VTB (the “Bank”) loaned money to a Russian company under a facility agreement that was entered into primarily for the purpose of enabling the company to acquire an interest in a target company in BVI. The Bank commenced proceedings in England in December 2010 claiming, among other things, that it was induced to enter into the facility agreement by fraudulent misrepresentations. One of the central allegations in the English action is that the transaction underlying the facility agreement was not, as the Bank was led to believe, a genuine commercial transaction between two independent companies for the sale of shares at market value. The Russian Company and the owner of the target shares were instead alleged to be companies controlled by the same beneficial owners, who’s ultimate controlling mind was Mr. Malofeev. Action was brought in England against Mr. Malofeev, the vendor of the target shares, and two intermediary companies. The Bank applied to the English Court for a worldwide freezing order against all of the parties in the English action, and for an order for alternative service on Mr. Malofeev, both of which were granted. Permission was granted to enforce the order against Mr. Malofeev’s assets in several jurisdictions, including the Cayman Islands, where he is alleged to hold interests in two Cayman companies. The freezing order and the order granting leave to serve Mr. Malofeev outside of the jurisdiction were reversed on appeal, a decision that is proceeding to the Court of Appeal in England.
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VTB Capital PLC -v- Malofeev et al Cause No. FSD 141 of 2011, per Creswell J (13 December 2011 and 10 January 2012)