Re A Company Ltd; SIB Ltd. v. Vwagh

Certain insolvent companies (companies) (plaintiffs) brought deceit and other claims against Vwagh (defendant). The companies presented evidence that Vwagh utilized an elaborate network of foreign and English corporations and trusts to conceal his beneficial interest in English assets to avoid paying a potential judgment against him by the companies’ liquidators. The companies alleged that Vwagh controlled and beneficially owned shares in corporations that were held by nominees and trusts that did not name him as a beneficiary (but that allowed the trustees to later name him as a beneficiary) and that such entities owned English assets. The lower court ordered Vwagh to provide extensive and detailed discovery regarding his financial holdings and enjoined Vwagh from disposing of his direct and indirect holdings in the relevant entities. Vwagh appealed, arguing that the orders exceeded the lower court’s jurisdiction to issue a Mareva injunction and to order discovery because the lower court effectively treated Vwagh as a judgment debtor. Specifically, Vwagh argued that it would be improper to pierce the veils of the relevant entities unless they were complete shams. Additionally, Vwagh contended that the discovery order was (1) premature because he would have voluntarily disclosed his financial holdings, (2) overly broad because some of the entities that he allegedly controlled had co-owners with equal or substantial shares, and (3) unduly burdensome because they required him to undertake an enormous global investigation. The companies responded that the veils could be pierced in the context of a Mareva injunction if Vwagh exercised substantial or effective control over the entities and that piercing the veils would prevent the dissipation of the entities’ English assets. The companies further argued that discovery regarding Vwagh’s interest in the entities was appropriate once the lower court determined that they held English assets. However, in response to Vwagh’s complaint that the discovery order would require disclosure of mere minority interests, the companies agreed to limit the discovery to entities over which Vwagh had direct or indirect substantial or effective control.