Banca Turco Romana SA v Cortuk & Ors, Court of Appeal - Commercial Court, March 28, 2018, [2018] EWHC 662 (Comm)

Resolution Date:March 28, 2018
Issuing Organization:Commercial Court
Actores:Banca Turco Romana SA v Cortuk & Ors
 
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Neutral Citation Number: [2018] EWHC 662 (Comm)

Case No: CL-2017-000700

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Rolls Building, Fetter Lane, London, EC4A 1NL

Date: 28 March 2018

Before :

THE HON MR JUSTICE POPPLEWELL

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Between :

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Philip Riches and Sam Goodman (instructed by Burford Law) for the Claimant

Graeme Halkerston (instructed by Fox Williams LLP) for the Third Defendant

James Leabeater (instructed by Dechert LLP) for the Fourth and Fifth Defendants

Hearing dates: 22 and 23 March 2018

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The Hon. Mr Justice Popplewell :

Introduction

  1. On 22 and 23 March 2018 I heard applications to continue freezing orders which I granted against the third to fifth defendants on an ex parte application on 16 November 2017. At the conclusion of the hearing I announced my decision that the orders would be set aside and not continued, for reasons which were expressed very briefly due to the lateness of the hour. These are my fuller reasons.

  2. The claimant (``BTR'') was incorporated in Bucharest, Romania in 1993 and until 2002, when it was put into liquidation, it carried on business as a large retail and commercial bank with operations chiefly in Romania but including a wide network of corresponding banks in Turkey and elsewhere. It was closely affiliated with, and majority owned by, the Bayindir Group. The first defendant (``Mr Çörtük'') is the owner and controller of the Bayindir Group.

  3. The second to fifth defendants are joined to the proceedings as non cause of action defendants for the purposes of seeking interlocutory relief from them. The second defendant (``Serkan'') is Mr Çörtük's son. The third defendant (``Ms Sakarya'') is Mr Çörtük's daughter. She worked in Human Resources for one of her father's companies within the Bayindir Group. She is a Turkish citizen and lives in Turkey. The fourth defendant (``Mr Özerman'') worked closely with Mr Çörtük for the Bayindir Group from 1998. BTR describes him as Mr Çörtük's right hand man. He is a Turkish citizen and resident in Turkey. The fifth defendant (``Ms Gönen'') worked in the Human Resources department within the Bayindir Group from around 1997. She is a close family friend of Mr Çörtük. She too is a Turkish citizen and lives in Turkey.

  4. On 16 November 2017 I granted freezing orders against each of the five defendants together with ancillary disclosure orders. The return date was 1 December 2017. The first and second defendants have played no part in these proceedings. They did not appear at the return date, when the orders were continued against them. They have failed to comply with the disclosure provisions. Ms Sakarya, Mr Özerman and Ms Gönen sought, and were granted, an adjournment of the return date in order to prepare evidence to resist the continuation of the orders.

  5. The relief sought against Ms Sakarya, Mr Özerman and Ms Gönen is ancillary to the substantive claim against Mr Çörtük and to various proceedings seeking to enforce that claim. The claim is based on what has been described as ``the Deposit Account Fraud'', namely that between 1998 and April 2000 Mr Çörtük caused BTR fraudulently to pledge large deposits held by BTR with foreign banks as security for loans made to the Bayindir Group, to a total value of about US$108 million and €14.8 million; the Bayindir Group company then defaulted on the loans, causing the lenders to exercise their security over BTR's deposits. A criminal investigation was opened against Mr Çörtük and a number of the other directors in Romania in February 2001. BTR joined its civil claim to the criminal proceedings seeking damages against Mr Çörtük and the other directors. On 19 April 2007 a first instance judgment awarded BTR the full amount sought. There were appeals, ultimately to the Second Criminal Chamber of the Court of Appeal of Bucharest, which in material respects dismissed the appeal on 25 May 2012. In that decision (``the Romanian Judgment'') the court held that Mr Çörtük had been instrumental in perpetrating the Deposit Account Fraud which had directly led to the insolvency and liquidation of the bank on 3 July 2002. The Court sentenced Mr Çörtük to 13 years imprisonment (a period subsequently reduced to 10½ years), and held Mr Çörtük liable to pay to BTR approximately US$59.4 million and €11.3 million plus interest. That judgment debt remains unsatisfied, save for a sum of CHF2.8 million which was recovered as a result of criminal proceedings in Switzerland against Mr Çörtük. Following the judgment and a request by Romania, Interpol issued a red notice for Mr Çörtük's arrest and extradition. He has served no part of his sentence and has evaded extradition and arrest. Mr Çörtük and his son, Serkan, now reside in Monroe Township, New Jersey, USA. He maintains his innocence of the Deposit Account Fraud and has alleged that the Romanian proceedings, in which he took no part, were without jurisdiction and a breach of his human rights.

  6. BTR filed an application for recognition and registration for enforcement of the Romanian Judgment in this court on 20 November 2017, shortly after the ex parte application for the freezing orders and as foreshadowed at the hearing of that application. On 28 November 2017 Master Kay QC made such an order (``the Enforcement Order''). It has been served on Mr Çörtük and the period of two months within which Mr Çörtük was entitled to apply to set it aside have passed without any such application. It is accordingly now final.

  7. The basis on which BTR says that the freezing order relief is appropriate and necessary against Ms Sakarya, Mr Özerman and Ms Gönen can be summarised as follows. The freezing order against Mr Çörtük alone is unlikely to be fully effective because he has hidden his significant assets in a complex web of entities across multiple jurisdictions. As a convicted criminal and a fugitive from justice he has demonstrated a propensity for dishonesty. His concealment of his assets relies to a significant extent on the assistance of Ms Sakarya, Mr Özerman and Ms Gönen who hold or control or manage a significant proportion of those assets at his direction or for his benefit. They must therefore also be restrained lest Mr Çörtük simply use them as his agents to help him to continue to evade justice. It is said that the freezing orders lend real and valuable support to four sets of proceedings, namely (1) the proceedings in England pursuant to the Enforcement Order; (2) the Romanian liquidation proceedings; (3) proceedings in New Jersey in the bankruptcy of Mr Çörtük; and (4) enforcement proceedings in Switzerland. Only (1) and (2) were relied on at the ex parte application.

    The assets

  8. The application focussed on three groups of assets said to be beneficially owned by Mr Çörtük, namely (1) the Rowena structure, (2) the Tempus structure, and (3) in Ms Gönen's case, a life insurance policy.

    The Rowena structure

  9. Assets within the Rowena structure are held as follows. At the head of the structure is Rowena Ventures Limited, a BVI company. Its shares are held by Lemania International SA, a Panamanian registered entity owned by a corporate service provider as nominee. Those shares are held as nominee ostensibly for Ms Sakarya. Ms Sakarya's case is that she is the ultimate beneficial owner of the shares in Rowena and accordingly of the assets below Rowena in the structure. It is BTR's case that in truth Mr Çörtük is the beneficial owner of the shares in Rowena and the assets in the structure below it. Rowena was placed into voluntary liquidation on 3 April 2013 and was struck off the BVI register, but there are grounds to believe that it has made the necessary payments for its restoration and that it has been or will be restored.

  10. Rowena owns all the shares in Hollydale Investments Ltd, an English company. Hollydale Investments Ltd owns all the shares in Westpoint Industries (UK) Ltd, another English company (``Westpoint UK''). The directors of Westpoint UK are Senton Properties Ltd which is part of Dominion, a wealth services provider assisting Mr Çörtük; and Ms Roue of Vicena, a corporate service provider. Serkan holds a power of attorney for Westpoint UK. Other than a Swiss bank account which is not relied on for the purposes of this application, Westpoint's only known assets are its 100% shareholding in Westpoint USA Inc (``Westpoint USA''), a company incorporated under the laws of New Jersey USA. Westpoint USA owns three companies incorporated under the laws of New Jersey, USA, each with Iron Bridge in its name (``the Iron Bridge Companies''), which in turn operate a business in engineering and construction with significant valuable assets. The location of that business and those underlying assets was not revealed by the evidence before me, but it is reasonable to infer that they are in whole or in part in New Jersey.

    The Tempus structure

  11. The Tempus Foundation is a Liechtenstein foundation, which, so far as the evidence on this application is concerned, it is common ground is ultimately beneficially owned by Mr Çörtük. The Tempus Foundation owns (indirectly) all the shares in Teneo Holdings Ltd (``Teneo'') a company incorporated in Malta. Mr Özerman has been, and is believed by BTR still to be, the sole signatory of Teneo. Teneo holds all the shares in Piedmont Investments Ltd (``Piedmont UK'') an English company. Piedmont's directors are Ms Roue and a corporate director registered at the same address. Piedmont UK own 99% of the shares in S.C. Piedmont Investments SRL (``Piedmont Romania'') a Romanian company. The other 1% shareholding in Piedmont Romania is held by Mr Özerman. Mr Özerman is a director of Piedmont Romania. Piedmont Romania holds valuable assets in the...

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