In the latest episode in long-running proceedings for the enforcement of an LCIA award now worth over $350m, the Claimant (“Cruz City”) successfully applied for the appointment of receivers by way of equitable execution over assets of the Defendants.
Males J handed down judgment on 2 October 2014 (see [2014] EWHC 3131 (Comm)), appointing the receivers over assets including the First Defendant’s (“Unitech’s”) shareholdings in four (Cypriot, Manx and Indian) companies.
The proceedings arise out of an LCIA award which Cruz City obtained in July 2012 (the “Award”), relating to a real-estate joint venture concerning the development of land in Mumbai. Unitech is one of India’s largest real estate investment and development companies, its shares being publicly listed on the National Stock Exchange of India and the Bombay Stock Exchange.
The Defendants failed in a s.67 challenge in respect of the award in December 2012 (see the judgment of Andrew Smith J at [2013] 2 All ER (Comm) 1). Subsequently, Cooke J made an order under s.66(1) of the Arbitration Act 1996 allowing Cruz City to enforce the Award as an order of the English Court to the same effect.
In May 2013, Cruz City obtained an order against the Defendants for the disclosure of their assets worldwide (see the judgment of Field J at [2013] 2 All ER (Comm) 1137).
The Defendants sought to appeal the order of Field J, including raising jurisdictional arguments in particular concerning alternative service, and the Commercial Court’s practice of permitting alternative service on London solicitors acting in the arbitrations.
In November 2013, Cruz City successfully obtained an order from Gloster LJ that the Defendants pay the entire award sums in to Court as a condition of their appeal (see [2013] EWCA Civ 1512).
The Defendants failed to comply with Gloster LJ’s order, following which their appeal was struck out and the stay of execution of Field J’s disclosure order was lifted.
In April 2014, Cruz City obtained an ex parte worldwide freezing order (“WWFO”) before Flaux J. This was continued on the return date following a contested hearing (see [2014] EWHC 1323 (Comm)).
The receivership order granted by Males J is the latest order that has been obtained by Cruz City in its enforcement efforts. The Judge’s judgment contains a comprehensive and up-to-date analysis of (1) the principles that apply to the appointment of receivers by way of equitable execution pursuant to section 37(1) of the Senior Courts Act 1981, (2) the relevance of the non-enforceability of a receivership order in the foreign jurisdictions where the assets are located, and (3) the extent to which conventional means of execution must be shown to be impossible or impracticable as a pre-condition to the appointment of receivers.
In the present case, the order empowers the receivers to exercise Unitech’s rights over its shareholdings, including the exercise of voting powers and seeking a winding up of subsidiary companies. Males J also granted a number of ancillary orders against the Defendants in order to render the appointment of receivers effective, including by requiring Unitech (under pain of contempt) to confirm the authority of the receivers to third parties, even if the receivership order may not be eligible for recognition in the foreign jurisdictions where the assets are located.
The receivership order, and the series of orders Cruz City has obtained to date, reflects the policy of the English Courts that arbitration awards should be satisfied and executed, and its willingness to grant orders against recalcitrant judgment debtors, and in particular where the assets of such debtors are in jurisdictions where enforcement is a lengthy and/or complex process. Males J followed the approach of Tomlinson J in the Masri litigation, stating that the jurisdiction to grant receivers should be “responsive to the demands of justice in the contemporary context”.
Alain Choo-Choy QC and Nehali Shah appeared for Cruz City (instructed by White & Case LLP)
Michael d’Arcy (with John Brisby QC and Alastair Tomson) appeared for the Defendants (instructed by Stephenson Harwood LLP)
The full version of the judgment is available here.