Beluga Shipping GmbH v Suzlon Energy Ltd

Federal Court of Australia|2009-12-15|Before: Rares J

On 15 December 2009, upon the Second Cross Claimants (the Suzlon Parties): (a) by their counsel giving to the Court: (i) the undertakings set out in Schedule A to the Penal Notice and Freezing Order annexed to these orders; and (ii) the usual undertaking as to damages; and (b) by their solicitors, undertaking to pay the filing fee of the motion, THE COURT ORDERS THAT:

The Suzlon Parties have leave to file in court the notice of motion.
Orders 1 to 9 sought in the notice of motion be returnable instanter and ex parte.
The time for service of the motion, the orders including the penal notice and freezing order and supporting affidavits listed in Schedule B to the penal notice and freezing order together with such other material as is provided for in order 7 below be abridged and service be effected by on or before 22 December 2009.
Leave be given to the Suzlon Parties to join Manning Limited (Bahamas Company No. 156337) (Manning Ltd), a Bahamas International Business Companies Act company as the Twelfth Second Cross Defendant.
The Suzlon Parties have leave to file in court a Third Further Amended Second Cross Application and a Second Further Amended Statement of Second Cross-Claim.
The Suzlon Parties have leave under Order 8 Rule 3 (2) of the Federal Court Rules to serve the Third Further Amended Second Cross Application and the Second Further Amended Statement of Second Cross-Claim and these orders out of the jurisdiction upon each of the Second Cross Defendants.
At the same time as service of the documents and orders referred to in order 6, Manning Ltd be served with: (a) the notice of motion dated 15 December 2009; (b) a copy of the evidence relied on by the Suzlon Parties to obtain these orders at the hearing of the notice of motion; (c) a copy of the written submissions made to the Court by the Suzlon Parties at the hearing of the notice of motion; (d) a note of the oral submissions made to the Court at the hearing of the notice of motion; and (e) the penal notice and freezing order and the schedules thereto.

(a) the 'Suzlon Parties' means the First to Sixth Second Cross Claimants;

(b) 'you', where there is more than one of you, includes all of you and includes you if you are a corporation;

(d) 'unencumbered value' means value free of mortgages, charges, liens or other encumbrances. 5. (a) If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions. (b) If you are ordered not to do something, you must not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way. FREEZING OF ASSETS 6. (a) You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia ('Australian assets') up to the unencumbered value of AUD$26,000,000.00 ('the Relevant Amount'). (b) If the unencumbered value of your Australian assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian assets still exceeds the Relevant Amount. (c) If the unencumbered value of your Australian assets is less than the Relevant Amount, and you have assets outside Australia ('ex-Australian assets'): (i) You must not dispose of, deal with or diminish the value of any of your Australian assets and ex-Australian assets up to the unencumbered value of your Australian and ex-Australian assets of the Relevant Amount; and (ii) You may dispose of, deal with or diminish the value of any of your ex-Australian assets, so long as the unencumbered value of your Australian assets and ex-Australian assets still exceeds the Relevant Amount. 7. For the purposes of this order: (1) your assets include: a. all your assets, whether or not they are in your name and whether they are solely or co-owned; b. any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions). (2) The value of your assets is the value of the interest you have individually in your assets. EXCEPTIONS TO THIS ORDER 8. This order does not prohibit you from: (a) paying up to US $1,000.00 or its foreign or Australian currency equivalent a week on your ordinary business expenses; (b) paying your reasonable legal expenses; (c) dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred; and (d) in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the Suzlon Parties, if possible, at least two working days written notice of the particulars of the obligation. 9. You and the Suzlon Parties may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the Suzlon Parties or you must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the Suzlon Parties and you, and the Court may order that the exceptions are varied accordingly. 10. (a) This order will cease to have effect if you: (i) pay the sum of $26,000,000.00 into Court; or (ii) pay that sum into a joint bank account in the name of your solicitor and the solicitor for the Suzlon Parties as agreed in writing between them; or (iii) provide security in that sum by a method agreed in writing with the Suzlon Parties to be held subject to the order of the Court. (b) Any such payment and any such security will not provide the Suzlon Parties with any priority over your other creditors in the event of your insolvency. (c) If this order ceases to have effect pursuant (a), you must as soon as practicable file with the Court and serve on the Suzlon Parties notice of that fact. COSTS 11. The costs of this application are reserved to the judge hearing the application on the Return Date. PERSONS OTHER THAN THE APPLICANT AND RESPONDENT 12. Set off by banks This order does not prevent any bank from exercising any right of set off it has in respect of any facility which it gave you before it was notified of this order. 13. Bank withdrawals by the respondent No bank need inquire as to the application or proposed application of any money withdrawn by you if the withdrawal appears to be permitted by this order. 14. Persons outside Australia (a) Except as provided in subparagraph (b) below, the terms of this order do not affect or concern anyone outside Australia. (b) The terms of this order will affect the following persons outside Australia: (i) you and your directors, officers, employees and agents (except banks and financial institutions); (ii) any person (including a bank or financial institution) who: (1) is subject to the jurisdiction of this Court; and (2) has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and (3) is able to prevent or impede acts or omissions outside Australia which constitute or assist in a disobedience of the terms of this order; and (iii) any other person (including a bank of financial institution), only to the extent that this order is declared enforceable by or is enforced by a court in a country or state that has jurisdiction over that person or over any of that person's assets. 15. Assets located outside Australia Nothing in this order shall, in respect of assets located outside Australia, prevent any third party from complying or acting in conformity with what it reasonably believes to be its bona fide and properly incurred legal obligations, whether contractual or pursuant to a court order or otherwise, under the law of the country or state in which those assets are situated or under the proper law of any contract between a third party and you, provided that in the case of any future order of a court of that country or state made on your or the third party's application, reasonable written notice of the making of the application is given to the Suzlon Parties.

SCHEDULE A UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT (1) The Suzlon Parties undertakes to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order. (2) As soon as practicable, the Suzlon Parties will file and serve upon the respondent copies of:

(b) the application for this order for hearing on the return date;

(iv) any other document that was provided to the Court.

(d) a transcript, or, if none is available, a note, of any exclusively oral allegation of fact that was made and of any exclusively oral submission that was put, to the Court;

(e) the originating process, or, if none was filed, any draft originating process produced to the Court. (3) As soon as practicable, the Suzlon Parties will cause anyone notified of this order to be given a copy of it. (4) The Suzlon Parties will pay the reasonable costs of anyone other than the respondent which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondent's assets. (5) If this order ceases to have effect the Suzlon Parties will promptly take all reasonable steps to inform in writing anyone to who has been notified of this order, or who it has reasonable grounds for supposing may act upon this order, that it has ceased to have effect. (6) The Suzlon Parties will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding. (7) The Suzlon Parties will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondent or the respondent's assets.

SCHEDULE B AFFIDAVITS RELIED ON Name of Deponent Date affidavit made (1) Siddharth Jhawar 14 December 2009 (2) Joseph Hurley 14 December 2009 (3) Kristin Hibbard 15 December 2009 (4) Kirtikant Vagadia 22 July 2009

NAME AND ADDRESS OF APPLICANT'S LEGAL REPRESENTATIVES The Second Cross Claimants' legal representatives are: HWL Ebsworth Lawyers Level 14 264-278 George Street Sydney NSW 2000 DX 129 Sydney Tel: +61 2 93348765 Fax: +61 1300 369 656 Ref: JAH:AJB:169200 Contact Solicitor: Joseph Hurley Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA

general division NSD 1670 of 2008

BETWEEN: BELUGA SHIPPING GMBH & CO. KS "BELUGA FANTASTIC"

REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 After I made orders on 6 November 2009 (Beluga Shipping GmbH v Suzlon Energy Ltd (No 3) [2009] FCA 1347) the Suzlon parties issued a subpoena addressed to the email service provider Yahoo!7 seeking emails sent on a number of accounts associated or believed to have been associated with Mr Sridhar and his companies. 2 The answer to the subpoena has resulted in the production by Yahoo of a number of emails that have revealed dealings instigated by Mr Sridhar to create places where money and assets under his control appear to have been located and subsequently moved. The affidavit evidence before me today is set out in the schedule to the orders that I will make. The evidence reveals that in March and April 2009 Mr Sridhar engaged Credit Suisse Trust Limited to establish a Bahamas company that I infer to be Manning Limited, and that company is now to be the twelfth second cross-defendant. 3 Manning was intended to be the trustee of a trust established in the Channel Island of Guernsey known as the MSRS Family Trust, the initials being acronyms apparently for Mr Sridhar and his wife. One of the beneficiaries of the trust was proposed to be his young child. 4 The emails obtained from Yahoo also included statements of account of Sunshine Trade Services, a Marshall Islands Company that is the ninth second cross-defendant, and Bluewind Enterprises, another company associated with Mr Sridhar. The emails suggest that the new trustee was intended to receive assets from, and take ownership of shares in, a Marshall Islands company. On the material before me I am satisfied that it is appropriate to draw the inference that this company was Sunshine Trade Services. 5 The emails also show that in September 2008 Sunshine's account with Merrill Lynch had a credit balance of about €3.9 million. By 31 July this year Sunshine's account with Merrill Lynch had a credit balance of over €7.25 million. It had reduced during that month from nearly €8.5 million. It is not immediately clear where over €1.2 million went in the month of July 2009. The account of Bluewind as at 31 March 2008 held €50,000. 6 On 2 September 2009, shortly before Mr Sridhar was arrested recently in India he signed instructions to Merrill Lynch that it should close Bluewind's and Sunshine's accounts and transfer the balances to a new account with Merrill Lynch in the name of Manning. 7 Earlier, in March 2009, Mr Sridhar and Credit Suisse exchanged correspondence dealing with the establishment of a Guernsey based discretionary trust that had a Bahamas trustee. Mr Sridhar gave his advisers at Credit Suisse, who proposed this, a statement of wishes. This indicated that he wished his wife to have the income and capital in the fund held for her during her life, then for his children, of which he named only his young son who was about five years old at the time, and on failure of those dispositions to a number of other relatives and a third party trust, the nature of which is not necessarily clear. Manning Limited, as identified by the Suzlon parties, is a Bahamas company of which Credit Suisse was registered agent in the Bahamas, hence the inference that it is, indeed, the Manning nominated by Mr Sridhar in his September 2009 letters to Merrill Lynch. 8 The material before me, which is partly summarised in some written submissions prepared by counsel for the Suzlon parties today, does not enable an exact tracing to be made between funds which the Suzlon parties have in the past been able to identify as going to companies associated with Mr Sridhar and Mr Bangad, or others involved in what are claimed to be the maritime frauds. Nonetheless, having regard to the other evidence that I have analysed in earlier judgments I have delivered in these proceedings, this material suggests that there is a reasonable inference to be drawn that all of the money in the accounts which I have mentioned above is likely to have come from dealings that Mr Sridhar caused to occur with a purpose to divert funds from his then employer in the Suzlon parties. I am satisfied that there is a real risk that, unless restrained, further dissipations of these funds may occur. 9 The opening and closing of bank accounts for companies incorporated in various parts of the world by an Indian national such as Mr Sridhar, in the circumstances that are before me, are at least highly probative absent some evidence to the contrary - and I appreciate this is an ex parte application - of an attempt to hide assets from the persons entitled to the fruits of any judgment, so as to make them likely to be unavailable in order to satisfy those judgments. 10 I am satisfied that there is a sufficient prima facie case for relief against Manning as sought in the notice of motion filed today, and that I should make a freezing order in respect of it. 11 I have already referred to the previous history of the matter in a number of judgments, including the most recent, Suzlon (No 3) [2009] FCA 1347. The evidence of the solicitor for the Suzlon parties is that the Attorney General's website indicates that there is no convention, treaty or other agreement in force between Australia and the Bahamas governing the service of documents in civil proceedings. However, the website indicates that a private agent should be used to serve Australian court process in the Bahamas and that service through an agent, generally a lawyer, does not breach the law of the Bahamas. That is the method of service that is proposed, and I am satisfied that it is appropriate to permit it. 12 I am satisfied the Court has jurisdiction to join Manning as a recipient of money that is alleged to have been obtained as proceeds of the maritime frauds alleged in the proceedings and by reason of its apparently being under the control of Mr Sridhar, who is alleged to be one of the principal architects of those frauds, as a means of obtaining safe sanctuary for his allegedly ill-gotten proceeds. 13 Once again, I have made the findings in this judgment on the basis of the material before me, conscious that there may well be another side that can be advanced to explain or provide some innocent circumstances in respect of the receipt and dealings of these moneys. It is possible that Manning is an innocent participant in the matters alleged against it. 14 Of course, I have formed no final view on any of these allegations, but have simply acted on the material before me, recognising that once Manning appears it may well be able to challenge or draw to my attention matters that would demonstrate that it ought not have had the orders made against it. 15 For these reasons, I am satisfied that I should make orders in terms of the notice of motion, subject to standing the proceedings over to 5 February 2010 and making the freezing order returnable on that date. And, I note pursuant to order 3 in the freezing order, any one served with or notified of it may apply to the Court for an earlier discharge or variation of those orders. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.

Dated: 18 December 2009 Counsel for the First, Second, Third, Fourth, Fifth and Sixth Second Cross Claimants AW Street SC with J Hogan-Doran

Solicitor for the First, Second, Third, Fourth, Fifth and Sixth Second Cross Claimants HWL Ebsworth

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