Millennium Financial Ltd Appellant v [1] Thomas Mc Namara [2] Bank of Nevis International Ltd Respondents [ECSC]

• Jurisdiction: Saint Kitts and Nevis
• Judge: BAPTISTE, J.A. [AG.]:,BAPTISTE, J.A. [AG.],Justice of Appeal [Ag.],Davidson Kelvin Baptiste,Janice George-Creque,Michael Gordon, QC
• Judgment Date: 15 March 2010
• Judgment citation (vLex): [2010] ECSC J0315-3
• Court: Court of Appeal (Saint Kitts and Nevis)
• Date: 15 March 2010
• Docket Number: HCVAP 2008/012

[2010] ECSC J0315-3

IN THE COURT OF APPEAL

Before:

The Hon. Mde. Janice George-Creque

Justice of Appeal

The Hon. Mr. Michael Gordon, QC

Justice of Appeal [Ag.]

The Hon. Mr. Davidson Kelvin Baptiste

Justice of Appeal [Ag.]

HCVAP 2008/012

Between:

Millennium Financial Limited

Appellant

and

[1] Thomas Mc Namara

[2] Bank Of Nevis International Limited

Respondents

Appearances:

Mr. Adrian Scantlebury for the Appellant

Mr. Anthony Gonsalves for the first Respondent

Civil Appeal – recognition of order appointing a receiver in foreign court – whether there was a sufficient connection between the company and the foreign court – whether recognition of the order gave effect to a foreign penal law – whether inherent jurisdiction provides authority for recognition of foreign appointed receiver in the absence of statutory basis – fraud – piercing the corporate veil – lex fori – admissibility of hearsay evidence

The appellant, "Millennium Nevis", is a company incorporated in Nevis. In May 2002, the United States Securities and Exchange Commission (SEC) commenced civil proceedings in New York against "Millennium Uruguay", a company incorporated in Uruguay, alleging that it was involved in a scheme to defraud investors. Millennium Uruguay, it alleged, routed investor money through intermediary banks to several foreign accounts in order to conceal its unlawful activity. This included an account held in the name of Millennium Nevis at Bank of Nevis International ("the second respondent").

In December 2002, Thomas Mc Namara ("the US Receiver") was appointed to act as receiver for Millennium Uruguay and all its divisions, groups, subsidiaries, affiliates etc. doing business as "Millennium Financial Ltd." Having reviewed the business records of Millennium Uruguay and Millennium Nevis, the US Receiver concluded that they were both elements of the same integrated international operation. In December 2005, SEC obtained a final judgment of permanent injunction against Millennium Uruguay. In October 2008, the US Receiver filed an application for recognition of the US Receivership Order in proceedings then joined as between Millennium Nevis and the second respondent. By order dated 28^th November 2008, the High Court of Saint Christopher and Nevis, Nevis Circuit, ordered that the US Receivership Order be recognized and given full effect to within the Federation of Saint Christopher and Nevis. No reasons were given for the decision.

Millennium Nevis appealed, inter alia, on the ground that the learned judged had no jurisdiction to recognise or enforce the US Receivership Order having regard to the fact that there is insufficient connection between Millennium Nevis and the US Court's jurisdiction; the US Receivership Order gave effect to a foreign penal law; and even if the law were civil and not penal, the statutory provisions for the reciprocal treatment of foreign judgments do not extend to the United States of America. Millennium Nevis also challenged the learned judge's findings with respect to separate legal personality and the admissibility of hearsay evidence.

Held: allowing the appeal, setting aside the order recognizing and giving effect to the US order appointing the receiver and ordering that the parties make written submissions on costs within 21 days:

• 1. The court's jurisdiction to recognise a receiver appointed by a foreign court (the United States District Court) is triggered by the existence of a sufficient connection between the foreign jurisdiction and the company covered by the receivership (Millennium Nevis). Absent reasons for the decision in the court below, the appellate court is free to exercise its own discretion de novo, taking into account the material evidence.

  Dictum of Goulding J. on the "sufficient connection test" in Schemmer v Property Resources Limited et al [1975] 1 Ch 273, applied.

• 2. There was no sufficient connection between Millennium Nevis and the United States having regard to the fact that Millennium Nevis was incorporated in Nevis, it was not a party to or defendant in the US action; there is no evidence that it conducted business in the United States or that it submitted itself to United States jurisdiction (save for the actions of the US Receiver acting on behalf of Millennium Uruguay). Such finding is made having regard to all the affidavit evidence and exhibits presented and is sufficient to dispose of the appeal in the appellant's favour.

• 3. The fact that a provision found within a law contains criminal sanctions, such as penalties or forfeiture, does not mean that the provision itself is penal in nature. The court has to determine the substance of the right sought to be enforced and whether its enforcement would, directly or indirectly, involve the execution of the penal law of the foreign jurisdiction, in this case, the United States of America.

  Dicta of Goulding J. in Schemmer v Property Resources Limited et al [1975] 1 Ch 273 and Schofield J. in Stutts v Premier Benefit Capital Trust 1992–93 CILR 605 (Grand Court of the Cayman Islands) on foreign penal law considered and not applied. Roy Madison Terry JR and Durette Bradshaw Plc v Butterfield Bank (Guernsey) Ltd. Royal Court of Guernsey 24^th February 2006, approved. Dictum of Lord Phillips in Islamic Republic of Iran v The Barakat Galleries Ltd. [2007] EWCA Civ 1374, followed.

• 4. Having regard to the terms of the US Receivership Order and the affidavit of the US Receiver, it is pellucid that the substance of the right sought to be enforced was the protection, preservation and collection of the remaining assets of Millennium Uruguay for the benefit of defrauded investors and to compensate them. Accordingly, there is no issue of executing the penal laws of a foreign state, namely, the United States of America. This aspect of the first ground of appeal accordingly fails.

• 5. There is no treaty ratified or legislation enacted for the reciprocal enforcement of civil judgments between the Federation of Saint Christopher and Nevis and the United States of America. In the absence of a statutory basis, the inherent jurisdiction of the court provides the requisite authority for the recognition of a foreign appointed receiver.

  Globe-X Management Limited, Globe-X Canadian Limited, Silicon Isle Limited v Clifford Johnson and Wayne Aranha Anguilla Civil Appeal No. 4 of 2003 which considered Re African Farms Ltd. [1906] TS 373, followed in part. Texan Management Ltd. & Others v Pacific Electric Wire & Cable Company [2009] UKPC 46, followed.

• 6. The court may pierce the corporate veil where a company is party to fraud. However, Millennium Nevis, as distinct from Millennium Uruguay, did not play a “pivotal role" in nor was it party to the international investment fraud scheme so as to warrant the piercing of the veil of incorporation. The use of Millennium Nevis account cannot, on its own, establish a sufficient nexus with Millennium Uruguay's fraudulent operations. Further, it does not appear that Millennium Nevis was incorporated or transacted business merely as a vehicle for Millennium Uruguay's fraud. The significance of separate corporate personality was not fully appreciated. The appellant accordingly succeeds on the third ground of appeal.

  Jones v Lipman [1962] 1 WLR 832 , DHN Food Distributors Ltd. v Tower Hamlets LBC [1976] 1 WLR 852, Re A Company Ltd. [1985] BCLC 333 [1985] BCLC 333 (CA), Adams v Cape Industries [1991] 1 All ER 929, Trustor AB v Smallbone [2001] 3 All ER 987, applied.

• 7. The reception or rejection of evidence must be governed by the lex fori, that is, the law of the court in which the proceeding is brought. The judgment of a foreign court having jurisdiction over the parties and the subject-matter of the suit therefore cannot be impeached on the ground that it is erroneous on the merits. Millennium Nevis was not however a party to the proceedings before the United States court and had not submitted to United States jurisdiction. The principle of law is accordingly inapplicable.

  De Cosse Brissac v Rathbone 158 ER 123 , distinguished.

• 8. Although rather late in the proceedings for the appellant to complain, it would be unsafe to recognise a foreign order which was the fruit of proceedings where inadmissible hearsay evidence was adduced and the right to challenge such was waived by the US Receiver. Ground 4 of the appeal is also allowed.

1 BAPTISTE, J.A. [AG.]: Millennium Financial Limited, the appellant (hereinafter called Millennium Nevis) is incorporated in Nevis and has its registered office in Charlestown, Nevis. On 28^th November 2008, the High Court of Saint Christopher and Nevis, Nevis Circuit, made an order recognizing the order of a United States District Court appointing Thomas W. Mc Namara as receiver of Millennium Nevis. This is an appeal against that decision. Millennium Nevis seeks to assail the order on jurisdictional and other grounds. It is necessary, first, to give a brief narrative of the background facts.

BAPTISTE, J.A. [AG.]

2 On or about 22^nd May 2002, the United States Securities and Exchange Commission (SEC) instituted civil proceedings in New York against Millennium Financial Limited, a company incorporated in Uruguay (hereinafter Millennium Uruguay), for alleged violations of sections 17(a) of the Securities Act 1933 and 10(b) of the Securities Exchange Act 1934. On 6^th December 2002, the SEC obtained an order appointing Thomas W. Mc Namara ("The US Receiver") as receiver of Millennium Uruguay. The Receivership Order stated that the US Receiver was to act as receiver for Millennium Uruguay and "all of its divisions, groups, subsidiaries, subdivisions, successors, affiliates, and nominees, including, but not limited to entities doing business as "Millennium Financial Ltd." and incorporated in Uruguay, the Federation of Saint Kitts and Nevis, or in any other country or state."

3 The complaint of the SEC alleged...