Alexander Tugushev v Vitaly Orlov

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMrs Justice Carr
Judgment Date27 March 2019
Neutral Citation[2019] EWHC 645 (Comm)
Docket NumberCase No: CL-2018-000498

[2019] EWHC 645 (Comm)

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

Before:

THE HONOURABLE Mrs Justice Carr

Case No: CL-2018-000498

Between:
Alexander Tugushev
Claimant
and
(1) Vitaly Orlov
(2) Magnus Roth
(3) Andrey Petrik
Defendants

Ms Helen Davies QC, Mr Richard Slade QC and Mr Richard Blakeley (instructed by Peters & Peters 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

Hearing dates: 29, 30, 31 January and 6 February 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

Outline of Contents

This judgment is structured as follows:

Section A Introduction

A. Introduction

1

This litigation involves a bitter and high-profile battle between two Russian businessmen, the Claimant, Alexander Tugushev (“Mr Tugushev”), and the First Defendant, Vitaly Orlov (“Mr Orlov”), alongside two of Mr Orlov's associates, the Second and Third Defendants, Magnus Roth (“Mr Roth”) and Andrei Petrik (“Mr Petrik”) respectively, in relation to the Norebo Group.

2

The Norebo Group is a corporate group which operates an international fishing business largely under Russian state fishing quotas. It harvests, processes and distributes around 400,000 metric tonnes of fish every year and is worth an estimated US$1.5 billion. It includes the group of companies currently owned and controlled by JSC Norebo Holding (“Norebo Holding”), a Russian company, together with the group of companies currently owned and controlled by Three Towns Capital Limited (“TTC”), a Hong Kong company.

3

Mr Tugushev claims that he co-founded the Norebo Group with Mr Orlov and Mr Roth and, under a Joint Venture Agreement made orally in 1997 (“the JVA”) and put into writing in 1998 (“the 1998 Agreement”), is the owner of a one-third interest accordingly. He contends that he has been the victim of a complex and sophisticated conspiracy by Mr Orlov and Mr Roth to misappropriate and/or deny the existence of his interest in the Norebo Group (“the Norebo Group conspiracy claim”). He has also been the victim of the misappropriation of his direct shareholding in CJSC Almor Atlantika (“AA”), a Russian company, as a result of a conspiracy between Mr Orlov, Mr Roth and Mr Petrik (“the AA conspiracy claim”). He brings claims in contract and conspiracy for damages, declaratory relief and an account. His claims are valued in excess of US$350 million.

4

Mr Tugushev alleges very serious dishonest conduct by Mr Orlov, including the orchestration of false proceedings in Russia designed to shut out any claims by Mr Tugushev in England, the use of forged powers of attorney and other forged documents, including statements purportedly from Mr Tugushev. The features relied on by Mr Tugushev bear the hallmarks of the well-known practice of “corporate raiding” in Russia.

5

Mr Orlov strenuously denies any wrongdoing. Mr Tugushev has contrived “tortured” claims in conspiracy so as to gain advantages in terms of English jurisdiction and concomitant interim freezing relief. They represent a “naked attempt” to squeeze claims which have nothing to do with the jurisdiction through the gateways in CPR Practice Direction 6B (“the Practice Direction”). Whilst Mr Tugushev did once have a share in AA, a company which subsequently became a comparatively small part of the Norebo Group, he relinquished that share in 2003 to embark on a misjudged and short-lived career as a corrupt government official (as the Deputy Chairman of the Russian State Committee for Fisheries), a position he lost in 2004 following his arrest, conviction and incarceration for fraud. Since his release from prison, Mr Tugushev has attempted to re-establish for himself a role and economic interest in what Mr Orlov and Mr Roth have built independently into a very substantial business. Having failed in this attempt through legitimate means, Mr Tugushev has now resorted to extortion in the form of these proceedings, together with co-ordinated criminal proceedings in Russia commenced at the same time. This is “corporate raiding” on the part of Mr Tugushev.

6

On 23 July 2018 Mr Tugushev applied without notice for worldwide freezing relief against Mr Orlov in the sum of US$350million and for permission to serve out of the jurisdiction on Mr Orlov. Bryan J granted both applications, making a worldwide freezing order (“the WFO”), which Mr Tugushev seeks to continue.

7

Mr Orlov now challenges both the orders made by Bryan J (“the jurisdiction challenge”; “the WFO challenge”). As for the jurisdiction challenge, Mr Orlov contends that he is not domiciled in England, but instead lives and works in Russia. Further, this is an almost entirely Russian dispute, between Russians, relating to the ownership and operation of Russian companies in Russia, governed by Russian law and under concurrent investigation by the Russian authorities. The dispute should be resolved in the Russian courts which are the most suitable forum. There is no proper basis for inferring that any alleged conspiracy was “hatched” in London. Mr Orlov is not a necessary or proper party to a claim against Mr Petrik which does not contain a real issue which it is reasonable for the English court to try. As for the WFO challenge, in addition to a lack of jurisdiction, Mr Orlov contends that Mr Tugushev cannot demonstrate any sufficient risk of dissipation in relation to Mr Orlov's assets. In any event, on both applications before Bryan J, Mr Tugushev breached his duties of full and frank disclosure and fair presentation such that the court should discharge both orders for this reason alone.

8

The applications have generated a depressingly vast amount of material. By way of example, on 18 January 2019 Mr Orlov served 19 witness statements and five further expert reports. The costs on the applications on each side already run into many millions of pounds. Mr Tugushev's costs of the applications up to the conclusion of the first three days of the hearing are estimated at £1.118million, Mr Orlov's at “in the region of £4million”.

9

It is therefore necessary to remind oneself of the warnings in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 (“ The Spiliada”) (at 465G – H) where Lord Templeman hoped that future submissions on the merits of trial in England and trial abroad would be measured “ in hours and not days”. The position is very far removed from that contemplated by Lord Neuberger in VTB Capital v Nutriek International Corpn [2013] UKSC 5; [2013] 2 AC 336:

“82. The first point is that hearings concerning the issue of appropriate forum should not involve masses of documents, long witness statements, detailed analysis of the issues, and long argument. It is self-defeating if, in order to determine whether an action should proceed to trial in this jurisdiction, the parties prepare for and conduct a hearing which approaches the putative trial itself, in terms of effort, time and cost. There is also a real danger that, if the hearing is an expensive and time-consuming exercise, it will be used by a richer party to wear down a poorer party, or by a party with a weak case to prevent, or at least to discourage, a party with a strong case from enforcing its rights.

83. Quite apart from this, it is simply disproportionate for parties to incur costs, often running to hundreds of thousands of pounds each, and to spend many days in court, on such a hearing. The essentially relevant factors should, in the main at any rate, be capable of being identified relatively simply and, in many respects, un-controversially. There is little point in going into much detail: when determining such applications, the court can only form preliminary views on most of the relevant legal issues and cannot be anything like certain about which issues and what evidence will eventuate if the matter proceeds to trial.”

10

As Flaux J said in Erste Group Bank AG v JSCVMZ RED OCTOBER [2013] EWHC 2926 (Comm) (at [11]) (“ Red October”), although Lord Neuberger's deprecation of the proliferation of documentation was in the context of the determination of appropriate forum, his observations are obviously equally applicable to other aspects of jurisdictional challenges.

11

Perhaps as a result of the extent of the arguments raised and the mass of documentation produced, it was apparent at least by the end of the first day of the hearing that the three days allocated for the hearing of the applications would be insufficient. After discussion and with the parties' agreement, I proceeded to hear the jurisdiction challenge alone at this stage (with the exception of that part of Mr Orlov's jurisdiction challenge based on breaches of the duty of full and frank disclosure and fair presentation). That part of the jurisdiction challenge and the WFO challenge would fall to be considered (so far as relevant) at a further hearing in the event that Mr Orlov's jurisdiction challenge were otherwise to fail.

12

It has not proved necessary (nor, for the reasons set out above, do I consider it appropriate) for the purposes of this judgment to rehearse the full detail of the evidence or to address every one of the copious submissions (often legal), comments and innuendo contained in what should have been witness statements of fact and no more. This is not a case where the parties can be said to have been guilty of adopting the art of understatement. Rather I have focussed on the main arguments and material as pressed upon me by the parties in their written skeletons and oral arguments in particular....

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