Goldtron Ltd v Most Investment Ltd

CourtRoyal Court
JudgeBirt, Deputy Bailiff and Jurats Bullen and Clapham
Judgment Date09 August 2002
Date09 August 2002
Birt, Deputy Bailiff and Jurats Bullen and Clapham

M.J. Thompson for the plaintiff;

M. St. J. O'Connell for the defendant;

The parties cited did not appear and were not represented.

Cases cited:

(1) Brink's Mat Ltd. v. Elcombe, [1988] 1 W.L.R. 1350; [1988] 3 All E.R. 188, followed.

(2) Deustche Schachtbau-und Tiefbohr GmbH v. R'As Al Khaimah National Oil Co., [1990] 1 A.C. 295; [1987] 2 All E.R. 769; on appeal, [1988] 2 All E.R. 833; sub nom. Deustche Schachtbau-und Tiefbohr GmbH v. Shell Intl. Petroleum Co. Ltd., [1990] 1 A.C. 295, considered.

(3) Gidrxslme Shipping Co. Ltd. v. Tantomar-Transportes Maritimos Lda. (The Naftilos), [1995] 1 W.L.R. 299; [1994] 4 All E.R. 507, considered.

(4) Siporex Trade S.A. v. Comdel Commodities Ltd., [1986] 2 Lloyd's Rep. 428, followed.

(5) Third Chandris Shipping Corp. v. Unimarine S.A., [1979] Q.B. 645; [1979] 2 All E.R. 972; [1979] 2 Lloyd's Rep. 184; (1979), 123 Sol. Jo. 389, referred to.

Additional cases cited by counsel:

Lumley v. Osborne, [1901] 1 K.B. 532; (1901), 70 L.J. K.B. 416; 49 W.R. 374.

Savings & Invs. Bank Ltd. v. Gasco Invs. (Netherlands) B.V., [1984] 1 W.L.R. 271; [1984] 1 All E.R. 296.

Young (J.L.) Manufacturing Co., Re, [1900] 2 Ch. 753; 69 L.J. Ch. 868; 49 W.R. 115.

Legislation construed:

Arbitration (Jersey) Law 1998, art. 1(1): The relevant terms of this article are set out at para. 8.

art. 30: The relevant terms of this article are set out at para. 8.

art. 43: The relevant terms of this article are set out at para. 8.

InjunctionsMareva injunctionmisrepresentation and non-disclosureex parte applicant to make full and frank disclosure of known potential defences to order sought and insufficient that only discoverable within voluminous exhibitsno defence for plaintiff to state that unaware of importance of undisclosed mattersmay discharge injunction even if order would have been made with full disclosure

InjunctionsMareva injunctionmisrepresentation and non-disclosurere-imposition of injunction on grounds of non-disclosureto consider that (a) discharge deprived applicant of advantage improperly obtained and encouraged full disclosure; (b) injunctions not routinely re-imposed; (c) re-imposition inappropriate in case of serious non-disclosure; and (d) innocent non-disclosure not decisive consideration

ArbitrationawardenforcementMareva injunction available to support enforcement of arbitration awardslower post-judgment threshold applicable post-award, as under Arbitration (Jersey) Law 1998, art. 30, award treated as equivalent to judgment

The defendant applied for the discharge of a Mareva injunction on the ground that the plaintiff had failed to make full and frank disclosure in his ex parte application.

The defendant, a Dutch company ("Media Most") and a Russian company ("ZAO Media Most") were controlled by a Russian, Mr. Guskinsky. In April 1998, the plaintiff agreed, in separate transactions, to sell shares in a Russian company to the defendant and Media Most for US$13.5m. each, payable in three instalments. Both agreements were governed by Russian law and provided that any dispute should be subject to arbitration in Moscow. The shares were registered in the names of the two purchasers and the first instalment of US$5m. was paid in each case. In August 1998, the rouble was substantially devalued by the Russian government. The remaining instalments were not paid.

The purchasers instituted arbitration proceedings pursuant to the contract, seeking a variation of their respective contracts on the basis of the devalued dollar-rouble exchange rate. The plaintiff sought the payment of the full outstanding purchase price. The arbitration panel found in favour of the plaintiff and ordered each purchaser to pay US$9.5m. Media Most appealed against the arbitration award to the Russian courts on the grounds that (a) a dissenting opinion to the award had severely criticized the conduct of the arbitration; and (b) the arbitration panel chairman had acted in a biased and prejudiced manner. Media Most opposed the plaintiff's enforcement of the award in Holland on the same grounds.

The plaintiff sought to enforce the arbitration award in Jersey, pursuant to the Arbitration (Jersey) Law 1998, within the time period allowed for the defendant's appeal. It obtained (a) a Mareva injunction, freezing the assets of the defendant in Jersey up to a value of US$10m.; and (b) a gagging order preventing the defendant from informing Mr. Guskinsky of the existence of the Order of Justice for 14 days. The gagging order was subsequently lifted by agreement.

The defendant submitted that the injunction should be set aside, and not re-imposed, as (a) the plaintiff had failed to disclose the existence of a likely defence to the validity of the arbitration award when applying for injunctive relief, namely the defence raised by Media Most on appeal in Russia and in opposition to the plaintiff's enforcement of it in Holland; (b) the plaintiff's affidavit misleadingly inferred that an injunction was required because the defendant was in financial difficulties; and (c) there was no evidence of any risk of dissipation of assets.

The plaintiff submitted in reply that (a) it had no obligation to disclose the existence of the possible defence in the minority opinion because the arbitration award was determined by majority; (b) in any event, the text of the majority award, exhibited to the affidavit, dealt with the procedural issues at length in order to dismiss them; (c) the fact that one of Mr. Guskinsky's other companies, ZAO Most Media, had been placed in liquidation by the Russian court was evidence of the defendant's financial difficulties; and (d) the plaintiff had not produced evidence to show that it was willing and able to meet the award if upheld on appeal.

The court also considered the circumstances justifying (a) a gagging order; and (b) the adjournment of an application to set aside a Mareva injunction.

Held, setting aside the injunction and re-imposing it:

(1) When making an ex parte application for injunctive relief, the applicant had a duty to disclose any matters which militated against the making of the order in question, and to identify all potential defences. The plaintiff had failed to discharge this duty as, although it was fully aware of the allegations of serious procedural impropriety in relation to the arbitration and that they would be raised as a defence by the plaintiff, the defence had been placed before the court only as part of the detail of the lengthy majority arbitration decision exhibited to the supporting affidavit. When numerous documents were exhibited, it was not sufficient for the applicant to state generally that a particular point was available to the judge somewhere in the voluminous exhibits. There had therefore been inadequate disclosure and the injunction would be set aside. It was no defence for the plaintiff to state that it was unaware of the importance of the omitted matters. Furthermore, it was open to the court to discharge the injunction even if, after full enquiry, it considered that the order made was just and convenient and would probably have been made even if there had been full disclosure ( paras. 14-19).

(2) The court had a discretion, however, to re-impose an injunction discharged for non-disclosure. When exercising this discretion, it was to consider that (a) the injunction had been discharged to deprive the applicant of an advantage improperly obtained and to encourage full disclosure in all cases; (b) defendants would stop applying to set aside injunctions obtained as a result of non-disclosure if their re-imposition became routine; (c) it was inappropriate to re-impose an injunction in a case of serious non-disclosure; and (d) innocent non-disclosure, i.e. when the applicant did not know of it or perceive it to be relevant, was an important, but not a decisive, consideration as the applicant had a duty to make all proper inquiries and to give careful consideration to the case being presented ( paras. 21-24).

(3) Moreover, the lower threshold for obtaining a Mareva injunction, applicable in post-judgment applications, was applicable in cases involving arbitration awards as, under the 1998 Law, arbitration awards were to be enforced and satisfied in the same way as judgments ( paras. 29-30).

(4) It was appropriate to re-impose the injunction in this case as (a) the non-disclosure was "innocent"; (b) although there were serious issues to be argued on the appeal to the Russian court, the defendant was nevertheless subject to an arbitration award which the plaintiff sought to enforce in Jersey; (c) the lower threshold for obtaining injunctive relief post-award was applicable; (d) the court's policy was to assist the enforcement of arbitration awards by ensuring sufficient funds were available to meet such awards; (e) there was reason to doubt the defendant's ability to do so as there was strong prima facie evidence that it was connected with ZAO Most Media, which had been compulsorily wound-up; and (f) the defendant had failed to produce evidence of its financial position, the nature of its business, the nature, location or substance of its assets, any particular hardship which would be caused by the injunction or its willingness to meet the award if upheld on appeal ( paras. 32-33).

(5) The imposition of a gagging order was only justified by convincing evidence. The affidavit in support of an application for a gagging order must refer specifically to that order, and explain why it was required and justified. It was not sufficient merely to include it as part of a prayer for interim relief ( paras. 34-35).

(6) A plaintiff who took the step of restraining a person from dealing with his assets was to anticipate a prompt application to set aside or vary the injunction and be ready to respond. It was not acceptable for a plaintiff to agree a hearing date for the...

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