Edward Thomas v Metro Bank Plc
| Jurisdiction | England & Wales |
| Judge | Parfitt |
| Judgment Date | 09 August 2022 |
| Neutral Citation | [2022] EWHC 2112 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BR-2022-000047 |
[2022] EWHC 2112 (Ch)
DEPUTY INSOLVENCY AND COMPANIES COURT JUDGE Parfitt
Case No: BR-2022-000047
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF ILYA YUROV
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice
Rolls Building
Fetter Lane
London EC4A 1NL
Stefan Ramel (instructed by Steptoe & Johnson UK LLP) for the Applicants
Duncan McCombe (instructed by Gresham Legal) for the 5 th Respondent
The 1 st–4 th Respondents did not appear and were not represented
Hearing date: 23 June 2022
The date and time of handing down is deemed to be 10 am on 9 August 2022.
This is an application by the 5 th Respondent (“Mrs Yurova”) for disclosure of privileged Russian law advice obtained by the Applicants (the “Trustees”), who are the trustees in bankruptcy of Mrs Yurova's husband, Ilya Yurov (“Mr Yurov”). I will refer to this application as the “Privilege Application”.
The Privilege Application arises in the context of an application by the Trustees for an order under section 366 of the Insolvency Act 1986 (the “1986 Act”) against the first four respondents, which are UK banks (the “Banks”). I will refer to that application as the “s. 366 Application”. Mrs Yurova holds accounts with the Banks in her sole name. The Trustees want the Banks to provide them with access to bank statements in relation to those accounts.
Mrs Yurova was not in terms joined as a respondent to the s. 366 Application. She was, instead, named on the application notice as a “Third Party”. That description does not seem to have been chosen as a particular term of art. It appears that the Trustees gave her that description to put her status “higher up” (as it was put by Mr McCombe, counsel for Mrs Yurova) than a person merely to be given notice of the application, but to reflect the fact that no substantive relief is sought against her.
Plainly, given that she is the account holder and the Banks' customer, it was appropriate for Mrs Yurova to be given notice of the s. 366 Application. In my judgment, it is also appropriate to treat her as a respondent to the s. 366 Application. This has been tacitly accepted by the Trustees and Mrs Yurova in these proceedings, in that Mrs Yurova was listed as the 5 th Respondent (a) in an earlier directions order made on 6 April 2022 by Deputy ICC Judge Schaffer, (b) in both counsel's skeleton arguments, and (c) in the title of the proceedings on documents relating to this hearing such as the bundle indices. Perhaps, formally, Mrs Yurova ought to have applied to be joined as a respondent, but she could equally have been made a respondent to the s. 366 Application from the outset. Although one of the Trustees' arguments is that there is no hostile litigation between the Trustees and Mrs Yurova, Mr Ramel rightly did not press this point before me. It would be bizarre if the holder of a bank account were not able to intervene in an application for disclosure of bank statements made only against the banks, and it is obvious why the applicant and the accountholder would be the substantive parties to such an application. In all the circumstances, it seems to me that any application by Mrs Yurova to be joined as a respondent would have been a mere formality. The s. 366 Application is in substance a dispute between the Trustees and Mrs Yurova. I am satisfied that Mrs Yurova should continue to be referred to as a respondent to the s. 366 Application since, in substance, that is what she already is.
The wider background
Before turning to the substance of the Privilege Application, I will briefly describe the wider background.
On 23 January 2020 Mr Justice Bryan handed down judgment in proceedings brought by National Bank Trust, a company incorporated in Russia, against (inter alia) Mr and Mrs Yurov. Mr Yurov and two other defendants were ordered to pay very substantial sums in three currencies, excluding pre-judgment interest: US$408,179,036, RUB 27,096,844,323 and EUR14,691,420. I am told that in dollar terms the aggregate value of those sums is in the region of US$900 million.
I was provided only with extracts from that judgment. It appears that one of the allegations was that Mr Yurov had transferred assets to Mrs Yurova in circumstances engaging section 423 of the 1986 Act as transactions defrauding creditors. At paragraph 1386 of his judgment, Mr Justice Bryan found that allegation proved. I am told by counsel for the Trustees that certain transactions were set aside.
Following the judgment, on 27 February 2020 Mr Yurov was made the subject of a worldwide freezing order in respect of assets worth up to $900 million. By the same order, Mrs Yurova was ordered not to dispose of Mr Yurov's interest in four properties and the proceeds of an investment which had been sold in August 2019.
Mr Yurov's application for permission to appeal was dismissed by Lord Justice Flaux on 6 January 2021.
Meanwhile Mr Yurov petitioned for his own bankruptcy. The Trustees were appointed as his trustees in bankruptcy on 12 May 2020.
The s. 366 Application
Given the dealings which resulted in the judgment against him, it is unsurprising that Mr Yurov's bankruptcy is a complex one.
As part of the Trustees' investigations into Mr Yurov's affairs, on 9 February 2022 the Trustees issued the s. 366 Application against the Banks. That application is yet to be determined because on 23 February 2022 Mrs Yurova made the Privilege Application. By order of Deputy ICC Judge Schaffer dated 6 April 2022, the Privilege Application was ordered to be determined first, with directions being given for the further progress of the s. 366 Application thereafter. Accordingly, I express no views in this judgment as to the merits of the s. 366 Application, which I leave for the parties to argue in due course.
As described above, the s. 366 Application is made against the Banks, with Mrs Yurova named as a “Third Party”. The Trustees seek an order that the Banks disclose all the bank statements in the Banks' possession and/or under their control for any current or former bank accounts held in the name of Mrs Yurova since 1 January 2016, including but not limited to seven specified accounts.
The s. 366 Application was supported by a witness statement of Edward Thomas, one of the Trustees, dated 8 February 2022. That witness statement sets out the basis on which the Trustees seek relief against the Banks. In broad terms (and without making any findings as to the substance of the application), the Trustees' application is made for the following reasons, as set out at paragraph 99 of Mr Thomas's witness statement:
(a) Mr Yurov is the 50% beneficial owner of assets in Mrs Yurova's sole name, including assets which were the subject of a declaratory order made by Mr Justice Bryan. The Trustees assert that most of those assets have been sold and no proper account has been given as to the utilisation of the millions of dollars of proceeds of sale;
(b) Mrs Yurova was using a bank account which was not disclosed by her as required under the disclosure provisions of worldwide freezing orders made in the litigation, and there could be other undisclosed bank accounts or other undisclosed sources of funds unknown to the Trustees;
(c) Mrs Yurova had a number of other bank accounts in relation to which 50% of the balances belonged to Mr Yurov; and
(d) Mrs Yurova has steadfastly refused to disclose her bank statements so that the Trustees can conduct proper enquiries.
It is the evidence in relation to the third of these grounds, that 50% of the balances in Mrs Yurova's bank accounts belonged to Mr Yurov, which has led to the Privilege Application. In support of this ground of the s. 366 Application, a section of Mr Thomas's witness statement is headed “Russian Law on Matrimonial Property”. Under this heading, Mr Thomas states as follows at paragraphs 66 to 72:
“RUSSIAN LAW ON MATRIMONIAL PROPERTY
66. The Trustees have received legal advice regarding the legal regime of spousal interests in the assets, acquired by the spouses during the marriage.
67. I do not waive privilege in that advice but in summary, the Trustees have been advised that the starting point under Russian law is that as a general rule, and in the absence of agreement between the parties to the contrary, the property of spouses is subject to the regime of joint property, pursuant to clause 1 of Article 33 of the Family Code of the Russian Federation No. 223-FZ of 29.12.1995 (the “Family Code”).
68. Pursuant to clauses 1 and 2 of Article 34 of the Family Code and clause 15 of the Resolution of the Plenum of the Supreme Court of the Russian Federation No. 15 of 05.11.1998 “On the application of legislation by courts when considering cases of divorce”, the joint property of spouses may include the following:
• income of each of the spouses from labour activity, entrepreneurial activity and the results of intellectual activity;
• pensions, benefits received by them, as well as other monetary payments that do not have a special purpose (amounts of material assistance, amounts paid in compensation for damage in connection with disability due to injury or other damage to health, etc.);
• movable and immovable property acquired at the expense of the spouses' general income, securities, shares and deposits in capital contributed to credit institutions or other commercial organisations; and
• any other property acquired by the spouses during the marriage, regardless of in which spouses' name it was...
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