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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Abu Dhabi Commercial Bank PJSC v Shetty & Ors  EWHC 3423 (Comm) (02 December 2020)
Cite as:  EWHC 3423 (Comm)
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
7 Rolls Buildings
London EC4A 1NL
B e f o r e :
Remotely via Skype
| ABU DHABI COMMERCIAL BANK PJSC
|- and -
|(1) BAVAGUTHU RAGHURAM SHETTY
(2) KHALEEFA BUTTI OMAIR YOUSIF ALMUHAIRI
(3) SAEED MOHAMED BUTTI MOHAMED ALQEBAISI
(4) PRASANTH MANGHAT
(5) SURESH KUMAR VADAKKE KOOTALA
(6) PRASHANTH SHENOY
2nd Floor, Quality House, 6-9 Quality Court, Chancery Lane, London WC2A 1HP.
Telephone No: 020 7067 2900. DX 410 LDE
MS. REBECCA ZAMAN (instructed by Holman Fenwick Willan LLP) for the Claimant/Applicant
THE DEFENDANTS/RESPONDENTS did not appear and were not represented
Crown Copyright ©
MR. JUSTICE BRYAN:
"a hearing, or any part of it, must be held in private if ...
(a) publicity would defeat the object of the hearing; ...(e) it is a hearing of an application made without notice and it would be unjust to any respondent for there to be a public hearing; ...(g) the court ... considers this to be necessary ..." in the interests of justice.
(1) The NMC Group's balance sheet in its 2018 financial statements had been manipulated by failing to disclose certain supply chain borrowings and failing to disclose certain leases associated with one of its acquisitions as finance leases which represented a US$350 million liability.
(2) Large amounts of NMC Group's money appeared to have been invested in redeveloping purchases in certain medical facilities, the cost of which appeared to have been inflated. The contractor engaged on the redevelopment, Modular Concepts LLC, appeared to be de facto controlled by BR Shetty, yet that had not been disclosed.
(3) The interest income reported in NMC Group's financial statements was too low to be credible and its profit margins were "too good to be true" relative to its competitors.
(4) The standard of corporate governance "falls well short". Its "independent Board" is not "not truly independent" and "the relationship with its auditor, Ernst & Young, raises flags" and "insiders have cashed out approximately 300 million of stock net".
(5) There had allegedly been an attempt to cover up the fact that NMC Group had purportedly entered into a US$105 million facility arranged by regional bank, First Energy Bank, chaired by one of its principal shareholders, Khaleefa Butti, i.e. the second defendant. Muddy Waters concluded, "We are unsure how deep the rot at NMC goes but we do not believe that its insiders or financials can be trusted."
" that the applicant for the order has a good, arguable case, that there is real risk that judgment would go unsatisfied by reason of the disposal by the defendant of his assets, unless he is restrained by the court from disposing of them, and that it would be just and convenient in all the circumstances to grant the freezing order."
That quote of the test comes from Lakatannia Shipping v Morimoto  2 All ER (Comm) 359 at .
" the law applicable to a non-contractual obligation arising out of dealings prior to the conclusion of a contract, regardless of whether the contract was actually concluded or not, shall be the law that applies to the contract or that would have been applicable to it had it been entered into."
Accordingly, and set against the backdrop of the material that I have identified, the evidence of Mr. Davis, the evidence of Mr. Frangulov as recounted by Mr. Zo'mot, for the reasons that I have given, I am satisfied that there is a good arguable case whether under English law or under the relevant provisions of UAE law in the Civil Code, including under Article 282 generally in relation to acts of harm and for deceit under Article 285.
"(i) The claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway;
(ii) If there is an issue of fact about it or some other reason for doubting whether it applies, the court must take a view on the material available if it can reliably do so; but
(iii) The nature of the issue and the limitations of the material available at the interlocutory stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it."
(See the breakdown and application of the test in the Court of Appeal decision of Kaefer Aislamientos SA de CV v AMS Drilling Mexico SA de CV  1 WLR 3514 at  to .
"It is fair to say that the statutory effect which section 1140 has been held to have or assumed to have is surprising, albeit when the wording of the section is read, it is easy to see why such findings or assumptions have been made, I have decided to follow those judgments at first instance."
The most recent case that is relied upon is a decision of Waksman J in Republic of Mozambique v Safa, unreported, 30th July 2020 at  to  where, in robust terms, he also concluded that there was jurisdiction under section 1140 of the Companies Act even in circumstances such as those identified in the prior authorities.
" unless the claimant is suing in order to assert a contractual right or a right which has arisen as a result of the non-performance of a contract, his claim is not in this context properly to be regarded as one made in respect of a contract. I think it likely that ordinarily such claims can only be made in respect of contracts to which the intended defendant is party" which, of course, is not this case."
" it must be a rare case in which this head of jurisdiction can avail against a defendant who is not party to the relevant contract and who has not thereby participated voluntarily in creating the nexus to this jurisdiction which the gateway assumes nor, at least on the current pleaded case, can it be said that this is a claim in which the claimants seek to enforce their performance interest under a contract against a non-party."
" it would have been right for the judge to take into account a finding of a good arguable case that Mr. Malofeev had been engaged in a major fraud, and that he operated a complex web of companies in a number of jurisdictions, which enabled him to commit the fraud and would make it difficult for any judgment to be enforced. We would regard such factors as capable of providing powerful support for the case of a risk of dissipation."
"If there is a good arguable case in support of an allegation the defendants acted fraudulently or dishonestly or with unacceptably low standards of morality giving rise to a feeling of uneasiness about the defendant (Thane Investments Ltd v Tomlinson  EWCA (Civ) 1277 at 28) then it is often unnecessary for there to be any further specific evidence of dissipation for the court to be entitled to take the view that there is a sufficient risk to justify granting Mareva relief."
"I am satisfied that there is a special need for urgency when a without notice freezing order has been made which meets the test of special circumstances where service under an applicable convention might delay the point at which the order is formally served on the respondent" (paragraph 51).