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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> VTB Capital Plc v Nutritek International Corp & Ors  EWCA Civ 808 (20 June 2012)
Cite as:  2 BCLC 437,  EWCA Civ 808,  WLR(D) 181,  2 CLC 431,  2 Lloyd's Rep 313
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
MR JUSTICE ARNOLD
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE RIMER
LORD JUSTICE AIKENS
| VTB CAPITAL PLC
|- and -
|(1) NUTRITEK INTERNATIONAL CORP
(2) MARSHALL CAPITAL HOLDINGS LTD
(3) MARSHALL CAPITAL LLC
(4) KONSTANTIN MALOFEEV
for the Appellant
Nigel Jones Q.C. and David Lewis (instructed by Kearns & Co) for the First Respondent
Michael Lazarus and Christopher Burdin
(instructed by SJ Berwin LLP) for the Second Respondent
Ian Milligan Q.C., Cyril Kinsky Q.C. and James McClelland
(instructed by SJ Berwin LLP) for the Fourth Respondent
Hearing dates: 19 to 23 March 2012
Crown Copyright ©
Lord Justice Lloyd:
The factual background
"Confirm that [RAP] is 100% owned by Alginin. As per the info just received from Nutritek management, Mr Alginin has a 90% share in [RAP], the remaining 10% share belongs to the management team."
The issues on the appeal
The contract issues
i) The first set of issues arises from VTB's application for leave to amend its Particulars of Claim so as to assert that Marcap BVI, Marcap Moscow and Mr Malofeev are liable to VTB in contract, by piercing the veil of incorporation of RAP. The first and fundamental point is whether there is (at least) a good arguable case for asserting contractual liability on that basis.
ii) If the answer to that is yes, the second aspect of this set of issues is whether article 23(1) of Council Regulation 44/2001/EC on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Brussels Regulation) applies so that VTB would be entitled to serve the amended Claim Form on the defendants as of right.
iii) The third aspect, which also depends on a positive answer to the first question, is whether, if VTB cannot rely on article 23(1) and so requires permission to serve the amended proceedings out of the jurisdiction, it should have permission to do so (so far as the claim in contract is concerned) pursuant to gateway (6) of paragraph 3.1 of PD 6B of Part 6 of the CPR.
The tort issues
iv) The second group of issues concerns the tort claims. The three basic requirements that VTB must satisfy in order to obtain permission to serve the proceedings out of the jurisdiction (pursuant to gateway (9)) on Nutritek, Marcap BVI and Mr Malofeev, are common ground. Thus, first, VTB must show that there is a serious issue to be tried on the merits of the claims as against each defendant on which it seeks to serve the proceedings out of the jurisdiction. That means that VTB must show that there is a substantial question of law or fact or both, with a real, as opposed to a fanciful prospect of success. Secondly, VTB must establish that there is a good arguable case that the claim against each particular foreign defendant falls within the class of case relied on for permission to serve out of the jurisdiction. Thirdly, it is for VTB to establish that the English court is clearly or distinctly the appropriate forum in which to try the issues that arise between the parties.
v) On the first of these three requirements, the judge's conclusion that there was no good arguable case for liability on the part of Marcap BVI is challenged by VTB and his finding that there was such a case on the part of Mr Malofeev was challenged by him.
vi) On the second requirement, the defendants challenged the judge's conclusion that there was a good arguable case that VTB had suffered a loss as a result of the fraudulent deception of the defendants. They submitted that he should have accepted their argument that the real loss had been suffered by VTB Moscow and that VTB was protected from any loss by virtue of the Participation Agreement. The defendants argued that if VTB could not show that it had a good arguable case that it had suffered real, as opposed to nominal, loss then it could not bring itself within gateway (9)(a) of Practice Direction 6B to Part 6 of the CPR.
vii) As to the third requirement, the argument in this court concentrated on three particular aspects of the overall question as to whether VTB could establish that England was clearly or distinctly the appropriate forum and whether, in consequence, the court should exercise its discretion to give permission to serve proceedings out of the jurisdiction. The first was whether, assuming that there is a good arguable case that VTB has suffered a loss within the jurisdiction as a result of the torts committed, there is, in law, any kind of presumption that England is to be regarded as clearly or distinctly the appropriate forum.
viii) The second aspect of the third requirement was what law governs the claims in tort. It was accepted that, at this stage of the case, the question is whether one side or the other has "by far the better of the argument" as to whether the applicable law of the torts is English or Russian. The issue has to be decided according to sections 11 and 12 of the Private International Law (Miscellaneous Provisions) Act 1995. The judge favoured Russian law. VTB challenged that, arguing for English law.
ix) The third aspect of the third requirement was whether, overall, the judge was correct to conclude that England was not shown to be clearly and distinctly the appropriate forum for the determination of the issues between the parties. VTB argued that the judge had erred in this regard and that he should have exercised his discretion to permit service out of the jurisdiction on Nutritek, Marcap BVI and Mr Malofeev pursuant to gateway (9).
x) There is a subsidiary issue which is relevant to both the contract and the tort claims. VTB's only claim against Nutritek is in tort, but if it can establish jurisdiction against one or more other defendants, whether in tort or in contract, it will be able to rely on gateway (3) in paragraph 3.1 of the Practice Direction ("necessary or proper party") to serve on Nutritek, as a "proper" (though not a "necessary") party. Thus Nutritek's position on the appeal depends on the view taken by the court on the merits of the tort claim generally (i.e. the "no loss" point) and on whether the claim can proceed in these courts against another defendant. If it cannot proceed against another defendant, then jurisdiction as regards Nutritek would depend on gateway (9) in paragraph 3.1 of the Practice Direction, that is to say on the merits of the tort claim. In the circumstances, this aspect of the case did not require or receive any separate submissions.
The WFO issues
xi) The last set of issues arises from VTB's application for a WFO. If VTB can maintain the permission to serve out as originally granted, as regards Mr Malofeev, or can establish that it can or should be allowed to serve out on the basis of its contract claim against him (or both), should it continue to have the benefit of the WFO against him? There are two points here. The first is whether it has shown a sufficiently well arguable case for liability against him, and whether it has established that there is a real risk that, unless restrained by injunction, he will dissipate his assets, otherwise than through ordinary living or business expenditure. The second is whether the WFO as originally obtained ought to be discharged because of material non-disclosure on the part of VTB when applying for it to Roth J.
The amendment application: piercing the veil of incorporation
"… involved the fraudulent misuse of the company structure. This was an improper use of the company structure of RAP, which was used as a device or façade to conceal the wrongdoing of each of Marcap BVI, Marcap Moscow and Mr Malofeev". (Paragraph 72 of the draft amended Particulars of Claim).
Third, that combination of facts entitles VTB to "pierce the corporate veil" of RAP and to hold the three defendants jointly liable with RAP under the two agreements. That conclusion is said to follow from the assertion that, once the veil is pierced, Marcap BVI, Marcap Moscow and Mr Malofeev can be seen always to have been parties to the two agreements jointly with RAP and the guarantors.
"I have some doubts whether in this respect the Court of Appeal properly applied the principle that it is appropriate to pierce the corporate veil only where special circumstances exist indicating that it is a mere façade concealing the true facts."
"I say this because their names and their persons were so well known generally that the chance of detection and the chances of repudiation were great in connection with any commercial transactions in which they engaged. The fraud here is that what they did through the corporation they did themselves and represented it to have been done by a corporation of some standing and position, or at any rate a corporation which was more than and different from themselves".
He found that they purported to sell C Ltd's "trivial interest" in the quarry for shares and cash to W Ltd and thereby made a large profit. The case for the liquidator was that they concealed that profit from W Ltd and also concealed from it that they were 'the real vendors and promoters'. Phillimore J appears to have accepted, at 102, that the W Ltd prospectuses that were issued to the public were untruthful in describing C Ltd as the promoter and vendor, since D & G were the real promoters. The claim, however, was not by members of the public who had subscribed pursuant to the prospectuses, but was (in effect) by W Ltd. Phillimore J regarded the only issue he had to decide as being whether D & G, having received, through C Ltd, their personal profit on the sale to W Ltd, were entitled to retain it as against W Ltd. In his view, they were not entitled to do so unless they had disclosed their making of that profit to W Ltd. He said, at 103:
"Now they made that profit either directly or through the agency of [C Ltd], it does not matter which, and they may hold it if they disclosed it at the proper time. They may not hold it if they did not disclose it, and the burden of shewing that they did so disclose it is upon them."
He found that they had not made a disclosure of their profit to W Ltd. Thus the appeal succeeded.
"I am quite satisfied that this company was formed as a device, a stratagem, in order to mask the effective carrying on of a business of Mr E.B. Horne. The purpose of it was to try to enable him, under what is a cloak or a sham, to engage in business which, on consideration of the agreement which had been sent to him just about seven days before the company was incorporated [that was a copy of the service agreement], was a business in respect of which he had a fear the plaintiffs might intervene and object."
Lord Hanworth then explained, at 961, why the injunction should go both against Mr Horne and the company:
"[Leading counsel for the defendants] admitted that if the company were such as is indicated by Lindley LJ in Smith v. Hancock  2 Ch. 377, 385, it would not be possible to object to the injunction against the company. Lindley LJ indicated the rule which ought to be followed by the Court: 'If the evidence admitted of the conclusion that what was being done was a mere cloak or sham, and that in truth the business was being carried on by the wife and Kerr for the defendant, or by the defendant through his wife for Kerr, I certainly should not hesitate to draw that conclusion, and to grant the plaintiff relief accordingly.' I do draw that conclusion; I do hold that the company was 'a mere cloak or sham'; I do hold that it was a mere device for enabling [Mr Horne] to continue to commit breaches of clause 9, and under those circumstances the injunction must go against both defendants, ..."
Lawrence LJ, at 965, and Romer LJ, at 969, essentially agreed with that as the basis for the grant of an injunction also against the company.
"Those comments on the relationship between the individual and the company apply even more forcibly to the present case. [Alamed] is the creature of [Mr Lipman], a device and a sham, a mask which he holds before his face in an attempt to avoid recognition by the eye of equity. [Gilford's case] illustrates that an equitable remedy is rightly to be granted directly against the creature in such circumstances…. The proper order to make is an order on both the defendants specifically to perform the agreement between the plaintiffs and [Mr Lipman]." (Our emphasis)
"I do not accept that argument which, if correct, would provide the easiest possible escape from the rigours of equity's strict principle of accountability. All that would be required would be for the profiting director to ensure that he diverts the profit into his own creature company. The facts of this case are that Burnstead was an offshore company which was wholly owned and controlled by Mr Dalby and in which nobody else had any beneficial interest. Everything it did was done on his directions and on his directions alone. It had no sales force, technical team or other employees capable of carrying on any business. Its only function was to make and receive payments. It was in substance little other than Mr Dalby's offshore bank account held in a nominee name. In my view this is the type of case in which the court ought to have no hesitation in regarding Burnstead simply as the alter ego through which Mr Dalby enjoyed the profit which he earned in breach of his fiduciary duty to ACP. If the arrival at this result requires a lifting of Burnstead's corporate veil, then I regard this as an appropriate case in which to do so. Burnstead is simply a creature company used for receiving profits for which equity holds Mr Dalby to be accountable to ACP. Its knowledge was in all respects the same as his knowledge. The introduction into the story of such a creature company is, in my view, insufficient to prevent equity's eye from identifying it with Mr Dalby: see generally, as to the readiness of the courts in appropriate cases to pierce the corporate veil, Re H (restraint order: realisable property)  2 BCLC 500, at 511, per Rose LJ. I hold that Mr Dalby and Burnstead are both accountable for the profit represented by this commission and I will make an order against them accordingly."
"23. In my judgment the court is entitled to 'pierce the corporate veil' and recognise the receipt of the company as that of the individual(s) in control of it if the company was used as a device or façade to conceal the true facts thereby avoiding or concealing any liability of those individual(s). …
24. [The Vice-Chancellor summarised the facts relating to Mr Smallbone's use and control of Introcom]
25. In my view these conclusions are such as to entitle the court to recognise the receipt of the money of Trustor by Introcom as the receipt by Mr Smallbone too. Introcom was a device or façade in that it was used as the vehicle for the receipt of the money of Trustor. Its use was improper as it was the means by which Mr Smallbone committed unauthorised and inexcusable breaches of his duty as a director of Trustor…."
"682. In all of the cases where the court has been willing to pierce the corporate veil, it has been necessary or convenient to do so to provide the claimant with an effective remedy to deal with the wrong which has been done to him and where the interposition of a company would, if effective, deprive him of that remedy against him. It seems to me that the veil, if it is to be lifted at all, is to be lifted for the purposes of the relevant transaction. …
683. It is not permissible to lift the veil simply because a company has been involved in wrongdoing, in particular because it is in breach of contract. And whilst it is clear that the veil can be lifted where the company is a sham or façade or, to use different language, where it is a mask to conceal the true facts, it is, in my judgment, correct to do so only in order to provide a remedy for the wrong which those controlling the company have done …."
"164. … The question is whether it is being used as a façade at the time of the relevant transaction(s). And the court will pierce the veil only so far as is necessary to provide a remedy for the particular wrong which those controlling the company have done. In other words, the fact that the court pierces the veil for one purpose does not mean that it will necessarily be pierced for all purposes."
"Whether the claimants can pierce the corporate veil on the basis that the Corporate Defendants were used, by the defendant (and the other Beneficial Owners) controlling them, as a device for the purpose of a fraud on the claimants, and, if so, whether the defendant (with the others) is liable as a party to the charterparties which claimants were caused to enter into with the Corporate Defendants".
"I am satisfied that both Warren J in Dadourian and Flaux J in Lindsay were only ruling out the course of finding the puppeteer liable for breach of contract because in neither case was it appropriate to do so in the event, since a remedy of finding the puppeteer personally liable (as tortfeasor) had already been granted which was, certainly in the case of Dadourian, inconsistent with taking the contractual route. None of the reasons which Warren J put forward argues against a conclusion, depending on how the facts fall out at trial, that in this case the puppeteer should be held party to the puppet company's contract. There is in my judgment no good reason of principle or jurisprudence why the victim cannot enforce the agreement against both the puppet company and the puppeteer who, all the time, was pulling the strings. The claimants seek to enforce the contract against both the puppeteer and the puppet company (as in Gilford and Jones). …"
"I have no doubt nevertheless that, for the reasons I gave in Gramsci, there is a serious issue of fact and law as to whether, in the circumstances described by me above, the Sixth, Seventh and Eighth Defendants are to be treated as being parties to the Loan Agreements, as I found arguable in the case of the defendant and the interposed chartering companies in Gramsci. I also am satisfied that, as I concluded in Gramsci, the question of whether the veil should be pierced in such a situation, so as to decide whether the puppeteers are parties to the contract, is to be resolved, just as would be issues of agency, undisclosed or otherwise, by reference to the proper law of the contract (see paragraph 46 of Gramsci). In this case, the proper law of the Loan Agreements is expressly English law …."
"For present purposes the law can be summarised shortly. (1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority. (2) In entering into the contract, the agent must intend to act on the principal's behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the third party may have against the agent is available against his principal. (5) The terms of the contract may, expressly or by implication, exclude the principal's right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal.
The origin of, and theoretical justification for, the doctrine of the undisclosed principal has been the subject of much discussion by academic writers. … It seems to be generally accepted that, while the development of this branch of the law may have been anomalous, since it runs counter to fundamental principles of privity of contract, it is justified on grounds of commercial convenience."
Service out of the jurisdiction
Order of dealing with the three principal components
The "VTB has suffered no loss" point
"… when in the course of his business, he has taken action arising out of the transaction, which action has diminished his loss, the effect in the actual diminution of the loss he has suffered may be taken into account … The subsequent transaction, if to be taken into account, must be one arising out of the consequences of the breach and in the ordinary course of business. This distinguishes such cases from a quite different class of case illustrated by Bradburn … The reason of that decision was that it was not the accident, but a contract wholly independent of the relation between the plaintiff and the defendant which gave the plaintiff the advantage".
VTB's case against Marcap BVI of participation in the alleged fraud/conspiracy
"The only inference that can reasonably be drawn is that the Marcap group and Mr Malofeev were party to a conspiracy with Nutritek to defraud VTB. Further, it is reasonable to infer that the Marcap companies involved included not only Marcap Moscow but also Marcap BVI which owned at least a little under half of Nutritek".
Is England and Wales clearly or distinctly the appropriate forum in which the claim of VTB against the defendants should be determined?
Where were the torts committed?
Does this give rise to a "presumption" that England is the "natural forum" or the "appropriate forum" for the resolution of these disputes?
"This illustrates the weakness of the argument. The distinction between a prima facie position and treating the same factor as a weighty circumstance pointing in the same direction is a rather fine one. For my part the Albaforth line of authority is well established, tried and tested and unobjectionable in principle. I would hold that Hirst LJ [who gave the decision in the Court of Appeal] correctly relied on these decisions".
"Like him, I would reject the argument [of counsel] advanced that the application of the Spiliada test did not admit of the application in this case of the principle that the jurisdiction in which the tort is committed is prima facie the natural forum for the dispute".
The law applicable to VTB's claims in tort
"Choice of applicable law: the general rule.
11(1) The general rule is that the applicable law is the law of the country in which the events constituting the tort or delict in question occur.
(2) Where elements of those events occur in different countries, the applicable law under the general rule is to be taken as being:
(a) for a cause of action in respect of personal injury caused to an individual or death resulting from personal injury, the law of the country where the individual was when he sustained the injury;
(b) for a cause of action in respect of damage to property, the law of the country where the property was when it was damaged; and
(c) in any other case, the law of the country in which the most significant element or elements of those events occurred.
(3) In this section 'personal injury' includes disease or any impairment of physical or mental condition.
Choice of applicable law: displacement of general rule.
12(1) If it appears, in all the circumstances, from a comparison of:
(a) the significance of the factors which connect a tort or delict with the country whose law would be the applicable law under the general rule; and
(b) the significance of any factors connecting the tort or delict with another country, that it is substantially more appropriate for the applicable law for determining the issues arising in the case, or any of those issues, to be the law of the other country, the general rule is displaced and the applicable law for determining those issues or that issue (as the case may be) is the law of that other country.
(2) The factors that may be taken into account as connecting a tort or delict with a country for the purposes of this section include, in particular, factors relating to the parties, to any of the events which constitute the tort or delict in question or to any of the circumstances or consequences of those events."
Was the judge wrong to conclude that VTB had failed to demonstrate that England was "clearly or distinctly the appropriate forum" to determine these disputes for the ends of justice and in the interests of all the parties?
"Mr Blackett-Ord submitted that it has now become the practice for parties to bring ex parte applications seeking a freezing order by pointing to some dishonesty, and that, he says, is sufficient to enable this court to make a freezing order. I have to say that, if that has become the practice, then the practice should be reconsidered. It is appropriate in each case for the court to scrutinise with care whether what is alleged to have been the dishonesty of the person against whom the order is sought in itself really justifies the inference that that person has assets which he is likely to dissipate unless restricted."
"163. In this context, and entirely properly, Mr Weekes referred me to the decision of the Court of Appeal in Thane Investments v Tomlinson  EWCA Civ 1272 where Peter Gibson LJ at  deprecates the tendency to infer a risk of dissipation from the fact that allegations of dishonesty are made against the defendant. However, Mr Weekes submitted that Thane Investments was a case which must be approached with caution, as it was an ex tempore judgment given where the defendant was unrepresented, so that the case was not perhaps as fully argued as it might have been. In particular, two earlier relevant decisions of the Court of Appeal do not appear to have been cited to the Court of Appeal.
164. The first is Norwich Union v Eden (1996 25 January, unreported) a decision of a two man Court of Appeal (Hirst and Phillips LJJ). The main judgment was given by Phillips LJ who said:
"It seems to me that when the court considers whether there is a good arguable case it is at that stage that it considers whether the likelihood of a judgment in favour of the plaintiff is sufficient to justify the grant of Mareva relief. If it is so satisfied, the question then arises:- if such a judgment is given, what is the risk that there will be no assets there to satisfy it? If the judgment in question being considered is a judgment in which allegations of fraud are made, then it seems to me that it is open to the court to conclude from that fact alone that there is sufficient risk of dissipation of assets to justify the grant of relief. For myself it does not seem to me that there would be any prospect of persuading this court that the learned Judge had erred in principle in so concluding."
165. The other decision is that in Gru po Torras SA v Al Sabah 1997 WL 1105536 (21 March 1997) where Saville LJ said:
"Mr Etherton also criticised the judge for failing, as he put it, properly to address himself to the question whether there was a real risk of dissipation of assets, and simply concluded that such a risk existed because this was a fraud case. In this context Mr Etherton pointed out that Mr Dawson had lived and worked as an investment adviser in Switzerland for a long time and that his assets included a very valuable house in Geneva, so that it was hardly likely that he would set about making them judgment proof. Mr Etherton also drew attention to the fact that the litigation had begun years ago and long before Mr Dawson was joined to it, yet there was no suggestion that he has yet made any attempt to dissipate assets.
These are certainly points that can be made on behalf of Mr Dawson, but again I am not persuaded that the judge simply failed to take them into account. What is clear from the judgment is that the judge took the view that there was a good arguable case that Mr Dawson was knowingly implicated in the fraud; and that the nature of the allegations was such that there was a strong fear of dissipation. Since it is part of Mr Dawson's own case that he was expert in the sort of intricate, sophisticated and international financial transactions which feature in this case, and since the plaintiffs had established a good arguable case that Mr Dawson had used his expertise for dishonest purposes, I am not in the least surprised that the judge reached the conclusion he did. In short I remain wholly unpersuaded that the judge so erred in his assessment of the risk of dissipation that it would be right for this court to interfere."
166. Mr Weekes relied upon that case in support of a submission that, like the defendant in that case, Mrs Kohn is experienced in sophisticated international financial transactions. He submitted that in the light of those earlier authorities, the way in which Thane Investments should be read is correctly set out by Patten J in Jarvis Field Press v Chelton  EWHC 2674 (Ch), where having cited the relevant passage from the judgment of Peter Gibson LJ, the learned judge says at :
"The relevance of that passage, of course, is to the submission made by Mr Lord, on behalf of the claimants on this application, that I should infer from the apparent dishonesty of Mrs Chelton, together with the recent change of circumstances, a real likelihood and risk of dissipation. I have no difficulty in accepting the general principle, emphasised by Peter Gibson LJ, that a mere unfocused finding of dishonesty is not, in itself, sufficient to ground an application for a freezing order. It is necessary to have regard to the particular respondents to the application and to ask oneself whether, in the light of the dishonest conduct which is asserted against them, there is a real risk of dissipation. As Peter Gibson LJ made clear in the passage I have already quoted, the court has to scrutinise with care whether what is alleged to have been dishonesty justifies the inference. That is not, therefore, a judgment to the effect that a finding of dishonesty (or, in this case, an allegation of dishonesty) is insufficient to found the necessary inference. It is merely a welcome reminder that in order to draw that inference it is necessary to have regard to the particular allegations of dishonesty and to consider them with some care."
167. I agree with that analysis of the approach which the court should adopt when considering whether to grant a freezing injunction, in a case where there are allegations of fraud or deliberate misconduct against a defendant."
Final conclusion and disposition
In this Agreement:
'Acquisition Agreement' means the sale and purchase agreements to be entered into relating to the sale and purchase of the Target Shares …
'Buyer's Account' shall mean the blocked bank account in the name of the Company with the London officer of the Lender with account number 1001632020.
'Fee Letter' means the letter dated on or about the date of this Agreement between the Lender and the Company in respect of the arrangement fee.
'Obligor' means each of the Company, the Guarantors and the Production Companies.
'Participant' means [VTB Moscow] in its capacity as participant under the Participation Agreement.
'Participation Agreement' means the Terms and Conditions of the funded participation agreement dated or on about the date hereof between the Lender as grantor and the Participant …
'Party' means a Party to this Agreement.
'Pledged Shares' means the Production Company Shares, the Company Participatory Interest, the Target Shares and the Migifa Shares.
'Production Companies' means [the Dairy Companies].
'Repeating Representations' means each of the representations set out in Clause 18 (Representations) other than Clauses 18.9 (No Filing or Stamp Taxes) and 18.29 (Sales Contracts).
'Seller' means [Nutritek].
'Seller's Acquisition Account' means the account at the offices of the Lender with account number 1001622020.
'Target' means [Newblade].
'Target Shares' means 49,001 shares (being 100% of the issued and outstanding shares) in the Target purchased by the Company pursuant to the Acquisition Agreement
'Tranche A Commitment' means two hundred eight million seven hundred thousand Dollars ($208,700,000).
'Tranche B Commitment' means twenty-one million three hundred thousand Dollars ($21,300,000).
1.3 Contracts (Rights of Third Parties) Act 1999
A person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or enjoy the benefit of any term of this Agreement.
2.1 The Facility
Subject to the terms of this Agreement, the Lender makes available to the Company:
2.1.1 a US Dollar term loan facility in an aggregate amount equal to the Tranche A Commitment ('Tranche A'); and
2.1.2 a US Dollar term loan facility in an aggregate amount equal to the Tranche B Commitment ('Tranche B'),
together, the 'Facility'.
The Company shall apply all amounts borrowed by it:
3.1.1 under Tranche A, towards partial payment of the purchase price for the Target Shares under the Acquisition Agreement, payment of the Acquisition Costs, (other than periodic fees), payment of financing and other transactional costs (including legal fees) incurred in connection with the Finance Documents, or for the general corporate purposes of the company; and
3.1.2 under Tranche B, towards the general corporate purposes of the Company.
3.2 Direction to Pay
3.2.1 The Company directs the Lender to deposit into the Buyer's Account (and such monies shall be thereafter immediately transferred into the Seller's Acquisition Account in accordance with the irrevocable instructions referred to in Schedule 2, Part 1 Clause 4.17) on the date of first Utilisation of Tranche A, part of the proceeds of the first Utilisation of Tranche A equal to the purchase price (howsoever defined) under the Acquisition Agreement to be paid by the Company less the Reserved Amount.
4.1 Initial Conditions Precedent
4.1.1 The company may not deliver a Utilisation Request in respect of Tranche A unless the Lender has received all of the documents and other evidence listed in Part 1 of Schedule 2 (Conditions Precedent) in form and substance satisfactory to the Lender (acting reasonably). The Lender shall notify the Company promptly upon being so satisfied. The first drawdown of Tranche A shall comply with Clause 3.2 above.
4.2 Further conditions precedent
Subject to Clause 4.1 (Initial Conditions Precedent), the Lender will only be required to comply with Clause 5.3 (Lender's Funding), if on the date of the Utilisation Request and on the proposed Utilisation Date:
4.2.1 no Default is continuing or would result from the proposed Loan;
4.2.2 the Repeating Representations to be made by each Obligor are true in all material respects; and
4.2.3 the Participant has credited the Receiving Account of the Lender with the funding for that Loan in accordance with the terms of the Participation Agreement.
11.1 Arrangement Fee
The Company shall pay to the Lender an arrangement fee in the amount and manner specified in the Fee Letter.
18.11 No Misleading Information
Save as disclosed in writing to the Lender prior to the date of this Agreement:
18.11.1 any factual information (including in relation to the Acquisition and the Group) provided to the Lender was true and accurate in all material respects as at the date it was provided;
18.11.2 any financial projection or forecast (including in relation to the Acquisition and the Group) provided to the Lender has been prepared on the basis of recent historical information and on the basis of reasonable assumptions and was fair (as at the date it was provided) and arrived at after careful consideration;
18.11.3 the expressions of opinion or intention provided by or on behalf of an Obligor to the Lender were made after careful consideration and (as at the date of the relevant report or document containing the expression of opinion or intention) were fair and based on reasonable grounds; and
18.11.4 no event or circumstance has occurred or arisen and no information has been omitted from the information provided to the Lender pursuant to paragraphs 18.11.1 to 18.11.3 above and no information has been given or withheld that results in the information, opinions, intentions, forecasts or projections contained in the information provided to the Lender pursuant to paragraphs 18.11.1 to 18.11.3 being untrue or misleading in any material respect.
This Agreement is governed by English law.
35.1 Jurisdiction of English Courts
35.1.1 Subject to Clause 35.3 (Arbitration) below, the courts of England have nonexclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a Dispute regarding the existence, validity or termination of this Agreement) (a 'Dispute').
35.1.2 The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.
35.1.3 This Clause 35.1 is for the benefit of the Lender only. As a result, the Lender shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Lender may take concurrent proceedings in any number of jurisdictions.
In addition to Clause 35.1 (Jurisdiction of English Courts) above, the Lender shall have the right to refer any dispute which may arise out of or in connection with this Agreement to final and binding arbitration in London, England, pursuant to the arbitration rules of LCIA (the 'LCIA Rules'). The language of the arbitration proceedings shall be English. Such arbitration shall be conducted in accordance with LCIA Rules. The seat or legal place of arbitration shall be deemed to be England, and accordingly the substantive laws of England shall be applicable for the purposes of the arbitration. The procedural law for any reference to arbitration shall be English law. …
Conditions Precedent to Utilisation of Tranche A
The Lender shall have received (in form and substance satisfactory to the Lender) each of the following:
2. Finance Documents
The following original Finance Documents each duly executed by each of the parties to it:
2.1.1 this Agreement;
2.1.2 the Participation Agreement (and confirmation thereto);
2.1.3 the Transaction Security Documents;
2.1.4 the Hedging Documents;
2.1.5 the Production Company Guarantees (other than MK Penzensky);
2.1.6 the Fee Letter; and
2.1.7 an Accession Letter from the Target.
3. Transaction Security
3.1 A financial report of an independent valuer acceptable to the Lender regarding the determination of the market value of the Pledged Shares (other than the shares in Molkombinat and the participatory interests in Aktiv).
The purchase price under the SPA was US$250 million less the "Indebtedness" as defined in clause 3.2 and determined under Annex 1 of the SPA. It was to be paid in two instalments: on the Closing Date, US$50 million less the "Indebtedness" was to be paid by RAP to Nutritek, whereupon the shares in Newblade were to be transferred to RAP (clause 3.3.2); and within two days thereafter, a further US$200 million (less US$5 million which was to be retained by RAP pending performance by one of the Nutritek group companies of a particular obligation (clause 19.6)) was to be paid (clause 3.3.5).
The SPA is governed by English law (clause 17.1) and provides that any dispute arising out of or in connection with it shall be referred to arbitration under LCIA rules (clause 18.1).
The ISA takes the form of a Confirmation supplemental to an International Swap and Derivative Association Master Agreement between VTB and RAP dated 23 November 2007. The purpose of the ISA was to hedge against an increase in the interest paid by RAP pursuant to the Facility Agreement which was to be calculated by reference to, amongst other matters, LIBOR. The dates and spreads under the Facility Agreement and the ISA were matched. The ISA benefited from the same security as the Facility Agreement.
The ISA is governed by English law and provides that any dispute arising out of or in connection with it shall be referred to arbitration under the LCIA rules (Part 5 (g)).
In these Terms and Conditions words and expressions shall (unless otherwise expressly defined in these Terms and Conditions) have the meaning given to them in the Facility Agreement and:
'Enforcement Proceeds' means, following an Enforcement Event, all receipts and recoveries by the Lender (or by any person which are properly paid over to the Lender):
(a) pursuant to, upon enforcement of or in connection with the Transaction Security; and
(b) without prejudice to subclause (a) above, in respect of all representations, warranties, covenants, guarantees, indemnities and other contractual rights of the Lender made or granted in or pursuant to any Finance Document.
2.1 Sums Due Under the Relevant Finance Documents
If at any time on or after the date of the Confirmation a sum falls due from the Grantor under the Relevant Finance Documents and the sum is, in the Grantor's reasonable opinion, attributable in whole or in part to any Loan or Participated Tranche, then the Participant shall pay to the Grantor amount equal to such sum.
2.2 Payment of sums due
The Participant shall make each payment required under Clause 2.1 (Sums Due Under the Relevant Finance Documents) in the currency and funds and in the place and time at which the Grantor is required to make the payment under the Relevant Finance Documents.
The Grantor is entitled to receive, recover and retain all principal, interest and other money payable under the Relevant Finance Documents in relation to each Participated Tranche.
Subject to compliance by the Participant with its payment obligations under the Participation, on and after the date of the Confirmation the Grantor shall, upon applying any amount actually received by it in respect of any Loan or Commitment (whether by way of actual receipt, the exercise of any right of set-off or otherwise), pay to the Participant:
(a) if that amount is applied in respect of the principal of a Loan, an amount equal to the amount so applied by the Grantor;
All payments or deposits by either Party to, or with, the other under the Participation shall be made to the Receiving Account of that other Party. Each Party may designate a different account as its Receiving Account for payment by giving the other not less than five Business Days notice before the due date for payment.
4.5 Failure to remit
The Grantor shall not be:
(b) liable to remit to the Participant any amount greater than the amount it received from any Obligor in respect of any Participated Tranche or Loan.
6.1 Status of Participation
(a) The Grantor does not transfer or assign any rights or obligations under the Relevant Finance Documents and, subject to Clause 6.3 (Assignment Following Event of Default) the Participant will have no proprietary interest in the benefit of the Relevant Finance Documents or in any monies received by the Grantor under or in relation to the Relevant Finance Documents.
(b) The relationship between the Grantor and the Participant is that of debtor and creditor with the right of the Participant to received monies from the Grantor restricted to the extent of an amount equal to the relevant portion of any monies received by the Grantor from any Obligor.
(c) The Participant shall not be subrogated to or substituted in respect of the Grantor's claims by virtue of any payment under the Participation and the Participant shall have no direct contractual relationship with or rights against any Obligor.
(d) Nothing in the Participation constitutes the Grantor as agent, fiduciary or trustee for the Participant.
6.3 Assignment Following Event of Default
At any time following an Event of Default and while such Event of Default is continuing, the Participant may (at its election and in its sole discretion):
(a) require the Grantor to assign and/or novate all of its rights and interest in the Facility Agreement and other Relevant Finance Documents to the Participant; and/or
(b) instruct the Grantor to procure that all amounts payable by the Obligors to the Grantor under the Relevant Finance Documents be paid by such Obligors directly to the Participant, at such account as the Participant may inform the Grantor,
and the Grantor shall so comply.
6.4 Enforcement Event
Notwithstanding any other provision of these Terms and Conditions the Parties hereby agree that, subject to Clause 6.3 (Assignment Following Event of Default) above, following the occurrence of an Early Termination Date, the Grantor shall apply all Enforcement Proceeds in the following manner:
(a) first, in payment of costs, charges, expenses and liabilities incurred by on or behalf of the Grantor and any receiver, attorney or agent in connection with exercising its powers of enforcement under the Finance Documents and the remuneration of every receiver, attorney or agent under or in connection with the Finance Documents;
(b) second in pro rata payment of:
(i) amounts due to the Participant under the Participation; and
(ii) amounts due under the Hedging Documents;
9.2 No obligation to support losses
(a) The Grantor notifies the Participant and the Participant acknowledges that the Grantor shall have no obligation to repurchase or reacquire all or any part of the Participation from the Participant or to support any losses directly or indirectly sustained or incurred by the Participant for any reason whatsoever, including the non-performance by any Obligor under the Relevant Finance Documents of its obligations thereunder (other than any loss caused by the gross negligence or wilful default of the Grantor in performing its obligations under the Participation).
(b) Any rescheduling or renegotiation of Participation shall be for the account of, and the responsibility of, the Participant, who will be subject to the rescheduled or renegotiated terms.
16.1 Governing Law
These Terms and Conditions and the Participation are governed by English law.
The parties submit to the non-exclusive jurisdiction of the English courts.
16.4 Convenient Forum
Save as provided below, the Parties agree that the courts of England are the most appropriate and convenient courts to determine and settle any dispute arising relation to the Agreement (including any question as to its existence, validity or termination) (a "Dispute") between them and accordingly no party shall raise any arguments based on forum non convenience.
Notwithstanding the submission by the Parties to the jurisdiction of the English courts in Clause 16.2 (Jurisdiction), either Party refer any Dispute to be finally resolved by arbitration under the Rules of the London Court of International Arbitration in London, England. There will be 3 arbitrators, one of whom will be nominated by each of the claimant and the defendant, and the third to be agreed by the 2 arbitrators so appointed and in default thereof shall be appointed by the President of the London Court of International Arbitration. If there is more than one claimant or defendant they will jointly nominate one arbitrator. The arbitration will be conducted in English and any judgment rendered shall be final and binding on the Parties.