available for execution, were its interest in two private equity funds registered as limited partnerships in England and Wales but administered in Guernsey, namely, Reiten & Co. Capital Partners VI LP ("Reiten VI") the Fifth Defendant and Reiten & Co. Capital Partners VII LP ("Reiten VII") the Sixth Defendant.
4. These assets, which are identified in the Receivership Order at Schedule 1 as part of the Receivership Interests, were ultimately transferred to the First Defendant, Sarek Holdings Inc ("Sarek"), another Turks and Caicos Islands company allegedly controlled by Mr. Vik in what the Plaintiff asserts were transfers in breach of trust, in a deliberate attempt to put the assets out of the Bank's reach and obstruct recovery. On these facts, the Plaintiff claims against Sarek in knowing receipt of trust property and against Mr. Vik for breach of fiduciary duty, among other claims.
5. Before being transferred to Sarek, the Reiten VII interests were first transferred by Sebastian to the Fourth Defendant, Otto Inc. ("Otto"), another company registered in Turks and Caicos Islands in January 2009, then back to Sebastian in March 2009 and then to Sarek in April 2011. Otto is described in a Limited Partnership Agreement as an associate of Sebastian, i.e. "a corporation or undertaking which in relation to the person concerned is a holding company or parent undertaking or a subsidiary of any such holding company or parent undertaking..."1 The Plaintiff alleges that Otto is owned and controlled by Per Johansson, the Third Defendant, an associate of Mr. Vik who was retained to act as Sebastian's Litigation Consultant in relation to the Bank's ongoing litigation against Sebastian in the USA. The Plaintiff asserts that Mr. Johansson, inter alia, signed the transfers of the Reiten VII interests to Sarek and Otto and have claimed against him for knowing/dishonest assistance.
6. Against Otto the Plaintiff claims in knowing receipt and knowing assistance in the breaches of Mr. Vik's breach of fiduciary duty. It claims against Mr. Johansson in dishonest assistance. It further claims, against all the first four named Defendants, damages for unlawful means conspiracy and /or unlawful interference in the Plaintiff's economic interests.
7. The Writ having been served on the two Defendants who are resident in this jurisdiction, Sarek and Otto, The Plaintiff seeks leave to serve the remaining Defendants out of the jurisdiction. The law has been usefully set out at some length by Mr. Wilson QC in his skeleton. I reproduce his submissions below:
Service out of the jurisdiction is governed by 0.11, of the Rules of the Supreme Court 2000, which provides that service of a writ out of the jurisdiction is permissible with the leave of the Court (rule 1(1)), but no such leave shall be granted unless "it shall be mode sufficiently to appear to the Court [by affidavit or otherwise] that the case is a proper one for service out of the jurisdiction under this Order." (rule 4(2))
1 Page 20 Memorandum on Evidence
In the Privy Council case of AK Investment v Kyrgyz Mobil Tel Ltd  UKPC 7;  1 WLR 1804, Lord Collins set out three requirements in English law that the court must consider in granting permission to serve out of the jurisdiction. These have been conveniently summarised by Gloster LJ in the English Court Appeal case Erste Bank v. JSC VMZ Red October  1 CLC 706 at :
"[Requirement 1]: the claimant must satisfy the court that in relation to the foreign defendant there is a serious issue to be tried on the merits;
[Requirement 2]: the claimant must satisfy the court that there is a good arguable case that the claim falls within one or more classes of case in which permission to serve out may be given, which in this context connotes that one side has 'much the better of the argument' than the other on that point;
[Requirement 3]: the claimant must satisfy the court that in all the circumstances, England and Wales [in this case, the Turks and Caicos Islands] is clearly or distinctly the appropriate forum for the trial of the dispute, and that in all the circumstances the court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction."
These requirements have been further clarified in the following English case law.
A serious issue to be tried:
• This requires a substantial question of fact or law, or both, see Goff LJ in Seaconsar Far East Ltd v. Bank Markazi Jomhouri Islami Iran  1 AC 438 at 457.
• The test is whether there is a real (as opposed to fanciful) prospect of success, per Clarke LJ in Carvill America Inc. v Camperdown UK Limited  EWCA Civ 645;  1 C.L.C. 845, at .
• The claim must be of sufficient substance to defeat a notional summary judgment or strike out application (AstraZeneca UK Ltd v. Albemarle International Corp and another  EWHC 1028 (Comm);  1 C.L.C. 715, per Hamblen J at ).
• It is not a part of the court's function at this stage, "to decide difficult questions of law which call for detailed argument and mature considerations", see Lord Collins in AK Investment at , referring to American Cyanamid Co. v. Ethicon Limited  AC 396, 407
• At this stage, "an affidavit is sworn in proper form deposing to facts which, if proved, provide a sufficient foundation for the alleged cause of action, that should generally be enough for present purposes", per Lord Goff in Seaconsar (at 452B-D).
A good arguable case that the claim falls within the accepted classes of case for service out:
• The classes of case in which permission to serve out may be given are referred to as the "jurisdictional gateways".
• A "good arguable case" connotes that "one side has a much better argument than the other” that the claim falls within one or more of the gateways, known as the "Canada Trust gloss" (see Canada Trust Co. v. Stolzenburq (No. 2)  1 WLR 547, 555-7 per Waller LJ, affirmed  1 AC 1).
TCI is "clearly or distinctly" the appropriate forum:
• The Court should have regard to the factors and approach set out by Goff LJ in Spiliada Maritime Corporation v. Cansulex Limited  AC 460.
• The task for the court is "to identify the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice" (VTB Capital v Nutritek  2 AC 337 per Lord Mance at )
8. The Plaintiff relies on the gateway at r 1 (1)(c) which provides that leave to serve out may be granted where,
"the claim is brought against a person duly served within or out of the jurisdiction and a person out of the jurisdiction is a necessary or proper party thereto;"
9. And r 1(1)(v) of our Civil Rules 2000 which permits service out where,
"the claim is brought against a person who is or was a director, officer or member of a company registered within the jurisdiction or who is a partner of a partnership whether general or limited which is governed by the laws of the Islands and the subject matter of the claim relates in any way to such company or partnership or the status, rights or duties of such director, officer, member or partner in relation thereto"
10. There is no similar rule in the UK CPR.
11. In my judgment, the evidence supporting the claims made against Sarek and Otto raise substantial issues of fact and law. If Mr. Vik and Mr. Johansson were in the jurisdiction there is no question that they would be proper parties to the action, as the knowing receipt of the two corporate defendants was allegedly procured by Mr. Vik in breach of his fiduciary duties owed to Sebastian with the dishonest assistance of Mr. Johansson.
12. The Court also has jurisdiction to order service out against Mr. Vik under r 1(1)(v) as he is, on the evidence before the Court, a former or present director, officer or member of SHI, Sarek and Otto each of which are registered in TCI and the subject matter of the claim relates to breach of his fiduciary duties owed to one or more of those companies as a director.
13. On the question of proper forum, the issue of whether a director of a Turks and Caicos Islands company transferred assets belonging to that company to other Turks and Caicos companies in breach of trust, with the connivance of the Director of those companies, is eminently suitable to be tried here. The Plaintiff is seeking a proprietary remedy against Mr. Vik and Mr. Johansson, not seeking to establish title to property which is situate either in England or in Guernsey which might suggest either might be the more appropriate forum. The potential inconvenience to witnesses who would have to travel here is not a relevant factor, as they would have to travel to the other two putative jurisdictions where this case might be tried.
14. The Plaintiff has leave to serve Mr. Vik and Mr. Johansson out of the jurisdiction under r 1(i) (c) and in respect of Mr. Vik, under r 1(1)(v).
15. With respect to the remaining Defendants who are the entities in Gibraltar that control the Reiten Interests and to whom Mr. Wilson refers as non-cause of action Defendants, Mr. Wilson submits that they are a necessary party to the Writ because of the limited relief sought against them. I accept that submission and the Plaintiff has leave to serve them out of the jurisdiction.
16. Costs in the cause.
DATED 3RD MAY 2017