Bouvier, Yves Charles Edgar and another v Accent Delight International Ltd and another and another appeal

1. Sundaresh Menon CJ (delivering the judgment of the court):

2. Introduction

3. [1]

   [1] Judges and lawyers, when speaking of Mareva injunctions, often allude to the famous description of them as one of the “nuclear weapons” of civil litigation: Bank Mellat v Nikpour [1985] FSR 87 at 92 per Donaldson LJ (as he then was). A worldwide Mareva injunction is that and even more. The reach of such an injunction, stretching far beyond the geographical confines of the jurisdiction of the court making the order, is such that it can have a crippling effect on those against whom it is directed. This underscores the need to scrutinise the basis for such an injunction with utmost care.

4. [2]

   [2] Even the English courts, which, in 1975, had been the first to articulate the court’s power to grant Mareva injunctions (see Nippon Yusen Kaisha v Karageorgis and another [1975] 1 WLR 1093 at 1095 per Lord Denning MR), for some time resisted extending the exercise of that power to assets worldwide (see Ashtiani and another v Kashi [1987] 1 QB 888 at 899F–899G and 900G–902B per Dillon LJ). The English Court of Appeal departed from this only in 1988 in a trilogy of judgments handed down within just over a month of each other, namely: Babanaft International Co SA v Bassatne and another [1990] 1 Ch 13; Republic of Haiti and others v Duvalier and others [1990] 1 QB 202 (“Republic of Haiti v Duvalier”); and Derby & Co Ltd and others v Weldon and others (No 1) [1990] 1 Ch 49 (“Derby v Weldon (No 1)”).

5. [3]

   [3] Lawrence Collins, writing before his elevation to the bench, described this trilogy of cases as the English Court of Appeal’s response to the widespread abolition of exchange controls and the growth of offshore tax havens for cash and securities. These developments, he said, “made it easier for defaulters involved in international business to make themselves judgment proof, and for dishonest fiduciaries to enjoy the illegal fruits of breaches of trust”: “The Territorial Reach of Mareva Injunctions” (1989) 105 LQR 262 at p 262.

6. [4]

   [4] The present case concerns two appeals brought by three well-heeled appellants against the refusal of a High Court judge (“the Judge”) to set aside worldwide Mareva injunctions and ancillary disclosure orders that she had earlier made ex parte against them. The appellants are involved in international business and operate through companies, some of which are incorporated in offshore tax havens. The respondents’ claims against the appellants include allegations that the latter were fraudulent or had dishonestly breached their fiduciary duties. The sums involved are also sizeable. The cumulative value of the assets subject to the worldwide Mareva injunctions is US$1.1bn.

7. [5]

   [5] The central question in these appeals is whether it has been sufficiently shown that there is a real risk that the appellants will dissipate their assets to frustrate the enforcement of an anticipated judgment of the court. This requirement lies at the heart of the court’s power to grant Mareva injunctions. In our judgment, the respondents have failed to establish that risk. For this and other reasons, which we elaborate on below, we allow both appeals and set aside the Mareva injunctions as well as the ancillary disclosure orders made against the appellants.

8. The facts

9. The parties

10. [6]

    [6] The appellants in Civil Appeal No 80 of 2015 are Yves Charles Edgar Bouvier and MEI Invest Limited (“MEI Invest”). Mr Bouvier is a Swiss businessman who runs an art-related transport and storage business. He also invests and deals in art. He resides in Singapore and holds a Singapore permanent residency. Mr Bouvier has control over and often acts through MEI Invest, a company incorporated in the Hong Kong Special Administrative Region. He also holds substantial shareholdings in companies across multiple jurisdictions, including the British Virgin Islands (“BVI”), Seychelles and the Isle of Man.

11. [7]

    [7] The appellant in Civil Appeal No 81 of 2015 is Tania Rappo. She plays a subsidiary part in the dispute between the parties. She resides in Monaco and holds dual Swiss and Bulgarian citizenships. Her assets appear to be located predominantly in Monaco and are held in the names of Monegasque companies. Her assets are managed by asset management agencies in Monaco.

12. [8]

    [8] The respondents in both appeals are Accent Delight International Ltd (“Accent Delight”) and Xitrans Finance Ltd (“Xitrans Finance”). Both are BVI companies owned wholly by the family trusts of a well-known Russian billionaire, Dmitry Rybolovlev. The trusts are constituted under Cypriot law. The respondents appear to be controlled by Mr Rybolovlev, or at the very least, have issued powers of attorney for Mr Rybolovlev to act on their behalf. Mr Rybolovlev resides in Monaco. He was previously resident in Switzerland until 2011.

13. Outline of the dispute between the parties

14. [9]

    [9] The dispute between the parties arises out of the respondents’ acquisition of 38 art masterpieces between 2003 and 2014. These are highly-prized pieces and include the works of Picasso, van Gogh, da Vinci, Modigliani and Rothko. All the acquisitions were arranged (to use a neutral term) by Mr Bouvier, who was responsible for locating and obtaining the artworks that the respondents wished to purchase. Mr Bouvier in turn acted through either MEI Invest (which was the case for most of the 38 acquisitions) or one of his associated companies. As it is not necessary to distinguish between MEI Invest and these associated companies for the purposes of the present appeals, we shall, for ease of narration, refer solely to MEI Invest as the corporate vehicle which Mr Bouvier used in respect of the acquisition of the 38 artworks.

15. [10]

    [10] The respondents contend that unbeknownst to them until late 2014, when it came to light, Mr Bouvier had secured these artworks at prices that were considerably less than those at which he told the respondents he had secured them. The nub of the dispute between Mr Bouvier and the respondents comes down to the capacity in which Mr Bouvier was acting when he arranged the respondents’ acquisitions. Was Mr Bouvier acting as an agent who negotiated for and obtained the target artworks on behalf of the respondents, and who therefore owed the latter fiduciary duties? Or was Mr Bouvier acting as an independent seller transacting at arm’s length with the respondents, such that he was entitled to sell the artworks to the respondents at the highest price he thought they would pay?

16. [11]

    [11] This dispute as to the true nature of the relationship between Mr Bouvier and the respondents is the subject of Suit No 236 of 2015 (“the Singapore action”), in which the respondents are the plaintiffs and the appellants are the defendants. The worldwide Mareva injunctions and ancillary disclosure orders mentioned at [4] above were obtained by the respondents in support of the claims which they make in that suit. The appellants have separately applied for a stay of the Singapore action on the ground of lis alibi pendens or forum non conveniens. These applications are pending and have been fixed to be heard by a High Court judge.

17. [12]

    [12] We will begin by tracing the relationship between Mr Bouvier and the respondents, which will set the context for their dispute. Next, we will set out the history of the litigation between the parties. It began in Monaco and eventually found its way to Singapore. The respondents also appear to have commenced related proceedings in France and Hong Kong. We will then consider the orders that were made in the court below by the Judge before explaining our decision in these appeals.

18. The acquisition of the 38 artworks

19. [13]

    [13] Mr Rybolovlev began collecting art in the early part of this century. He was introduced to Mr Bouvier in 2003 by Mrs Rappo on Mr Bouvier’s request. Mrs Rappo was a close family friend of the Rybolovlevs and is the godmother of one of Mr Rybolovlev’s children.

20. [14]

    [14] From the time of their introduction in 2003, Mr Bouvier played a critical role in helping Mr Rybolovlev build his private art collection. The 38 artworks which the latter acquired (using the respondents as his corporate vehicles) were all purchased through Mr Bouvier (acting through MEI Invest). These transactions appear to have followed a common pattern. Once Mr Rybolovlev confirmed his interest in a particular artwork, Mr Bouvier would locate it and try to persuade the owner to agree to sell it. The paperwork suggested that the artwork would be purchased by MEI Invest from the original owner; MEI Invest would then issue a sales invoice to either of the respondents for the purchase price. Once MEI Invest received payment, it would deliver the artwork to the respondents. The respondents paid Mr Bouvier a sum equivalent to 2% of the value of the artwork on each transaction that he arranged. The respondents say that this was a commission and was the extent of the profit that Mr Bouvier was entitled to earn on each transaction. Mr Bouvier, however, says that this was only an administrative fee paid to cover expenses such as shipment, storage and other miscellaneous expenses.

21. [15]

    [15] As a result of the way in which the transactions were arranged, the respondents acquired the 38 artworks from MEI Invest without knowing the identity of the original sellers from whom MEI Invest had obtained the artworks. Mr Bouvier was the only person whom the respondents dealt with. It appears that Mr Rybolovlev decided to make all his acquisitions through Mr Bouvier because it was more convenient than sourcing for each piece separately through multiple dealers. The only difference in the way the transactions were arranged over the years is that the earlier few were documented in formal written contracts between MEI Invest as the seller and the respondent concerned as the buyer, and these appear to have been specifically negotiated. This gave way to more informal dealings through emails and invoices that served to document the transactions, and this came to characterise all the transactions subsequent to 2007 or 2008.

22. [16]

    [16] It is not clear whether the acquisitions over the years were initiated by Mr Bouvier or Mr Rybolovlev. Mr Bouvier paints Mr Rybolovlev as an art aficionado who had definite ideas as to what he liked and formed his own opinions as to which masterpieces he wished to acquire. Mr Bouvier claims that it was always Mr Rybolovlev who gave instructions as to the artworks he wished to purchase. The respondents, on the other hand, say that the spark for their acquisitions invariably came from Mr Bouvier. On their version of the events, Mr Bouvier would inform Mr Rybolovlev or his principal intermediary, Mikhail Anatolievitch Sazonov, of the opportunity to acquire artworks whenever this arose. Mr Bouvier would also advise Mr Rybolovlev and Mr Sazonov as to the approximate value of the artwork in question and the price at which it could be obtained. We digress to mention that Mr Sazonov is a business associate of Mr Rybolovlev. He is employed by the Rybolovlev family trusts and was the sole director of Xitrans Finance, the second respondent in these appeals, until 2009. Mr Sazonov was the main representative of the respondents in their dealings with Mr Bouvier. This was because both Mr Sazonov and Mr Bouvier were conversant in English and French, whereas Mr Rybolovlev spoke only Russian. Mr Sazonov affirmed the affidavits that were filed on behalf of the respondents in these proceedings.

23. [17]

    [17] On either version of the facts, Mr Bouvier’s role in the acquisition of the 38 artworks was a crucial one. It appears that buyers and sellers of art masterpieces prize secrecy and discretion, and as a result, masterpieces usually change hands in discreet private sales, presumably so that the wealth of the parties concerned will not be made public. But, this also means that the ownership of many of these paintings is opaque. Mr Bouvier was able to locate the target artworks, identify their owners and make the acquisitions concerned due to his extensive network of contacts in the international art market. The respondents say that this climate of secrecy and discretion was the reason why they never had any direct dealings with the original sellers of the artworks, and why the acquisitions were routed through MEI Invest. This also protected Mr Rybolovlev’s privacy as the ultimate purchaser of these artworks.

24. [18]

    [18] Mr Bouvier’s contacts arose from his well-established business conducted through the Natural Le Coultre group of companies, which specialises in the storage, packing and shipping of artworks. Natural Le Coultre operates out of the Geneva “freeport”, which is a secure and confidential facility used by the wealthy to store expensive artworks, fine wines and other luxury items. Mr Bouvier is credited with having successfully transplanted the freeport model from Geneva to Singapore and Luxembourg.

25. Mr Bouvier and Mr Rybolovlev fall out with each other

26. [19]

    [19] Mr Bouvier and Mr Rybolovlev fell out with each other in late 2014. They disagree over how this came to pass.

27. [20]

    [20] Mr Bouvier says that in September 2014, Mr Rybolovlev ran into financial difficulties following his divorce settlement and was unable to finance the purchase of a Rothko, No 6 (Violet, vert et rouge). The purchase of that artwork was the last acquisition that Mr Bouvier arranged for the respondents. MEI Invest did not receive the full purchase price of €140m from Accent Delight, and so did not deliver the masterpiece to the respondents. This apparently upset Mr Rybolovlev, and caused his relationship with Mr Bouvier to sour.

28. [21]

    [21] The respondents, on the other hand, say that Mr Bouvier and Mr Rybolovlev fell out with each other when the latter discovered that Mr Bouvier had been fraudulently inflating the prices of artworks that he had acquired for and on behalf of the respondents. On 31 December 2014, Mr Rybolovlev apparently found out that a Modigliani which Accent Delight had obtained through Mr Bouvier in January 2012 for US$118m had in fact been sold by the original seller for only US$93.5m. This meant that MEI Invest had sold the painting to Accent Delight at more than US$24m in excess of the price that it had paid for the painting. Mr Rybolovlev claims that he discovered this at a meeting which he had with an art expert, Sanford Heller, on 31 December 2014. Mr Heller was the art dealer representing the original seller of the Modigliani in that transaction, and he therefore knew the price at which it had in fact been sold. Sometime in late 2014, Mr Rybolovlev also discovered that the respondents had fallen for a similar ruse in respect of a da Vinci, Le Christ comme Salvator Mundi (“Salvator Mundi”), which had been bought through Mr Bouvier in May 2013. Accent Delight paid MEI Invest US$127.5m for the painting, which MEI Invest had obtained from the original seller for a sum of between US$75m and US$80m. According to the respondents, this is what led to the breakdown of Mr Rybolovlev’s relationship with Mr Bouvier.

29. [22]

    [22] The respondents say that by selling the paintings at undisclosed mark-ups, Mr Bouvier had breached the fiduciary duties which he owed them as their agent. Mr Bouvier, they say, was in Mr Rybolovlev’s “inner circle” and was someone whom Mr Rybolovlev and the respondents trusted. Mr Bouvier negotiated the price of the paintings on the respondents’ behalf and was not entitled to profit from the transactions beyond the 2% commission that he was paid by the respondents.

30. [23]

    [23] The respondents also allege that Mr Bouvier’s “fraud [or] deceit is not limited to [these two paintings] but extends to all, or many of, the other paintings which [the respondents] purchased through him”. We shall refer to the mark-ups that Mr Bouvier imposed as “the Excess Payments”. The Excess Payments are said to amount in total to around US$1bn. In the Singapore action, the respondents make personal claims against Mr Bouvier and MEI Invest for breach of fiduciary duties and dishonest assistance respectively. There are also conspiracy claims against both Mr Bouvier and MEI Invest. The respondents alternatively assert a proprietary interest in the Excess Payments and their traceable proceeds.

31. [24]

    [24] Mr Bouvier does not dispute having received the Excess Payments. His position is that he was perfectly entitled to receive those payments. Mr Bouvier denies having acted as the respondents’ agent. According to him, the transactions between MEI Invest and the respondents took place on a “willing buyer-willing seller basis”, with the respondents as the purchasers and MEI Invest as the seller. Mr Bouvier, through MEI Invest, would acquire any artwork that Mr Rybolovlev expressed sufficient interest in. Mr Bouvier would bear all the “risks of the acquisition” of the artwork from the original seller. If Mr Rybolovlev eventually decided not to purchase the artwork or if there were defaults in the payment obligations to Mr Bouvier, then Mr Bouvier would be solely and wholly liable to the original seller for the artwork. Mr Bouvier therefore says that he was entitled to sell the artworks to the respondents at any price which he wanted to. The respondents obtained the masterpieces, which were precisely what they wanted, and these were all transacted at the prices they had agreed to pay.

32. Mrs Rappo’s involvement

33. [25]

    [25] Mrs Rappo was drawn into the dispute because she received payments from Mr Bouvier upon the completion of each acquisition that Mr Bouvier arranged with or for the respondents. Mrs Rappo is alleged to have received tens of millions of euros from Mr Bouvier in this way. The respondents say that Mrs Rappo “must have known what Mr Bouvier [was] up to”. They also suggest that she deliberately concealed from the Rybolovlevs the fact that she was receiving payments from Mr Bouvier. In the Singapore action, the respondents make personal claims against Mrs Rappo for knowing receipt and conspiracy. They assert, alternatively, a proprietary interest in the payments made by Mr Bouvier to Mrs Rappo out of the Excess Payments and their traceable proceeds.

34. [26]

    [26] Mr Bouvier and Mrs Rappo do not deny having, respectively, made and received these payments. However, they say that these payments were innocuous. Mr Bouvier’s position is that he paid Mrs Rappo because he considered her to be a “business finder”. She had a good relationship with Mr Rybolovlev and could have influenced Mr Rybolovlev away from transacting with Mr Bouvier if she had wanted to. As for Mrs Rappo, she says that the payments were to be seen as a “commercial arrangement” and represented a “finder’s fee” that Mr Bouvier paid her. As far as she was aware, the payment of such fees was a regular practice in the art world. She had never actively concealed the fact of these payments from the Rybolovlevs. On the other hand, she never considered that she was under any obligation to inform them of the payments.

35. The proceedings in Monaco

36. [27]

    [27] These events eventually culminated in the respondents filing a criminal complaint against Mr Bouvier “and any participant” in the Principality of Monaco on 9 January 2015 for fraud and complicity in money laundering. The criminal complaint set in motion a chain of investigative and judicial proceedings in Monaco. The Monaco authorities commenced initial investigations into the complaint on 12 January 2015. This in turn led to Mrs Rappo being investigated for money laundering on the basis that she was a “participant” in Mr Bouvier’s activities. On 24 February 2015, the Monaco Public Prosecutor’s Office requested the appointment of an investigating judge and also requested the investigating judge to initiate proceedings against Mr Bouvier and Mrs Rappo. It appears that during this period up to the time of their subsequent arrest, Mr Bouvier and Mrs Rappo were not aware of the criminal complaint or the investigations.

37. [28]

    [28] Mr Bouvier was arrested by the Monaco police in a sting operation on 25 February 2015 at Mr Rybolovlev’s Monaco residence. Mr Rybolovlev had invited Mr Bouvier to his home under the pretext of discussing business. The Monaco police lay in wait at Mr Rybolovlev’s residence and arrested Mr Bouvier when he arrived. Mr Bouvier was detained for questioning for three days, and was only released on 28 February 2015 on bail of €10m and with reporting conditions. Mrs Rappo was also arrested by the Monaco police and brought before an investigating judge for questioning on 25 February 2015. She was similarly detained for three days, and was released from police custody on 28 February 2015 with reporting conditions. The Monaco authorities have frozen Mrs Rappo’s bank accounts in Monaco in the wake of the proceedings there.

38. The proceedings in Singapore

39. [29]

    [29] On 12 March 2015, the respondents commenced the Singapore action and simultaneously applied ex parte to the Singapore High Court for Mareva injunctions and ancillary disclosure orders against the appellants. This was a little less than two weeks after Mr Bouvier and Mrs Rappo had been released from detention in Monaco. The appellants were not given notice of either the application or the hearing. On the same day (ie, 12 March 2015), the Judge granted the Mareva injunctions and the ancillary disclosure orders sought. She also gave leave for the court papers to be served either out of jurisdiction or through substituted means. In addition, orders were made for the delivery up of the Rothko, No 6 (Violet, vert et rouge).

40. [30]

    [30] The worldwide Mareva injunctions against Mr Bouvier, MEI Invest and Mrs Rappo prevented them from disposing or dealing with any of their assets in Singapore or worldwide up to the sums of US$500m (in respect of each of Mr Bouvier and MEI Invest) and US$100m (in Mrs Rappo’s case) respectively. There were also orders requiring them to disclose their assets worldwide and other documents relating to the subject matter of the parties’ dispute.

41. [31]

    [31] Mr Bouvier, MEI Invest and Mrs Rappo applied to set aside the Mareva injunctions and the ancillary disclosure orders. Their applications (“the appellants’ setting-aside applications”) were heard inter partes by the Judge on 25 March, 6–8 and 10 April 2015. The Judge did not set aside either the Mareva injunctions or the ancillary disclosure orders, but attenuated them. Among other things, the carve-outs built into the Mareva injunctions for Mr Bouvier’s and Mrs Rappo’s ordinary expenses were increased to €50,000 per month. Exceptions were also made for the payment of the legal fees of the appellants’ solicitors.

42. [32]

    [32] In addition, the scope of the ancillary disclosure orders was pared down and conditions were imposed on the disclosure of information. These conditions were put in place to meet the appellants’ concern that the respondents would make public the disclosed information or use it for improper purposes. The ancillary disclosure orders were made conditional on an undertaking by the respondents’ solicitors that the affidavits filed pursuant to those orders would be disclosed only to them (ie, the respondents’ solicitors) and no one else unless leave from the court was obtained. These conditions prevented the disclosed information from being released to even the respondents or their foreign lawyers, except for Ms Tetiana Bersheda, the respondents’ Swiss lawyer who was at that time (and currently is still) instructing their Singapore solicitors. The Judge also ordered the respondents to fortify their undertaking as to damages by providing a banker’s guarantee in the sum of US$20m.

43. [33]

    [33] It is against these orders that Mr Bouvier, MEI Invest and Mrs Rappo have appealed. We did not have the benefit of a reasoned judgment from the Judge because of the expedition with which these appeals were brought and heard. We were nonetheless assisted by the Judge’s comprehensive notes of the arguments made at the inter partes hearing of the appellants’ setting-aside applications.

44. The issues before this court

45. [34]

    [34] Two broad issues arise for our consideration. The first is whether the requirements for the grant of Mareva relief have been satisfied. The second is whether we should alternatively grant interlocutory proprietary injunctions to prevent the appellants from dealing with the Excess Payments and their traceable proceeds pending the resolution of the dispute. In respect of the latter, we note that the summons which the respondents filed in the court below in applying for the Mareva injunctions did not include a prayer for interlocutory proprietary injunctions. The respondents, nonetheless, presented arguments on such injunctions before the Judge, although ultimately, no orders were made on it. Each of the two broad issues we have just outlined in turn raises subsidiary factual and legal issues. We will elaborate on these subsidiary issues together with the parties’ submissions in the course of our analysis.

46. [35]

    [35] Mr Bouvier and MEI Invest were jointly represented in the court below as well as in these appeals. As their positions are aligned, we will use Mr Bouvier as shorthand for both unless it is necessary to distinguish between them. Thus, when we refer to the respondents’ claims and the Mareva injunction against Mr Bouvier, we include their claims and the Mareva injunction against MEI Invest; references to Mr Bouvier’s assets include MEI Invest’s assets; and so on. This is purely for the sake of convenience, and is not the result of a finding that there is no separate personality between them. Also before us were two applications by Mrs Rappo. One was for the introduction of further evidence on appeal, which the respondents consented to. The other was for a stay, pending the resolution of these appeals, of the disclosure orders made against her by the Judge, which she has yet to comply with. We make no order on the latter application since it has become academic in the light of our decision to allow these appeals.

47. Whether the requirements for the grant of Mareva relief have been satisfied

48. [36]

    [36] The requirements for the grant of Mareva relief are well established. Two are relevant to these appeals, namely: (a) a good arguable case on the merits of the plaintiff’s claim; and (b) a real risk that the defendant will dissipate his assets to frustrate the enforcement of an anticipated judgment of the court (referred to hereafter as a “real risk of dissipation” for short where appropriate to the context). A good arguable case is one which is “more than barely capable of serious argument, but not necessarily one which the judge considers would have a better than 50 per cent chance of success”: Ninemia Maritime Corporation v Trave Schiffahrtgesellschaft GmbH [1983] 2 Lloyd’s Rep 600 at 605 per Mustill J. In respect of a real risk of dissipation, there must be some “solid evidence” to demonstrate the risk, and not just bare assertions to that effect: Guan Chong Cocoa Manufacturer Sdn Bhd v Pratiwi Shipping SA [2003] 1 SLR(R) 157 at [18] per Chao Hick Tin JA.

49. [37]

    [37] Worldwide Mareva injunctions have rightly been said to be exceptional, but the same rationale and test informs the grant of a Mareva injunction, whether over assets within the jurisdiction or over assets without. Lord Donaldson of Lymington MR put it this way in Derby & Co Ltd and others v Weldon and others (Nos 3 and 4) [1990] 1 Ch 65 at 79D–79F:

50. While the legal test for a worldwide Mareva injunction may be the same as that for a Mareva injunction over assets within the jurisdiction, the circumstances that will have to be established in order to cross the threshold of necessity will likely be more exacting where a worldwide Mareva injunction is concerned.

51. [38]

    [38] The appellants challenge the satisfaction of both requirements set out at [36] above. For reasons that will become apparent, we are unimpressed by their arguments that there is no good arguable case on the merits of the respondents’ claims against them. The main focus at the hearing of these appeals was, instead, on the real risk of dissipation. We will address, first, the arguments made by Mr Bouvier and then the arguments made by Mrs Rappo, because they engage somewhat different factual considerations. We should also add that the analysis at [39]–[142] below proceeds on the assumption that Singapore law governs the respondents’ claims as that is the basis on which the arguments were presented to us. We are nonetheless aware that there are cogent arguments that Swiss law should govern the respondents’ claims instead. These arguments on the applicable law are touched on in greater detail in the context of our analysis of the respondents’ alternative request for interlocutory proprietary injunctions.

52. The arguments by Mr Bouvier

53. Overview

54. [39]

    [39] Mr Bouvier says that there is no real risk of dissipation in his case for three main reasons. The first is his international standing. He runs a successful, well-established and reputable business that operates in multiple countries. Second, Mr Bouvier relies on his punctilious compliance with the asset disclosures ordered by the Judge. This, he contends, evinces his intention to “participate fully in [the] proceedings and to clear his name [through] the legal process”. Third, Mr Bouvier says that a good arguable case of dishonesty is by itself insufficient to give rise to a real risk of dissipation. He argues that the High Court decision of Spectramed Pte Ltd v Lek Puay Puay [2010] SGHC 112 (“Spectramed”) is wrong. Spectramed is a decision which, on one reading, appears to obviate the requirement of showing a real risk of dissipation once the court is satisfied that a good arguable case of dishonesty or unconscionability on the defendant’s part has been established.

55. [40]

    [40] The respondents advance the contrary position, also in three parts. First, they contend that they have established a good arguable case of dishonesty against Mr Bouvier, in that he perpetrated the sophisticated fraud which lies at the heart of their claims in the Singapore action. This alone warrants an inference of a real risk of dissipation. The respondents say that Spectramed is consistent with authority and does “no more than apply the general principles” pertaining to Mareva injunctions. Second, the respondents highlight that Mr Bouvier is a sophisticated international businessman who is capable of moving about large sums of money globally. In this regard, the respondents point to his shareholdings in companies across multiple jurisdictions. Third, the respondents argue that Mr Bouvier has been untruthful in his asset disclosures. This contributes to the degree of risk of dissipation by Mr Bouvier.

56. [41]

    [41] In our judgment, the Mareva injunction against Mr Bouvier should be discharged, and we arrive at this conclusion for these reasons. We accept that the respondents have established a good arguable case of dishonesty against Mr Bouvier, but it cannot be put higher than that. And it is insufficient to stop there. Rather, it is necessary to go further and inquire into the nature of the dishonesty that is alleged. As we see it, the nature of the dishonesty that is alleged against Mr Bouvier is not such that it can in itself fairly ground an inference of a real risk of dissipation. We are also not persuaded that the bare fact that Mr Bouvier operates through companies internationally is on its own relevant. The combined effect of these points is that the respondents have failed to establish a real risk that Mr Bouvier will dissipate his assets. We deal with these points in the two sections that follow (ie, [44]–[97] below).

57. [42]

    [42] We also find that the respondents’ argument predicated on Mr Bouvier’s asset disclosures is wrong in principle and is, in any event, unconvincing. We deal with this argument in the third section that follows (ie, [98]–[106] below).

58. [43]

    [43] The final reason why we discharge the Mareva injunction against Mr Bouvier is that it was an abuse of the court’s process, and we deal with this point in the fourth and final section (at [107]–[130] below) of our analysis of Mr Bouvier’s arguments.

59. Good arguable case but no higher

60. [44]

    [44] We mentioned at [10] above that the nub of the dispute between Mr Bouvier and the respondents turns on the characterisation of their relationship. The question is whether it was an agent-principal relationship or a principal-to-principal relationship. There is email correspondence which very strongly favours the former characterisation. But, in our view, the circumstances of the transactions concerned as a whole cast doubt on such a characterisation. While the respondents assert, and we agree, that their claims against Mr Bouvier cross the threshold of a good arguable case, there remain too many gaps in the evidence to put it any higher than that.

61. [45]

    [45] In support of the agent-principal characterisation, counsel for the respondents, Mr Alvin Yeo SC, took the court through numerous emails between Mr Bouvier and Mr Sazonov. These were communications between them in which they discussed the price and payment terms for the artworks, as well as the negotiating strategy that would be adopted when dealing with the original owners. We agree with Mr Yeo that the email correspondence appears damning and does suggest that Mr Bouvier presented himself to Mr Rybolovlev and Mr Sazonov as though he was negotiating on the respondents’ behalf.

62. [46]

    [46] In this regard, there is no trace in the email correspondence of Mr Bouvier (or, for that matter, MEI Invest) being addressed as the “sellers”. Instead, references to the “sellers” are consistently to third parties whose identities were not known to the respondents. There were numerous instances where Mr Bouvier held himself out as negotiating for the respondents with the “sellers”. Mr Bouvier invariably also sought authorisation from Mr Rybolovlev, through Mr Sazonov, as to the maximum permitted price at which he could deal before he met with the “sellers”. Mr Bouvier, on most occasions, described to Mr Sazonov the negotiation strategy which he intended to employ in order to coax the “sellers” to bring down the prices of the artworks for the respondents’ benefit. The complexion of the email correspondence as a whole strongly suggests that Mr Bouvier was acting as an agent of the respondents and was negotiating for the artworks on their behalf. It is thus consistent with the agent-principal relationship that the respondents are contending for.

63. [47]

    [47] The respondents’ characterisation of the relationship between themselves and Mr Bouvier is that it was one built entirely on trust. There was no written agency agreement between them because they were prepared to work on the basis of a standing informal oral agreement. Among the essential terms of that agreement was one that they would pay Mr Bouvier a 2% commission for each transaction that he arranged. They and Mr Rybolovlev relied solely and entirely on Mr Bouvier for advice on which paintings to purchase and for how much. In short, they had complete confidence in Mr Bouvier.

64. [48]

    [48] However, the email correspondence, which we have referred to and which seems to corroborate the respondents’ version of what transpired, presents at most a partial view of the entire factual landscape that is relevant to this dispute; and when the dealings are viewed in their totality, other aspects of them raise questions that hint at dealings on a principal-to-principal basis, or at the very least, that Mr Rybolovlev and the respondents were aware of and thus acquiesced in the profit which Mr Bouvier was making on the transactions concerned. Three points stand out in particular.

65. [49]

    [49] First, it is at least doubtful, even if not wholly incredible, that the respondents genuinely believed that the remuneration for Mr Bouvier’s services was limited to the 2% fee that the respondents plainly knew they were paying him. There is a dispute over whether that amount represented a commission or payment for administrative and other related services. Both sides claim that there is documentary evidence in support of their respective positions. But, putting that dispute aside, it was urged upon us by Mr Bouvier’s counsel, Mr Edwin Tong SC, that the 2% commission, if that was indeed the entirety of Mr Bouvier’s return, would have been an implausibly slim margin for the expertise, experience and value that Mr Bouvier had to bring to bear in order to source and then secure the target artworks that Mr Rybolovlev was seeking.

66. [50]

    [50] There was evidence before the court which indicated that art houses such as Sotheby’s and Christie’s typically charged a buyer’s premium that was upwards of 20% for art auctions. The exact percentage varied according to the price at which the particular piece was sold. Mr Bouvier also told the Monaco authorities that it was “impossible” and “unimaginable” that Mr Rybolovlev could think he (Mr Bouvier) was not making money from the transactions. According to Mr Bouvier, Mr Rybolovlev “knows the market practices, he knows the rates of the sales houses”. If that was the case, then in the absence of any other explanation, it seemed to us improbable that the respondents could reasonably have thought that Mr Bouvier, who was acting for them to source specific artworks, negotiate the price, secure the artworks and then make them available to the respondents, would limit his takings to the 2% payment that was made on these transactions.

67. [51]

    [51] Second, the respondents’ account of their discovery of Mr Bouvier’s fraud in late 2014 leaves a number of unanswered questions as to the true characterisation of the relationship between Mr Bouvier and the respondents. This point will require us to delve somewhat deeply into the events surrounding the respondents’ purchase of the da Vinci, Salvator Mundi, which was made through Mr Bouvier in May 2013 (and which we have alluded to at [21] above).

68. [52]

    [52] The respondents purchased Salvator Mundi on 3 May 2013 for US$127.5m. About a year later, on 3 March 2014, the New York Times reported that Salvator Mundi “was bought by an unidentified collector for between $75 million and $80 million in May 2013, in a private sale” [emphasis added]. This article (“the NYT article”) is of considerable significance. Had Mr Rybolovlev read the article, then in the absence of any compelling explanation, he must have known that it was describing his purchase of Salvator Mundi. The NYT article pinpointed the painting as well as the month of the transaction through which the respondents purchased the painting. But, there was one jarring discrepancy: the price that the respondents paid was about US$50m in excess of the amount reported by the New York Times.

69. [53]

    [53] The evidence is unclear as to when the NYT article actually came to Mr Rybolovlev’s attention, although it was common ground that he became aware of it at some stage before the end of 2014. Mr Rybolovlev told the Monaco authorities that he read it when an associate, Yuri Bogdanov, showed it to him “[s]ome time later” after the respondents had purchased Salvator Mundi. What is clear is that Mr Rybolovlev brought up the NYT article and its reference to Salvator Mundi at a meeting with Mr Bouvier in Monaco on 22 November 2014.

70. [54]

    [54] At that meeting, it does not appear that there was any serious argument or disagreement between Mr Rybolovlev and Mr Bouvier. The statements which Mr Rybolovlev gave to the Monaco authorities suggest that he was more concerned with the possibility of having overpaid for some of the artworks which he had acquired than the possibility of having been defrauded. He cited a Modigliani sculpture that he had purchased through Mr Bouvier which “sold at auction below the acquisition price”. This is also consistent with Mr Bouvier’s statements that when Mr Rybolovlev brought up the NYT article, Mr Rybolovlev expressed his concern over whether the respondents had purchased Salvator Mundi at “too high a price”. But, it did not go further than that. Mr Rybolovlev did not think it necessary to inquire further into the purchase of Salvator Mundi or press Mr Bouvier for written proof of the amount that he had paid the original seller for the painting. It appears that Mr Bouvier was able to assuage Mr Rybolovlev’s concerns by explaining that the art market at that time was “very difficult”. Mr Bouvier told Mr Rybolovlev that “the Russians are no longer buying, the stock markets are weak, the Greek crisis is here, there is also the fall in oil prices, and the market in China has yet to be created”. At the meeting on 22 November 2014, Mr Bouvier and Mr Rybolovlev also discussed other matters, including the financing for the purchase of the Rothko, No 6 (Violet, vert et rouge).

71. [55]

    [55] It is notable, in this connection, that after the 22 November 2014 meeting, business continued as usual between the parties. There was upbeat correspondence between Mr Bouvier and Mr Sazonov in mid- and late December 2014 discussing the respondents’ purchase of No 6 (Violet, vert et rouge). The exchanges were convivial and nothing appeared out of the ordinary; indeed, one of the email threads was titled “Re: How are things going? :-)”.

72. [56]

    [56] On the respondents’ version of the events, the relationship between Mr Rybolovlev and Mr Bouvier only broke down on or after 31 December 2014, when Mr Rybolovlev met Mr Heller and discovered that he had overpaid for a Modigliani (see [21] above). Mr Yeo argued that the conversation between Mr Rybolovlev and Mr Bouvier on 22 November 2014 marked only the beginning of suspicions that took shape and eventually developed into a deep sense of betrayal, resulting in an irretrievable fissure by the end of that year. It was therefore not unusual that business carried on as usual after the 22 November 2014 meeting. As Mr Yeo put it, a relationship of trust that had been built up over many years did not simply “fall off a cliff”.

73. [57]

    [57] With great respect, we find it impossible to accept this account of the events. If the characterisation of the relationship between Mr Bouvier and the respondents is as the latter suggest, Mr Rybolovlev could not possibly have been satisfied by any explanation of the market value of Salvator Mundi that Mr Bouvier might have given at or after the 22 November 2014 meeting. This is all the more so because based on Mr Bogdanov’s statements to the Monaco authorities, there were already “some doubts [about Mr Bouvier] in September or October 2014” [emphasis added]. If that was true, then the discovery (assuming this was the first time Mr Rybolovlev found out) in November 2014 that there was a gulf of approximately US$50m between the price which the respondents had paid for Salvator Mundi and the reported selling price of that painting could not possibly be explained away on the basis of a residual sense of trust.

74. [58]

    [58] On the respondents’ version of the facts, the question in Mr Rybolovlev’s mind at the 22 November 2014 meeting could not have been whether he had overpaid for Salvator Mundi by reference to its market value. The foremost – indeed, the only – question on Mr Rybolovlev’s mind must have been whether and, if so, how he had been cheated by Mr Bouvier. Mr Bouvier would not have been able to give any convincing explanation of this marked price differential when he was confronted with these facts by Mr Rybolovlev at the 22 November 2014 meeting. Significantly, there is nothing in the evidence to suggest that Mr Bouvier tried to deny the accuracy of the NYT article or any of the details contained therein. This seems almost impossible to reconcile with the notion that the respondents and Mr Rybolovlev all thought that Mr Bouvier was purely the fiduciary agent of the respondents earning nothing but the 2% “commission”. Moreover, it seems to us inexplicable that business between the parties could carry on as usual after the 22 November 2014 meeting if the respondents’ version is accepted.

75. [59]

    [59] We accept that we should not wade into the merits in a case such as this, which is very much at an interlocutory stage. But, we have examined the underlying evidence on the characterisation of the relationship between Mr Bouvier and Mr Rybolovlev in some detail because whereas the emails that we referred to at [45]–[46] above seem to weigh strongly in favour of the respondents’ agent-principal characterisation, this aspect of the case seems to weigh just as strongly in the opposite direction.

76. [60]

    [60] The third and final reason why we consider that the respondents do no more than cross the threshold of a good arguable case is that the early transactions between the respondents and Mr Bouvier, at least, do not appear to have rested on a relationship built solely on trust. It will be recalled that Mr Bouvier was introduced to Mr Rybolovlev in 2003. The first of the 38 artworks that the respondents purchased through Mr Bouvier was a van Gogh on 26 August 2003. There is no documentation of that transaction in the evidence. But, the next three transactions, which involved, respectively, a Picasso (on 4 November 2004), a Modigliani (on 10 April 2006) and another Picasso (on 25 October 2006), were all documented with formal contracts. For each of these transactions, the respondents sent the contracts to their Swiss lawyers, Lenz & Staehelin (Switzerland’s largest law firm), for comment and review before they were concluded. The email correspondence between Mr Bouvier and Mr Sazonov in relation to these transactions was cordial and polite, but reserved. The fifth to seventh transactions were for, respectively, two pieces of furniture (one on 2 March 2007 and the other, on 10 July 2007) and a Modigliani sculpture (on 25 October 2007). These transactions were documented by invoices, and there is little correspondence relating to them in the evidence.

77. [61]

    [61] It was only in the correspondence for the eighth transaction (dated 21 December 2007) for a Modigliani and onward that Mr Bouvier began to employ language which suggested that he was negotiating as the agent for the respondents. Even then, the email correspondence relating to that transaction was warm, but not yet informal. The relationship between Mr Bouvier and the respondents was therefore not a uniform one. If the relationship had started on one footing, then there would have to be some explanation as to how that changed. However, no evidence was put before the court to explain this. The respondents’ position before us was simply that the relationship between Mr Bouvier and the respondents was a fiduciary one that was built on trust from the outset.

78. [62]

    [62] We recognise that seven artworks are but a fraction of the 38 artworks which the respondents purchased through Mr Bouvier. But, these concerns add up. Together, they bring home the point that at the interlocutory stage, the court must tread cautiously. It must not treat allegations of dishonesty as established. This is not a case where the uncontroverted documentary evidence is so firmly in the respondents’ favour that the court can comfortably descend into the merits and conclude that Mr Bouvier was dishonest, and then assess on this basis whether his dishonesty suggests a real risk of dissipation. There yet remain inflections in the narrative and gaps in the plot, which will have to be filled in due course. All that can be said at this stage is that there is a good arguable case of dishonesty on Mr Bouvier’s part.

79. Dishonesty and a real risk of dissipation

80. [63]

    [63] The respondents argue that the court may infer a real risk of dissipation just from the fact that a good arguable case of dishonesty has been put forward against Mr Bouvier. The argument is grounded in part on the following passage in Spectramed at [19]:

81. We refer to this as “the Spectramed proviso”. It appears to obviate the need to separately establish a real risk of dissipation once a good arguable case of dishonesty against the defendant has been established.

82. [64]

    [64] Chan Seng Onn J (“Chan J”), who decided Spectramed, cited two cases in support of this proviso. The first was his own earlier decision in Multi-Code Electronics Electronic Industries (M) Bhd and another v Toh Chun Toh Gordon and others [2009] 1 SLR(R) 1000 (“Multi-Code Electronics”), and the second, the decision of the New South Wales Court of Appeal in Patterson v BTR Engineering (Aust) Ltd and others (1989) 18 NSWLR 319 (“Patterson v BTR Engineering”). Chan J also referred to the monograph by Steven Gee QC, Mareva Injunctions and Anton Piller Relief (Sweet & Maxwell, 4th Ed, 1998), which makes a statement (at p 198) to a similar effect. The same passage from Mareva Injunctions and Anton Piller Relief had been cited with approval in the earlier decision of the Singapore High Court in OCM Opportunities Fund II, LP and others v Burhan Uray (alias Wong Ming Kiong) and others [2004] SGHC 115 (“OCM Opportunities”) at [73], where it was said to be “trite law” that “an appropriate case of risk of dissipation is made out, evidentially, where there is a good arguable case of fraud”.

83. [65]

    [65] In our judgment, the Spectramed proviso goes too far. An allegation of dishonesty cannot obviate the need to establish a real risk of dissipation. This conclusion stands on three planks. The first is a matter of common sense. The fact that a defendant might be crooked does not in and of itself establish that there is therefore a real risk that he will bury his spoils to defeat a judgment that may in due course be rendered against him. The Spectramed proviso fails to distinguish between a defendant against whom a plausible allegation of dishonesty is made but who may turn out otherwise after defending the suit, and one who might be motivated by the pending litigation against him to behave even more dishonestly. Moreover, dishonest conduct can come in different shades and hues. The Spectramed proviso fails to distinguish between different types of dishonest conduct, some of which might more readily support an inference of a real risk of dissipation than others. To take an obvious example, it seem to us wrong in principle to treat a case where there is really no dispute that a grave fraud has been committed with the defendant’s involvement, leaving only the precise nature of his role to be determined, in precisely the same way as a case where there may or may not have been fraud or dishonest conduct on the defendant’s part at all, that being a matter which can only be determined at the trial.

84. [66]

    [66] This leads us to our second point, which is that it is incorrect for the court to treat allegations of dishonesty made at an interlocutory stage as if they have already been established. Such allegations may eventually be refuted. As a matter of principle therefore, the grant of Mareva relief should not generally be wholly founded upon an unproven allegation of dishonesty. This does not mean that the evidence provided in support of an allegation of dishonesty is irrelevant. But, the objection from principle dictates that the existence of a real risk of dissipation must be assessed independently from the prospect of the plaintiff’s eventual success (or failure) in establishing an allegation of dishonesty. This point was made by Chan Sek Keong J (as he then was) in European Grain & Shipping Ltd v Compania Naviera Euro-Asia SA and others (CN Jaya SA, intervener) [1989] 2 SLR(R) 445 (“European Grain”) at [21], where he refused to consider allegations of fraud directed at a defendant when determining whether there was a real risk of dissipation. European Grain was not considered by the court in either Spectramed or OCM Opportunities.

85. [67]

    [67] Third, the Spectramed proviso is not borne out by either the case law cited in support of it or the larger body of jurisprudence dealing with Mareva injunctions. The fifth edition of Steven Gee’s monograph on Mareva injunctions and Anton Piller relief, which was renamed Commercial Injunctions (Sweet & Maxwell, 5th Ed, 2004), pulls back (at para 12.040) from the absolute position that the fourth edition of the work (ie, Mareva Injunctions and Anton Piller Relief (cited earlier at [64] above)) took. Commercial Injunctions does not appear to have been drawn at all to the court’s attention in Spectramed, and it had not been published yet when OCM Opportunities was decided.

86. [68]

    [68] We will discuss decisions from Singapore as well as other jurisdictions in terms of how they weigh in on this third point. Many of these decisions were raised either in counsel’s written submissions or in the oral arguments before us. We summarise our detailed observations on the relationship between allegations of dishonesty and a real risk of dissipation at [93]–[94] below. Following that, at [95]–[97] below, we examine the facts before us against the backdrop of our review of the jurisprudence.

87. [69]

    [69] It will be evident from what we have said that our case law has not taken a uniform approach to whether and, if so, when allegations of dishonesty may in themselves ground an inference of a real risk of dissipation. In European Grain, the plaintiff charterers brought claims against a defendant shipowner for, among other things, damages for breach of a charterparty. The plaintiffs argued that there was a real risk of dissipation because: (a) the defendant was a Panamanian trading company with little or no assets to its name and a small market capitalisation; (b) the defendant had not been forthcoming with its financial records; and (c) the defendant was dishonest and was being sued for fraudulent conspiracy in a separate pending suit. Chan Sek Keong J disagreed with the plaintiffs and discharged the Mareva injunction that they had obtained ex parte. He pointed out that the fact that the defendant was a Panamanian one-ship company was not at all unusual. The defendant had also been candid in its compliance with the asset disclosures that were ordered as ancillaries to the Mareva injunction. As for the allegation of dishonesty, this was given short shrift, as we have already noted (see [66] above). In our judgment, it was material that in European Grain, no allegation of dishonesty was made in the action in which the injunction was sought. Rather, the allegation of dishonesty was the subject of a separate, and as yet unconcluded, suit.

88. [70]

    [70] In OCM Opportunities, the plaintiff investors brought claims against the first to eleventh defendants for fraudulent misrepresentations. The misrepresentations allegedly induced the plaintiffs to invest in sophisticated financial instruments issued by the seventh and eighth defendants. The misrepresentations were said to include the following, amongst others:

89. (a) Third-party receivables were reflected in the seventh defendant’s financial statements when they were actually owed by parties related to or controlled by the first defendant’s family.

90. (b) Fictitious transactions were entered in the seventh defendant’s accounts with the intent that they should create the appearance of genuine commercial sales.

91. (c) The invested funds were not channelled into the seventh defendant’s expansion plans as represented. They were instead diverted to illegal logging activities, and the proceeds from those activities were channelled back to the fourteenth and fifteenth defendants.

92. The defendants “categorically denied any wrongdoing”, and alleged that the plaintiffs’ losses were no more than investment losses incurred in the distressed debt market: OCM Opportunities at [20]. The judge refused to discharge the Mareva injunctions which had earlier been granted to the plaintiffs because she thought that a good arguable case of fraud had been made out, and that was “evidentially” sufficient to establish a real risk of dissipation: OCM Opportunities at [73]. It seems to us that the judge may have been swayed by the passage in the fourth edition of Steven Gee’s monograph (viz, Mareva Injunctions and Anton Piller Relief), but, as we have noted, this was later revised in the next edition (viz, Commercial Injunctions).

93. [71]

    [71] In Multi-Code Electronics, the plaintiff companies alleged that their assets had been misappropriated by the first and second defendants. The first defendant was the managing director of the first plaintiff and a director of the second plaintiff. The second defendant was a director of the second plaintiff. Together, they allegedly caused the plaintiffs to make unauthorised payments totalling about RM44m out of the plaintiffs’ accounts. The plaintiffs asserted on affidavit that these payments were made against forged or fictitious documents. This was not disputed by the defendants: Multi-Code Electronics at [11]. The plaintiffs sought and obtained ex parte Mareva injunctions against the first and fourth defendants, amongst others. Chan J refused to discharge the Mareva injunctions. He said, after a close examination of the documents, that there was “more than prima facie evidence … of [the first and fourth defendants’] participation in the alleged fraud”: Multi-Code Electronics at [150]. The first defendant appeared to be the mastermind using the fourth defendant as a vehicle for his fraudulent conspiracy. Chan J concluded at [151]:

94. In our judgment, it is evident from this passage as well as the other references we have made above to the decision, that Chan J was satisfied, having regard to: (a) the particular allegations of dishonesty; (b) the strength of the evidence before him; and (c) the absence of any denial by the defendants of some of the key damning facts, that there was more than sufficient basis to infer a real risk of dissipation. We see no difficulty with this, but we do not read it as supporting the broader statement of the law that is set out in Spectramed.

95. [72]

    [72] Chan J issued his decision in Spectramed more than a year after he decided Multi-Code Electronics. In Spectramed, the plaintiff company brought claims against the defendants for systematically and deceitfully running the company to the ground by diverting its business to a competing company. The first defendant and her husband, the second defendant, were employed by the plaintiff as the managing director and the marketing manager respectively. The third defendant was an administrator employed by the plaintiff. The second defendant incorporated the fourth defendant while he was still in the employ of the plaintiff, and, together with the first and third defendants, diverted the plaintiff’s business to the fourth defendant over a period of time. The first to third defendants were alleged to have taken active steps to dishonestly conceal their actions. The plaintiff sought Mareva injunctions against the first, second and fourth defendants. These defendants argued they had not done anything to dissipate their assets. Chan J disagreed and granted the Mareva injunctions. He held that there was a prima facie case that the defendants had dishonestly misappropriated the plaintiff’s assets such that a risk of dissipation existed: Spectramed at [20].

96. [73]

    [73] Despite articulating the Spectramed proviso (which, on the face of its wording, should have been sufficient to dispose of the case since there was a good arguable case of dishonesty), Chan J in fact went on to consider evidence from the defendants as to the type of assets they held: Spectramed at [21]. He observed that a large part of their assets were held in bank accounts and unit trusts, and that these could be spirited away with ease. He also thought that there was a danger of the fourth defendant transferring its distributorships and goodwill (which were alleged to have been misappropriated from the plaintiff) to another company in the same way as they had allegedly been diverted from the plaintiff. Based on all these factors, Chan J concluded that there was a real risk of dissipation and granted the Mareva injunctions sought. Hence, it seems to us that the learned judge, despite having articulated the Spectramed proviso, did not base his decision solely on it, but went on to assess the evidence to determine whether it supported the inference that there was a sufficient risk or likelihood of dissipation of assets.

97. [74]

    [74] We turn, next, to the English authorities, which likewise have not been entirely consistent in their approach to the weight that the court may attribute to allegations of dishonesty when considering whether there is sufficient basis to infer a real risk of dissipation. Five cases stand out, and we take them in chronological order. They serve to illustrate the ebb and flow of English legal opinion on this point.

98. [75]

    [75] The first case is Grupo Torras SA, Torra Hostench London Limited v Sheikh Fahad Mohammed Al Sabah and others 1997 WL 1105536 (21 March 1997, unreported) (“Grupo Torras”), a decision of the English Court of Appeal. The plaintiffs in that case claimed that they had been defrauded of a sum of about US$300m. US$20m of that larger sum was routed through a Swiss lawyer’s client account and distributed on the instructions of Sheikh Fahad Mohammed al Sabah. The person responsible for distributing the money on the Sheikh’s instructions was a Mr Dawson, who himself received US$2m out of the US$20m sum. The plaintiffs brought a claim against Mr Dawson based on, amongst other causes of action, conspiracy, dishonest assistance and knowing receipt. The plaintiffs obtained a Mareva injunction against Mr Dawson. On appeal by the latter against the grant of that injunction, one of the questions before the English Court of Appeal was whether there was a real risk of dissipation. Mr Dawson argued that the judge below had erred in concluding that such a risk existed merely because the case involved allegations of fraud.

99. [76]

    [76] The English Court of Appeal rejected Mr Dawson’s argument. Saville LJ, with whom Judge LJ and Sir Patrick Russell agreed, said that in the light of the nature of the fraud which was alleged, it was not surprising that the judge concluded that there was “a strong fear of dissipation”:

100. The Mareva injunction was therefore upheld by the English Court of Appeal, but we pause to observe that what seemed to have been decisive was the nature of the conduct that was at issue and how it bore on the inference of a real risk of dissipation.

101. [77]

     [77] The next case is Thane Investments Ltd v Brian Tomlinson 2003 WL 22073907 (29 July 2003, unreported) (“Thane Investments”), also a decision of the English Court of Appeal, which seemed to curtail any trend there might have been towards generously drawing inferences of a real risk of dissipation whenever dishonesty or fraud had been alleged and found to be seriously arguable. In that case, the plaintiff companies brought proceedings against two former directors, Mr Tomlinson and Mr Knopp, for misfeasance and breach of fiduciary duties. The English High Court had found, in separate proceedings which were already concluded, that Mr Tomlinson and Mr Knopp were errant directors who had run the plaintiff companies like “their private fiefdom”. Mr Tomlinson was not a defendant in those earlier proceedings, although he did give evidence therein. After the judgment in those earlier proceedings was issued, the plaintiffs applied ex parte and obtained a worldwide Mareva injunction against Mr Tomlinson and Reyall, a company alleged to be controlled by him. Mr Tomlinson was resident in the Isle of Man, and Reyall was also incorporated there. The application to discharge the Mareva injunction was heard inter partes and dismissed by Neuberger J (as he then was). Mr Tomlinson and Reyall appealed.

102. [78]

     [78] The English Court of Appeal made some strongly-worded remarks on the procedural breaches occasioned at the ex parte hearing of the plaintiffs’ injunction application. But, putting those breaches aside, the English Court of Appeal turned to consider whether it should continue the Mareva injunction against Mr Tomlinson and Reyall. It held that there was no real risk of dissipation and set aside the Mareva injunction. Peter Gibson LJ, with whom Sir Anthony Evans agreed, said at [28]:

103. The English Court of Appeal also did not think it persuasive that Mr Tomlinson was resident in the Isle of Man or that Reyall was a Manx corporation. Peter Gibson LJ said that there was nothing to suggest any difficulty in enforcing English judgments in the Isle of Man. We note that the English Court of Appeal, in coming to its decision to set aside the Mareva injunction, did not appear to have cited or considered Grupo Torras.

104. [79]

     [79] Subsequent first-instance English decisions have cited Thane Investments with approval, for instance, Michael Cherney v Frank Neuman [2009] EWHC 1743 (Ch) (“Cherney v Neuman”) and Irish Response Limited v Direct Beauty Products Limited [2011] EWHC 37 (QB) (“Irish Response”). In both cases, the court refused to infer a real risk of dissipation even though there was a good arguable case of dishonest conduct by the defendant. In the former, the defendant was alleged to have taken inconsistent positions in related proceedings in Spain (see Cherney v Neuman at [78]–[90]); in the latter, the defendant was alleged to have perjured himself before a Danish court in proceedings that had already concluded and that arose from a connected dispute (see Irish Response at [69]–[77]).

105. [80]

     [80] The third case that we consider is the English High Court decision of Patten J in Jarvis Field Press Limited v Chelton and others [2003] EWHC 2674 (Ch) (“Jarvis Field Press”). In that case, the plaintiff company (“Jarvis”) sought the continuance of a Mareva injunction which it had previously obtained ex parte against the defendants, Mrs Chelton and Mr Long. Mrs Chelton was a director of Jarvis. Jarvis alleged that Mrs Chelton and Mr Long had made unauthorised and unlawful payments out of its assets over a period of two years. Mrs Chelton was also alleged to have caused Jarvis, through deception, to make a loan to a third company, CSM Group Limited. Most of the loan monies, however, were not paid to CSM Group Limited, but were instead paid to Glenwise Limited, a company owned wholly by Mrs Chelton. The documentary evidence and the particulars of claim against Mrs Chelton were said to disclose (Jarvis Field Press at [5]):

106. Jarvis asked the court to infer that there was a real risk of dissipation based on the alleged dishonest conduct on Mrs Chelton’s part and the fact that the liquidator of CSM Group Limited had recently commenced proceedings against Mrs Chelton: Jarvis Field Press at [8].

107. [81]

     [81] Patten J cited the passage from Thane Investments quoted at [78] above, but did not consider it at odds with the proposition that an allegation of dishonesty could in itself justify an inference of a real risk of dissipation (Jarvis Field Press at [10]):

108. Patten J maintained the Mareva injunction which Jarvis had earlier obtained because he thought that there was a real risk of dissipation. He emphasised that there was a good arguable case that Mrs Chelton “will have systematically defrauded the claimant company in a dishonest and secretive way, and in a way that has every indication of being relatively sophisticated”: Jarvis Field Press at [11]. He said that there was an “appreciable risk” in the case of a defendant who “appears to be guilty not merely of dishonesty, but [of] dishonesty in financial dealings in relation to the use or misuse of assets, that she will take steps to put some of those assets ... out of the [plaintiff’s] reach”: Jarvis Field Press at [17]. It is plain to see that it was the nature of the dishonesty alleged in Jarvis Field Press that led Patten J to conclude that there was a sufficiently real risk of dissipation to warrant the Mareva injunction being maintained.

109. [82]

     [82] The fourth case is Madoff Securities International Limited v Stephen Ernest John Raven and others [2011] EWHC 3102 (“Madoff Securities”), a decision of Flaux J. The two plaintiffs in that case were the liquidators of the Madoff group of companies and were seeking to claw back payments made to the defendants. Amongst the defendants was Sonja Kohn, an Austrian who “lived and conducted her affairs internationally through a series of corporate vehicles” (she and her corporate vehicles were collectively referred to by Flaux J as “the Kohn defendants”): Madoff Securities at [4]. The Kohn defendants had received millions in payments from the Madoff group over the course of some 30 years for introducing investors to Bernard Madoff. The claimants did not plead that the Kohn defendants were actually party to Mr Madoff’s fraud, nor did they allege that the Kohn defendants ought to have been aware of the fraud: Madoff Securities at [5]. Rather, the allegation of dishonesty arose from the fact that none of the invoices which the Kohn defendants issued for the payments from the Madoff group indicated that the payments were in the nature of commissions. The invoices contained, instead, vague references to “research, analysis and consulting”, “market researching” and “strategic consulting and market researches”: Madoff Securities at [7]. The plaintiffs alleged that these sham invoices were intended to conceal the true nature of the payments (Madoff Securities at [8]):

110. The plaintiffs applied for proprietary and Mareva injunctions against the Kohn defendants. On a jurisdictional point, Flaux J found that he had jurisdiction only over the claims made by one of the two plaintiffs. That plaintiff argued that there was a real risk of dissipation by the Kohn defendants as they had issued “a whole raft of sham invoices and disguised the true nature of payments received”; this was said to be “evidence of deliberate misconduct on a grand scale over a long period of time”: Madoff Securities at [161].

111. [83]

     [83] Flaux J was referred to Grupo Torras, Thane Investments and Jarvis Field Press. He agreed with Patten J’s analysis in Jarvis Field Press. Flaux J did not accept the Kohn defendants’ submission that the fact of Mrs Kohn’s cooperation with the authorities upon Mr Madoff’s arrest showed that there was no real risk of dissipation. Flaux J said that Mrs Kohn’s cooperation was outweighed by her refusal to voluntarily disclose her assets. She had also been evasive when questioned by an Austrian state prosecutor in separate proceedings. Flaux J said that the false invoices which Mrs Kohn had produced over many years “crie[d] out for a proper explanation”. He concluded at [169]:

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