Bank St Petersburg and Another v Vitaly Arkhangelsky and Another Oslo Marine Ports LLC (Part 20 Claimant)
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Hildyard,Mr Justice Hildyard |
| Judgment Date | 05 March 2014 |
| Neutral Citation | [2014] EWHC 574 (Ch) |
| Docket Number | Case No: HC12C00643 |
| Court | Chancery Division |
| Date | 05 March 2014 |
and
[2014] EWHC 574 (Ch)
The Honourable Mr Justice Hildyard
Case No: HC12C00643
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Philip Marshall QC and Ruth den Besten (instructed by Baker & McKenzie LLP) for the Claimants
The Defendants appeared by their McKenzie friend, Mr Pavel Stroilov
Hearing dates: 17 January 2014 and 6–7 February 2014
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.
Scope of this judgment
At hearings over the course of 17 January and 6/7 February 2014 I have had to consider a number of issues raised by the parties in this convoluted dispute, the background and substance of which I have summarised in my previous judgments (see, for example, judgments on 14 and 22 November 2013). The matters for my determination now are:
(1) whether in dealing with (a) a life insurance policy governed by French law ("the Policy") which would not, under that law, be available to creditors in any enforcement proceedings in France, and (b) monies held in the account of a Bulgarian company ("Petrograd") said to be owned by her, the Second Defendant (whom with no disrespect I shall refer to individually as "Mrs A") was in breach of the worldwide freezing order made by this Court on 15 March 2012, as continued on 29 March 2012 ("the Freezing Order");
(2) if so, whether, although the Claimants have not sought to establish contempt nor the sanction of committal, I should (a) make a declaration of breach and (b) further tighten the Freezing Order to prevent the use by the Defendants of any remaining proceeds of the Policy until the Defendants have properly complied with the disclosure orders in the Freezing Order on the basis that (so the Claimants allege) there is reason to suppose that the Defendants have other undisclosed sources of funds and should look to them first;
(3) whether the Claimants should be permitted to make certain amendments to their Particulars of Claim and their Reply against the opposition of the Defendants;
(4) whether the Defendants' claims in their Counterclaim alleging that the Claimants had subjected their bank ("the V-Bank") and its senior managers to intimidation "by the officers of the Russian political secret police" and thereby persuaded the V-Bank to decline further assistance in the proceedings brought by the Defendants in the BVI (which collapsed in consequence) should be disallowed or struck out as disclosing no identifiable cause of action and/or as vexatious and embarrassing;
(5) whether the Defendants' claims in their Counterclaim to the effect that the Claimants' claims in this action are brought as part of a campaign of unlawful and politically-motivated persecution of the Defendants in Russia with the backing of senior figures in the government of the Russian Federation, and also as part of an unlawful takeover, with the assistance of the Russian authorities, of the OMG group previously owned and controlled by the Defendants, should be disallowed or struck out as being non-justiciable by this Court and in any event vexatious;
(6) whether the scope of expert evidence on Russian banking practice should extend to a variety of matters relating to (a) the terms on which loans are usually made; (b) Russian practice of loan restructuring; (c) Russian banking procedures upon any default; and (d) Russian auction and other practices for the realisation of a debtor's assets on default;
(7) whether the present directions for exchange of evidence should be amended.
These matters have occupied the Court for some two and a half days (not including one day suggested for reading time). Five full lever-arch files were lodged. A considerable amount of Court resource has been expended in dealing with these issues, in respect of a trial set for May 2014.
Alleged breaches of Freezing Order
There is no dispute or doubt that Mrs A has (a) realised the surrender value of the Policy (under which she is the life assured) and remitted part of the proceeds to pay legal expenses, and (b) caused or permitted monies to be paid out of Petrograd's account in payment of fees owing to the trustees of a BVI trust ("the Acorn Trust"), in which the Defendants are the primary beneficiaries and which is the ultimate owner of a pyramid of companies formerly in or connected with the OMG group.
The Claimants contend that (a) the Policy and (b) Petrograd's funds were 'assets' within the meaning of the Freezing Order; and that in surrendering the Policy and arranging for payments out of Petrograd's account the Second Defendant "dealt" with such assets in breach of the Freezing Order.
The Claimants seek a declaration to that effect. They also seek a variation to the Freezing Order to prevent the Defendants using any part of the proceeds from the surrender of the Policy even for reasonable living and/or legal expenses (which under the Freezing Order at present would be permitted) until the Defendants have fully disclosed their assets (it being the Claimant's case that they have not done so thus far). Over the course of the hearing it emerged that it is the latter relief that the Claimants primarily seek. They urge that it is necessary and appropriate so as to ensure that the Freezing Order is more strictly observed, and so that the Defendants are constrained to resort to and make disclosure of assets to which they have access but which they have sought (it is said) to keep safely beyond the reach of the Freezing Order.
Should the court entertain the application, there being no application for committal?
Before considering that issue, however, a prior question has been raised on behalf of the Defendants: and that is whether the Court should entertain and seek to determine the application at all, in circumstances where (a) the usual recourse for alleged breach of a freezing order is an application for committal based on contempt of court; but (b) the Claimants have disavowed any intention, present or future, to apply on these grounds for committal; and (c) the rigorous procedural requirements for such an application have accordingly not been fulfilled.
Taking (c) first, it is well known and of fundamental importance that on an application for committal, which potentially concerns a person's liberty, the procedural requirements laid down by CPR 81 must be scrupulously fulfilled. In particular, proper service must be effected on proper notice, and the grounds on which the application is made must identify, separately and numerically, each alleged act of contempt, including (if known) its date: CPR 81.10.
When the Claimants' application came before the court on 20 December 2013 the Defendants strenuously argued that these requirements had not been fulfilled, and that in such circumstances they should not have to answer what amounts to an application for committal, even if not so-called. The Claimants accepted that they had not fulfilled all the procedural requirements applicable to such an application; but they made the obvious point that they were not seeking to establish contempt nor seeking committal.
Nevertheless, to ensure a fair process, I adjourned the application over from December and I required the Claimants to set out in full the detail of the alleged breach. With those safeguards, and subject to my continuing concern that the Claimants do not proceed by incremental steps towards a committal application which they have disavowed (what I termed "a game of grandmother's footsteps"), I do not think the application should be refused on grounds of unfairness or procedural failure.
However, and as to (a) in paragraph 6 above, Mr Stroilov (acting with my permission as the McKenzie friend of the Defendants, with, in very unusual circumstances, a speaking role) also relied on Elliot v Klinger and Others [1967] 1 WLR 1165. In that case, Stamp J (as he then was) declined to grant an injunction against a third party who was alleged to have aided and abetted a breach of an undertaking given by a party to the action, and held that the proper remedy was by way of motion for committal or sequestration. Mr Stroilov submitted that the Claimants should, by parity of reasoning, not be permitted to seek declaratory relief in respect of a breach of the Freezing Order without applying for committal and affording the Defendants all the protections required in any such application (both procedural and substantive, since the criminal standard of proof is required).
I do not consider that Elliot v Klinger is really in point. In that case the injunction was sought against a non-party; there is usually no jurisdiction to grant such an injunction; the applicant sought to surmount this impediment by invoking the jurisdiction of the court to prevent or punish the breach of its orders in proceedings for contempt, but without seeking committal. The application failed. But that is a long way from this case. There is plainly jurisdiction in the Court to grant declaratory relief against an existing party to the proceedings, whether or not any other remedy is claimed; and see as to the latter CPR 40.20.
Should the court grant a declaration of breach?
That said, however, the making of a declaration is always discretionary, and when considering whether to grant a declaration or not, the Court takes into account justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose, and whether there are any other special reasons why or why...
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