Schwartz v VGV (UK) Ltd & Ors

Factual and Procedural Background

This case concerns an application to commit for contempt an English company, the First Defendant ("VGV UK"), and an Ecuadorian lawyer, the Fifth Defendant ("Mr Vivanco"). VGV UK is trustee of the Consov Trust ("the Trust"), a BVI-governed discretionary trust, of which the Claimant ("Ms Schwartz") is a beneficiary. Mr Vivanco is the protector of the Trust. The Trust holds significant assets, including shares in an Ecuadorian company ("TV Cable Shares").

The contempt allegations arise from breaches of court orders made in December 2019 and January and February 2020 ("the December Order", "the January Order", and "the February Order") that restrained dealings with the TV Cable Shares and required disclosure of Trust assets and related documents. The orders supported proceedings commenced by Ms Schwartz in the British Virgin Islands (BVI) challenging certain actions concerning the Trust, including the validity of a "Letter of Wishes" and a "Deed of Amendment" allegedly signed by the late settlor, Mr Schwartz.

VGV UK and Mr Vivanco failed to comply fully with disclosure orders requiring detailed statements of Trust assets and production of key documents. Mr Vivanco was added as a defendant after the February Order, on the basis that he might be the de facto controller of VGV UK and PEISA (a Trust-owned company). The contempt application alleges seven separate breaches by VGV UK and Mr Vivanco, with Mr Vivanco accused of procuring or permitting breaches by VGV UK.

The proceedings involved remote hearings due to the Covid-19 pandemic, with Ms Schwartz represented by a large international law firm and Mr Vivanco represented by counsel only shortly before the substantive hearing. Extensive evidence was adduced, including witness statements, affidavits, and cross-examinations, focusing on the authenticity of key Trust documents and the existence of a purported director of VGV UK, "Ms Meade."

Legal Issues Presented

1. Whether VGV UK and/or Mr Vivanco committed contempt by breaching specific disclosure and preservation orders made by the Court in respect of the Consov Trust.
2. Whether Mr Vivanco exercised de facto control over VGV UK such that he can be held responsible for its breaches.
3. The authenticity and validity of the "Letter of Wishes" dated 7 May 2019 and the "Deed of Amendment" allegedly signed by Mr Schwartz and Mr Vivanco.
4. The existence and role of "Ms Meade" as a director of VGV UK, and whether she is a genuine individual or a fictitious creation.
5. Whether the defendants' explanations for non-compliance with Court orders, including impossibility due to Covid-19 restrictions, are credible and legally sufficient to excuse breaches.

Arguments of the Parties

Claimant's Arguments

• VGV UK failed to comply with disclosure orders by not providing witness statements as ordered, omitting key assets, and failing to provide accurate valuations.
• Mr Vivanco personally failed to comply with disclosure orders, delayed responses, and provided false or misleading explanations, including regarding the existence of Ms Meade and the authenticity of key Trust documents.
• The 2nd Letter of Wishes and Deed of Amendment are forgeries produced after Mr Schwartz's death to alter the Trust's beneficiary structure.
• Ms Meade does not exist, and her identity has been appropriated to create fraudulent documents and affidavits.
• Any excuses based on Covid-19 restrictions are insufficient to excuse the extensive delays and failures to comply with Court orders.

Defendants' Arguments

• Mr Vivanco asserts that compliance difficulties were caused by Covid-19 lockdowns and restrictions in Ecuador, justifying delays and alternative modes of compliance (e.g., witness statements instead of affidavits).
• Mr Vivanco denies exercising control over VGV UK, describing it as a separate entity within a commercial alliance with his law firm.
• Mr Vivanco maintains that Ms Meade exists, providing details of meetings and correspondence, but lacks access to certain personal documents required by the Court.
• Mr Vivanco contends the 2nd Letter of Wishes was legitimately signed by Mr Schwartz, though he later modified his account regarding witnessing the signature.
• Regarding the provision of key documents, Mr Vivanco claims originals were deposited with a Public Notary in Quito but acknowledges restricted access due to the pandemic.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court carefully examined each alleged breach of the January and February Orders, applying the criminal standard of proof for contempt. It distinguished between breaches by VGV UK and those allegedly committed by Mr Vivanco personally.

Regarding VGV UK, the Court found that:

• Failure to provide a witness statement as ordered, instead submitting letters, constituted contempt.
• Omission of current valuation for a real estate asset was a breach, though there was no conclusive evidence that the Trust owned a large commercial property beyond the one disclosed.
• Failure to comply at all with the February Order's disclosure and document production requirements was established.

Regarding Mr Vivanco, the Court found that:

• He failed to comply with the February Order by the deadline but partially purged contempt by later providing witness statements.
• His failure to produce an electronic copy of the 2nd Letter of Wishes was deliberate and unsupported by credible excuse, leading to a finding of contempt.
• His failure to produce an electronic copy of the Deed of Amendment was excused on the basis that he did not have control over VGV UK, which was responsible for that document.
• His failure to provide required personal details and certified documents relating to Ms Meade was excused due to lack of access and inability to verify her existence conclusively.
• His failure to provide dates for inspection of originals was not established as contempt due to uncertainty about document custody and Covid-19 related restrictions.
• The allegations that he exercised de facto control over VGV UK were not proven to the criminal standard, so he was not held responsible for VGV UK's breaches.

The Court assessed the authenticity of the 2nd Letter of Wishes and Deed of Amendment and concluded beyond reasonable doubt that these documents were produced after Mr Schwartz's death and backdated, rejecting Mr Vivanco's evidence on this point. The Court also analyzed the evidence regarding Ms Meade's existence, concluding that there was insufficient proof to find she did not exist, although concerns remained.

The Court recognized the impact of Covid-19 on compliance but emphasized that delays and failures were not fully excused, especially given Mr Vivanco's professional experience and opportunity to seek variations of the orders.

Holding and Implications

The Court made the following findings:

• VGV UK is in contempt for failing to comply with the January Order (providing information by letter, not witness statement, and failing to provide a current valuation of real estate) and for failing to comply with the February Order in full.
• Mr Vivanco is in contempt for failing to comply with the February Order’s disclosure requirements by the deadline, though this contempt was purged by subsequent witness statements, and for failing to produce an electronic copy of the 2nd Letter of Wishes.
• Other contempt allegations against Mr Vivanco, including those based on de facto control of VGV UK and failure to produce certain documents or inspection dates, were dismissed.

The Court did not impose sentence at this stage, directing that a separate hearing be arranged to determine appropriate sanctions. The decision does not set new legal precedent but clarifies the application of contempt principles to complex international trust and disclosure orders, emphasizing strict compliance and the importance of truthful evidence in such proceedings.