Ras Al Khaimah Investment Authority & Ors v Bestfort Development LLP

This is an application by six Applicants which are entities forming part of the arrangements for investing the sovereign wealth of the state of Ras Al Khaimah, one of seven Emirates forming the United Arab Emirates. The first three Applicants are based in Ras Al Khaimah and the 4^th 5^th and 6^th Applicants were incorporated to take part in the various investments in the Republic of Georgia which give rise to this application. The Applicants seek ancillary relief including the grant of freezing orders and the appointment of receivers over the assets of the 14 Respondents which are all LLPs registered in England and Wales and said to be connected with Mr Gela Mikadze. He is a Georgian national, a lawyer and businessman, who was a director of the 4^th 5^th and 6^th Applicants between about 2008 and 2013. He also held senior management positions with those Applicants.

The relief is sought pursuant to s 25 of the Civil Jurisdiction and Judgments Act 1982 (‘CJJA’) in support of claims issued by the Applicants in the Republic of Georgia and in the UAE. They ask the court to freeze each of the Respondent’s assets up to a value of $42,561,555. No freezing order or other relief is sought against Mr Mikadze because he is not present in this jurisdiction and so far as the Applicants are aware, he has no assets here apart from his interest in some or all of the Respondent LLPs. The Part 8 claim in this jurisdiction was issued on 1 May 2015 and served on 1 June 2015. An order was made by Richard Spearman QC, sitting as a Deputy High Court Judge on 18 June 2015 adjourning the claim on the basis of certain undertakings given by some of the Respondents and setting a timetable for serving evidence. The main evidence in support of the application is given in an affidavit and a witness statement of Caroline Black and in witness statements of David Hughes, both of them partners in Dechert LLP the solicitors acting for the Applicants. Evidence opposing the application is given in a witness statement from Mr Mikadze and also in statements from Mr Clayman an associate solicitor in Peters & Peters Solicitors LLP acting for Mr Mikadze. Mr Mikadze says he is authorised to give evidence on behalf of all the Respondents except for the 7^th Respondent (‘Hornberg’) and the 9^th Respondent (‘Raystar’). Similarly Mr Marshall QC appeared at the hearing for all the Respondents except those two. Those two were not separately represented though have been served with the proceedings but the Applicants did not invite me to deal with Hornberg and Raystar differently from the other Respondents.

The Respondents divide into 2 groups. One group comprises the 1^st, 3^rd, 5^th and 9^th Respondents (Bestfort, Bellcrown, Tecberg and Raystar). They are defendants to some of the claims brought by the Applicants in Georgia or UAE. The other Respondents are not parties to any claims. Injunctive relief is sought against them on the basis that they are beneficially owned by Mr Mikadze such that their assets would be available to satisfy any judgment awarded against Mr Mikadze in those countries. As regards those Respondents, the Applicants rely on the Chabra jurisdiction named after the decision of Mummery J in TSB Private Bank International v Chabra [1992] 1 WLR 231. The Applicants also seek relief under the Chabra jurisdiction against the Respondents which are also defendants in the foreign proceedings on the basis also that their assets are beneficially owned by Mr Mikadze. The sum to be frozen is thus the totality of the sums claimed against Mr Mikadze regardless of whether the Respondents are defendants to any proceedings or not.

The background to the claims and to this application is the decision in 2006 on the part of the rulers of Ras Al Khaimah to take up investment opportunities in Georgia when Georgia embarked on an ambitious programme of privatisation. The ruling family of Ras Al Khaimah put a Dr Khater Massaad in charge of these plans. Dr Massaad was a close friend and confidant of some at least of the members of the ruling family and had their full confidence and trust. He was Chief Executive Officer of the 1^st Applicant, RAKIA, Chairman of the 3^rd Applicant and Ras Al Khaimah’s most prominent economic representative. I have seen evidence of Mr Galadari, an expert in UAE law, setting out the Ras Al Khaimah ordinances that conferred powers and functions on Dr Massaad. It is fair to say that he was given the widest possible powers to pursue investments without apparently needing to have recourse to the ruling family for authorisation. The Emiri Resolutions in particular conferred on Dr Massaad the power to appoint whomever he considered fit to assist him to achieve the state’s objectives.

Dr Massaad made contact with Mr Mikadze and after a period during which the two men got to know each other well, Mr Mikadze was invited by Dr Massaad to become Ras Al Khaimah’s partner in developing investment opportunities in Georgia. The Applicants assert that thereafter both Dr Massaad and Mr Mikadze abused the trust that had been placed in them and acted in serious breach of the fiduciary duties that they owed to the Ras Al Khaimah entities of which they were in charge. The Applicants allege that Mr Mikadze diverted monies to his personal bank accounts and caused Ras Al Khaimah companies for which he was supposed to be working to enter into lucrative contracts with contractors which were in fact his creatures and which did not in fact provide any services in return for the substantial remuneration paid.

The claims and all allegations of wrongdoing are vigorously disputed by Mr Mikadze. He says that there are entirely proper explanations for all the transactions which are impugned. In his witness statement he paints a very different picture of what has happened and explains in some detail the work he has done in relation to various projects. His case is that he had every reason to think that Dr Massaad continued to have the confidence and trust of the ruling family and assumed that Dr Massaad was discussing with them such details of the projects that he thought they would want to know. Mr Mikadze describes the substantial amount of work he put into the various projects he undertook for the Ras Al Khaimah companies, the problems he encountered and his ingenuity and determination in overcoming those obstacles to make the projects successful. The remuneration he received was agreed between him and Dr Massaad and was commensurate with his efforts. Where the contractors used on the projects were his vehicles, then this was fully disclosed to Dr Massaad and the Ras Al Khaimah entities and those contractors did indeed provide the services that helped make the various projects successful.

Mr Mikadze describes how the situation changed in October 2010 when Sheikh Saud who had been the member of the ruling family most interested in the Georgian investment projects became Emir. The new Emir was less interested in investing outside the UAE and there was a ‘new focus’, resulting in instructions to Dr Massaad to divest the sovereign wealth fund from its foreign holdings. Further, Mr Mikadze says that once the new Emir was in place, there was a political move to oust and discredit Dr Massaad. Mr Mikadze believes that the ‘ousting’ of Dr Massaad was at the behest of Sheikh Saud’s son who became Crown Prince in December 2010 and wanted to take Dr Massaad’s place as the Emir’s right-hand man. Control of RAKIA was then taken over by members of the Emir’s family. As well as discrediting Dr Massaad, the Ras Al Khaimah ruling family attacked Mr Mikadze, in particular by instigating a criminal prosecution against him in Georgia. Mr Mikadze believes that the 14 civil claims against him and this application are politically motivated and are aimed at clawing back some of the money that he was properly paid for his work.

A number of projects have given rise to particular claims. I will describe each of them before considering in more detail the claims arising from them.

The Tbilisi Mall. Mr Mikadze’s evidence is that this was the first project he worked on with Dr Massaad. His initial role was as General Director of the 4^th Applicant, Rakeen Development. The Tbilisi shopping mall (‘the Mall’) was constructed from scratch on a greenfield site that Mr Mikadze identified. He negotiated the purchase of the site for $7.2 million in October 2006, a substantial discount from the initial asking price. The way in which the construction work was undertaken forms part of the background of the claims and is described below. The Tbilisi Mall opened to the public in April 2012 and is still open for business with a number of well-known European brand name shops whose business Mikadze says he attracted to the Mall through his negotiating skills.

The renovation of the Sheraton Metechi Palace Hotel (‘the Sheraton Hotel’). Mr Mikadze’s evidence is that the Sheraton Hotel had once been the leading 5 star hotel in Tbilisi but was very run down and dated. He says that he project managed the refurbishment of the hotel to bring it up to modern standards.

Development and operation of the Poti sea port and container terminal. The Poti Port on the west coast of Georgia occupies a strategic location on the Black Sea serving not only Georgia but also Azerbaijan and Armenia. The opportunity to acquire it arose at the start of 2008 when the port was put up for tender. RAKIA acquired 100 per cent of the shares in the Poti Sea Port Corporation for about $155 million. Mr Mikadze says that the bid was successful because they undertook to develop some 400 hectares of land adjacent to the port. RAKIA undertook that by 2012 it would build an airport and develop an industrial free zone. Mr Mikadze says that the port project has been a huge success with net profits growing from about $7 million in 2008 to $27 million in 2012. However, according to Mr Mikadze, the rulers of Ras Al Khaimah ‘lost interest in pursuing available investment opportunities in Georgia’ and he was asked to find new investors. A global port operator later acquired parts of the Port business.

The Mtatsminda Amusement Park in Tbilisi. The Mtatsminda Amusement Part (‘the Park’) occupies 100 hectares of land in Tbilisi. Prior to June 2008 it was controlled by the Tbilisi municipal government through a company called Mtatsminda Park LLC. Tbilisi had earlier acquired control of the Park from the Patarkatsishvili family. Mr Mikadze negotiated the acquisition of the rights to manage the Park by the 3^rd Applicant, Rakeen Georgia. Again Mr Mikadze says that he was responsible for obtaining funding for the project because Ras Al Khaimah rulers were unwilling to invest their own money. In 2011 Mr Mikadze says he was informed by Dr Massaad that Rakeen Georgia wanted to sell its interest in the Park. Ultimately the Park was transferred to the Patarkatsishvili family and Mr Mikadze received $6 million.

The test for whether to grant relief under section 25 of the CJJA is described in Dicey, Morris and Collins On The Conflict of Laws 15th edn, para 8-034. On an application for interim relief under section 25, the court should first consider whether the facts would warrant the relief sought if the substantive proceedings had been brought in England. Secondly, the court may refuse to grant the relief if, in the opinion of the court, the fact that the court has no independent jurisdiction in relation to the subject matter of the proceedings makes it inexpedient for the court to grant it.

In order to establish that the court would grant the relief sought if the substantive proceedings had been brought here, the Applicants must show first that they have a good arguable claim against all the defendants in the overseas proceedings and also that they have an arguable case that the Respondents’ assets are beneficially owned by Mr Mikadze. I therefore turn to the Georgian and UAE claims in more detail. There is one preliminary point that the Respondents have emphasised namely that no proprietary claim is made against any of the defendants in the overseas proceedings. The claims are for damages for breach of fiduciary duty or for declarations as to the invalidity of various contracts. The Respondents did not suggest that I could conclude that there is no arguable case on any of the 14 claims; there are clearly disputes of fact which will need to be explored in the proceedings. However, it is important to examine the claims in some detail because the Applicants rely on the nature of the allegations not only to establish that there is a good arguable case but also as evidence of the kind of dishonesty that gives rise to a risk of dissipation of the assets. Thus, Ms Black’s description of the alleged misconduct refers in emotive language to the large number of different frauds perpetrated against the Applicants and to Mr Mikadze’s use of a ‘web of English LLPs to defraud the Applicants primarily by siphoning and/or diverting moneys due or owed to the Applicants’; the documents on which Mr Mikadze relies in response to the allegations of wrongdoing are dismissed as sham; the companies involved in the projects are described as mere shells created by Mr Mikadze for the purpose of defrauding the Ras Al Khaimah entities and so forth.

The first claim in Georgia is for $232,000 and is brought against Mr Mikadze alone. This sum is the amount of costs incurred by Ras Al Khaimah entities in taking proceedings against Mr Mikadze for the return of certain shareholdings in Ras Al Khaimah entities. Mr Mikadze says that when the time came in 2011 for him and Dr Massaad to wind down the Ras Al Khaimah investments, he was given a share in the equity of the different entities in which the Ras Al Khaimah investments in Georgia had been held. This was pursuant he says to an oral agreement he entered into with Dr Massaad at the start of their relationship and in 2011 Dr Massaad determined what share he was entitled to receive.

The Applicants contend that the acquisition by him of these shareholdings was fraudulent. He was paid what Ms Black calls ‘an extremely generous’ salary for the work he did amounting to between $10,000 and $26,000 per month. They say that he could not be entitled to an equity stake in the Ras Al Khaimah entities which held the investments for the ruling family. Mr Mikadze contends that he was entitled to this equity share because although he drew a salary from the entities as from 2008 once their businesses started to grow, he did not draw any moneys from them in 2006 and 2007 despite the very considerable work he undertook on these projects in those early years to get them up and running. The equity share was in part in payment for this early work. His evidence on the shareholdings is as follows:

He also says that the size of his equity shares in the projects reflected the fact that his role in the projects turned out to be much greater than initially expected for a number of reasons, for example, because the flare up of military conflict between Georgia and Russia in 2008 made it more difficult to find investors prepared to invest in Georgian infrastructure and cooled the enthusiasm of the Ras Al Khaimah ruling family to commit the necessary funds. This, and the resulting need to cut costs, involved him in more work for the various schemes. It appears that Dr Massaad broadly supports Mr Mikadze’s assertion that they agreed that Mr Mikadze would have an equity share in the projects as his partner as well as a salary. A partner in Peters & Peters has spoken to the lawyer acting for Dr Massaad and reports that Dr Massaad says that he would brief Sheikh Saud regularly, often on a daily basis, regarding the investments of the sovereign wealth entities and that the Sheikh was aware of all significant transactions being undertaken by Ras Al Khaimah’s Georgian subsidiaries. Dr Massaad also apparently agrees that Mr Mikadze would receive an allotment of shares in all the Georgian subsidiaries because of his strong local connections and influence he used for the benefit of the projects. The Applicants say that Dr Massaad’s approval is irrelevant because Dr Massaad is also now accused by the Ras Al Khaimah entities of acting in concert with Mr Mikadze to defraud the companies of which he was a director.

In support of the first claim, the Applicants also rely on the plea bargain that was struck between Mr Mikadze and the Georgian state after he was imprisoned. Mr Mikadze describes the criminal proceedings brought against him in Georgia. He was investigated over the first half of 2013 and then arrested on 9 June 2013 and charged with misappropriating the shares. He says that prosecution and his detention in custody pending trial was politically motivated and that throughout his time in prison he was held in solitary confinement and prevented from seeing his family. He describes the circumstances in which he agreed to the plea bargain as follows:

Mr Mikadze pleaded no defence on 31 December 2013 and handed back the shares. He was immediately released from prison. He has made an application to the European Court of Human Rights and the application has been accepted by the Court. He has also caused the 1^st and 2^nd Respondents, Bestfort and Manline, the recipients of the shares to bring proceedings in Georgia for the recovery of the shares.

Clearly there is an arguable claim in the Georgia proceedings. The Applicants point to the implausibility of Mr Mikadze’s assertion that he had only an oral agreement with Dr Massaad for a substantial part of his remuneration and they also rely on his guilty plea in the criminal proceedings. However it appears to me that the claim is not clear cut and it seems to me entirely plausible, on the basis of the relationship Mr Mikadze describes and the scope of his role in the projects that he would be rewarded by a minority equity stake as well as by a monthly salary. Where the truth lies between the two extreme positions adopted by the parties remains to be explored.

The second claim in Georgia is for $5,204,247 and is against Mr Mikadze and Bestfort. This arises out of the development of the Park. Briefly, the 4^th Applicant, Rakeen Georgia was set up in order to acquire from the Tbilisi Municipality in June 2008 the rights to run the Park for the next 49 years in return for an annual payment. Rakeen Georgia is wholly owned by Ras Al Khaimah interests. The claim against Mr Mikadze and Bestfort asserts that when the Park was sold in March 2012, Mr Mikadze misused his powers to cause $5.2 million to be transferred to his own company Bestfort. The Applicants demand reimbursement of that sum. Mr Mikadze accepts that Bestfort is his company and that it received the money from the sale of the Park. His explanation for this is that when Rakeen Georgia acquired the rights to manage the Park it also undertook to build certain amusement park rides and a cable car within a certain period. Under the contract, if Rakeen Georgia failed to complete the rides etc it would forfeit the rights to manage the Park. A UAE company was set up, Rakeen Amusement Park Ltd, 20 per cent of which was held by Mr Mikadze through a nominee, 10 per cent by Mr Janashia and 70 per cent by Rakeen. This equity stake was agreed to by Dr Massaad and was intended to be Mr Mikadze’s remuneration for his work on this project. That company set up a subsidiary to manage the Park called International Amusement Park LLC. The right to manage the Park was then assigned by Rakeen to International Amusement. Mr Mikadze rejects the suggestion that there was anything sinister about the transfer of the rights held by Rakeen Georgia to International Amusement.

In 2011 (that is shortly after Sheikh Saud became Emir of Ras Al Khaimah), Mr Mikadze says he was informed by Dr Massaad that Rakeen Georgia wanted to sell its interest in the Park. He says that it was difficult to find a buyer because the buyer would have to take on the building and investment obligations and perform them within a short time frame at the risk of losing the right to manage the Park if they failed to do so. That was the context in which he says Dr Massaad told him that he should arrange the sale and that he could keep any proceeds of sale over $6 million. He brokered the sale through Bestfort and, he says, Dr Massaad was well aware that Bestfort was his vehicle. He ultimately arranged for the sale of the interest in the Park to the Patarkatsishvili family for $12 million and kept $6 million. He says that this was the total remuneration he received in respect of his involvement in the Park.

Ms Black challenges Mr Mikadze’s account. She says first that it appears that Mr Mikadze did not provide any consideration for his equity share in the project, although she does not seem to regard his work on the project, rather than cash, as potential consideration. She also challenges the decision to allow him to keep the surplus of any sale price over $6 million on the basis that that $6 million benchmark was arrived at by a fraud on the part of Mr Mikadze. What happened was that once the Park was put up for sale, an offer was received from the 4^th Respondent Labbey for $6 million. The Applicants say that in fact Labbey is another creature of Mr Mikadze’s and his presentation of this as an arm’s length offer was dishonest. Again there is clearly something here that calls for investigation. There is force in the Applicants’ submission that the way that the Labbey offer of $6 million is presented by Mr Mikadze is deceptive if Labbey was indeed his alter ego at the time. On the other hand, the Applicants do not seem to challenge Mr Mikadze’s account of the extensive work he did in relation to the Park over a number of years or to suggest that he received remuneration for this in some other form.

The third claim in Georgia is against Mr Mikadze for $495,755. This also arises from the transaction related to the Park. Of the $12 million that was paid for the Park, an amount was paid to a company called Rustavi Steel. Rustavi Steel had provided 650 tonnes of steel armature to a company called Labbei Development LLC a subsidiary of the 4^th Respondent. I agree that this payment of an apparently unconnected debt calls for explanation although Mr Mikadze may be able to establish that this was remuneration to which he was entitled and that Dr Massaad was happy to pay him via this mechanism of settling the debt owed by Labbey.

The fourth and fifth claims in Georgia relate to an alleged sale of land at an undervalue. The 4^th Applicant Rakeen Development bought land in Mukhrovani in Georgia and in August 2012 entered into a contract for sale of the land to a company called Georgia Golf and Resorts LLC for GEL2 million. The Applicants allege that that purchase price was not paid and that in any event the market value of the land was much higher, about GEL33 million. It is alleged that Mr Mikadze entered into the agreement in his capacity as the general director of Rakeen Development and breached his duty of care and loyalty by authorising the sale. In the fourth claim an amount of over $14 million is claimed in damages against Mr Mikadze. The fifth claim appears to be advanced in the alternative seeking declaratory relief on the basis that Georgia Golf and Resorts LLC was set up by Mr Mikadze shortly before the sale of the land. The relief sought in the fifth claim is the setting aside of the sale as invalid and the reinstatement of the claimants rights to the land. Mr Marshall submits that since the fifth claim only seeks declaratory relief, it cannot form the basis of this application under section 25 of the CJJA. Further, it appears, as I describe later, that the land itself has been frozen by an interim order of the Georgian court in the proceedings there so that the claim is already secured.

The sixth and seventh claims in Georgia are against Mr Mikadze for declaratory relief for sales of land at an undervalue. They do not play any role in this application as the freezing orders sought are not needed to support them. Indeed it appears again that the land which is the subject of these claims has been frozen by the Georgia court.

The eighth claim in Georgia is for $1,486,000 against Mr Mikadze and the 5^th Respondent, Tecberg and relates to the construction of the Tbilisi Mall. As part of the project, Tecberg was engaged to provide consultancy services under a project management services agreement dated 14 June 2011 which was subsequently replaced by a service agreement requiring further work to be undertaken by Tecberg. Tecberg was paid $1,486,000. The Applicants say that Tecberg was incorporated only shortly before the date of the consultancy contract and that there is no evidence that it provided any services at all. Mr Mikadze however exhibits to his witness statement a detailed agreement and also many hundreds of pages of daily progress reports purporting to have been submitted by Tecberg showing the workers present on the site that day and what they were doing, the percentage of work completed. There are also monthly progress reports with photographs of the building site. Ms Black in her second statement casts doubt on the authenticity of these reports and argues that the ‘only viable inference’ is that these documents have been edited to give the impression that they are the work product of Tecberg. It appears therefore that the success of this claim will depend, like some of the other claims, on how far Mr Mikadze is able to show that Dr Massaad was aware of any links that Mr Mikadze has with Tecberg and whether Tecberg was really responsible for the work that went into the daily and monthly reports on the construction of the Mall or whether the Applicants are right that it was incorporated solely to receive this money and the contract was in fact a sham.

The ninth claim in Georgia is against Mr Mikadze and the 3rd Respondent Bellcrown for $500,000. It is similar to the eighth claim in that it relates to a service contract entered into in April 2011 whereby Bellcrown agreed to provide electrical services to the Tbilisi Mall. The Applicants make similar allegations, namely that there were in fact no services provided and that there was a conflict of interest that was not disclosed whereby Mr Mikadze caused the Georgian Ras Al Khaimah entity of which he was a director to enter into a contract for the supply of services with a company which he also controlled without proper disclosure. Mr Mikadze’s evidence on this point is that Bellcrown won the tender to supervise and manage the installation of the Mall’s electrical infrastructure and it performed the work. He exhibits the Report prepared by Bellcrown describing the work done. He says: “the fact that works were performed is self-evident; the Mall requires a substantial supply of electricity but is currently operational and it is not asserted by the Applicants that anyone else apart from Bellcrown was responsible for the provision of the electricity supply.”

The tenth and 11 ^th claims are brought against Mr Mikadze and Dr Massaad. They relate to the alleged non-payment of the purchase price for certain shares sold by a subsidiary of the 4^th Applicant to Montbury the 6^th Respondent which is alleged to be a vehicle for Mr Mikadze. In the tenth claim the Applicants seek $550,000 in damages for the loss caused by Mr Mikadze’s and Dr Massaad’s failure to chase Montbury for payment. In the 11^th claim it is alleged that prior to the sale of the shares there was an unfair distribution of dividends during the years 2009-2011 giving rise to a claim for damages of GEL3.2 million. The claimant in the tenth claim is not one of the Applicants, so this claim is not in fact relied on for the purposes of this application.

The 12 ^th claim in Georgia is brought by the 6^th Applicant against Mr Mikadze and Tecberg for $428,760. This relates to work supposedly done by Tecberg on the Sheraton Hotel project under a contract entered into in June 2011. The same points arise here as in relation to the claim against Tecberg arising from the building of the Mall. Again the Applicants allege that the work was supposedly provided very shortly after Tecberg was incorporated and the contract for the supply of services was signed on behalf of the two Ras Al Khaimah entities by Mr Mikadze so he was effectively causing them to enter into a contract with his own company. Mr Mikadze says that the work was done and he exhibits a lengthy technical due diligence report dated 20 September 2011 describing the different systems in the building (heating and ventilation, fire-fighting, security alarms, water supply etc) and what work needed to be done to bring them up to standard. He says that Dr Massaad was fully aware and consented to Tecberg’s involvement in the project.

The 13 ^th claim in Georgia is a claim against Mr Mikadze alone, again connected with the refurbishment of the Sheraton Hotel. It is alleged that Mr Mikadze caused the 6^th Applicant to enter into a contract in April 2011 with a company called International Construction Holding LLC (ICH) to perform demolition work to the value of over $12 million. An advance payment was made of GEL2 million but then the agreement was terminated in December 2012. It is alleged that Mr Mikadze caused the contract to be revised so that instead of the advance payment having to be returned by ICH, a large part of it was treated as a penalty payment owed by the Ras Al Khaimah entity to ICH for termination of the contract. It is alleged that ICH was controlled by Mr Mikadze and that the remainder of the advance payment was never paid back because of a spurious counterclaim mounted by ICH arising from the Poti Port development.

The 14 ^th claim in UAE is the most substantial claim for $17.2 million. It is brought by the 1^st Applicant against Dr Massaad, Mr Mikadze, Mr Janashia (an associate of Mr Mikadze) and Raystar. This related to the operation of the Poti Port once it had been developed. The sum was supposedly paid by RAKIA to Raystar in compensation for giving up rights under a partnership agreement dated 4 November 2010 under which Raystar was supposed to provide container services and know-how to the value of $19 million to manage a container terminal at the Port. It seems to be common ground that the agreement for the provision of services had to be terminated because RAKIA decided to sell the Port. The Applicants submit that the prospective purchasers of the Port considered that the Port was much less valuable if it was bound by the agreement to allow Raystar to provide the services than if the Port could get free of its obligations to Raystar. The $17.2 million was therefore paid in April 2011 to release the obligations so the Port could be sold. However, the Applicants claim that these are sham transactions simply designed to cause RAKIA to make a very large payment in effect to Mr Mikadze and his associates. They point to the fact that the email referring to the desire of the potential purchasers to be free of the agreement with Raystar is dated 3 November 2010 whereas the partnership agreement apparently committing the Port to acquire services from Raystar is dated a day later, 4 November 2010. The Applicants assert that the supposed commitment to Raystar was not a genuine pre-existing commitment but was engineered by Mr Mikadze for the sole purpose of prompting a very substantial payment to release the supposed commitment.

Mr Mikadze’s explanation for this transaction is entirely different. He says that in addition to working on the plans for the development of the Port, he and his associate Mr Janashia came up with the idea of building a customs clearance terminal at the Port. When he put this proposal to Dr Massaad, Dr Massaad invited them to develop the idea as a joint venture with RAKIA on land within the Port. They formed a joint venture company called Poti Port Terminal LLC of which half was owned by RAKIA and half by Raystar, at that point a vehicle of Mr Mikadze and Mr Janashia. Under the joint venture agreement RAKIA had an option to buy Raystar for $20 million. However, Mr Mikadze says, the prospective buyer of the Port wanted to include the customs clearance business in the deal. Raystar (that is Mr Mikadze and Janashia) agreed that the customs clearance business of which they owned half should be included in the deal. This was achieved by RAKIA buying Raystar for $20 million, thereby gaining ownership of all the Poti Port Terminal JV which it could then sell on to the buyer of the Port. RAKIA then terminated the JV agreement with Raystar.

Mr Mikadze also raises two procedural points which he says can defeat the UAE claim. First, the limitation period in the UAE for this kind of claim is 3 years so the claim may be time barred. Secondly, if the authorities in Ras Al Khaimah decide to bring criminal proceedings against Dr Massaad and Mr Mikadze, the civil claim will be stayed. I have seen the evidence of the parties’ experts on Ras Al Khaimah law, Mr Galadari and Mr Aidarous and it seems from that that neither of these points is a knock-out blow in Mr Mikadze’s favour.

My conclusion on all these claims is that they clearly raise arguable issues against Mr Mikadze and the four Respondents which are also defendants. However, Mr Mikadze has given a detailed rebuttal in respect of most of the claims and has produced material to support his version of events in some instances.

I turn now to the question whether the Applicants have shown that they have a good arguable case that the assets of the Respondents are the assets of, or are under the control of, Mr Mikadze. The evidence of Ms Black sets out the information available about the Respondents.

The 1^st Respondent, Bestfort is an English LLP incorporated on 27 January 2011. Its registered office is in Birmingham. Mr Mikadze accepts that this is his vehicle and that he set it up in January 2011 for the express purpose of receiving the shares in the three Ras Al Khaimah subsidiary companies to which the first claim in Georgia relates. He says that the LLP only remains in existence to bring the claim in Georgia for the recovery of those shares. Bestfort has two corporate members, Pintox Systems Ltd and Systen Group Limited registered in the Marshall Islands. Its most recent financial statement was signed by Sabine Boze on behalf of Pintox. It has a bank account in Latvia.

The 2^nd Respondent Manline is an English LLP with a registered office in Elstree. It was incorporated on 7 June 2011. It has now two corporate members, Formond Inc and Primecross Inc also based in the Marshall Islands. Its original designated members were I&OA and Milltown. Mr Mikadze accepts that he is the beneficial owner of this LLP. As with Bestfort, he says it was set up in June 2011 to receive the shares transferred to him. It also has a bank account in Latvia and is also bringing a claim in Georgia for the recovery of the shares transferred following Mr Mikadze’s imprisonment.

The 3^rd Respondent Bellcrown was incorporated on 1 December 2010 and has a registered office in Potters Bar. It now has two members based in Nevis in the West Indies but originally its designated members were I&OA and Milltown, the same original members of Manline which Mr Mikadze admits that he owns. Its accounts were signed by a Mr Ali Moulaye. Ms Black also exhibits documents which identify Mr Mikadze as having represented Bellcrown in certain transactions. Bellcrown was also a party to a contract which the Applicants regard as a sham under which it supplied electrical services to the Tbilisi Mall (see the ninth claim above). It also has a bank account in Latvia.

The 4^th Respondent, Labbey Development LLP was incorporated on 7 September 2010 and is registered in Birmingham at the same address as Bestfort which Mr Mikadze admits to owning. Further, its designated members are Pintox and Systen which are the same as Bestfort.

The 5^th Respondent Tecberg was incorporated on 7 June 2011. It has the same registered address in Elstree as Manline which Mr Mikadze admits is his company. At the time Ms Black made her first statement Tecberg had been dissolved and removed from the register but it has since been restored. Its original designated members were I&OA and Milltown, which were the same original members as Manline. It also had a bank account in Latvia before it was dissolved. Tecberg is a defendant to the eighth and 12^th claims in Georgia.

The 6^th Respondent, Montbury was incorporated on 12 October 2011 and has the same registered address in Potters Bar as Bellcrown. It has designated members based in the Seychelles. Its financial statements were signed by Ali Moulaye who has also signed accounts for various other of these entities including Manline. It also has a bank account in Latvia.

The 7^th Respondent Hornberg was incorporated on 31 January 2010. Its registered office in Potters Bar is the same as Bellcrown’s and Montbury’s. Its original designated members were I&OA and Milltown, the previous members of Manline and it has at points been owned by entities which also own other Respondents. Its financial accounts were signed by Ali Moulaye. It also has a bank account in Latvia.

The 8^th Respondent Worldfound was incorporated on 19 January 2012 and is registered at the same Potters Bar address as some other Respondents. Its financial accounts were signed by Ali Moulaye. Ms Black also exhibits a power of attorney granted by Worldfound to Mr Mikadze which gives him wide ranging powers.

The 9^th Respondent Raystar was incorporated on 21 June 2010 and dissolved on 29 January 2013. Its registered office is in Cardiff. Its designated members at the time of its dissolution were I&OA and Milltown who are or have been the members of other Respondents. Raystar is a defendant in the claim brought in the UAE in relation to the proceeds of sale of the Poti Port Terminal. Ms Black acknowledges that the Applicants’ investigators have found an executed contract dated 25 April 2011 between Raystar and the 1^st Applicant which appears to be for the sale of the entire share capital of Raystar to RAKIA for $20 million payable as to $15.2 million to Mr Mikadze and as to $4.8 million to Mr Janashia. Ms Black says “Although this contract was executed, it could not have been implemented as RAKIA UAE later entered into a purported termination agreement with Raystar”. She says that she still believes that Mr Mikadze was the beneficial owner of Raystar when it was dissolved.

The 10^th Respondent, Bontrade was incorporated on 1 February 2011 and has the same registered address in Elstree as Manline and Tecberg. It also has the same two members as some of the other Respondents and its accounts were signed by Ali Moulaye. Its original designated members were I&OA and Milltown.

The 11^th Respondent Sonland was incorporated on 24 June 2010 and has the same Potters Bar registered address as Worldfound, Bellcrown and Montbury. Its members are I&OA and Milltown and its financial statements were signed by Ali Moulaye. The Applicants’ investigations have uncovered an unsigned resolution of the beneficial owner of Sonland dated 13 August 2010 stating that Mr Mikadze is the beneficial owner. There is also an unsigned transfer of Mr Mikadze’s interest to a third party though it is not clear whether this was ever executed.

The 12^th Respondent QB Enterprises LLP was incorporated on 21 April 2011 and has the same registered address in Elstree as Manline and others. Its original members were I&OA and Milltown and its financial statements were signed by Mr Moulaye. Ms Black exhibits a form dated 22 February 2012 naming Mr Mikadze as the beneficial owner.

The 13^th Respondent The Sollutions Alliance LLP was incorporated on 9 November 2011 and is registered at the same Potter Bar address as some of the other LLPs. It has the same members as Montbury and Worldfound and its accounts were signed by Mr Moulaye. Ms Black exhibits a power of attorney dated 19 February 2013 granted by Sollutions Alliance to Mr Mikadze.

Finally the 14^th Respondent Luxtron Worldwide LLP was incorporated on 17 February 2012 and is at the same Potters Bar address as some of the others. It has the same members as some of the other LLPs and its accounts were signed by Mr Moulaye. There is also a general power of attorney to Mr Mikadze dated 17 February 2012.

What conclusions can one draw from all this about Mr Mikadze’s relationship with these entities? The Applicants rely on the shared registered addresses, shared designated members and shared accounts signatory (Mr Moulaye) as showing that if Mr Mikadze accepts that he beneficially owns Bestfort and Manline then he is likely to own the others too. The difficulty with this is that Mr Mikadze’s evidence is that he acquired Bestfort and Manline from Hornberg which runs a business of providing LLPs for a small fee and then providing the service of making sure that the LLP files whatever documents are needed each year to maintain the LLP in being on the register. The other LLPs might simply be others that have been set up and run by Hornberg or a similar service provider in which case it is not surprising that they have the same registered addresses and same members and same person signing their accounts. There is no evidence from Ms Black about what business is run from the Potters Bar and Elstree addresses – there may be many hundreds of LLPs registered there.

As regards Bellcrown, Labbey, Tecberg, Montbury, Raystar, Worldfound and Luxtron, they are entities which have some involvement with the events giving rise to the claims. In the case of some of them, an important aspect of the claim against Mr Mikadze is that the payment to the relevant LLP was improper because it was his creature. As I describe below, there is an issue over whether Mr Mikadze has in fact sold his interest in Labbey, Worldfound and Luxtron to someone else, Mr Goguadze. I consider this in relation to the question of risk of dissipation. As regards the Sollutions Alliance, QB Enterprises LLP and Sonland there is some additional evidence showing a connection with Mr Mikadze. As regards Hornberg and Bontrade, the most that can be said of them is that they have the same structure as the others – though that may be a structure shared by many other LLPs - and some shared features. However, I accept Mr Moverley-Smith’s points that (i) if Hornberg really is simply a third party service provider based in England then is it surprising that its only members are companies based in the Marshall Islands and that its only apparent asset is a bank account in Latvia; and (ii) if these LLPs were really unconnected with Mr Mikadze, it is also surprising that no one has come forward to assert that fact on their behalf in answer to these proceedings. Mr Goguadze, who Mr Mikadze says is now the owner of Labbey, Worldfound and Luxtron has not come forward, nor has anyone who runs Hornberg done so.

The Applicants also rely on Mr Mikadze’s evidence in his witness statement that he operates through offshore vehicles:

On balance, though the evidence is rather thin in relation to some of the LLPs, I am prepared to accept that there is a sufficiently arguable case that they are all beneficially owned by Mr Mikadze. Given that finding, I do not need to deal with the scope of the jurisdiction to freeze assets of non-defendants who are not beneficially owned by the defendant but have some other link with him sufficient to found the basis of freezing relief against them: see Linsen International Ltd and others v Humpuss Seat Transport PTE Ltd and others [2011] EWHC 2339 (Comm) on which Mr Moverley-Smith relied in the alternative.

In A v C [1981] 1 QB 956, one of the early authorities on the freezing order jurisdiction, Robert Goff J stated that in order to establish his right to relief at all, the plaintiff has at least to give grounds for believing that the defendant has assets which will be caught by the order. In this case I must be satisfied of two things in relation to each of the Respondents; that it has or is likely to have some assets somewhere in the world and that those assets can be effectively frozen by the order sought – the court will not make an order which is futile.

On this point the Applicants’ case is very weak. There is no real evidence that any of the Respondents currently has any assets at all. It is not suggested that they have any assets in this jurisdiction and the Applicants cannot point to any assets that they clearly currently have anywhere else in the world. What the Applicants rely on is that in the past the LLPs have filed financial statements with the register of LLPs and that those statements record that the LLP holds a cash balance. They also point to the fact that in the past payments have been made by Ras Al Khaimah entities into bank accounts in Latvia in the name of some of the Respondents. They cannot say that the cash shown in the financial statements was ever actually held in the Latvian bank accounts that they seek to freeze, but they submit that the cash must have been held in a bank account somewhere.

There are various problems with the Applicants’ case:

for Luxtron, Sollutions Alliance, QB Enterprises, Bontrade, Sonland, Worldfound and Montbury there is no evidence of any bank account currently open in their name or any other assets currently held. The financial statements on which Applicants rely as showing that they held cash all date back to 2014 or January 2015 at the latest. Further, the cash sums recorded are only a few thousand pounds, well under £20,000 in each case.

In respect of Tecberg and Raystar the Applicants accept that the LLP was dissolved and has only recently been restored to the register at the request of the Applicants. I consider it most unlikely that any money would have been left in those companies by Mr Mikadze for it to go to the Crown as bona vacantia as Mr Moverley-Smith seemed to be suggesting. It is much more likely that all assets were transferred out of the LLPs before they were dissolved. I cannot think of any reason why Mr Mikadze would have put these LLPs in funds once they were restored to the register for the purpose of being Respondents to this application.

As regards Bestfort and Manline and Montbury there is evidence that the account into which payments were previously made have been closed. As regards Bestfort, the Applicants rely on a financial statement dated 31 January 2013 in which Bestfort was shown as having just under $500,000 in its account. Mr Mikadze’s evidence is that that account was closed in October 2014 and he has produced evidence to prove it, in compliance with the undertaking he gave to the court under the order of Mr Spearman QC. As regards Manline the evidence relied on by the Applicants is that in June 2014 it had £12,785 in cash in a Latvian account. Mr Mikadze says this was closed in February 2014 and again he has produced evidence to prove it.

As regards some of the LLPs there is evidence that there was at some time a reasonable amount of cash according to their financial statements. I do not accept that this is convincing evidence that they currently hold cash:

Labbey’s financial statement relied on is dated 30 Sept 2013 and it is said to have about $41,000 cash. However, as I describe elsewhere, there was clearly some transaction as regards Labbey between Mr Mikadze and Mr Goguadze much more recently than that. Whether or not Labbey and/or its subsidiary actually changed hands, there is no reason to suppose that that cash has been left there.

For Bellcrown, the financial statement relied on is dated 31 December 2014 and shows about £31,500 cash holding. It also apparently has a Latvian bank account. Again this is very thin evidence as to the existence currently of that money as an asset that could be frozen by the order sought.

The Applicants say that even if these Latvian bank accounts have been closed, the money must be somewhere in the ownership of the LLP either still in the form of cash in some other bank account or in the form of other property such as land or investments acquired by the LLP and now held by it. There is no evidence in support of that contention and the manner in which Mr Mikadze clearly uses a large number of vehicles to carry on his business is equally consistent with these Respondents now being empty shells, if they are indeed beneficially owned by him. Mr Moverley-Smith argues that the mere fact that Mr Mikadze is spending so much time and money opposing this application indicates that there must be some money in these vehicles which he is trying to hide. I do not accept either that that is true or that it is a proper inference for a court to draw. Parties are entitled to defend proceedings without the risk of inferences adverse to their case being drawn from the very fact of their opposition. In any event, given the very wide and intrusive nature of the relief sought as I will describe, there is good reason for Mr Mikadze to oppose the making of these orders even if, as he says, there are no assets held by the Respondents so far as he is aware. Mr Moverley-Smith also argues that Mr Mikadze has given no explanation as to what has happened to the assets. However, the burden of establishing that there are assets is placed on the applicants seeking relief, it is not incumbent upon Mr Mikadze to prove that the LLPs have no assets or what has happened to any assets they might have had in the past.

I am therefore not satisfied that there is sufficient evidence of any substantial assets held by these Respondents on which this order can bite. I say ‘substantial’ because I accept the point made by Mr Marshall that it is important to bear in mind the proportionality of the relief sought. Enforcing it is likely to involve a substantial amount of work because of the nature of the relief set out in the draft orders, as I describe below. This is not a case where a simple letter to a London bank is going to result in a sum of money being frozen. It is only worth making an order if I am satisfied that there are assets, or at least that there are likely to be assets, of a greater value than the sums likely to be swallowed up very quickly in legal and other fees incurred in enforcing the order. There is no evidence before me that that is the case.

If there are assets in bank accounts in Latvia, can they be effectively frozen and protected by relief granted by this court? A freezing order against the balance of bank accounts in Latvia is only worth imposing if the bank with which the account is held will regard itself as obliged to freeze the monies and provide information about the current balance to the Applicants. It is common ground that the Latvian court will not recognise an order made by the English court freezing assets in Latvia in support of substantive proceedings which are not brought in England but in another jurisdiction. If therefore I were simply to make a freezing order in the usual form, the Latvian bank would not regard that as sufficient to justify freezing the money or providing information about the bank account.

To overcome this obstacle, the Applicants ask not only for an injunction but for orders appointing receivers over all 14 of the Respondents, pursuant to the power granted in section 37 of the Senior Courts Act 1981. That provides that the High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so. The Applicants propose appointing two people from PriceWaterhouse Coopers LLP as joint interim receivers. They will be given the task of endeavouring to obtain payment of all sums standing to the credit of all bank accounts held anywhere in the world in the name of any of the Respondents. Further, the receivers are to gather details of all transactions on the Latvian bank accounts since the account was opened and are given very extensive powers to request information from anyone in the world; to bring or defend any action or other legal proceedings anywhere in the world (though the Applicants will bear the costs of such proceedings). The draft order also provides that the receivers must make all documents and information they receive in the course of the receivership available to the legal representatives of the Applicants. This is said to be only for the purpose of ensuring the freezing order is effective.

The Applicants accept that even that order appointing receivers is not enough to give the court confidence that a bank in Latvia will comply with the freezing order if it is made. This is because the Applicants also accept that Latvia does not have the concept of receivership and its courts will not recognise an order of this court appointing receivers. In other words the banks are not obliged or empowered under Latvian law to recognise the receivers as entitled to control the Respondent LLPs. To overcome this further obstacle the Applicants have included in the draft order a further provision requiring each of the Respondents to grant a power of attorney to the receivers to act on behalf of the LLP. The proposed power of attorney grants the receivers authority to give all such instructions and execute all documents on the LLP’s behalf as may be necessary to obtain payment by the Latvian or any other bank of all moneys standing to the credit of the bank account where one has been identified and to gather details of all transactions that have taken place on the account and payment of all moneys standing to the Respondent’s credit at any bank anywhere in the world. It further provides that all authority given to any other person to conduct dealings on behalf of the Respondent with any bank is terminated. Mr Moverley-Smith argues that this power of attorney will be recognised in Latvia by the banks or by the court and will result in the banks freezing or handing over the money in any bank accounts held there.

Yet further, the Applicants invite the court to anticipate in the orders made the failure of the LLPs to comply with the requirement to sign the power of attorney. The draft order therefore not only requires the LLPs to grant the receivers a very wide power of attorney but provides that if they fail to do so by a certain date, a Master of the High Court can sign it on their behalf. This is said to be pursuant to the power of the court in section 39 of the Senior Courts Act.

I find that it is very doubtful indeed whether any order made by this court, even in these exorbitant terms, would be effective. The Applicants submit that the expert evidence on Latvia law filed by the Respondents indicates that the Latvian court and hence the Latvian banks would recognise the authority of the receivers if there were a power of attorney granted by the LLPs or if there were the signature of a High Court Master conferring the power of attorney pursuant to an order of the court. They argue that Latvian law will regard the question of who is empowered to act on behalf of an LLP in the context of a receivership as a question governed by the law which governs the LLP, that is English law.

The evidence on Latvian law was provided by Agris Repšs who is a partner in and head of the Dispute Resolution Team in the Latvian office of a leading regional business law firm. Mr Repšs draws a distinction between the recognition and enforcement of a court order compelling the grant of a power of attorney and the operation of the power of attorney itself. As regards the former, he concludes that the order would not be enforceable in Latvia – this is accepted by the Applicants. As regards whether a Latvian bank would in fact comply with instructions given pursuant to a power of attorney he says this: (footnote omitted)

Mr Moverley-Smith did not make any submissions as to who in this jurisdiction would issue the kind of certificate that Mr Repšs believes would be necessary. What emerges therefore from Mr Repšs’ evidence is that even if I were to make the freezing order and the receivership order and the order compelling the grant of a power of attorney, the likelihood of the banks complying with the receivers’ instructions without demur is remote. Having regard to the evidence of Mr Repšs I am not satisfied that any order that I make will be effective to freeze any assets that the Respondents might have or are likely to have.

If this relief were being sought in support of proceedings brought within the jurisdiction, the Applicants would need to show that there is a risk that the Respondents would dissipate their assets in order to avoid satisfying any judgment later obtained. In Elektromotive Group Ltd v Pan [2012] EWHC 2742 (QB) Eder J set out the relevant principles; bare assertions that a defendant is likely to put assets beyond the claimant’s grasp and is unlikely to honour any judgment or award are not enough of themselves; there must be solid evidence of the risk of dissipation. Further, mere reliance on the alleged dishonesty of the defendant is not enough to found a risk of dissipation. The court must scrutinise with care whether what is alleged to have been the dishonesty of the person against whom the order is sought in itself really justifies the inference that the person has assets which he is likely to dissipate.

The Applicants do rely principally on very serious allegations of fraud; on Mr Mikadze’s use of off-shore vehicles to keep his assets and his guilty plea to the Georgian criminal proceedings for the misappropriation of the shares. I have already indicated that I do not consider that the allegations of fraud against Mr Mikadze are as clear cut as the Applicants assert. They depend not only on an assessment of what work he did and what he was entitled to be paid, but on what Dr Massaad knew and agreed to, on what the ruling family of Ras Al Khaimah knew and agreed to and many other contentious issues. As to his guilty plea in the Georgian criminal proceedings, I have also set out Mr Mikadze’s evidence on that and the action he is now taking to reverse the share transfers. The Applicants also rely on the fact that Mr Mikadze chooses to hold his assets through opaque corporate structures controlled by off shore companies and that the monies appear to have been held in Latvian bank accounts. However, there are many reasons why people working in politically uncertain countries choose to hold their assets in that way and this does not of itself give rise to an inference that Mr Mikadze will try to defeat any judgment awarded against him.

There is one particular transaction that the Applicants point to as evidence of Mr Mikadze’s propensity to remove assets from the jurisdiction. This concerns the sale of the Georgian subsidiary companies of the 4^th, 8^th and 14^th Respondents, Labbey, Worldfound and Luxtron. In her first statement, Ms Black referred to the subsidiary companies of Labbey (called Labei LLC) and Worldfound (called Worldfound LLC) as being incorporated in Georgia and owning valuable land. In her second witness statement in October 2015, Ms Black states that it appears that on 9 June 2015, a few days after being served with the application (but before the undertakings were given in the order of Mr Spearman QC), Mr Mikadze transferred Labei LLC and Worldfound LLC to an associate of his Mr Goguadze.

In a witness statement in answer to this, Mr Clayman, from Peters & Peters said that he understood from Mr Mikadze that Mr Goguadze is the beneficial owner of Labbey, Worldfound and Luxtron having bought them in February 2015, before the proceedings in Georgia were commenced. He stated further that according to Mr Mikadze, the Georgian subsidiary companies of Labbey, Worldfound and Luxtron (called Luxtron LLC) had each acquired property and land in Georgia that was subject to substantial investment obligations imposed by the Georgian government and Mr Mikadze sold them because he no longer wanted to meet those obligations. He refers to the documents exhibited to Ms Black’s second statement appearing to show that Mr Goguadze personally acquired the three subsidiary companies on 10 June 2015. In answer to the obvious question: why would Mr Goguadze acquire in June 2015 subsidiaries that he effectively already owned if he had really bought the parent companies from Mr Mikadze in February 2015, Mr Clayman says that Mr Goguadze was not able to obtain finance from Georgian banks for the Georgian subsidiaries because they were held by offshore entities and were therefore considered high risk. Mr Goguadze therefore acquired the subsidiaries into his direct ownership to obtain that finance.

The Applicants regard the transfer of the subsidiaries in June as clear evidence of dissipation of assets by Mr Mikadze since the subsidiaries held the only valuable assets (land and property) that have been identified as belonging to any of the Respondents. They assert that the February 2015 transaction supposedly selling the parent LLPs to Mr Goguadze is a sham concocted recently once it became clear that the Applicants had found out about the transfer of the subsidiaries and were likely to point to it as evidence of risk of dissipation. They reject Mr Mikadze’s explanation saying that if the transfer of the subsidiaries into Mr Goguadze’s name in June was really simply to acquire personal ownership, this does not explain why the share sale document obtained from the Georgian register shows a substantial payment being made by Mr Goguadze to the parent LLP. Further, they say that if Mr Mikadze had really divested himself of the three companies in February 2015, he would have dealt with that in his witness statement of 14 August 2015 when responding to the detailed passages in Ms Black’s first statement setting out the links between him and the different Respondents and asserting that they were all beneficially owned by him. These points have considerable force and I consider that the transfers of the parent LLP and the subsidiary LLC’s assets to Mr Goguadze may well be a move to put assets out of the reach of the court.

To counter this, however, Mr Marshall has powerful points to make that there is no risk of dissipation (aside from the point that there are no assets to be dissipated). The first is that neither Mr Mikadze nor any of the Respondents has thus far failed to comply with any order of the English or Georgian court. He provided the Applicants with information about the bank accounts of some of the Respondents as he undertook to do and there is no suggestion that the disclosure was inadequate or incorrect. In the course of the Respondents’ application for security for costs (currently before the Court of Appeal) the Respondents were ordered to pay £50,000 in costs and that sum has been paid. This is not, therefore, on a par with other cases to which the Applicants refer where defendants accused of misappropriating millions of pounds have consistently defied injunctions or costs orders of the court.

The second point is that there has been considerable delay here. I agree that the explanation put forward by the Applicants for delay is very weak. In Anglo Financial S A and another v Goldberg [2014] EWHC 3192 (Ch) Roth J noted that the significance of delay will vary greatly from case to case. It is important to consider what happened over the period of delay and how the claimant seeks to explain it. In that case there had been a delay of several years during which the parties had been in protracted negotiations over the dispute. The judge held that if the defendant in that case was someone who had the intention or desire to spirit away or conceal his assets to avoid a judgment, he had had ample opportunity to do so and conversely that if the applicant really believed that there was a serious risk of dissipation, he would have commenced proceedings years earlier. The same point arises here. The claims in Georgia and the UAE all relate to projects that were completed some time ago. The most valuable claim, that against Raystar relating to the Poti Port arises from a payment made in April 2011. In the claim form the Applicants say only that they ‘subsequently’ found out that the agreements were fictitious without giving further detail of when this was discovered. As regards, for example, the first claim for the recovery of the costs incurred in recovering the shares, this was known about as soon as Mr Mikadze signed the plea bargain in December 2013 but no action seems to have been taken to recover those costs until May 2015, after Bestfort and Manline issued their proceedings in Georgia for the return of the shares. The Applicants accept that investigations into the Ras Al Khaimah investments in Georgia started in 2013 and have been going on for 18 months. Those investigations are still on-going and new material is coming to light all the time. I agree with Mr Marshall that this is a wholly inadequate explanation as to why these applications are being brought now rather than some years ago.

Weighing up these competing factors, if the grant of the relief turned on whether there was a risk of dissipation I would, on balance, not be satisfied that there is a sufficient risk to justify the grant of relief of the very intrusive kind sought. I should say for completeness that I do not regard the fact that an application was made to the LLP registry to dissolve Bellcrown and QB Enterprise or Mr Mikadze’s decision to sell his town house in the UAE in 2014 as providing any evidence of a risk of dissipation.

The Respondents made a number of further points relevant to the question whether if the Georgian and UAE proceedings had been brought in this jurisdiction, it would have been appropriate to make the orders that are sought against the Respondents.

As regards the freezing order, Mr Moverley-Smith helpfully provided me with a track change copy of the draft order showing how it differs in many respects from the Commercial Court standard form order. The first contentious amendment to the standard form order is as regards the provision of information. Paragraph 7 of the draft order provides that each Respondent must within 72 hours of the order inform the Applicants of any assets worldwide exceeding $1,000 giving value, location and details. Paragraph 8 of the draft order then provides that within 7 working days the Respondents must swear an affidavit setting out that information and also setting out:

Mr Marshall argued that an order for the provision of this kind of information is only appropriate relief where a tracing remedy is being sought and there is no such remedy sought in any of the Georgia or UAE proceedings. In A v C [1981] 1 QB 956, referred to earlier, Robert Goff J drew a distinction at page 958D-E between the relief that was appropriate in the personal claim and the relief appropriate in the proprietary claim. The former relief was granted to prevent the abuse of parties causing assets to be removed from the jurisdictions in order to avoid the risk of having to satisfy any judgment which might be entered against them in pending proceedings. The latter was to restrain the disposal of assets of which the plaintiffs claimed to be the beneficial owners. In the proprietary claim, Goff J went on, there was good authority that the court may make orders with the purpose of ascertaining the whereabouts of the missing fund. In the personal claim he said (see page 960C) the court’s powers to order disclosure should be exercised only to ensure that the freezing order secured its objective of preventing abuse. He also made clear that as regards the personal claim it would not be right to make general use of this power to enable the plaintiff to discover whether the defendants has assets.

That approach was approved by the Court of Appeal in A. J. Bekhor & Co Ltd v Bilton [1981] 1 QB 923. Ackner LJ stressed that the ‘privileged position’ occupied by a claimant who is granted a freezing order must not be carried too far and that the court must be vigilant to ensure that the defendant who is subject to the order is not treated like a judgment debtor. In particular it would not be right to make general use of the power to enable the plaintiff to discover whether the defendant has any assets. Of course, the freezing order jurisdiction has evolved greatly in many ways since those early decisions. But the Applicants were not able to point to a case where that important distinction between the disclosure obligations necessary to support a freezing order in a personal claim and the disclosure obligations necessary to support a proprietary claim has been eroded. Mr Moverley-Smith argued that all that the disclosure provision is seeking to uncover here is to identify whether these LLPs hold some of their assets through beneficial ownership of other entities. I do not accept that that is really the purpose of these provisions. None of these LLPs trades or has any function other than to hold assets. Those LLPs that have owned assets in the past (Worldfound, Luxtron and Labbey) have done so through their legal ownership of subsidiary companies which are apparent on the register. There is no reason to suppose that the others will have operated in a different way. In my judgment the information sought is clearly aimed not at identifying other assets beneficially owned by these LLPs but in tracing any moneys that they once held into the ownership of another entity. On the authorities that is not a legitimate exercise in the absence of a proprietary claim.

So far as the appointment of the receiver is concerned, there have been instances where the courts have granted this relief in the past. Mr Moverley-Smith referred me to the judgment of the Court of Appeal in JSC BTA v A [2010] EWCA Civ 1141:

This relief is usually granted where what is being frozen is an asset such as a property or a business which needs some ongoing management in order that it does not diminish in value before the end of the proceedings. Mr Marshall accepted that exceptionally the court has appointed a receiver in support of a freezing injunction, but it has only done so where it has concluded that the freezing order is insufficient on its own and there is a measurable risk that the defendant will act in breach of the freezing order. He submitted that it would be unprecedented to appoint a receiver in respect of a Respondent which is not a defendant in proceedings where the substantive proceedings are in England, let alone proceedings which are ancillary to an action pursued overseas. He also points out that in the current case there is no previous history of Mr Mikadze failing to comply with orders of the court in these proceedings. I bear in mind the comments of the Court of Appeal in JSC BTA Bank v A [2010] EWCA Civ 1141 where the Court described the appointment of a receiver as a very intrusive remedy which is expensive and not easily reversible. In that case there was a tracing claim asserted and there had already been a history of inadequate disclosure by A and cross-examination of A on his affidavit.

In my judgment there are two important factors that weigh in the balance against exercising the court’s discretion to grant the additional relief sought. As I explained earlier, the primary if not the only reason why the Applicants are seeking the appointment of receivers here is to get round the fact that the Latvian courts are not empowered to enforce protective measures granted by another state unless the substantive proceedings are taking place in the courts of that state. The arrangements between Latvia and this jurisdiction as to the enforcement of judgments and orders are governed by EU Regulation 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Official Journal 20.12.2012 L351 p. 1) (“the Regulation”). The aim of the Regulation according to its 4^th and 5^th recitals is to ensure rapid and simple recognition and enforcement of judgments given in a Member State by unifying the rules of conflict of jurisdiction in civil and commercial matters and by doing so through the adoption of a legal instrument of the Union which is binding and directly applicable. Other recitals provide as follows: (emphasis added)

According to the evidence of Mr Repšs, the Latvian Civil Procedure Law provides that the courts there must enforce a foreign judgment if the recognition of the adjudication and enforcement arises from directly applicable legal norms of the European Union or international agreements binding upon Latvia. Latvia has decided to go no further in its recognition of orders of other Member States than it is required to do under the Regulation. Article 42(2) of the Regulation provides that the mechanism by which interlocutory measures are enforced in another Member State requires the person seeking to enforce the order to produce a certificate from the court of origin certifying, amongst other things, that the court has jurisdiction over the substance of the matter.

In this case I do not need to go so far as to hold that it would in all cases be inappropriate for a court to grant additional relief in support of a freezing order with the sole purpose of avoiding the limitations set out in the Regulations. I consider that it is certainly a factor relevant to the exercise of my discretion and in my judgment it would require circumstances much more extreme and unusual than arise in this case to justify such steps.

The second important factor in the exercise of my discretion is the serious risk that the appointment of the receivers and the grant of the power of attorney would stifle the litigation being brought by Bestfort and Manline in Georgia to recover the shareholdings that Mr Mikadze transferred over as part of the plea bargain when he was imprisoned in Georgia in 2013. It is difficult to see how that litigation can be continued once Bestfort and Manline are in the control of receivers appointed by the very people against whom they are litigating. Mr Moverley-Smith acknowledges the force of this concern but countered it by saying that the rights of the LLPs to pursue their litigation could be carved out of the receivership. I do not see how that could work in the circumstances of this case where it is likely that the main asset of the LLPs is their right of action and the powers to be granted to the receivers are so all encompassing. One can readily foresee that disputes are likely to arise over whether particular documents or information gathered by the receivers fall within their obligation to disclose material found to the Applicants’ legal representatives or whether they fall within the carve out for information relating to their claims. If the Georgian court made some interlocutory order which required Bestfort and Manline to be put in funds, then there are likely to be all sorts of problems about whether the funds are frozen by this court’s order, whether the receivers can exercise control over those funds and if not, who is empowered to deal with the funds on behalf of the LLP. The grant of the receivership order is likely to impede the pursuit of Bestfort’s and Manline’s claim in Georgia by causing delay and expense far beyond any likely benefit in terms of assets frozen.

So far as the grant of the power of attorney is concerned, the Applicants rely on In re Huinac Copper Mines Ltd [1910] W.N. 218, a decision of Neville J, as authority for the power to make such an order. In that case a debenture holder sought to enforce a debenture which had fallen due. The company’s principal asset forming the security for the debt was a copper mine in Peru. A receiver was appointed over the company’s property including the mine. Another company in Lima (DF) was granted a power of attorney by the company and pursuant to that power took possession of the mine on behalf of the receivers. The company then revoked that power and granted a power of attorney to another company (C) who ousted DF and started dealing with the mine to the detriment of the claimant. Neville J made an order requiring the company to revoke the power granted to C and execute a power for DF. The single paragraph of the report of his judgment concludes that the power of attorney was to be sealed by the judge if necessary. That appears to be the only instance in which an order in this form has been granted and clearly the facts there are very far away from the facts here. There is a reference to the Huinac decision in Derby & Co Ltd and others v Weldon and others (No 6) [1990] 1 WLR 1139. There a freezing order had been granted in interlocutory proceedings and a receiver appointed. Some of the assets frozen were deposited in Swiss banks but held by those banks outside Switzerland. It appeared that the Swiss courts would not recognise any judgment arising from the English proceedings. The claimants therefore sought an order that the assets should not be returned to Switzerland. In the course of his judgment, Dillon LJ with whom Taylor LJ agreed said:

Sparse though that authority in support of that power is, I accept that in an appropriate case an order compelling the grant of a power of attorney may be permissible. Clearly it was appropriate in In re Huinac itself where the company had acted in flagrant disregard of the receivership that was already in place. The court in Derby v Weldon did not in fact order the grant of a power of attorney or give any further guidance as to what would be an appropriate case in which to do so. This may be a useful weapon in the armoury of the courts but it is not one that should be deployed in this case against Respondents most of whom who are not defendants to any claim brought by the Applicants; where the sole reason for making the order is to overcome the policy of Latvia not to enforce orders of this kind; where there are unlikely to be assets of sufficient value to justify the very considerable costs that will be incurred by the receivers in using the power of attorney and where there is no history of disobedience to court orders on the part of either Mr Mikadze or any of the Respondents.

My conclusion is therefore that the Applicants fail on the first limb of the test to be applied under section 25 of the CJJA. I would not grant this relief even if the substantive proceedings had been brought in this jurisdiction rather than in Georgia and the UAE.

The second part of the test to be applied under section 25 of the CJJA is whether it is inexpedient to grant relief because the substantive proceedings are taking place overseas. Since this question does not arise for decision in light of my findings on the first limb, I can deal with it more briefly. The factors which the court should take into account were set out in Motorola Credit Corpn v Uzan and others (No. 2) [2003] EWCA Civ 752. Potter LJ said:

The main issue raised by the parties as regards expediency was the question whether the Georgian court has the power to freeze assets outside Georgia and so could have made the order sought by this application. Mr Moverley-Smith asserted that it could not and therefore that there was a lacuna in Georgian law that this court was invited to fill. He based this submission on the evidence of Prof David Kereselidze who is a Professor of Private Law at the Faculty of Law at the Tbilisi State University and at the New Vision University Law School in Georgia. His report was submitted by the Respondents. On the question of interim relief Prof Kereselidze concludes;

In relation to rights in legal entities and assets located in Georgia the Georgian courts regard themselves as having exclusive jurisdiction. This is also true in relation to any interim measure to be enforced in Georgia. There would be scope for confusion in the event of both jurisdictions granting orders affecting the same assets. There would also be potential interference with the progress of the Georgian proceedings.

It is highly unlikely that the Georgian court would grant a worldwide freezing order. Generally the courts only grant a restricted list of remedies explicitly provided for by legislation and would avoid measures unknown to them. Georgian law does not envisage interim protection orders applying in a general way to all of a party’s assets wherever they are located. The principles of Georgian private international law prohibit such orders from operating abroad as they would otherwise affect the sovereignty of foreign states and the principles of comity.

There is no practice of removing assets from the control of the owner on an interim basis prior to any final judgment. He states that he considers that there ‘is a distinct policy’ against the grant of orders appointing interim receivers or requiring the grant of a mandate which would have the effect of removing the assets of a party from his control before any judgment on the merits.

Prof Kereselidze goes into some detail about the ambit of Article 198.2 and 198.3 of the Georgian Civil Procedure Code of 1997. Both parties read his report as supporting their position. The Applicants argue that the freezing of Mr Mikadze’s assets held by the Respondents outside Georgia is not possible under Georgian law but that that does not amount to a conflicting policy of the kind which the Court of Appeal indicated in Motorola makes it inexpedient to grant relief under section 25 of the CJJA. The Respondents argue that Prof Kereselidze’s evidence is that the Georgian courts have a statutory power to freeze all Mr Mikadze’s assets wherever situated but have chosen not to, applying a policy which this court should not undermine.

There was no real evidence from the Applicants about what has happened so far in the Georgian proceedings as regards the grant of interim relief. Attached to the Applicants’ skeleton argument served shortly before the hearing was a schedule headed ‘List of Frozen Property’. Included in the list was land in Georgia to the value of about $8.8 million, personal items belonging to Mr Mikadze of relatively small value, shareholdings of Mr Mikadze in a number of Georgian companies to which no values are ascribed and sums standing in Georgian bank accounts of Mr Mikadze, Montbury and others up to a certain value. The shareholdings described as held by Mr Mikadze do not include any shareholdings in the Respondent LLPs or their subsidiaries, in particular in the Georgia based subsidiaries of Worldfound, Labbey and Luxtron which the Applicants contend are still beneficially owned by Mr Mikadze. It appears therefore that there have been significant proceedings seeking interim relief in the Georgian courts and that substantial relief has been granted. There is no evidence explaining when or on what basis these applications have been brought and in particular whether more relief going beyond assets held in Georgia was applied for but refused. Rather belatedly in the course of his submissions in reply, Mr Moverley-Smith told me on instruction that the Applicants had not applied for relief going beyond Mr Mikadze’s assets in Georgia because they thought the Georgian court would not grant such relief. There is no evidence as to the value of some of the assets frozen and to what extent, therefore, the sums which the Applicants seek to secure in these applications are already secured by freezing orders made in Georgia.

The position as regards what has happened in the Georgian courts remains very unclear. Prof Kereselidze’s evidence is ambiguous as to whether the Georgian courts are empowered to grant worldwide relief but apply a self denying ordinance not to do so and if that is the case, what the basis for that practice is. Mr Moverley-Smith submitted that the Georgian courts’ practice could not be considered a ‘policy’ of the kind referred to in Motorola unless there was case law setting out and explaining that policy. I do not accept that. It seems to me that the Georgian court has considered what interim relief it is appropriate to grant against Mr Mikadze and the defendants in support of the Georgia proceedings and has not granted relief beyond the list of frozen assets. The orders sought here cover all assets wherever they are in the world, whether or not in the Respondent’s name, whether owned solely or jointly and whether the Respondent is interested in them legally beneficially or otherwise. The order would certainly freeze any Georgian assets of these Respondents.

My conclusion on the second limb is therefore that it is inexpedient to grant the relief sought. There is a serious risk here that any order I make will cut across the decisions of the Georgian courts about what is appropriate relief to grant in the substantive proceedings and will freeze assets over which the Georgian courts regard themselves as having exclusive jurisdiction.

I therefore dismiss the applications for relief under section 25 CJJA on the grounds that:

I would not grant the relief sought if the substantive proceedings were taking place within the jurisdiction, and

It is inexpedient to grant the relief in the circumstances of the cross claims taking place in Georgia.