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Caterpillar Financial Services (UK) Ltd v Saenz Corp Ltd


Queen's Bench Division (Commercial Court)
05 September 2012

Case Analysis
Where Reported

[2012] EWHC 2888 (Comm); Official Transcript

Case Digest

Subject: Company law


Keywords: Companies; Control; Corporate personality;
Enforcement; Judgment debts; Ownership; Residential property
Summary: A court declared that a finance company that had obtained
judgment against a defendant loan guarantor was entitled, to a limited extent,
to pierce the corporate veil of a company that the defendant controlled in order
to enforce the judgment against it.
Abstract: The applicant finance company (F) applied by way of summary
judgment for a declaration that it could enforce a judgment obtained against
the third respondent (K), against property owned by the fourteenth respondent
company (G).
F had obtained judgment against the first to ninth respondents in respect of
funds that F had advanced to the first and second respondents pursuant to a
loan agreement. The first to ninth respondents, including K, had guaranteed or
provided security for the loan agreement obligations which the first and second
respondents had defaulted on. Much of that judgment remained unsatisfied. F
obtained a worldwide freezing injunction in those proceedings. A south-west
London property owned by G was frozen under that order. K accepted that he
was the attorney-in-fact of G but not a shareholder and contended that G had a
sole shareholder (D).
F submitted that (1) it was entitled, on the basis that K was the alter-ego of G,
to pierce G's corporate veil and enforce the judgment that it had obtained
against K against G; (2) the court should make a declaration that entitled it to
enforce the judgment against any of G's assets.
Held: Application granted. (1) Following the principles in VTB Capital Plc v
Nutritek International Corp [2012] EWCA Civ 808, [2012] 2 Lloyd's Rep. 313 for
when a court might pierce the corporate veil, the question in the instant case
was whether F was able to show both that K controlled G and that there had
been impropriety in the sense of a misuse of the company as a device or facade
to conceal wrongdoing, VTB Capital applied. It did not appear to be in dispute
that K had control over and directed the actions of G. The fact that K had
resided in the property permanently, had registered companies there, had used
it as a company correspondence address and was attempting to sell it at the
time of the freezing injunction application was of little assistance in satisfying
the test in relation to wrongdoing. In K's net worth statements of 2007 and
2009 there were references to a "residence in Fulham" which were and could
only have been references to the property. That evidence came directly from K
and was wholly inconsistent with the more recent evidence received by K and
D, which was that K had never owned nor had any interest in the property.
Those contemporaneous documents indicated that the bare assertions made by

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K and D were not credible. Although it was not appropriate to engage in a mini
trial on the evidence in an application for summary judgment, it exceptionally
seemed that it was a case where there were no contemporaneous documents
that supported the assertions made by K and D. The important point was that
the loan agreements had been entered into and the loan advanced on the basis
that K had told F that the property was his asset. No mention had been made of
G and it had not been suggested that K's interest was merely by way of a
shareholding in a company. In those circumstances the requirements set out in
VTB Capital were satisfied (see paras 12-17, 19 of judgment). (2) The court
would only pierce the veil so far as was necessary to provide a remedy for the
particular wrong which those controlling the company had done. The particular
wrong which K had done was misusing the company as a device or seeking to
do that. F was not entitled to enforce the judgment against G generally; it had
to be limited. Consequently, K was entitled only to a declaration that it was
entitled to lift the corporate veil as far as the property was concerned and that
any judgment against K could be enforced against that asset (paras 22-26).

Judge: Eder J
Counsel: For the applicant: Stephen Cogley QC, Yash Kulkarni.
For the respondent: No appearance or representation.
Solicitor: For the claimant: Holman Fenwick Willan LLP.

Significant Cases Cited

VTB Capital Plc v Nutritek International Corp


[2012] EWCA Civ 808; [2012] 2 Lloyd's Rep. 313; [2012] 2
B.C.L.C. 437; Official Transcript; CA (Civ Div); 20 June 2012

All Cases Cited

VTB Capital Plc v Nutritek International Corp


[2012] EWCA Civ 808; [2012] 2 Lloyd's Rep. 313; [2012] 2
B.C.L.C. 437; Official Transcript; CA (Civ Div); 20 June 2012

All Cases Citing

Mentioned by
Lakatamia Shipping Co Ltd v Su
[2014] EWCA Civ 636; [2015] 1 W.L.R. 291; [2014] C.P. Rep. 37;
[2014] 1 C.L.C. 688; Official Transcript; CA (Civ Div); 14 May
2014
2015 Sweet & Maxwell

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Caterpillar Financial Services (UK) Limited v Saenz Corporation Limted, Mr


Karavias, Egerton Corporation & Others
Case No: 2011 Folio 1540
High Court of Justice Queen's Bench Division Commercial Court
5 September 2012

[2012] EWHC 2888 (Comm)


2012 WL 4867006
Before: Mr Justice Eder
Wednesday, 5 September 2012
Representation

Mr Stephen Cogley QC and Yash Kulkarni (Instructed by Messrs Holman Fenwick Willan LLP )
appeared on behalf of the Claimant.

The Defendants did not attend and were not represented.

Approved Judgment

Wednesday, 5 September 2012Mr

Justice Eder:

1 This is an application by the claimant for summary judgment, in effect to seek to enforce the
judgment that it has already obtained against the third defendant, Mr Anastassios Karavias,
against certain property owned by the fourteenth defendant, Egerton Corporation. The main
basis of that application is that the claimant should be entitled to pierce the corporate veil of
the fourteenth defendant.
2 The application originally came before Christopher Clarke J on 2 August but in the event it
was adjourned and was refixed for today. The fourteenth defendant, Egerton Corporation, has
been duly served but does not appear before me today. At the beginning of the hearing,
counsel on behalf of a Mr Dean, to whom I shall refer in a moment, appeared before me to
make an application to adjourn this hearing for two weeks. In the event, I rejected that
application to adjourn and proceeded to hear the present application. The reasons for my
decision to refuse the application to adjourn are set out in a separate judgment which I do not
propose to repeat here.
3 The application is far from straightforward. The background is as follows. The claimant
advanced funds by way of loans to the first and second defendants for the purpose of funding
the acquisition and construction of two yachts. The third to ninth defendants are guarantors
and/or provided security in relation to the obligations of the first and second defendants to the
claimant. The first and second defendants defaulted under the loan agreements and the
claimant then made demands on the first and second defendants after service of notices of
default and thereafter terminated the loan agreements. Demands have also been made on
each of the guarantors.

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4 The claimant submits that the defendants are liable for the total amount of the sums
outstanding under both loans pursuant to the express provisions of each security agreement.
Notwithstanding the foregoing, the said indebtedness remains outstanding and on that basis
the claimant has commenced these proceedings. Mr Cogley tells me that the claimant has
obtained judgment against the first to ninth defendants in a total sum of approximately US$ 8
million. However, much of that judgment remains unsatisfied.
5 In addition, the claimant has obtained in the course of these proceedings a worldwide
freezing injunction against a number of the defendants. One of the assets frozen by that
freezing injunction is a property at 43 Coniger Road, London SW6 3DB. The evidence before
me indicates that that property is in fact owned by Egerton Corporation. At least, the property
is registered in the name of that company, which is incorporated in Panama.
6 According to the evidence of Mr Karavias, Egerton is administered through a Panamanian law
firm, Crespo Arias y Asociados. Further, according to the evidence of Mr Karavias, the sole
shareholder of Egerton is Mr N Dean, although Mr Karavias accepts that he is the attorney in
fact for Egerton. According to that evidence, Mr Karavias says that he is not a shareholder and,
once the mortgage has been paid in full, the balance will not be paid to him personally, but to
the owner. Mr Karavias also says that Mr Dean allows him to stay in the property when he
visits London, about six weeks of every year.
7 In a separate affidavit sworn by Mr Dean dated 23 July 2012, he explains his relationship
with the fourteenth defendant as follows:
11. I say that at some point in time in the 1990s, the date of which I cannot be
certain as I have no written records, when the Third Defendant was suffering from a
serious and what he believed was a potentially fatal medical condition, I was informed
by him that I had been made the beneficiary of the shares of the Fourteenth
Defendant, which owned a property situated at 43 Coniger Road, London, SW6 3TB.
At that time, I was informed by the Third Defendant that Crespo Arias y Asociados
were the Panama counsel for the Fourteenth Defendant.
12. It is my recollection that following the Third Defendant's recovery from his
medical condition that little or no discussion was had in relation to the Fourteenth
Defendant and/or the property. In my view it would have been insensitive for me,
after my friend had made mention of the disposition of assets following his death, to
make enquiries of the legal status of assets upon his recovery. During the following
years I stayed at the property when in London and still do from time to time, having
my own room, telephone connection and keys to the property.

8 On the basis of this evidence, it might appear that Mr Karavias has nothing to do, at least
any more, with the ownership or any interest in Coniger Road. One of the difficulties in that
context is that there are no documents whatsoever to assist in explaining whether or not that
is so or not. Be that as it may, it is Mr Cogley's submission today on behalf of the claimant that
that suggestion, that is that Mr Karavias has nothing to do with Coniger Road, is fanciful and,
indeed, not credible. Mr Cogley submits that in truth Mr Karavias is the alter-ego of the
fourteenth defendant and that the claimant is entitled on that basis to pierce the corporate veil
of the fourteenth defendant and enforce the judgment that it has obtained against Mr Karavias
against the fourteenth defendant and, in particular, Coniger Road.
9 So far as the law is concerned, Mr Cogley relies in particular upon the recent decision of VTB
Capital Plc v Nutritek International Corp [2012] EWCA Civ 808 , in particular at paragraphs 47,
70 and 78. Paragraph 78 refers to an earlier decision of Munby J in Faiza Ben Hashem v Shayif
and Another [2008] EWHC 2380 which includes, between paragraphs 144 and 221 a
comprehensive discussion of the principles by reference to which the court may pierce the veil
of incorporation. Referring in particular to Munby J's judgment at paragraph 159 to 164,

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paragraph 78 of VTB Capital summarises the principles as follows:


First, ownership and control of a company are not of themselves sufficient to justify
piercing the veil. Second, the court cannot pierce the veil, even when no unconnected
third party is involved, merely because it is perceived that to do so is necessary in
the interests of justice. Third, the corporate veil can only be pierced when there is
some impropriety. Fourth, the company's involvement in an impropriety will not by
itself justify a piercing of its veil: the impropriety must be linked to use of the
company structure to avoid or conceal liability (a principle derived from Trustor ).
Fifth, it follows that if the court is to pierce the veil, it is necessary to show both
control of the company by the wrongdoer and impropriety in the sense of a misuse of
the company as a device or faade to conceal wrongdoing. Sixth, a company can be a
faade for such purposes even though not incorporated with deceptive intent:
164. The question is whether it is being used as a faade at the time of the relevant
transaction(s). And the court will pierce the veil only so far as is necessary to provide a
remedy for the particular wrong which those controlling the company have done. In
other words, the fact that the court pierces the veil for one purpose does not mean that
it will necessarily be pierced for all purposes.

10 When the matter originally came before Christopher Clarke J on 2 August, he apparently
raised a potential concern as to whether the requirements set out at paragraph 78 of the VTB
Capital judgment were met in order to enable the court in the present case to pierce the
corporate veil. The learned judge apparently emphasised that the point he was raising was
expressly obiter in light of the need to remedy other matters in relation to the hearing and that
it was being made without inviting any submissions from the claimant.
11 Notwithstanding, Mr Cogley submits that the requirements identified at paragraph 78 of the
VTB Capital case are more than satisfied in the circumstances here. I agree for the brief
reasons set out below.
12 First, as submitted by Mr Cogley, Mr Karavias does indeed appear to control and direct the
actions of the fourteenth defendant. This does not appear to be in dispute at all. As I have
indicated, Mr Karavias has already stated in his affidavit that he was the attorney in fact for
Egerton and there are numerous documents to confirm that he was, for example, receiving
bank documents on behalf of Egerton.
13 The real question in the present case is whether or not the fifth requirement has been
satisfied, ie, whether the claimant has been able to show both the control of the company by
Mr Karavias and that there was impropriety in the sense of a misuse of the company as a
device or faade to conceal wrongdoing. That is indeed submitted by Mr Cogley here. In
particular, Mr Cogley relies upon a number of matters. First, he submits that, although the
fourth defendant notionally owns Coniger Road, Mr Karavias resides at the property
permanently, has registered companies at the address, has used it as the correspondent
address for a host of companies and was attempting to sell the property at the time of the
freezing injunction application.
14 In my view, those matters may well be correct but they are of little assistance in satisfying
the test that I have just indicated. I propose to proceed on the basis that they are entirely
neutral matters that do not necessarily indicate that there was any wrongdoing, still less any
wrongdoing or impropriety in the sense of a misuse of the company as a device or faade to
conceal wrongdoing.
15 Second, and much more importantly in my judgment, Mr Cogley asserts that Mr Karavias
is, on the face of the documents, shown to be the ultimate owner and controller of the
fourteenth defendant. In particular, he relies on certain documents in November 2007 prior to
the relevant agreements in the present case and the time when the funds were advanced. In

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particular, Mr Cogley has referred me to a letter from Mr Karavias to the claimant dated 13
November 2007 in which he attached a net worth statement of the same date from a Greek
certified public accountant that shows, under the heading of the assets of Mr Karavias
residence in Fulham, 3,500,000 USD. Subsequently, a further net worth statement was
provided dated 15 April 2009 from the same Greek accountant setting out again Mr Karavias'
assets as at 31 March 2009. Once again that document identified Mr Karavias' assets as
including residence in Fulham, although the value was stated to be US$ 3.2 million at that
time.
16 It is quite plain, says Mr Cogley, and I accept, that that reference, ie, the reference to a
residence in Fulham was and could only have been a reference to the property in Coniger
Road. That evidence, which comes directly from Mr Karavias, is wholly inconsistent with the
more recent evidence from Mr Karavias and Mr Dean which is, in effect, that Mr Karavias does
not own and never did own nor had any interest in the Coniger Road, at least in the relevant
period. These contemporary documents, in my view, indicate that the bare assertions made by
Mr Karavias and Mr Dean are not credible.
17 I fully recognise that this is an application for summary judgment and that it is not
appropriate in this kind of application to engage in a mini trial on the affidavits, but it does
seem to me exceptionally that this is a case where there are no contemporaneous documents
whatsoever to support the assertions made by Mr Karavias and Mr Dean, whereas the
contemporaneous documents which emanate from Mr Karavias himself are completely to the
contrary and that, therefore, even on this summary judgment application, I should proceed on
the basis that I have indicated above.
18 The evidence contained in the witness statement of Mr Benjamin Hancock who is the
portfolio manager for the claimant, is to the effect (and I refer to paragraph 15 of his witness
statement) that at no time did Mr Karavias make the claimant aware that Coniger Road was
owned by the fourteenth defendant:
Had he done so, I cannot say that I would have been prepared to recommend that
Cat Finance advance the loans. The only basis on which I would have considered
recommending the loans to have been made would have been made on the basis that
Egerton Corporation provided a guarantee in respect of the loans so that, in default of
payment under the loans, Cat Finance would be in a position to pursue Egerton
Corporation and, ultimately, enforce any judgment against 43 Coniger Road.

19 In support of the case, Mr Cogley also referred to various other documents, including bank
transfer documents and the fact of the circumstances relating to certain payments and
documents from the register showing the original ownership by Egerton and the subsequent
mortgage that was then taken out. In my view, these do not take the matter any further. The
really important point is that, when the loan agreements were entered into and when these
loans were advanced, that was done on the basis that Mr Karavias had told the claimant that
the residence in Fulham, which, as I say, I take to be a reference to Coniger Road, was his
asset. No mention whatsoever was made of Egerton. It was not suggested that Mr Karavias'
interest was merely by way of a shareholding in a company.
20 In those circumstances, it seems to me indeed the case that the fifth requirement as set
out in VTB Capital has been satisfied.
21 I have already referred to the affidavit of Mr Dean in relation to which Mr Cogley made
certain further submissions. It is unnecessary to consider those in detail, but as I have already
indicated, I accept that Mr Dean's evidence is incredible for the reasons that I have given.
22 For these brief reasons, it seems to me that the claimant is entitled to lift the corporate
veil, at least so far as the property at Coniger Road is concerned. Mr Cogley sought to
persuade me that I should, in effect, make a declaration entitling the claimant to enforce the

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judgment that it has obtained against the third defendant, that is Mr Karavias, against any of
the assets of Egerton. It seems to me that that is going too far and would not be consistent
with the passage that I have just quoted from VTB Capital . As appears from the passage I
have just quoted, the court will only pierce the veil so far as is necessary to provide a remedy
for the particular wrong which those controlling the company have done. Here it seems to me
that the particular wrong which Mr Karavias in his capacity controlling the company has done,
is that he has mis-used the company as a device, in effect, or is now seeking to do that.
23 For those reasons, I am unable to accept Mr Cogley's submission that I should, in effect,
entitle the claimant to enforce the judgment it has obtained against Mr Karavias against
Egerton Corporation generally; it should be limited.
24 At the end of the hearing, I considered with Mr Cogley the precise form of the order. He put
before me a redraft which was in terms in relevant part:
IT IS DECLARED that the assets of the Fourteenth Defendant are the assets of the
Third Defendant and that any judgment against the Third Defendant can be enforced
against the Fourteenth Defendant and its assets accordingly.

25 As I explained in the course of argument, it seems to me that there are considerable


difficulties with that formulation. I asked Mr Cogley whether or not he had been able to find a
formulation in any decided case of an order of the kind that he is now seeking which involved
lifting the corporate veil. Apparently, he has been unable to find a previous order which might
form the basis of the order in the present case. Be that as it may, it seems to me that it would
be wrong simply to declare that assets of the fourteenth defendant are assets of the third
defendant. The concept of piercing the corporate veil is derived from the courts of equity and,
in essence, are concerned with the remedies available to a claimant.
26 In those circumstances, it seems to me that, at the very most, the claimant is entitled only
to a declaration that it is entitled to lift the corporate veil, at least so far as Coniger Road is
concerned and that any judgment against the third defendant can be enforced against that
asset. Subject to further consideration of precise wording, it seems to me that that is the
declaration that ought to be made in the present case.
2015 Sweet & Maxwell