Alexander Tugushev v Vitaly Orlov

JurisdictionEngland & Wales
JudgeMrs Justice Carr
Judgment Date26 July 2019
Neutral Citation[2019] EWHC 2031 (Comm)
CourtQueen's Bench Division (Commercial Court)
Docket NumberCase No: CL-2018-000498
Date26 July 2019
Between:
Alexander Tugushev
Claimant
and
(1) Vitaly Orlov
(2) Magnus Roth
(3) Andrey Petrik
Defendants

[2019] EWHC 2031 (Comm)

THE HONOURABLE Mrs Justice Carr

Case No: CL-2018-000498

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS

OF ENGLAND AND WALES

COMMERCIAL COURT (QBD)

Royal Courts of Justice

Strand, London, WC2A 2LL

Ms Helen Davies QC, Mr Richard Slade QC and Mr Richard Blakeley (instructed by Peters & Peters Solicitors LLP) for the Claimant

Mr Christopher Pymont QC, Mr George Hayman QC, Mr Benjamin John and Mr James Kinman (instructed by Macfarlanes LLP) for the First Defendant

JUDGMENT NO 2

Hearing dates: 12, 13, 14 June 2019

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

THE HONOURABLE Mrs Justice Carr

Mrs Justice Carr Mrs Justice Carr

Introduction

1

This is the second reserved judgment in this litigation, the full background to which can be found in my judgment earlier this year ( Tugushev v Orlov and others [2019] EWHC 645 (Comm)) (“the jurisdiction judgment”). There I held that the English courts have jurisdiction to entertain the claims against Mr Orlov on the basis of his domicile in England (and in the alternative that permission should be granted to serve out of the jurisdiction under CPR 6.36). I refused permission to appeal against that decision; Mr Orlov is currently exercising his right to renew his application for permission to appeal against it before the Court of Appeal.

2

I adopt below the same definitions and abbreviations as before and again nothing in this judgment is intended to lift confidentiality attaching to material in the confidentiality ring.

3

Following a resumed hearing, the issues now before the court are:

i) Mr Orlov's challenge to the WFO and to the order permitting service out of the jurisdiction (“the service out order”) on the basis of alleged breaches by Mr Tugushev of his duty of full and frank disclosure on his without notice application before Bryan J (“the non-disclosure application”);

ii) Mr Tugushev's application to continue the WFO/the WFO challenge by Mr Orlov (“the continuation application”);

iii) (if the WFO survives) Mr Tugushev's application for permission to apply in Russia to freeze assets (“the domestication application”).

4

The parties have again engaged in some intricate footwork, for which I do not criticise them. But I propose to limit this judgment to the key points that have arisen. That should not be taken as any indication that I have not considered the full detail of the material advanced in reaching the conclusions that I have.

The non-disclosure application

5

Mr Orlov identifies the following four main categories of alleged failures by Mr Tugushev of his duty of full and frank disclosure:

i) A (deliberate) failure fairly to present his prior conviction for fraud;

ii) A (deliberate) failure to present fairly the credibility of Mr Orlov's claim that Mr Tugushev had divested himself of his shares in AA before taking up public office in 2003;

iii) A (deliberate) failure to draw the court's attention to Mr Tugushev's previous statements that he had knowingly transferred his shares in AA to Mr Orlov and Mr Roth in 2003;

iv) A (deliberate) failure to inform the court of parallel criminal proceedings in Russia.

6

He further relies on the following additional specific matters:

i) A (deliberately) misleading presentation of evidence regarding Mr Orlov's domicile;

ii) A failure (by oversight) to inform the court of evidence illegally obtained;

iii) A failure (deliberate or by oversight) to inform the court that Mr Orlov had been found to be not resident in England in the Norwegian proceedings;

iv) A failure (by oversight) to take the court appropriately through the application for permission to serve out of the jurisdiction pursuant to the tort or necessary or proper party gateways;

v) A failure (by oversight) to address the court on the question of the governing law of his claims;

vi) Reliance on illicitly recorded conversations between Mr Tugushev and Mr Orlov without (deliberately or by oversight) drawing attention to Mr Orlov's previous comments on these recordings.

The law

7

The law is non-contentious. The following general principles can be distilled from the relevant authorities by way of summary as follows:

i) The duty of an applicant for a without notice injunction is to make full and accurate disclosure of all material facts and to draw the court's attention to significant factual, legal and procedural aspects of the case;

ii) It is a high duty and of the first importance to ensure the integrity of the court's process. It is the necessary corollary of the court being prepared to depart from the principle that it will hear both sides before reaching a decision, a basic principle of fairness. Derogation from that principle is an exceptional course adopted in cases of extreme urgency or the need for secrecy. The court must be able to rely on the party who appears alone to present the argument in a way which is not merely designed to promote its own interests but in a fair and even-handed manner, drawing attention to evidence and arguments which it can reasonably anticipate the absent party would wish to make;

iii) Full disclosure must be linked with fair presentation. The judge must be able to have complete confidence in the thoroughness and objectivity of those presenting the case for the applicant. Thus, for example, it is not sufficient merely to exhibit numerous documents;

iv) An applicant must make proper enquiries before making the application. He must investigate the cause of action asserted and the facts relied on before identifying and addressing any likely defences. The duty to disclose extends to matters of which the applicant would have been aware had reasonable enquiries been made. The urgency of a particular case may make it necessary for evidence to be in a less tidy or complete form than is desirable. But no amount of urgency or practical difficulty can justify a failure to identify the relevant cause of action and principal facts to be relied on;

v) Material facts are those which it is material for the judge to know in dealing with the application as made. The duty requires an applicant to make the court aware of the issues likely to arise and the possible difficulties in the claim, but need not extend to a detailed analysis of every possible point which may arise. It extends to matters of intention and for example to disclosure of related proceedings in another jurisdiction;

vi) Where facts are material in the broad sense, there will be degrees of relevance and a due sense of proportion must be kept. Sensible limits have to be drawn, particularly in more complex and heavy commercial cases where the opportunity to raise arguments about non-disclosure will be all the greater. The question is not whether the evidence in support could have been improved (or one to be approached with the benefit of hindsight). The primary question is whether in all the circumstances its effect was such as to mislead the court in any material respect;

vii) A defendant must identify clearly the alleged failures, rather than adopt a scatter gun approach. A dispute about full and frank disclosure should not be allowed to turn into a mini-trial of the merits;

viii) In general terms it is inappropriate to seek to set aside a freezing order for non-disclosure where proof of non-disclosure depends on proof of facts which are themselves in issue in the action, unless the facts are truly so plain that they can be readily and summarily established, otherwise the application to set aside the freezing order is liable to become a form of preliminary trial in which the judge is asked to make findings (albeit provisionally) on issues which should be more properly reserved for the trial itself;

ix) If material non-disclosure is established, the court will be astute to ensure that a claimant who obtains injunctive relief without full disclosure is deprived of any advantage he may thereby have derived;

x) Whether or not the non-disclosure was innocent is an important consideration, but not necessarily decisive. Immediate discharge (without renewal) is likely to be the court's starting point, at least when the failure is substantial or deliberate. It has been said on more than one occasion that it will only be in exceptional circumstances in cases of deliberate non-disclosure or misrepresentation that an order would not be discharged;

xi) The court will discharge the order even if the order would still have been made had the relevant matter(s) been brought to its attention at the without notice hearing. This is a penal approach and intentionally so, by way of deterrent to ensure that applicants in future abide by their duties;

xii) The court nevertheless has a discretion to continue the injunction (or impose a fresh injunction) despite a failure to disclose. Although the discretion should be exercised sparingly, the overriding consideration will always be the interests of justice. Such consideration will include examination of i) the importance of the facts not disclosed to the issues before the judge ii) the need to encourage proper compliance with the duty of full and frank disclosure and to deter non-compliance iii) whether or not and to what extent the failure was culpable iv) the injustice to a claimant which may occur if an order is discharged leaving a defendant free to dissipate assets, although a strong case on the merits will never be a good excuse for a failure to disclose material facts;

xiii) The interests of justice may sometimes require that a freezing order be continued and that a failure of disclosure can be marked in some other way, for example by a suitable costs order. The court thus has at...

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