Divorcee granted injunction against ex-husband's holding company

Out-Law News | 24 Jul 2019 | 5:15 pm | 2 min. read

The High Court in England has granted an injunction against the holding company to which a wealthy Russian businessman transferred ownership of a luxury yacht in order to avoid enforcement of a £500 million divorce settlement, preventing the company from moving the yacht from where it is docked in Dubai.

Last year the court ordered the businessman, Farkhad Akhmedov, to transfer ownership of the yacht to ex-wife Tatiana Akhmedova in a rare example of 'piercing the corporate veil', going against the long-standing legal principle that a company is a legal entity independent of its shareholders. However, both Farkhad Akhmedov and the Liechtenstein holding company, Straight, have so far ignored the court order.

The High Court, in its latest judgment in the long-running case, has also agreed to list the individual directors of Straight's corporate director, by name, in the penal notice accompanying the injunction, on the grounds that they are the 'de facto' directors of Straight. This means that the individual director would be personally guilty of contempt of court if the yacht is moved from Dubai.

Andrew Barns-Graham

Associate

Plainly there is no prospect of Mr Akhmedov complying with the court orders, so instead she has targeted the individual professionals who administer his asset holding vehicle, and who will not wish to be the subject of criminal contempt proceedings.

Litigation expert Andrew Barns-Graham of Pinsent Masons, the law firm behind Out-Law, said Tatiana Akhmedova's enforcement strategy in the case had been "exactly right".

"Plainly there is no prospect of Mr Akhmedov complying with the court orders, so instead she has targeted the individual professionals who administer his asset holding vehicle, and who will not wish to be the subject of criminal contempt proceedings," he said.

"As well as being an example of an effective enforcement strategy, this case also contains helpful summaries of the law regarding what constitutes a 'de facto' director and the circumstances in which de facto directors should be named in a penal notice," he said.

Farkhad Akhmedov was ordered to pay £453,576,152 worth of financial support to Tatiana Akhmedova in December 2016. To date, Mr Akhmedov has only paid a "very small proportion" of the award to his ex-wife. In March 2018, the High Court made a freezing order against Straight, the registered owner of Farkhad Akhmedov's €250 million yacht, for the outstanding amount.

In the latest court proceedings, Tatiana Akhmedova sought extended injunctive relief against Straight, preventing "any voyage or movement" of the yacht, particularly its removal from port in Dubai. She also sought to name its de facto directors, who are Liechtenstein-based lawyers, in the accompanying penal notice.

Mrs Justice Knowles ruled that it was "just and convenient" to grant the orders sought, "even though Straight and Mr Akhmedov have a history of breaching this court's orders".

"The order will be enforceable here against Straight, an entity which has previously been found to have submitted to the jurisdiction," she said. "Additionally, these orders should provide a serious incentive to [its directors] to ensure Counselor [Straight's corporate director] and Straight act in compliance with what is required of them."

The judge said that there were no rules of the court requiring a penal notice to identify every individual against whom contempt of court proceedings could be brought. However, in this case, she thought it was worth listing Counselor's directors by name in the notice in order to put them "on proper notice of the possible consequences of failure to comply if they cause (or continue to cause) Straight to act in breach of this court's order".

Ingram Sarah July_2019

Sarah Ingram

Senior Associate

The judgment highlights the importance of off-shore corporate directors or trustees taking advice at an early stage when informed of an English shareholder, beneficiary or settlors’ divorce.

The case law did not require the courts to reach a concluded finding on whether each of Counselor's directors was a de facto director of Straight - only that there was a "good arguable case" that this was true, the judge said. She noted that each of the individuals was able to "validly and bindingly" act for Counselor on its own behalf, and so "could be said to be part of the corporate governance structure of Straight".

Private wealth and family disputes expert Sarah Ingram of Pinsent Masons said that the judgment "highlights the importance of off-shore corporate directors or trustees taking advice at an early stage when informed of an English shareholder, beneficiary or settlor's divorce".

"Even though the Straight 'de jure' directors in this case had not submitted to the English jurisdiction, the English family court has still found jurisdiction through the husband who had submitted to the jurisdiction through 'alter ego' arguments and arguments that the husband had effective control of Straight and the de jure directors are mere puppets," she said.