Sunday, 21 June 2015



Case Reference - Division Code
Case Reference - Year
Case Reference - Number
Judgment Date
10 May 2013
The Judgment of
His Honour Deemster Corlett
Party One
Advocate Party One
Charles Coleman (Gough Law)
Party Two
Advocate Party Two
Oliver Helfrich (Long & Humphrey)
Party Three
Advocate Party Three
Steven Coren (Old Court Chambers)
Party Four
Party Five
Party Six
Party Seven
IN THE MATTER of the Application Notice dated 28th December 2012
1. This is an application dated the 28th December 2012 by the Fourth, Fifth and Sixth Defendants to stay the proceedings which were initiated on the 1st October 2012. It is a very substantial claim amounting to some €28.5m so I am told. Not all the heads of claim have yet been substantiated.
2. The matter which has prompted this application is the outcome of certain proceedings in Estonia which were commenced, before the Manx proceedings, in July 2011.
3. None of the defendants is a party to the Estonian proceedings and only the second Claimant, that is Pedragon Investments Limited, is a party to those proceedings.
4. The Manx claim essentially relates to four property investments in Russia, Latvia and Estonia. The claim also relates to a credit line agreement which is expressly governed by Estonian law.
5. That credit line agreement was made between Pedragon Investments Limited and a company called BAP Holdings which is an Estonian company. That credit line agreement is dated the 4th April 2009.
6. So far as the Estonian proceedings are concerned Pedragon has obtained a ruling from the Estonian Court that the "CLA" as I will call it is void.
7. As a matter of Estonian law particularly Estonian company and private international law the Estonian Court has held that Pedragon lacked capacity arising from its failure to register in the relevant commercial register.
8. I am told that an appeal against that judgment is likely to be delivered on the 14th May 2013, i.e. next week.
9. I will just briefly refer to that Estonian judgment.
10. It states that and I quote "Pursuant to section 26(2) of the General Part of the Civil Code Act the passive legal capacity of a legal person in private law arises as of entry of the legal person in a register prescribed by law. In as much as the Plaintiff's main business was in Estonia and it was managed from Estonia the pre-condition for the emergence of the passive legal capacity of the Plaintiff was its entry in the commercial register. Seeing that the Plaintiff (and that of course is Pedragon Investments Limited) was not entered in the commercial register it cannot bear the rights and obligations in the meaning of Section 26(1) of the General Part of the Civil Code Act and the transaction is null and void in respect of the Plaintiff."
11. The judgment concludes so far as that part of the judgment is concerned by saying that "Having regard to the above the action should be satisfied and the credit line agreement concluded by the parties on 4th April 2009 has to be declared null and void."
12. One of the claims in the Manx proceedings is that certain of the defendants including the current applicants for a stay misled the claimants as to the need for and the purpose of the CLA. It is claimed that there was no commercial justification for the CLA, that the Defendants had a conflict of interest, that they were in breach of their duty as directors and/or were in breach of various agreements.
13. In considering this application I have of course considered the skeleton arguments filed by Mr Coren and Mr Coleman. I have considered such of the witness statements as I have been referred to this morning and I have considered such of the pleadings as I have been referred to this morning. I have given particular attention to the Particulars of the Claim and in particular paragraphs 154-176 of the Particulars of Claim and their interplay with the Estonian proceedings.
14. It seems to me on a plain reading of the Estonian judgment and of the Manx pleadings that quite different issues are raised in the two jurisdictions.
15. In Estonia the Court is seized with the issue of the lack or otherwise of capacity of Pedragon under Estonian law to enter into the relevant transaction. It seems to me that it is common ground between the parties that the proper forum for establishing the legal validity of the CLA is indeed Estonia.
16. On the other hand in the Isle of Man the issues are largely it seems to me governed by Manx law and consist of issues of breach of fiduciary duty of the directors in relation to property transactions and the loan note transaction.
17. It is fair to say there is some issue taken by certain of the defendants with the proper law which might have to be applied by this Court.
18. For example in paragraph 24 of the defence of the 4th, 5th and 6th Defendants, that is the Applicants before me today, it is said that the tortious claims would be governed by Estonian law.
19. Even if this were the case (and I express no view on this at the moment) it would not of course entail a stay of these proceedings.
20. It seems to me that there is no risk of inconsistent findings between the two jurisdictions as they seem to me to address different issues although it is right to say that the Estonian judgment is likely to be relevant to issues of quantum so far as the Manx claim is concerned and I will turn to that in a moment.
21. It is important to note there has been no challenge to the order for service out of the jurisdiction which was granted by Deemster Roberts at the very commencement of these proceedings.
22. It will be recalled that the rules as to service out of the jurisdiction in particular Rule 2.42(3) provide that no permission shall be granted by the Court unless it is satisfied that the Isle of Man is the proper place in which to bring the claim.
23. So far as the law is concerned there was very little as between Counsel on this issue. As to the issue of forum non conveniens and a stay on those grounds the principle is of course that if there is another available forum clearly and distinctly more appropriate than the Isle of Man for the determination of a dispute the Manx proceedings will be stayed.
24. There is in fact it seems to me no suggestion that the claim could or should be tried in Estonia or elsewhere. In fact what the Applicants today before me are wishing to do is to postpone the Manx proceedings until the resolution of the Estonian proceedings.
25. I accept Mr Coren's submission based on the Arquebus case, that is the judgment of Deemster Doyle in Arquebus v Rafter 27th September 2004, that it is well settled that the Court may intervene to prevent possible injustice where two claims are pending, one in the Isle of Man and one in a foreign country between the same or substantially the same parties and in respect of the same or similar issues. Where the two claims are begun by different parties the Court may stay the Manx proceedings on grounds which in principle are those of forum non conveniens.
26. I accept from that proposition that the parties do not need to be identical provided the parties are related. The Court's powers are thus available even though the parties may not be identical provided that the issues are similar.
27. I have also been referred to the Assissi judgment of the Staff of Government, that is Assissi Investments Limited v James (19th February 2004). Deemster Kerruish observed in that case when comparing the Guernsey proceedings and the Isle of Man proceedings that the conclusion was that taken as a whole they related to the same subject matter and sought materially the same relief.
28. And then at paragraph 24 the Court set out the various principles whereby the Court will stay proceedings on the ground of forum non conveniens.
29. I will not read out all those propositions but I have taken them all into account. I would however emphasise as Mr Coleman correctly did, that the legal burden of proof that there ought to be a stay lies on the Defendant who seeks the stay although the evidential burden of proof rests on the party seeking to establish matters which will assist him in persuading the Court to exercise its discretion in his favour.
30. Again I emphasise number 3 in the list of principles. The burden on the Defendant is to establish that there is another forum which is clearly or distinctly more appropriate than England (or the Isle of Man of course in this case).
31. It is insufficient merely to establish that the Isle of Man is not the natural or appropriate forum and if the Court concludes that there is no other available forum which is clearly more appropriate for the trial the Court will ordinarily refuse a stay.
32. I also accept Mr Coren's proposition that the Court should not be circumscribed by unnecessarily restrictive rules in dealing with applications for a stay on the grounds of abuse of process and that is a quote from the judgment of the Court of Appeal in Bradford v Bingley Building Society v Seddon [1999].
33. It seems to me that the validity of the CLA is certainly relevant to the extent that it is relevant to the issue of quantum. If the CLA is valid this fact may well increase the recoverable loss of the Claimants. However, even if invalid there may well be claims relating to recoverability of payments which have been made under what has turned out to be an invalid agreement.
34. There are issues raised on the pleadings of alleged exorbitant interest rates and arrangement fees and of course issues of conflict of interest and who has benefitted from those high interest rates and fees.
35. There is also it seems on the pleadings an allegation of failure to carry out due diligence in relation to entering into the CLA.
36. I believe that Mr Coleman accepted that the Manx case will probably not be capable of conclusion until the Estonian case has been completed. Issues of quantum would be incapable of finalisation. Indeed in the Claimants' skeleton argument the Claimants' position on quantum is specifically reserved pending the outcome of the Estonian and Russian proceedings.
37. As to the issue of abuse of process I would add the reference to a "broad merits based assessment" which is set forth in paragraph 54 of the Claimant's skeleton argument based on the decision in Johnson v Gore Wood & Co in 2002. The Court must engage in a broad merits based assessment of the claimant's conduct in suing applicants in this Court. They must satisfy the Court that such conduct is in all the circumstances abusive.
38. I should touch very briefly on the Russian proceedings. These were understandably stayed to await the outcome of the Estonian proceedings because they are it seems to me enforcement proceedings which crucially depend on the validity of the CLA which is of course governed by the laws of Estonia and by the Courts of Estonia.
39. The most pertinent issue that Mr Coren raised in his submissions it seems to me was the issue of whether the Claimants were adopting an inconsistent position in the two jurisdictions.
40. On looking at the relevant pleadings it seems to me that there is no specific allegation in the Claimants' pleadings that the CLA is valid and it will be recalled of course that in Estonia one of the Claimants is pleading that the CLA is indeed invalid. It seems to me that in the Isle of Man the existence of the CLA is pleaded as a fact but no more than that. Its existence rather than its validity is pleaded. However, Mr Coren submitted that it is a "necessary implication" of referring to the CLA in the pleadings that it is claimed to be valid and that this gives rise to inconsistency.
41. I agree with Mr Coleman that it is necessary to examine the meaning of the phrase "necessary implication" and I agree with him that it essentially means that something is meaningless if it is not true. In other words without that inference it makes no sense. It is in fact the case that it is the fact of entering into the CLA (valid or invalid) which it seems on the pleadings gives rise to the claim for breach for fiduciary duty, tortious liability or breach of contract. In other words was it a breach of, for example, director's duties to enter into the agreement in the first place? It is that which gives rise to a claim in damages which as I mentioned earlier will be a viable claim whether the agreement is valid or invalid.
42. I therefore do not accept Mr Coren's submission that one cannot properly in this context allege a breach of duty in relation to an agreement which it turns out is legally unenforceable or ultra vires or in common parlance "does not exist".
43. I also have been referred to paragraph 33 of Mr Kenny's defence. Mr Kenny is the 7th Defendant and he says in paragraph 3 of his defence that as a result of the Estonian Court's ruling dated 5th November 2012 Pedragon did not enter into any transaction purported to have been entered into under the signature of Mr Habakuk. All the property transactions and the credit line agreement were purportedly entered into by Pedragon under the signature of Mr Habakuk. Accordingly none of those transactions has actually been entered into by Pedragon at all. Therefore none of those transactions can cause the Claimants any loss for they have not been entered into at all. Again I do not accept the logic of that pleading and as I have just said it seems to me that whether the transaction was ultra vires would not absolve the directors from liability or avoid what could be a substantial claim in damages.
44. In all the circumstances I do not consider either on the pleadings or indeed by reference to the evidence before me that there has been established an inconsistent position by the Claimants in this case.
45. I move on to deal briefly with the aspect referred to as the "transactional model" issue.
46. Mr Coren I think accepted that the overlap between the two sets of proceedings is at its most acute in relation to the CLA but that there is a degree of overlap also with the property transactions. In other words he says that it is a "necessary implication" that the property transactions which are the subject of the Manx proceedings which were entered into by Mr Habakuk on behalf of the 2nd Claimant are also necessarily invalid by reason of the Estonian Court ruling.
47. In exchanges with Mr Coren I put to him that this might be a matter of "inexorable logic". However, it seems to me that this is not in fact the case. There is simply no evidence before me that the property transactions are or might be affected by reason of the Estonian Court ruling. There was no finding by the Estonian Court as regards the validity of the property transactions themselves.
48. Once again I agree that it is for the Applicant to establish the necessary evidential and factual matrix to establish inconsistency to support a stay and in my view they have failed to do so.
49. In summary therefore it seems to me that the jurisdiction of this Court has been established not least by the order for service out of the Jurisdiction. This it seems to me is the appropriate forum for this dispute to be litigated. I do not detect any evidence of a "try on" as Mr Coren characterised it. I do not see any evidence of "issue switching" as was the case for example in the Yugraneft case decided by Mr Justice Clarke as he then was. I do not regard this as a case of abuse of process. No undue prejudice has been established. There is certainly no oppression from a multiplicity of proceedings in different jurisdictions which is a scenario which we occasionally see in this Court.
50. The Estonian proceedings and their outcome will as I have said have a material impact on the determination of quantum but no or only marginal effect on the issue of liability. Both proceedings are likely to take some considerable time to reach conclusion and I therefore do not take into account the issue of delay.
51. In simple terms, this is not a situation where there are two Courts grappling with the same issue, the same subject matter and the same witnesses. This is not a situation where there is in the words of the Staff of Government Division in the Chequepoint case a 'recipe for confusion and injustice'.
52. In those circumstances the application for a stay of these proceedings must be dismissed.

An update on Kristal Meos ;

Failed investment in Romania was led by Swedbank and the famous Kristel Meos


Katrin Lust writes Postimees that Swedbank relocatedPeep Aaviksoo 200 managed fund investor money and do not care to ensure that the property would be purchased for a decent price. Romanian company still sitting in the Council of Swedbank's asset management manager Kristel Meos . How and whether the bank is now responsible for their investors? 

Several well-known investors, among them Hannes Tamjärv , Armin Karu and Olav Osolin Swedbank trusting - parts even knowing that their property is migrated to Romania - nirude now become the owner of the parcel, with Katrin Lust said, "isetekkelised dumps". One of the more informed investor, Madis Habakuk, the Fund has granted a loan of crispy (30% interest), then there is no longer anything left.
Swedbank has found an investment opportunity to the FSA to keep out of sight, but not sure it was fair, writes Katrin Lust. Expect actions.
Peep Aaviksoo, who many trusted, went bankrupt in March personal. Kristel Meos name became publicly known when Indrek "ghastly" Iron bought the assets are in Russia for the rich, who had a number of Meos Broad Street apartment house in the street and Taludevahe registered residence. Nothing illegal was not such a reduction, however, was profuse malevolent rivals.


Conflict of laws 
Conflict of laws issues have also been prevalent in 2013. The staying of proceedings where there is ongoing litigation in multiple jurisdictions has been in the spotlight in the Isle of Man. The case of Metro Baltic & Otrs v. James & Others (10 May 2013) involved two competing claims in Estonia and the Isle of Man. Both the Manx and Estonian claims related to a credit line agreement made between Pedragon Investments Limited and BAP Holdings which was expressly governed by Estonian law. The Estonian court had ruled that the credit line agreement was null and void on the basis that Pedragon Investments Limited lacked capacity due to its failure to register onto the relevant commercial register. An appeal was due to be lodged in Estonia, and therefore an application was made by the Defendants to postpone the Isle of Man proceedings until the resolution of the Estonian proceedings. Only one of the defendants in the Isle of Man proceedings was involved in claims in both of the jurisdictions. The Court observed that the Estonian and Manx proceedings raised “quite different” issues. The Estonian court dealt with a lack of capacity under Estonian law to enter into the relevant transaction, whereas the Manx proceedings focused on arguments relating to a breach of fiduciary duties of the directors in relation to property transactions and the credit line agreement having no commercial justification. The court accepted that it may intervene to prevent injustice where two claims are pending in different jurisdictions, but held that there was no risk in this case of inconsistent findings between the two jurisdictions as they dealt with different issues. It held that the Isle of Man was the appropriate forum for the dispute to be litigated in and that since the applicant did not succeed in establishing that the issues overlapped enough to risk an injustice being done, there was no oppression caused from a multiplicity of proceedings in different jurisdictions. The application for a stay of proceedings was therefore dismissed. 

No comments:

Post a Comment