VTB Capital plc v Nutritek Int Corp
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is an
English company law The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directive (European Union), Directives and court cases, the co ...
case, concerning piercing the corporate veil for fraud. Together with the subsequent decision of the Supreme Court later the same year in the Supreme Court substantially restated the English company law position in relation to piercing of the corporate veil.


Facts

VTB Capital plc claimed that Nutritek, its parent and a director called
Konstantin Malofeev Konstantin Valeryevich Malofeev (russian: link=no, Константин Валерьевич Малофеев) is a Russian businessman and chairman of non-government pro-monarchism organisation Society for the Development of Russian Historical ...
, fraudulently misrepresented the value of dairy companies that Nutritek was selling to Russagroprom LLC. VTB was giving a $225m loan to Russagroprom to buy the dairy companies. VTB claimed that it was deceived into thinking that Russagroprom was not already under common control with Nutritek. It additionally sought to hold the owner of Nutritek, Marshall Capital Holdings, Marshall Capital LLC and the alleged controller, Konstantin Malofeev all jointly liable because of their control of Nutritek. VTB Capital was a subsidiary of the Russian state owned bank called JSC VTB Bank, but the loan facility agreement was expressed to be governed by English law. Russagroprom defaulted on the loan, and only $40m was recovered. VTB sought to amend to add claims that the court should pierce the veil of Russagroprom to make the defendants liable under the facility agreement.


Judgment


High Court

Arnold J Arnold may refer to: People * Arnold (given name), a masculine given name * Arnold (surname), a German and English surname Places Australia * Arnold, Victoria, a small town in the Australian state of Victoria Canada * Arnold, Nova Scotia Uni ...
refused permission to amend and serve the proceedings out of the jurisdiction, because England was not demonstrated to be the appropriate forum. It discharged the freezing injunction that was obtained against Malofeev.


Court of Appeal

The
Court of Appeal A court of appeals, also called a court of appeal, appellate court, appeal court, court of second instance or second instance court, is any court of law that is empowered to hear an appeal of a trial court or other lower tribunal. In much of t ...
dismissed the appeal. Lloyd LJ gave the judgment.
Rimer LJ Sir Colin Percy Farquharson Rimer (born 30 January 1944) is a former judge of the English Court of Appeal; he retired in 2014. Education He was educated at Dulwich College from 1954 to 1962 and at Trinity Hall, Cambridge. Legal career Rimer was ...
and Aikens LJ concurred.
EWCA Civ 808
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Supreme Court

The Supreme Court dismissed the appeal, Jonathan Mance, Baron Mance">Lord Mance Jonathan Hugh Mance, Baron Mance, (born 6 June 1943) is a retired British judge who was formerly Deputy President of the Supreme Court of the United Kingdom. Early life Mance was born on 6 June 1943, (subscription required) one of four child ...
giving the leading judgment, and holding that England was not the appropriate forum. Although the High Court had erred in interpreting ''Spiliada Maritime Corp v Cansulex Ltd'' [1987] AC 460, this did not effect its ultimate conclusion because its error favoured VTB. The High Court wrongly concluded that Russian law governed the alleged torts, but it had considered the position if English law had been applicable and found this not to be favourable. The Court of Appeal also erred in finding Russian law applicable for the torts and did not recognise the significance of the governing law, but this would not have changed the conclusion. The High Court’s exercise of discretion could not be faulted or set aside. It was unnecessary to resolve whether the court could not pierce the veil but this could not succeed in any case. The allegation would be an extension of existing law, so that there could be piercing if someone controlled a company, as if they had been a co-contracting partner. A strong justification would be required, and there was an overwhelming case against extension because the law provided redress against the controller in a misrepresentation action. It would be wrong to treat another defendant as party to the contract where none of the actual parties had intended this. The facts did not involve Russagroprom being used as a facade to conceal true facts. The worldwide freezing injunction would be discharged, and it was unsatisfactory given the length of litigation.
Lord Neuberger David Edmond Neuberger, Baron Neuberger of Abbotsbury (; born 10 January 1948) is an English judge. He served as President of the Supreme Court of the United Kingdom from 2012 to 2017. He was a Lord of Appeal in Ordinary until the House of Lo ...
gave a concurring judgment. While not technically necessary, he said the following on piercing the corporate veil. Lord Wilson concurred with Lord Mance and Lord Neuberger. He said the following on the corporate veil point. Lord Clarke gave a judgment, dissenting on the question of forum, while reserving any comments on the corporate veil for a future case.
Lord Reed Robert John Reed, Baron Reed of Allermuir, (born 7 September 1956) is a British judge who has been President of the Supreme Court of the United Kingdom since January 2020. He was the principal judge in the Commercial Court in Scotland before b ...
dissented regarding forum, and agreed with Lord Neuberger there were strong reasons against piercing the veil.


See also

* UK company law


Notes

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References

* United Kingdom company case law Supreme Court of the United Kingdom cases 2013 in British law 2013 in case law