Blue Tropic Ltd & Anor v Chkhartishvili

This judgment arises out of an unusual application made by the Defendant in this action. In order to understand the application I need to set out the background.

In May of this year I heard the trial in this action. The judgment is reserved and I am currently finalising that judgment. The Claim is brought by two BVI companies which held real estate assets and shares in companies incorporated in Georgia. The Claimants contend that those assets were held for the benefit of a Georgian billionaire Arkadi (“Badri”) Patarkatsishvili who died in February 2008. It is claimed therefore that these assets now pass under his will to his widow and daughters (“the AP Family”).

The Defendant Ivane (“Vano”) Chkhartishvili is a Georgian businessman and former politician who had business dealings with Badri.

The Claimants granted wide ranging powers of attorney to a Georgian based lawyer well known to Badri, Giorgi Kavtaradze, enabling him to deal with the Claimants’ assets. He also came to act for Vano.

Vano instructed Mr Kavtaradze to use his powers to transfer the assets out of the Claimants to companies owned or controlled by him. The Claimants assert that no consideration was provided for these transfers the majority of which took place within a month of Badri’s death.

The Claimants’ case is that there was no justification for the transfers and that by instructing Mr Kavtaradze to transfer them he engaged Georgian law delict and they claim damages from him under Georgian law to compensate them for the value of the lost assets.

Vano’s primary defence to the claim is that as a result of undocumented oral agreements entered into between Badri and himself he became the beneficial owner of the shares in the Claimant companies. Alternatively he says Badri created a sub trust in Vano’s favour over his beneficial interest in those shares.

There are allegations also based on Georgian law raising the defence of limitation. In addition to the lay witnesses I heard detailed expert evidence on Georgian law.

It will be seen therefore that the participants in the litigation (save technically the BVI companies) and the assets are all Georgian and the claim arises under Georgian law.

The proceedings were commenced in early February 2013 when Vano was served in this jurisdiction. He challenged that jurisdiction asserting that the proceedings should take place in the BVI. Master Marsh delivered a judgment on 25th October 2013 rejecting that application. Vano appealed. After bringing the appeal Vano commenced proceedings in Georgia. His appeal against the jurisdiction issue was also rejected by Newey J on 7th July 2014 primarily on the basis that when served Vano was domiciled in the United Kingdom (he returned to Georgia afterwards but that does not matter). It is interesting to note in paragraph 30 of his judgment Newey J based his decision primarily on the rejection of the arguments based on the Brussels Regulations but also noted “Mr Crow also floated the possibility of granting a stay pending the determination of the Georgian proceedings”.

Following that decision the parties were left with parallel proceedings arguing over mostly the same issues. This was entirely the fault of Vano in instituting the Georgian proceedings.

On 20th May 2014 a substantive trial started in the Georgian proceedings with the cross examination of witnesses. On 15th July 2014 that trial continued (somewhat unusually from an English law point of view) with a new Judge. On 22nd July 2014 he delivered a judgment in favour of Vano. The Claimants in this action and the members of the AP Family appealed and on 15th January 2015 the Tbilisi Court granted their appeal.

Having obtained the first instance judgment in his favour Vano amended his pleadings in this action to plead res judicata. When that decision was overturned by the Georgian Court of Appeal he withdrew his res judicata plea in these proceedings. The trial before me started on that basis.

However Vano was still seeking to appeal the decision of the Tbilisi Court of Appeal. That was the position during the trial.

On 26th October 2015 Mishcon de Reya, Vano’s solicitors wrote to me informing me that Vano’s appeal had been upheld in the Supreme Court of Georgia and the Tbilisi Court of Appeal’s decision had been overturned. They supplied me with a copy of the translation of the judgment. The decision was to allow Vano’s appeal in part and remit the case to the Court of Appeal for re-hearing. It is to be noted that the Claimants in this action asked the court to either dismiss the Georgian action without prejudice or suspend the hearing until I had delivered judgment. That was rejected by the court. The direction to the Appeals Court was to decide the case on the basis of the evidence given before the first instance Judge. The decision was made not to remit the case back to the first instance Judge.

As at the time of this hearing the Tbilisi Court of Appeal has not considered that judgment.

I asked the parties what they wanted to do and Vano’s lawyers replied stating that they wished me either to stay the action formally pending the result of the Tbilisi Court of Appeal’s decision or informally refrain from giving judgment.

In paragraph 8 of Vano’s skeleton argument it was stated that he expected that the Tbilisi Appeal Court would deliver a final determination within the next few weeks. The Claimants disputed that and in paragraph 30 of their skeleton argument they submitted that based on the time previously taken the period would likely be months and further the losing party would have the right of appeal to the Georgian Supreme Court. After the hearing they provided me with an extract of Article 391 of the Georgian Civil Procedural Code which provides for an appeal within 6 months.

Vano’s Counsel rightly say (paragraph 10) that the circumstances are unusual with both this court and the Georgian Civil court seized of the same dispute and moving to deliver a final judgment. As I have said that is entirely as a result of Vano’s decision to issue the Georgian proceedings creating that duplication. It is something that the courts in commercial matters generally strive to avoid for obvious reasons. Nevertheless that was the position that appertained at trial when I heard the evidence and nobody suggested at that stage that I should do anything other than proceed and deliver the judgment. There is something of a race between the two courts although I do not believe that either court regards it as such.

Vano submits as I have said that I should either stay the proceedings or simply delay. He hopes that he will win in Georgia. If he wins in Georgia it is proposed to seek to reopen the trial in this case, re-amend his pleadings to plead res judicata and if that is established seek dismissal of the claim.

There are formidable obstacles to late applications to amend. I will not go through those now as that is pre-emptive.

In the context of the present case if that procedure is invoked successfully and the plea is successful a considerable amount of the parties’ money and court time will have been wasted in the trial. Equally there will be the period between now and the final determination of the Georgian proceedings when nothing is happening on the judgment preparation. I am acutely conscious that the judgment is due for delivery. As I have said I am currently working on it. Circumstances beyond my control have inhibited the preparation of this judgment which I regret. In the normal course of events I would have expected to have delivered the judgment no later than the first week of October.

Both parties accepted that this was a discretionary matter according to the facts of the present case. Despite that the parties managed to find at least 6 authorities for me to consider in exercising the discretion. Whilst I am always grateful to receive assistance from my brother Judges and even follow decisions of a superior court nevertheless they are of limited relevance when I am asked to exercise a discretionary power. The circumstances of this case are unique.

The following factors must be considered:-

The Claimants make a number of submissions. First they say that the application is abusive because there has already been an application to stay issued on 9th April 2013. Further Vano as I have said appealed and as I have said above in the appeal “floated” a stay of the Georgian proceedings. All that failed. It is an abuse the Claimants say because there has been no material change in the circumstances since the hearing before Newey J. I do not think that is correct given the advanced stage now of the Georgian proceedings compared with the situation before Newey J when they had been recently issued.

Second it is submitted that the application is not properly constituted and out of time and not supported by evidence. I do not regard any of those as being relevant as the issue simply relates to what I should do (if anything) in the light of the progress of the Georgian proceedings. I therefore reject that as a basis for refusing Vano’s application.

Third it is submitted that the court has no jurisdiction to grant a stay on forum non conveniens grounds. That is correct as Newey J determined. Equally merely because Vano is no longer domiciled in this jurisdiction that is not a basis for reviewing the mandatory effect of the regulations which require the issue to be determined at the commencement of the proceedings see Skype Technologies SA v Joltid Ltd [2009] EWHC 2783 (Ch) at paragraph 22 where Lewison J (as he then was) said “the court should not under the guise of case management achieve by the backdoor a result against which the ECJ has locked the front door”.

Fourth it is all Vano’s fault. In his letter to the court Vano said the current situation is “unfortunate”. I agree with what the Claimants say, that it is unfortunate but that it is entirely his fault, as I have set out above. It is clear that Vano is trying to pirouette between the two jurisdictions as and when it suits him. Thus when he wins in Georgia he seeks to raise the issue of res judicata but abandons it when the appeal is overturned. Now that decision is overturned he is hoping that at some time in the future (unspecified) that he will be able to resurrect it again.

The request does not make sense nor does it satisfy the test for a case management stay.

In my view I should proceed to deliver the judgment as soon as possible. The factors above show that in reality nothing has changed since the trial and the problems that have arisen arise simply out of there being parallel proceedings which is entirely Vano’s fault and decision.

Further there is no clear indication when the Georgian procedure will be exhausted. Suppose Vano loses on the reconsideration by the Court of Appeal but then seeks to appeal to the Supreme Court. Would he then seek an extension of that time? If he wins before the Court of Appeal and the Claimants appeal would they be entitled to say the matter should be delayed yet further? This brings the administration of justice within this jurisdiction to a lottery.

If I accede to the stay I might never deliver a judgment which to my mind would be wasteful of the time spent by the parties and the courts in dealing with this case for no good reason. If I deliver a judgment it might bind the parties in Georgia. I simply do not know. The Georgian Court might recognise my judgment although it will involve Georgian law issues. Equally they might not. Conversely the Georgian decision might assist me in delivering judgment but I have not had a decision yet. I do not believe it is appropriate given the history of the case as outlined above that I should simply down tools and await whatever decision comes out of the Georgian Courts. I think I have a duty as a Judge to deliver the judgment as expeditiously as possible and that is what I propose to do.

Accordingly I dismiss Vano’s application.