vtb capital v nutritek law teacher

Rimer LJ and Aikens LJ concurred.[2]. However, such pejorative expressions are often dangerous, as they risk assisting moral indignation to triumph over legal principle, and, while they may enable the court to arrive at a result which seems fair in the case in question, they can also risk causing confusion and uncertainty in the law. VTB contracted for English law, and ultimately was found to have a claim in tort governed by English law. Neither of these features can be said to involve RAP being used as a "façade to conceal the true facts". Once one subjects the proposed extension to analysis, I consider that it is plain that it cannot be sustained: far from there being a strong case for the proposed extension, there is an overwhelming case against it. The purpose of the loan was the purchase of six Russian dairy companies from Nutritek International Corp. (Nutritek), a BVI company managed from Russia. He added that it was "impossible to say at the same time that there is a company and there is not.". Munby J in Ben Hashem seems to have seen the principle as a remedial one, whereas Sir Andrew Morritt V-C in Trustor AB v Smallbone (No 2) [2001] 1 WLR 1177 appears to have treated the principle as triggered by the finding of a "façade". Whilst Lord Mance disagreed with Arnold J’s conclusion that the torts were commissioned in Russia, it would be “over-simplistic” – particularly in the context of an international commercial transaction – to presume jurisdiction based on place of commission alone. By contrast, the jurisdiction issue was a close run thing: whilst the Court unanimously approved the Spiliada test for determining whether England was the appropriate forum, it split 3:2 (Lords Clarke and Reed dissenting) on the application of that test to the facts, with the majority holding that Russia, not England, was the appropriate forum to hear the claim. . 125. VTB CAPITAL PLC v NUTRITEK INTERNATIONAL CORPORATION AND OTHERS [2013] 1 Lloyd's Rep. 466 SUPREME COURT ... Applicable law of the tort – Private International Law (Miscellaneous Provisions) Act 1995, sections 11 and 12. VTB Capital Plc v Nutritek International Corp & Ors is one of the highest profile commercial cases of the year. It may not always mean the same thing" (and to the same effect, see Palmer's Company Law, para 2.1533). It discharged the freezing injunction that was obtained against Malofeev. A strong justification would be required, and there was an overwhelming case against extension because the law provided redress against the controller in a misrepresentation action. Together with the subsequent decision of the Supreme Court later the same year in Prest v Petrodel Resources Ltd [2013] UKSC 34 the Supreme Court substantially restated the English company law position in relation to piercing of the corporate veil. Snook v London and West Riding Investments Ltd, Daimler Company Ltd v Continental Tyre and Rubber Company (Great Britain) Ltd, Merchandise Transport Ltd v British Transport Commission, Kensington International Ltd v Republic of the Congo, Continental Transfert Technique Ltd v Federal Government of Nigeria, La Générale des Carrières et des Mines v F G Hemisphere Associates LLC, Barcelona Traction, Light, and Power Company, Ltd, Antonio Gramsci Shipping Corporation v Stepanovs, https://en.wikipedia.org/w/index.php?title=VTB_Capital_plc_v_Nutritek_International_Corp&oldid=867369616, Supreme Court of the United Kingdom cases, Creative Commons Attribution-ShareAlike License, This page was last edited on 5 November 2018, at 07:55. Russagroprom defaulted on the loan, and only $40m was recovered. Mr Lazarus argued that in all, or at least almost all, the cases where the principle was actually applied, it was either common ground that the principle existed (Gilford Motor Co Ltd v Horne [1933] Ch 935, Re H (restraint order: realisable property) [1996] 2 BCLC 500, and Trustor) and/or the result achieved by piercing the veil of incorporation could have been achieved by a less controversial route - for instance, through the law of agency (In re Darby, Ex p Brougham [1911] 1 KB 95, Gilford, and Jones v Lipman [1962] 1 WLR 832), through statutory interpretation (Daimler Company Ltd v Continental Tyre and Rubber Company (Great Britain) Ltd [1916] 2 AC 307, Merchandise Transport Ltd v British Transport Commission [1962] 2 QB 173, Wood Preservation Ltd v Prior [1969] 1 WLR 1077, and Re A Company [1985] BCLC 333), or on the basis that, as stated by Lord Goff in Goss v Chilcott [1996] AC 788, 798, money due to an individual which he directs to his company is treated as received by him (Gencor ACP Ltd v Dalby [2000] 2 BCLC 734, and Trustor). The notion that the principle can be extended to such a case receives no support from any case save for a very recent decision of Burton J, Antonio Gramsci Shipping Corporation v Stepanovs [2011] EWHC 333 (Comm), [2011] 1 Lloyd's Rep 647 (which he followed in his later decision in Alliance Bank JSC v Aquanta Corporation [2011] EWHC 3281 (Comm) [2012] 1 Lloyd's Rep 181, which was considered by the Court of Appeal at [2012] EWCA Civ 1588). VTB Capital plc claimed that Nutritek, its parent and a director called Konstantin Malofeev, fraudulently misrepresented the value of dairy companies that Nutritek was selling to Russagroprom LLC. 142. 143. VTB Capital Plc v Nutritek International Corp & Ors is one of the highest profile commercial cases of the year. As a consequence the Court ordered that the claim should not proceed in England and discharged a $200 million worldwide freezing order (“WFO“). Thus, at 30-31, Lord Halsbury LC said that a "legally incorporated" company "must be treated like any other independent person with its rights and liabilities appropriate to itself …, whatever may have been the ideas or schemes of those who brought it into existence". On 6 February 2013, the Supreme Court dismissed the appeal by the claimant bank VTB Capital Plc (“VTB”) on both points. L Stockin ‘Piercing the corporate veil: reconciling R. v Sale, Prest v Petrodel Resources Ltd and VTB Capital Plc v Nutritek International Corp’ (2014) 35(12) Company Lawyer 363; C Taylor, Company Law (Pearson Education Ltd, Harlow 2009) Footnotes [1897] AC 22 (HL). The worldwide freezing injunction would be discharged, and it was unsatisfactory given the length of litigation. That that is the right approach seems to me to follow from one of the most fundamental principles on which contractual liabilities and rights are based, namely what an objective reasonable observer would believe was the effect of what the parties to the contract, or alleged contract, communicated to each other by words and actions, as assessed in their context – see e.g. This is an important restatement of the law and brings greater clarity to the relationship between the Spiliada and The Albaforth, which Berezovsky v Michaels had previously left open to doubt. We were referred to a number of cases where courts have either granted relief on the basis of piercing the corporate veil, or where courts have proceeded on the assumption, or concluded, that there is power to do so. It also appears that the majority took wider considerations of judicial policy into account (discussed further under “Practical Implications” below). The decision in VTB Capital Inc. v. Nutritek International Corp. will give the Court an opportunity to clarify when the veil should be pierced, and whether the legal effect of doing so is to constitute the company’s controlling minds as actual parties to its agreements in derogation from the privity of contract doctrine. Discussion [11] I bear in mind, first, that the BVI order is a purely domestic order. In that this court welcomes blue sky thinking, I do not criticise Mr Lazarus for his over-arching attempt to persuade it that English law recognises no principle that the corporate veil may ever be lifted. The recent Supreme Court decision in VTB Capital Plc v Nutritek Corp and others has provided further clarity of the principle and limited the scope. For an explanation of the key facts of the case, see our Case Preview here; and for more detail, see paragraphs 7 to 42 of the judgment. It is unnecessary, because the second argument raised on behalf of Mr Malofeev, to which I shall shortly turn, persuades me that VTB cannot succeed on this issue. Accordingly, in agreement with the Court of Appeal and for substantially the same reasons, I consider that VTB's contention represents an extension to the circumstances in which the court will pierce the corporate veil, and on analysis it is an extension which is contrary to authority and contrary to principle. I am not convinced that all the cases where the court has pierced the veil can be explained on the basis advanced by Mr Lazarus. 06 Feb 2013. The case of VTB Capital Plc v Nutritek International Corp and others will be mentioned for years to come, says Fried Frank partner Justin Michaelson Not many things are certain in litigation, but one prediction I can make with confidence is that we will be citing the case of VTB Capital Plc v Nutritek International […] Practitioners may feel this is something of a missed opportunity, but the net result is that other than closing down the Gramsci principle, the law in this area remains unchanged. In so far as VTB invokes the principle of piercing the veil of incorporation, its case involves what, at best for its point of view, may be characterised as an extension to the circumstances where it has traditionally been held that the corporate veil can be pierced. VTB Capital, VTB Group’s investment banking business, is the leading international investment bank in Russia. The Supreme Court's decision in VTB Capital plc v Nutritek International Corp and others [2013] UKSC 5 was published on 6 February 2013. Clare Arthurs and Alex Fox reflect on the Supreme Court judgment in Nutritek The Supreme Court clearly declined to extend the circumstances in which the corporate veil may be pierced. It is true that in many civil law systems, abuse of rights is a well recognised concept, and it may be appropriate for a domestic court to apply such a principle in relation to some areas of EU law. – Company law – Piercing corporate veil – Whether controller of company to be regarded as party to company's contract. VTB Capital plc v Nutritek International Corp [2013] UKSC 5, [2013] 2 AC 337 is an English company law case, concerning piercing the corporate veil for fraud. VTB sought to amend to add claims that the court should pierce the veil of Russagroprom to make the defendants liable under the facility agreement. 138. However, there is st… Lord Neuberger, giving a concise judgment on the corporate veil issue, expressly overruled Gramsci and concluded that there was an “overwhelming” case (137) against extending the principle in this way. Arnold J refused permission to amend and serve the proceedings out of the jurisdiction, because England was not demonstrated to be the appropriate forum. Thus, the decision in Gilford had nothing to do with the fact that a company was involved, and therefore, as a matter of logic, the decision cannot have been based on piercing the corporate veil – a point made by Toulson J in Yukong Line at 308, and rightly accepted by Arnold J and the Court of Appeal in this case. In my view, it is unnecessary and inappropriate to resolve the issue of whether we should decide that, unless any statute relied on in the particular case expressly or impliedly provides otherwise, the court cannot pierce the veil of incorporation. per Munby J in Ben Hashem, para 164, and per Sir Andrew Morritt V-C in Trustor, para 23. Copyright © Matrix Chambers & CMS Cameron McKenna Nabarro Olswang LLP 2012 - 2021. After agreeing to sell a property to a purchaser, the vendor sold the same property to a company owned by him and his wife, and the purchaser obtained an order for specific performance against the company. VTB Capital PLC -v- Nutritek International Corp et al Claim No. See Heintzman and Goldsmith on Canadian Building Contracts (4th ed.) The Supreme Court dismissed the appeal, Lord Mance giving the leading judgment, and holding that England was not the appropriate forum. The concept of forming of corporations by registration and restricted liability of stake holders of corporations dates back to mid nineteenth century. 3 Hashem v … First, it is not suggested by VTB that any of the other contracting parties under the two agreements is not liable. The ultimate owner and controller of RAP (throug… None of the other decisions relied on by VTB in this connection is, on analysis, of assistance to its case. The appeal concerned two issues of significance to commercial law: first, the circumstances in which fraud claims involving foreign parties but relating to frauds allegedly perpetrated in England should be heard by the English courts; and second whether a claimant who has entered into a contract with a company as a result of a fraud practised by the company’s owners can “pierce the corporate veil” so as to sue the owners of the company under that contract. VTB Capital plc (Appellant) v Nutritek International Corp and others (Respondents) Judgment date. 139. It was unnecessary to resolve whether the court could not pierce the veil but this could not succeed in any case. VTB Capital plc v Nutritek International Corp 2013 Refers to a "company" being like a "human being" excepted it will act through human agents with the company as "principal". A company should be treated as being a person by the law in the same way as a human being. However, it was not suggested to us that it should be applied as a new or separate ground in domestic law for treating Mr Malofeev as contractually liable to VTB, or that it would assist VTB in this case. In its recent decision in La Générale des Carrières et des Mines v F G Hemisphere Associates LLC [2012] UKPC 27, para 24, the Judicial Committee of the Privy Council, in a judgment given by Lord Mance, was prepared to assume that the appellant was right in contending that it was open to a court in this jurisdiction to pierce the corporate veil, but it is to be noted that this was not challenged by the respondent. 130. VTB failed on both points at first instance (Arnold J) and in the Court of Appeal, and appealed to the Supreme Court. Recently the principle was controversially extended in Antonio Gramsci Shipping Corp v Stepanovs [2011] EWHC 333 (Comm), in which Burton J held that the veil could be pierced to allow the controllers of a company to be sued under the company’s contracts as if they were themselves a contracting party. This could not be said to result in unfairness to C: the law provides redress for C against A, in the form of a cause of action in negligent or fraudulent misrepresentation. 133. Gramsci, which involved a fraudulent shipping charterparty scheme, has caused considerable uncertainty in commercial law and has been widely regarded as an over-extension of legal principle to provide justice on a fairly extreme set of facts. View Notes - VTB Capital plc v Nutritek from LAW 203 at London School of Economics. It was suggested, however, by Mr Howard QC that the case against Mr Malofeev involves him "abusing the corporate structure", and that that is sufficient to justify piercing the corporate veil. VTB Capital was a subsidiary of the Russian state owned bank called JSC VTB Bank, but the loan facility agreement was expressed to be governed by English law. At 1978 SLT 159, 161, Lord Keith suggested that the court could only take such a course "where special circumstances exist indicating that [the involvement of the company] is a mere façade concealing the true facts". VTB Capital plc v Nutritek International Corp [2013] UKSC 5, [2013] 2 AC 337 is an English company law case, concerning piercing the corporate veil for fraud. In addition, there are other cases, notably Adams v Cape Industries plc [1990] Ch 433, where the principle was held to exist (albeit that they include obiter observations and are anyway not binding in this court). 140. In my view, however, and notwithstanding the difficulty of being able to define within one sentence the circumstances in which the law will – perhaps – lift the corporate veil, such was a highly ambitious submission. 120. Even accepting that the court can pierce the corporate veil in some circumstances, the notion of such joint and several liability is inconsistent with the reasoning and decision in Salomon. [1], The Court of Appeal dismissed the appeal. Although the High Court had erred in interpreting Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460, this did not effect its ultimate conclusion because its error favoured VTB. On the judge's reasoning, it would have equally been entitled to do so if, instead of the company, the property had been transferred to the vendor's wife. The future impact of the VTB Capital will depend, at least in Canada, on whether the same policy choice is made in Canada as was made in England. It lent $225 million to Russagroprom LLC (RAP), incorporated in Russia, under a facility agreement governed by English law. The Court of Appeal in VTB Capital v Nutritek International Corp [2012] kept it … The same point (as was said in Yukong Line) applies to Jones v Lipman, which I do not find an entirely easy case. Lord Clarke gave a judgment, dissenting on the question of forum, while reserving any comments on the corporate veil for a future case. It additionally sought to hold the owner of Nutritek, Marshall Capital Holdings, Marshall Capital LLC and the alleged controller, Konstantin Malofeev all jointly liable because of their control of Nutritek. Here, on VTB's case, "the true facts" relate to the control, trading performance, and value of the Dairy Companies (if one considers the specific allegations against Mr Malofeev), or to the genuineness of the nature of the underlying arrangement (which involves a transfer of assets between companies in common ownership). Forum for the dispute – see Palmer op QB 597, 607 of it to critical.! 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