Tatiana Mikhailovna Akhmedova vs (1) Farkhad Teimur Ogly Akhmedov (2) Straight Establishment [2018] DIFC CFI 011

March 21, 2018 Court of First Instance -Judgments,Judgments

Claim No: CFI-011-2018

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai

IN THE COURT OF FIRST INSTANCE

BEFORE HE JUSTICE ALI AL MADHANI

BETWEEN

TATIANA MIKHAILOVNA AKHMEDOVA

Applicant

and

(1) FArkhad Teimur Ogly Akhmedov

(2) Straight Establishment

Respondents

Hearing: 8 March 2018

Counsel: Michael Black QC assisted by Andrew Holden (Fichte & Co) for the Applicant

Vernon Flynn QC assisted by Sharif Shivji (Al Tamimi & Co) for the Respondents

Judgment: 21 March 2018

JUDGMENT OF H.E. JUSTICE ALI AL MADHANI

ORDER

UPON reading the Second Respondent’s Application to challenge the Order of 8 February 2018 on a jurisdictional basis

AND UPON reviewing the parties’ submissions

AND UPON hearing the parties on the return date hearing on 8 March 2018

IT IS HEREBY ORDERED THAT:

1.The Second Respondent’s jurisdiction challenge Application is dismissed.

2. The Freezing Order of 8 February 2018 is to continue until further order of this Court.

3. The Second Respondent is to bear the Cost of this Application on the standard basis to be assessed by the Registrar if not agreed.

Issued by:

Natasha Bakirci

Senior Assistant Registrar

Date of Issue: 21 March 2018

At: 3pm

JUDGMENT

1.This is my judgment after having heard parties at the return date of a freezing injunction made by this Court on 8 February 2018 (the ‘Freezing Injunction’).

2. The Freezing Injunction was brought in the context of a judgment that has been entered in the Applicant’s favour by the English High Court of Justice against her former husband, the First Respondent.

3. According to the Applicant, the First Respondent has undertaken a deliberate campaign to frustrate enforcement of the English court’s judgment against him. This includes concealing his assets using a web of corporate entities located in ‘asset protection’ jurisdictions around the world and it is alleged that the Second Respondent is one such entity: a Liechtenstein ‘Anstalt’ which the Applicant has reason to believe is being used by First Respondent to conceal and protect one of his most valuable assets, a superyacht known as “Luna” which is docked in Port Rashid in the Emirate of Dubai.

4. The Applicant seeks to enforce the English court’s judgment against the First Respondent and against the Second Respondent via an action in the DIFC Courts. The Applicant seeks to invoke this Court’s ‘conduit jurisdiction’ to make orders that can then be enforced in the Emirate of Dubai.

5. The Applicant asserts that there is a proper legal basis for freezing orders to be made against both Respondents.

6. There is also an overwhelming case that, without a freezing order, First Respondent will take steps to evade enforcement of this Court’s order. Freezing orders are therefore warranted.

7. In summary, the Applicant’s case is that she seeks to invoke this Court’s assistance to obtain execution of a judgment of the English court against a man who has taken every action available to him to frustrate that judgment; who acts in contempt and open mockery of the English court, and who by his own actions and his use of a web of corporate entities to conceal his assets has evaded justice.

8. The Freezing Injunction was granted on 8 February 2018 in favour of the Applicant.

9. The Freezing Injunction prevents the dissipation of the assets of the First Respondent, and of the Second Respondent, a Liechtenstein ‘Anstalt’ named Straight Establishment, as a mere corporate creature of First Respondent being used by him to frustrate the enforcement of an English judgment in the Applicant’s favour, up to the value of USD 540 million.

10. The Freezing Injunction applies in particular to a pleasure craft named ‘Luna’, title to which is presently held by the Second Respondent, and which is presently moored in Dubai.

11. On the basis of the Freezing Injunction granted by this Court, the Courts of Dubai have granted an interim arrest of Luna pending determination of the proceedings in the DIFC.

The Second Respondent’s Jurisdictional Challenge

12. The Second Respondent applies to this Court to challenge jurisdiction insofar as it relates to matters arising on continuation of the Freezing Injunction. The Second Respondent appears in this matter solely on the basis of contesting jurisdiction and reserves its right to seek to discharge the Freezing Injunction on other grounds in the event that its challenge on jurisdiction is unsuccessful.

13. At the Return date, the Second Respondent contended that the DIFC Courts have no territorial jurisdiction over the Second Respondent and as such, the DIFC Courts could not and should not have granted the Freezing Injunction against it. It further contends that the Second Respondent is a corporate entity incorporated in Liechtenstein and is not domiciled in the DIFC and has no branch office in the DIFC and it is common ground that the dispute does not relate to a DIFC contract or events which took place in the DIFC.

14. The Second Respondent argues that the present proceedings are said to be prompted by an on-going dispute between the Applicant, Mrs Akhmedova, and her former husband, Mr Akhmedov, which is being litigated in the High Court in England and in other jurisdictions including Liechtenstein. At the time of the Freezing Injunction, no proceedings had been brought by the Applicant against the Second Respondent in either England or Liechtenstein, therefore the DIFC Courts has no in personam jurisdiction against the Second Respondent and the Freezing Injunction should not be continued.

15. The Second Respondent also argued that although Articles 5A(1)(e), Article 7 of the judicial authority law and 24(1)(a) and Article 24(1)(e) of the DIFC Courts Law. permit claims for the enforcement of foreign judgments by and against the parties to such judgments, however, they do not permit claims for the enforcement of foreign judgments against third parties because this is inconsistent with the conceptual basis of enforcement.

16. Article 5A(1)(e) of the Judicial Authority Law, Law No.12 of 2004 in respect of the Judicial Authority at Dubai International Financial Centre as amended provides:

“Any claim or action over which the Courts have jurisdiction in accordance with DIFC Laws and DIFC Regulations.”

17. Article 7 of the Judicial Authority Law provides so far as is relevant:

“(6) The judgments, decisions, orders and ratified Arbitral Awards rendered outside DIFC by any court other than Dubai Courts shall be executed within DIFC in accordance with the procedure prescribed in the Rules of the Courts.”

18. The Applicant then relies on Article 24(1)(a) and Article 24(1)(e) of the DIFC Courts Law, DIFC Law No. 10 of 2004. Article24(1) of that law provides:

“24. Ratification of Judgments

(1) Pursuant to Article […7(6)] 9 of the Judicial Authority Law, the Court of First Instance has jurisdiction to ratify any judgment, order or award of any recognised:

(a) Foreign court;

(b) Courts of Dubai or the United Arab Emirates;

(d) Foreign Arbitral Award; or

(e) orders for the purposes of any subsequent application for enforcement in the courts of Dubai;

(2) Where the UAE has entered into an applicable treaty for the mutual enforcement of judgments, orders or awards, the Court of First Instance shall comply with the terms of such treaty.”

19. The Second Respondent further argues that there are clear DIFC authorities for the proposition that jurisdiction against one Respondent cannot generate jurisdiction against another Respondent and makes reference to the following authorities.

20. Justice Sir Roger Giles said this of Article 5(A) of the Judicial Authority Law in Nest Investments Holding Lebanon S.A.L. v Deloitte & Touche (M.E.) [2016] DIFC CFI 027 at [13]:

“13. The Applicants did not submit that there is (present) jurisdiction to hear and determine the claim against Mr Fadl under Article 5 (A) (1) (a) because he is another party to an action to which DTME is a party. Correctly so, since “claim [s] or action [s]” in Article 5 (A) (1) addresses the particular Respondent (see Al Khorafi v Bank Sarasin-Alpen (ME) Ltd [2011] DIFCCA 3 at [82]).”

“80. As we have already indicated, this was very much a “fall-back” submission which no doubt originated in the similar provision of Law 12.

81. It is however, an entirely misconceived application of Article 5(A)(1)a.

82. Sarasin Switzerland is not a DIFC Body or a DIFC Establishment or DIFC Licensed Establishment. Nor is it a party to any claim against Sarasin Dubai which is a DIFC Establishment or Licensed Establishment. It is necessary for the purposes of this provision to show that there is a claim for a remedy by or against a party which falls within one of the four identified categories. It is insufficient to rely on the fact that a different party to that against which the claim in question is brought happens to be a party to the proceedings.” Khorafi v Bank Sarasin-Alpen and others (2012), Court of Appeal at [80]-[82]’

21. In the same context the Second Respondent is claiming that it is irrelevant whether it would be more convenient or effective if third parties are joined because the CFI, unlike the English court, has no basis for asserting jurisdiction over a “necessary and proper party”. In England, that jurisdiction is provided for in the Civil Procedure Rule at Practice Direction 6B – Service out of the Jurisdiction para. 3.1. In contrast, there is no equivalent in DIFC law. Furthermore, the Second Respondent asserts that even if such jurisdiction existed, the Second Respondent would not under English law be a necessary and proper party for an enforcement claim against the First Respondent, given that the substantive dispute between the Applicant and the First Respondent is not before the DIFC Courts.

22. Against the Applicant’s alternative case that the injunction can be granted under the “Chabra” jurisdiction (TSB Private Bank International v Chabra [1992] 1 WLR 231) even if the Second Respondent’s jurisdiction challenge succeeds, the Second Respondent asserts that it is incorrect and appears to flow from a confusion of “territorial jurisdiction” with “substantive jurisdiction”. Chabra cannot give the Court territorial jurisdiction over a party which it otherwise would lack. The Second Respondent makes reference to the White Book at 15-6316 citing Belletti & Ors v Morici & Ors. [2009] EWHC 2316 (Comm) 2 CLC 525.17 [44]:

“44 I turn to Mr Chambers' arguments as to why the court does not need to be satisfied that it is expedient to make an order against the parents before doing so. The argument that s. 25(2) of the 1982 Act does not apply because the court has Chabra jurisdiction against the parents under s. 37 of the 1981 Act fundamentally confuses substantive jurisdiction (in the sense of the powers of the court against those over whom it has territorial jurisdiction) and that territorial jurisdiction (with which s. 25 and the Practice Direction B to Part 6 are concerned), the existence of which is a necessary pre-condition to the exercise of any powers under s. 37. Unless there is some basis for the English courts to assume territorial jurisdiction over the parents who are resident in Italy, this court has no power to make a Chabra order against the parents.”

23. The argument continues to the extent that if there is no territorial jurisdiction for a claim against the Second Respondent “in personam” in the DIFC, “Chabra” cannot create one. The Second Respondent further made a contrast with the position in England, the CFI has no jurisdiction to grant interim relief in support of foreign proceedings: Article 32(b) of the DIFC Courts Law only empowers the CFI to grant injunctions in “proceedings before the DIFC Courts”, which obviously does not include foreign proceedings. The second Respondent sums up that the Applicant’s injunction application cannot be salvaged even if the Applicant validly commences proceedings against the Second Respondent in a country where the Court has jurisdiction over it.

24. Finally, the Second Respondent contends that the Applicant has an obligation to comply with the duty of full and frank disclosure in an ex-parte without notice application and has failed to present the legal analysis as presented in the Second Respondent’s jurisdictional challenge, and confused substantive jurisdiction with territorial jurisdiction. As such the Applicant failed to explain to the Court the difference between those concepts and the fact that the Second Respondent was likely to raise the point that there was no territorial jurisdiction. The Second Respondent argues that this failure gives ground to discharge the injunction.

The Applicant’s Arguments

25. The Applicant’s first argument is that even if it is hypothetically correct that the action against the Second Respondent could only proceed on the basis of the enforcement of a judgment obtained against itself, the jurisdiction to enforce judgment against Mr Akhmedov the First Respondent extends to enforcement against Straight as his corporate creature. The application would still be flawed, because the Freezing Injunction was obtained on the basis of the Applicant’s intention to obtain precisely such a judgment against Straight in the English High Court.

26. The Applicant submitted evidence that the Second Respondent is aware of the fact that an application against it was issued in the English High Court on 1 March 2018, and the hearing of that application is due to take place on 21 March 2018. In this regard, the Applicant insists that the Freezing Injunction preserves the position pending the entry of judgment in England, and the ratification and enforcement of that judgment in the DIFC.

27. The Applicant says that such a judgment is likely to be entered by the High Court in England in under a fortnight and argues that it would be a nonsense for the Second Respondent to submit that this Court has no jurisdiction to make orders holding the ring in the meantime.

28. The Applicant’s second argument is that the jurisdiction of certain courts of common law is defined territorially. The English Courts’ jurisdiction is territorial in this sense: the English Court asserts ordinary jurisdiction only in respect of those persons who have been served within the territorial jurisdiction of the Court; it limits the assertion of ‘extra-territorial’ jurisdiction via an express requirement to obtain permission to serve out of the jurisdiction, which requires proof that the matter falls within a predefined jurisdictional ‘gateway’ and that England is ‘clearly and distinctly’ the most appropriate forum to determine the dispute.

29. The argument regarding the jurisdiction of the Courts of the DIFC is entirely different. The DIFC Courts’s jurisdiction is not limited territorially. In particular, in the DIFC there is no requirement to obtain permission to serve out of the jurisdiction: see Rule 9.53 of the Rules of the DIFC Courts (the “RDC”): “Given the international nature of the DIFC, permission to serve process outside the DIFC is not required”. Rather, the DIFC Courts’s jurisdiction is determined exclusively by the legislation.

30. A foreign Court – the English High Court – has entered judgment against Mr Akhmedov therefore this Court has jurisdiction to ratify and enforce that judgment against Mr Akhmedov. The question for this hearing is whether the jurisdiction to ratify and enforce that judgment extends to enforcement against a corporate entity that has been utilised by Mr Akhmedov in a deliberate attempt to evade and frustrate enforcement of the judgment.

31. The Applicant submits that, as a matter of fundamental policy and the proper construction of the statutory jurisdiction conferred by the Judicial Authority Law and the DIFC Courts Law, the Court’s jurisdiction does extend to making such orders as the Freezing Injunction.

32. The Applicant takes the view that being in a position to respond to fraud and deliberate evasion, it would denude the Court’s jurisdiction of much of its practical effect if it were possible to avoid the enforcement of a judgment in the DIFC by the simple expedient of placing one’s assets within a corporate entity in an offshore ‘secrecy’ jurisdiction. Indeed, to adopt such a limited approach to jurisdiction would prevent the Court from effectively enforcing its own judgments.

33. The whole point of the Applicant’s case against the Second Respondent is that it is not a genuine third party at all, but rather is a vehicle being used by the Second Respondent to evade the English Court’s judgment. In other words, the Applicant’s case is that Straight is Mr Akhmedov, and Mr Akhmedov is Straight. The Applicants made reference to the words of Russell J in Jones v Lipman [1992] 1 WLR 832, at 836, to establish that Straight is “the creature of the First Respondent, a device and a sham, a mask which he holds before his face in an attempt to avoid recognition by the eye of equity.”

The Judgment

34. As it was set out above the Second Respondent’s case is that it is not a party to the English High Court Judgment that is to be enforced nor is it a third party to the Judgment seeking to be enforced by the Applicant. The case goes further to the point that the Second Respondent is not within the Jurisdiction of the DIFC Courts by any means as far as the Gateways extend and that the Vessel Luna, the subject of the Freezing Injunction, is also beyond the DIFC Jurisdiction. It contends that no single provision of law allows this Court to give judgment against it or its assets.

35. On the other hand, the Applicant’s main case is that the First Respondent and Second Respondent are one and that Vessel Luna, held through Straight, was and continues to be owned and controlled by Mr Akhmedov the First Respondent personally. The Applicant basically argues that the asset is owned and controlled by the First Respondent and that the Second Respondent is just a mask which has been used deliberately by Mr Akhmedov to conceal his continuing ownership and control of the Vessel.

36. The Second Respondent has elected to bring an application to challenge the jurisdiction of this Court as under what basis this Court can enforce against its assets, but not to file any evidence or to challenge the Applicant’s fundamental case that Straight is Mr Akhmedov and Mr Akhmedov is Straight.

37. It is evident that to date the Second Respondent did not challenge the fact that the Vessel Luna was and continues to be owned and controlled by Mr Akhmedov, the First Respondent personally.

38. It is very odd that the Second Respondent, even in the context of a Jurisdictional challenge, does not argue that it is not the First Respondent or at least challenge the fact that the Vessel Luna is not the First Respondent’s property.

39. In my Judgment, the Vessel Luna has been transferred by Mr Akhmedov through the names of an Isle of Man company (Tiffany Limited), two Panama corporations (Avenger Assets Corporation and Stern Management Corporation), and two Liechtenstein ‘Anstalts’ (Qubo 2 Establishment and Straight Establishment).

40. All the transfers were undertaken following the issuing of the Applicant’s petition in England, all appear to have been timed to accord with steps in the litigation as the evidence shows that the transfers from Avenger to Stern, and from Stern to Qubo 2, took place on the second day of the trial, and on the following day.

41. It is in Mr Justice Haddon-Cave’s Order dated 20 December 2016 declaring that Qubo 2 and another Liechtenstein ‘Anstalt’ are “no more than ciphers and the alter ego” of the First Respondent.

42. Then in March 2017 in both the English Court and the Liechtenstein Court there was a freezing order against Qubo 2 who was holding the Vessel under its name by then. The First Respondent procured a transfer of Luna into the name of Straight, the present Second Respondent to these proceedings. The Second Respondent therefore obtained title to the vessel directly from a known alter ego of the First Respondent.

43. The Applicant further managed to demonstrate before this Court that the Second Respondent in this case and ‘Qubo 2’ share the same directors, administrators and registered address.

44. In my judgment, I agree with the argument put forward by the Applicant that as a matter of fundamental policy, this Court – like any other court of justice – must be in a position to respond to fraud and deliberate evasion. It would deny the Court’s jurisdiction of much of its practical effect if it were possible to avoid the enforcement of a judgment in the DIFC by the simple expedient of placing one’s assets within a corporate entity in an offshore ‘secrecy’ jurisdiction, see Beatson LJ in JSC BTA Bank v Ablyazov [2014] 1 WLR 1414 [36];

a.“The jurisdiction to make a freezing order should be exercised in a flexible and adaptable manner so as to be able to deal with new situations and new ways used by sophisticated and wily operators to make themselves immune to the Courts' orders or deliberately to thwart the effective enforcement of those orders”.

45. This ‘flexibility principle’ was referred to with approval by Lewison LJ in JSC Mehzprom Bank v Pugachev [2016] 1 WLR 160 who said at [20] in the context of the construction of a freezing order, but making a point of principle of general application:

“It would, I think, be a matter of concern if a person could make himself judgment-proof merely by setting up discretionary trusts or, as Patten LJ said, a Liechtenstein Anstalt”.

46. Further, I refer to the dictum of Robert Walker J (as he then was) in International Credit & Investment Co (Overseas) Ltd v Adham [1998] BCC 134, at 136:

“the Court will, on appropriate occasions, take drastic action and will not allow its orders to be evaded by manipulation of shadowy offshore trusts and companies formed in jurisdictions where secrecy is highly prized and official regulation is at a low level”

47. Accordingly, this Court’s jurisdiction to ratify and enforce foreign judgments extends to the making of orders against corporate entities such as the Second Respondent, if it can be shown that they are being used to conceal the assets of the judgment debtor.

48. As to this case and in order or to the level of granting a Freezing Injunction only I am satisfied that the Applicant has a good arguable case to believe that the Vessel Luna, held through Straight the Second Respondent, was and continues to be owned and controlled by Mr Akhmedov the First Respondent personally which gives this Court the Jurisdiction and the power to enforce against it with a view to enforcing a recognised English Judgment.

49. In my opinion if the Second Respondent wished to have a better chance with its jurisdictional challenge it should have distanced itself and its assets such as the Vessel Luna from the First Respondent. The Second Respondent’s attempts to distinguish itself as a genuine commercial third party to the First Respondent has failed as there were insufficient facts and evidence presented to support the allegation. In this regard, the Second Respondent’s reference to cases such as Khorafi (CFI 014/2016 (1) Mr Rafed Abdel Mohsen Bader Al Khorafi (2) Mrs Amrah Ali Abdel Latif Al Hamad (3) Mrs Alia Mohammed Sulaiman Al Rifai v (1) Bank Sarasin Alpen (ME) Limited (2) Bank J. Safra Sarasin) is entirely misplaced: Khorafi involved the construction of Article 5A(1)(e) of the Judicial Authority Law, which is not under consideration here), moreover the case involved an attempt to bring a claim against a genuinely independent commercial entity (Sarasin Switzerland) based on the establishment of a group company (Sarasin Dubai) within Dubai.

50. It is important to take into account that the Freezing Injunction was also granted based on the Applicant’s intention to obtain judgment against Mr Akhmedov which extends to enforcement against Straight as his corporate creature in the English High Court.

51. Furthermore, the Applicant put forward evidence that an application against the Second Respondent was issued in the English High Court on 1 March 2018 and the hearing of that application is due to take place on 21 March 2018. In this regard, the Freezing Injunction preserves the position pending the entry of judgment in England, and the ratification and enforcement of that judgment in the DIFC.

52. Costs on the Second Respondent.