VTB Capital plc v Nutritek International Corp and others

On an application to serve proceedings outside the jurisdiction, the claimant must show that England and Wales is clearly the appropriate forum. The place where a tort occurred is ordinarily a prima facie starting point, but all circumstances must be weighed. Other connections may overwhelm that factor.

Assuming that a court may pierce the corporate veil, the doctrine cannot make a controller jointly liable as a contracting party merely because the controller used the company to enter the contract and induced it by misrepresentation. Contractual liability depends on the parties’ objectively manifested intentions. A claimant in that position has its ordinary remedy in tort.

VTB Capital plc v Nutritek International Corp and others concerned a loan of about US$225 million made by VTB to a Russian company to finance the purchase of Russian dairy companies. VTB alleged that it had been induced in London by fraudulent misrepresentations about common control and value. It obtained permission to serve the foreign defendants outside the jurisdiction and later sought to add a contractual claim by piercing the borrower’s corporate veil.

Arnold J set aside service and refused the amendment: [2011] EWHC 3107 (Ch). The Court of Appeal upheld both decisions: [2012] EWCA Civ 808. The Supreme Court considered whether England was clearly the appropriate forum, whether the alleged torts were governed by English law, and whether veil piercing could arguably make non-parties liable under the loan agreements.

1. Disposition. By a majority, the appeal was dismissed. Lord Mance, Lord Neuberger and Lord Wilson held that the orders setting aside permission for service outside the jurisdiction should stand. Lord Clarke and Lord Reed dissented on that issue. All members agreed that permission to amend to advance the contractual claim should be refused and that the freezing orders should be discharged.
2. Appropriate forum. The claimant had to establish that England was clearly or distinctly the appropriate forum. The place where a tort was committed ordinarily provides a prima facie starting point, but it creates no decisive presumption. The governing principle remains the identification of the forum in which the case can suitably be tried for all parties and the ends of justice. Here the common design, transaction, witnesses, documents and central factual disputes were overwhelmingly connected with Russia. Those considerations outweighed the English place of the deceit, English governing law and the contractual jurisdiction clauses.
3. Governing law and appellate restraint. The alleged deceit was governed by English law under sections 11 and 12 of the Private International Law (Miscellaneous Provisions) Act 1995. The courts below had erred on that question, but the error did not materially affect their evaluative conclusions. An appellate court should not interfere with an evaluative forum decision unless the judge made a significant error of principle or concerning relevant considerations.
4. Corporate veil. Per Lord Neuberger, with all members agreeing in the result and a majority agreeing with his reasons, it was unnecessary and inappropriate to decide whether English law ever permits piercing the corporate veil. Assuming that it does, VTB’s proposed claim was an impermissible extension. A controller cannot be treated as jointly and severally liable under a company’s contract merely because the controller used the company and made misrepresentations inducing the contract. The proposal conflicted with separate corporate personality, objective contractual intention and the availability of an ordinary claim in deceit. Antonio Gramsci Shipping Corporation v Stepanovs [2011] EWHC 333 (Comm) was disapproved to the extent that it supported such contractual liability.
5. Freezing orders. Because the English proceedings could not continue, the discharged worldwide freezing order remained discharged and the temporary order pending appeal was also discharged.

1. United Kingdom Supreme Court: By a majority, dismissed VTB’s appeal from [2012] EWCA Civ 808; unanimously upheld refusal of the proposed contractual amendment; discharged the temporary freezing order.
2. Court of Appeal: In [2012] EWCA Civ 808, upheld the setting aside of permission to serve outside the jurisdiction and the refusal of permission to amend.
3. High Court, Chancery Division: Arnold J in [2011] EWHC 3107 (Ch) set aside service outside the jurisdiction, refused the proposed amendment and declined to continue the worldwide freezing order.